Conflict of interest

SRS Consortium, a joint venture of Gamuda Berhad (60%), Ideal Property Development Sdn Bhd (20%) and Loh Phoy Yen Holdings Sdn (20%) is seeking the role of the Project Delivery Partner. According to the World Bank Procurement guidelines, any member of the SRS Consortium cannot tender for any work package of a plan they have developed, without creating a conflict of interest. So therefore Gamuda cannot bid to build the LRT or the Penang Island Link, and Ideal and Loh Phoy Yen cannot bid for any of the reclaimed land without creating a conflict of interest.

1.7 A firm shall be considered to have a conflict of interest in a procurement process if: (a) such firm is providing goods, works, or non-consulting services resulting from or directly related to consulting services for the preparation or implementation of a project that it provided or were provided by any affiliate that directly or indirectly controls, is controlled by, or is under common control with that firm.

World Bank Procurement Guidelines: Conflict of interest

Despite this, representatives of Gamuda said the following in a press conference on the 4th May 2016:

“If we participate, we won’t be the PDP so there is no conflict of interest. For that component the state will engage another consultant to supervise the thing, so there is no conflict of interest”

Gamuda Rep. Link to video

Mr. Koon Yew Yin, a respected businessman and philanthropist, and one time owner of Gamuda has the following to say on the PDP arrangements in Penang:

  • The consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation;
  • The whole procedure of prequalifying contractors, calling tenders, evaluating and awarding the contracts must be carried out in a transparent way to avoid any suspicion of corruption;
  • They are not (even) engineering consultants. They are construction contractors. Gamuda might have constructed the tunnel in Kuala Lumpur but they did not design it;
  • Penang state government opted for the Project Development Partner (PDP) structure of the Klang Valley MRT which has been heavily criticised for cronyism and abuse. From the rakyat’s experience… (this) will definitely be unpleasant and disastrous for the public.

Tony Pua Kiam Wee, DAP Member of Parliament for Petaling Jaya had the following to say about the Gamuda’s PDP arrangement for the Kuala Lumpur MRT: 

“First of all, a 6% project fee is almost unheard of in a project of this scale…. The reason why the fee is so high is simple – not only was there no competitive tenders, which would surely have brought the fees down, the Government has chosen to award the contract and commenced work… before the fee was even agreed upon. Such recklessness on the part of the Government has resulted in it being beholden to the PDP with little room to manoeuvre or negotiate… Any ordinary man on the street will know that it is ridiculous to ask a contractor to start the kitchen renovation without first agreeing to the cost.

Tony Pua Kiam Wee

Media statement by Tony Pua Kiam Wee in Kuala Lumpur on Monday, 13th February 2012 

Secondly, and perhaps more critically, not only has the PDP contract been awarded with no open or competitive tender, the structure of the agreement is such that the overall cost of the project is incentivised to be inflated.

The entire MRT project has been awarded and structured in such a reckless manner that the consequences in a few years’ time may have a devastating impact on the KVMRT’s viability. The higher than necessary cost for the project would necessitate the imposition of higher MRT fares on the Klang Valley commuters, which will in-turn negate the intention of shifting the population to public transport”

Independent studies?

Both the SRS and Zenith Consortiums have appointed numerous consultants and commissioned numerous studies in the formulation of their proposals. However to ensure no conflict of interest arises, the state government should not allow consultants for key studies such as Environmental Impact Assessments (EIA) and Heritage Impact Assessments (HIA) to be appointed by any client that has clear vested interest in their outcomes.

If these studies are commissioned by the state, but paid for by the developer, no undue pressures can be placed on the study process and its findings can be argued to be truly independent. In order to be seen to be doing this in a most transparent manner, the state will have to rely on independent reviewers and referees to recommend qualified consultants based on clear terms of reference. The state should also establish a process of peer review to ensure that the public interests in environment and heritage are fully considered in the EIA and HIA.

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