The Malaysian Insider | May 27, 2011

KUALA LUMPUR, May 27 — The award of a contract to upgrade the light rail transit (LRT) line to European engineering powerhouse Balfour Beatty has sparked intense lobbying which is testing Datuk Seri Najib Razak’s commitment to public tenders.

According to a report in today’s Singapore Straits Times, the intense lobbying over the contract could also delay the PM’s plans to upgrade the chaotic transport network and inject fresh vigour into Malaysia’s economy.

It is also shaping up to be a test of Najib’s resolve to make public tenders a hallmark of his administration, as opposed to the opaque system of the past, the Straits Times said.

Syarikat Prasarana Negara has just completed an international tender for upgrading the LRT.

But Prasarana’s yet-to-be publicised decision to award the contract to the lowest bidder — a consortium led by European engineering powerhouse Balfour Beatty — is being hotly contested behind the scenes by the losing bidders, executives familiar with the situation told the Singapore Straits Times.

“The rivals include Bombardier, which installed the city’s existing light rail system, and Britain’s Colas. According to executives close to the tender exercise, the lowest bid was Balfour Beatty’s at RM590 million. The highest was Bombardier’s at RM850 million,” the Straits Times reported.

How Najib handles the Prasarana award will signal whether he can break away from past practices and introduce a more level playing field in the award of contracts, analysts and private economists told the Straits Times.

If the government decides to review the contract, it could raise speculation that the intense lobbying prompted him to step in.

“There is a strong lobby with people close to the PM to change the decision,” one industry executive closely involved in the tender exercise told the Straits Times.

This executive said the Balfour Beatty consortium could face problems integrating with the existing systems installed by Bombardier.

But parties close to Balfour Beatty said those concerns were misplaced. “These issues were considered by the Prasarana board before it came to the decision,” said one engineering consultant familiar with the tender exercise.

Prasarana had been forced last week to cave in to pressure from Malay rights groups when it revised pre-qualification criteria for several construction packages for the Klang Valley Mass Rapid Transit (KVMRT).

The project owner said last week that contractors who wish to tender for elevated civil works, stations and depots work construction packages will be allowed to form joint ventures or consortiums among local companies.

Prasarana had on March 30 imposed additional criteria on contractors taking part in the project tender which disallowed them from forming joint ventures or consortiums.

But Perkasa was quick to accuse Prasarana of blocking Bumiputera contractors from participating by enforcing “strict” guidelines that would only benefited “rich non-Bumis”, saying that MMC-Gamuda was “looting and monopolising” the project.

The Malay Chamber of Commerce Malaysia later asked the government to hand over the whole project to it as Bumiputera contractors were finding it hard to bid for tenders.

The KVMRT is expected to be the largest-ever construction project in Malaysia and had earlier been estimated to cost between RM36 billion and RM53 billion.