Terminating MRCB-George Kent as LRT3 PDP would have cost govt RM4.2b, says Lim

KUALA LUMPUR (Aug 7): The government would have to pay a RM4.2 billion compensation had it terminated RM31.5 billion light rail transit line 3 (LRT3)'s project delivery partner (PDP) MRCB-George Kent Sdn Bhd's contract, said Finance Minister Lim Guan Eng (pictured).

In a parliamentary reply to Kepala Batas member of Parliament (MP) Datuk Seri Reezal Merican, Lim reiterated that the government will not re-tender the project and will continue the LRT3 with the current PDP by making it a fixed fee contract.

"The compensation to the PDP is too high if we re-tender the project. (Since) we are reviewing the project as a fixed fee contract, this means the 6% fee that was initially promised to the PDP does not exist anymore," he added.

It was previously reported that the 6% fee to PDP for work packages tendered to winning bidders would have netted MRCB a total of RM948 million.

Separately, special officer to the ministry Tony Pua said the hypothetical RM4.2 billion termination compensation to MRCB George Kent took into consideration work that has been completed, loss of profit, and work that has been awarded.

"We are stuck because of this so we cannot re-tender the project or else we have to pay them compensation. The agreement from the cabinet is that they would approve the total cost of RM16.6 billion, including land acquisition, overheads, interest during construction as well as work package contract," he told reporters at the Parliament lobby.

The Damansara MP also said the details of the project cost will be made known once the new contract is signed soon.

"We are not sure when exactly, as we have to give MRCB George Kent time to talk to their contractors also. I don't have a deadline but the agreement should be signed soon, as work needs to continue," he added.

In 2015, state-owned Prasarana Malaysia Bhd, which will operate the LRT3 project, appointed MRCB-George Kent, comprising Malaysian Resources Corp Bhd (MRCB) and George Kent (Malaysia) Bhd, as the PDP for LRT3, with an initial budget of RM9 billion for construction works and RM1 billion for land acquisitions.

The RM9 billion did not include other costs such as PDP fees (of 6%), other consultant fees, operational and overhead costs, as well as interest payments during construction, hence the cost overrun to RM31.5 billion.

The 37km LRT3, which was initially on the chopping board due to its high cost structure, would connect Klang with Bandar Utama in Petaling Jaya. — theedgemarkets.com

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