Sunday, October 23, 2011

Pre-qualified bidders for MRT tunnelling project

KVMRT has get the news on the pre-qualified bidders for MRT tunnelling project. Only one Malaysian company, Gamuda-MMC is in the run with five other foreign bidders.

Gamuda-MMC faces lower bids from pre-qualified bidders for MRT tunnelling project (The Star)

PETALING JAYA: The front runner for the mass rapid transit (MRT) tunnelling project – the Gamuda Bhd-MMC Corp Bhd joint venture – may be put in a tough spot to match the lower bids from some of the pre-qualified bidders, industry sources said.

Yesterday a financial newspaper reported that five companies had been pre-qualified for the project, including Gamuda-MMC, China’s Sinohydro Group Ltd, South Korea’s SK Holdings and two other parties from China and Japan.

Gamuda-MMC was the only local company shortlisted.

Reliable sources have confirmed this.

In an e-mail reply to StarBizWeek, Gamuda said: “We have not been informed of being shortlisted.” It didn’t reply to other questions in the e-mail.

The tunnelling works for the MRT is estimated to cost RM7bil and the financial newspaper reported that the pre-qualified parties had three months to submit their bids.

It had been reported that the project delivery partner (PDP) of the MRT project, Gamuda-MMC, would have the upper hand in bidding for the job as it was given the right to match the lowest offer from other bidders for the tunnelling job under the Swiss challenge system (Gamuda-MMC has to match the lowest bid to win).

However, bidders from China are said to pose a threat to Gamuda-MMC due to their expertise and experience in tunnelling jobs as well as having the financial muscles to undertake the project.

A reliable source added that local parties have a price advantage of between 3.5% to 7.5%, depending on the level of local and bumiputra equity participation in the project.

“However even with this price advantage, Gamuda-MMC could still be hard-pressed to match the pricing of some of the other bidders,” an industry source said.

Meanwhile OSK Research pointed out that while there was a risk of the other four pre-qualified names “under-cutting in their bids, we believe the local JV (Gamuda-MMC) still has an edge.”

“As the MRT is funded by the Government, we believe it would like to keep the job largely in the hands of local contractors.

“Furthermore Pemandu (Performance Management and Delivery Unit) had also previously stated that under the Economic Transformation Programme, the awarding of contracts to foreigners would also depend on whether these would have a positive impact on the GNI (gross national income).”

OSK expected Gamuda-MMC to be prequalified for the project, “given Gamuda’s experience with the Penchala Tunnel, Smart Tunnel and Kaohsiung MRT.”

The research house said it expected the award to be made by the end of the first quarter of next year.

What is the criteria?
That maybe the most important question. To who government will awards the project package? The Malaysian government in awarding the jobs will have to weigh whether to go for the cheapest bid or for a higher one by a local player.

“There is no right or wrong, it’s just a matter of priorities,” the industry player said.

Global practices
“In most countries there are mechanisms to prevent foreign bidders from winning jobs, or even bidding. But don’t look at Hong Kong and Singapore, they have different economic models,” an industry player said. The barrier to entry for foreign companies can take many forms, from simple methods such as work permits or visas to more complex mechanisms.

In the European Union (EU) for instance, only EU-based companies are allowed to participate in EU Cohesion Fund projects.

It is the same for Japan International Cooperation Agency (JICA) loans, where it is understood that only Japanese companies will benefit from this funding.

Thailand requires that all tenders for the Bangkok MRT Blue Line are 51% led by local contractors.

“In China, a company must be incorporated there, in China, and must have completed at least three jobs. This is a chicken and egg situation. It would be great if local companies gain the expertise and can take their expertise abroad, much like the building of highways,” an industry player said.