Penang govt following World Bank procurement guidelines


By Koon Yew Yin

I refer to the article carried by The New Straits Times on June 30 titled “Gerakan to file injunction to stop Penang undersea tunnel and three road projects”. Gerakan vice-president Dominic Lau said the party’s legal bureau is currently studying the matter and it would take some time as it involves many legal documents.

Gerakan is complaining that the Penang state government is paying four times the normal scale of engineering consulting fees.

As I was one of the members of the Board of Engineers responsible for fixing the scale of fees for consulting engineering about 50 years ago, I would like to offer my opinion. If Lau has any doubt regarding consulting fees, he should refer to the Board of Engineers for clarification. He should not simply blow his top in public without checking.

I believe the Penang state government is following the World Bank procurement guidelines to prevent corruption and abuse of power.

The World Bank’s procurement guidelines

The World Bank has procurement guidelines which all borrowers have to follow. The guidelines include the system of calling tenders. This is a system which has helped prevent corruption, even in the most corrupted countries in the world.

The borrower must engage a reputable engineering consulting firm which has experience with similar projects to put up a proposal and open the project bidding to all contractors to tender. The most important thing to note is that the consulting company responsible for the tender process should be independent and should have no interest whatsoever in the project implementation. This ensures that there is no hanky-panky or “insider trading”.

After the contract is awarded, the consultant must make sure that the project is completed within cost and scheduled time.

All the contractors must be pre-qualified based on their technical and financial ability. All contractors must submit tenders conforming to the original design so that the cheapest tender can be selected. If all the contractors are pre-qualified, the government tender board has only to look at the tendered price.

It is important not to allow anybody from the government to negotiate with any contractor to avoid corruption.

Transparency and accountability requires that all documents on the proposal be placed in the public sphere – not just limited information, but detailed and full breakdowns in accordance with international best practices. This will ensure public monitoring and curbing of cost overruns which plague all mega projects in the country.

On the tender opening day, all contractors and representatives of the press should be invited to witness the opening of bids, and their tender prices should be publicly announced.

All contractors have to submit their tender according to the original design provided by the appointed consultant.

A contractor can also submit an alternative design provided that the price is cheaper and the quality is not inferior.

Additional safeguards

Besides the World Bank’s guidelines, I would like to propose the following safeguards since open tenders alone will not ensure a foolproof no-abuse procurement system for mega projects.

These additional safeguards are based on my experience as a chartered engineer and as a member of the Malaysian Board of Engineers for three two-year terms. I am also one of the founders of Mudajaya, Gamuda and IJM Corporation.

Never invite contractors to submit project proposals for any mega project because each contractor will submit his own planning and design which will be impossible for the tender board to evaluate. You cannot compare the cost of an apple with the cost of an orange, a banana or a pineapple.

A contractor should not be permitted to take on the role of the engineering consultant responsible for design as well as that of the construction contractor responsible for the project implementation as the two roles are of conflicting interest. If the company is permitted to do so, it will lead to public perception of abuse and corruption.

For mega projects, it is cheaper to employ a really qualified consultant to design the whole project rather than to ask each contractor to provide designs for different phases. The latter is false economy and will result in ballooning of costs.

Just say ‘no’ to negotiated tenders

As reported, the budget for the Penang Mass Transit project is about RM46 billion. Which is the correct price if the negotiated price is RM44 billion, RM45 billion or RM46 billion? Which negotiator would not be tempted to take an RM1 billion bribe?

The Penang state government is following the World Bank procurement guidelines by appointing an experienced consulting engineering firm.

Koon Yew Yin is a retired chartered civil engineer and one of the founders of IJM Corporation Bhd and Gamuda Bhd.

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