THE government will see cost savings of RM3.1 billion, or 14%, by terminating its agreement with the project delivery partner (PDP) for the Sarawak portion of the Pan Borneo Highway.

Finance Minister Lim Guan Eng said following the termination of the agreement with Lebuhraya Borneo Utara Sdn Bhd (LBU), the cost of the project will be brought down to RM18.8 billion from the initial RM21.9 billion.

“The cabinet decided on September 4, 2019 to carry out the 11 work packages for the 786.4km stretch of the Pan Borneo Highway’s Sarawak portion on a conventional basis, without the involvement of a PDP company,” he said in Putrajaya today.

The federal government, Danainfra Nasional Bhd and Sarawak today inked the mutual termination agreement for LBU.

With the termination, effective February 20, the government becomes the owner of the project, which will be overseen by the Public Works Department.

A new project funding deal was also inked by Danainfra and Putrajaya.

The government will allocate RM5 billion for the 11 work packages, and the remainder will be funded by Danainfra.

Lim said the switch to the conventional method, whereby the project is directly awarded to the contractor, will allow the government to save on the fees payable to the PDP, amounting to 5.5% of the project’s target cost.

“We are recording significant savings, and we intend to channel them back to Sarawak after the project is completed.”

Works Minister Baru Bian said the compensation settlement following the termination has yet to be determined.

“Whatever claim that is legal, lawful and legitimate, we will look into it.”

The Sarawak portion of the highway links Telok Melano and Semantan.

The first work package – a 33km stretch – was completed on schedule on January 6 last year. – February 6, 2020.