KL water project hits snags
Objections over tender process could result in legal action against govt
Prime Minister Badawi's administration faces wrangling over a disputed tender process that could result in legal action and further delays to the project.
By Leslie Lopez, The Straits Times
THE administration of Malaysian Prime Minister Abdullah Badawi is facing a dilemma over an urgently needed water supply project in Malaysia.
This is due to behind-the-scenes wrangling over a disputed tender process that could result in legal action against the government and cause further delays to the project.
The Pahang-Selangor Raw Water Transfer Project involves building a 57km-long pipeline, 45km of which is underground, to channel water to Kuala Lumpur and the surrounding Klang Valley area.
The pipeline will supply an additional 2,259 million litres daily to Malaysia's most densely populated area that previous reports said consumes some 3,050 million litres daily.
But there is a snag. Japan's Taisei Corp and its Malaysian joint-venture partner HRA Teguh have raised objections to the government plan to award the RM1.4 billion ($584 million) project to a consortium led by Shimizu Corp.
Their objections were based on the grounds that the bidding process had been marred by irregularities, financial executives and government officials close to the situation said.
Taisei executives in Malaysia declined to comment.
But a senior financial executive who was authorised to speak to this newspaper said that should Kuala Lumpur proceed with the contract award, Taisei will seriously consider suing the project's consultants and the government.
'The companies are exploring all options, including obtaining a court order to halt all work on the project until this matter is resolved,' said the executive.
A senior Malaysian official admitted that the Taisei-led joint venture has raised objections to the awarding of the contract, in particular over the government's decision to ask the Shimizu-led consortium to amend its bid.
The bid calls on the government to compensate Shimizu in the event that the cost of constructing the tunnels exceeds original estimates should it encounter poor rock formations.
The Taisei joint venture's 'view is that the government can't make variations to the bid after the award. But the government's view is that these amendments aren't out of the ordinary for a contract this large', said the official.
Economic planners said that without the project, residents and businesses in the Klang Valley will face acute water shortages by next year.
The project was originally mooted in the late 1990s after the Malaysian government signed an agreement with Japan to secure funding for the construction of the infrastructure undertaking under Tokyo's official development assistance programme.
But the project was stalled because of disagreements between Malaysia and Japan over covenants under the loan package, which required the recipient to award large portions of the project – in some cases as high as 80 per cent of contract work – to Japanese entities.
The plan was jump-started shortly after Datuk Seri Abdullah came to power in November 2003.
After a lengthy tender process, four groups, comprising foreign and local companies, were short-listed.
One group pulled out and the three remaining bids were opened last April.
According to those familiar with the tender, the Shimizu-led consortium submitted the lowest bid at RM1.31 billion, while the Taisei-led venture and Japan's Kajima Corp bid RM1.46 billion and RM1.47 billion, respectively.
The executives said that the bids by Shimizu and Kajima were so-called 'conditional bids', because they were attached with conditions that the government would be required to compensate the contractors for additional costs incurred in constructing the tunnels as a result of poor soil conditions.
Sources said that the Japan International Cooperation Agency, which signed an agreement with Malaysia to fund the project, is in favour of the Shimizu-led group, which submitted the lowest bid.
