LEBUHRAYA Borneo Utara (LBU), Putrajaya’s project delivery partner (PDP) for the Sarawak portion of the Pan Borneo Highway, said it is optimistic it can save RM2 billion on the four-lane highway stretch from Sematan in southern Sarawak to Miri in the north.

LBU said on its website today that the savings are due to “efficient design, cost and change control management”.

This follows reports that the federal government has decided to ditch the PDP model for the entire RM29 billion project in favour of the turnkey contractor model over reported concerns about keeping within budget.

LBU said total savings from design management and optimisation alone would cost about RM553 million.

It said despite savings on the design management side, it was still in compliance with the design brief and does not “compromise on standards or quality of highway, including design speed”.

“When other savings are included, mainly due to re-measured quantities based on actual site conditions, the total savings achieved to date is around RM1.5 billion.”

LBU however, said since the federal government has instructed for additional works to be carried out, like strengthening the pavement structure, the current nett savings was down to about RM1 billion.

It said the other RM1 billion in savings was expected from funds allocated for contingency purposes, which were not likely to be spent “in view of the cost and change control measures undertaken for the project”.

The cost of the highway project is currently projected to be about RM15.13 billion, down from the original cost of RM16.488 billion.

“Keeping a lid on construction costs is important for the PDP, whose performance is measured against meeting two key performance indicators.

“LBU is required to deliver the project within the agreed target cost and by the agreed completion date.

“While these KPIs sound simple, the task is very challenging,” the company said, referring to managing 11 works packages comprising 25 road sections of the a 786km stretch for Phase One of the highway.

Putrajaya has also set a completion period of within “a brief 5½ years” till the end of 2021, and with a post-award target cost of RM16.12 billion.

“With the PDP model, LBU is incentivised to keep within the target cost. Cost overruns will lead to expensive penalties in the form of a fee reduction.” – March 29, 2019.