Turnkey contracts to replace Pan Borneo Highway’s PDP construction model

Updated 7 years ago · Published on 21 Mar 2019 11:28AM · 2 Comments

Visitors posing for photos at the point where the Pan Borneo Highway starts in Sematan, on the southern tip of Sarawak. The highway's current project delivery partner model for construction is seen as less favourable, compared to the fixed-cost turnkey contract structure. – The Malaysian Insight pic, March 21, 2019.

PUTRAJAYA is looking to scrap the project delivery partner (PDP) model in the RM29 billion Pan Borneo Highway and replace it with a turnkey contract model, reported The Edge Financial Daily.

The decision was made after the 5,324km project saw a cost overrun under the current PDP structure.

Quoting sources with knowledge of the matter, the report said the Works Ministry will take over the project and replace the existing PDP with turnkey contractors who will be hired to complete the remaining construction works.

However, it is unclear if the existing PDP will be considered for the turnkey contracts.

The PDP model is seen as less favourable, compared to the fixed-cost turnkey contract structure.

Under a PDP model, contractors are not incentivised to be cost-efficient and are not liable for cost overruns and project delivery delays. They are usually given a portion from the project cost.

The PDP for the 706km Sabah portion of the highway is Borneo Highway PDP Sdn Bhd (BHP).

Warisan Tarang Construction Sdn Bhd holds a 60% stake in BHP, while the UEM Group-MMC Corp joint venture holds 40%. Warisan Tarang, said the report, is “perceived to be” linked to former Sabah chief minister Musa Aman.

Quoting The Edge Weekly, the report said the Sabah state government has submitted a proposal to takeover the Sabah portion of the project, which is divided into 35 work packages and is scheduled for completion in 2023.

To date, work has only begun on 12 packages.

The PDP for the Sarawak portion is currently under Lebuhraya Borneo Utara Sdn Bhd which is linked to Bustari Yusof, said to be a close associate of former prime minister Najib Razak.

Works for the 1,060km Sarawak portion are expected to be completed in 2021, and 11 work packages have been awarded.

Citing an example of a costly PDP-model project, The Edge said the Mass Rapid Transit 2 (MRT2) project increased by RM29 billion to RM56.93 billion.

The government was able to lower costs for the above-ground portion of the MRT2 from RM22.64 billion previously to RM17.42 billion, by adopting a turnkey model. – March 21, 2019.

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Comments

  • PDP appointed by Najib to siphon off billions but Turnkey contract is unhealthy not suitable for Malaysia because the consultant engineers will be appointed and their fees paid by the contractor which leads to poor quality work because the contractor controls the consultant,Turnkey contracts were a total failure in this country.

    Posted 7 years ago by Soma Govin · Reply

  • Its best to do it the conventional way where the consultants are appointed by the client and paid directly by the client.

    Posted 7 years ago by Soma Govin · Reply