How to evaluate and award contracts to the cheapest contractors?
By Koon Yew Yin
I refer to the article ‘Transparency in MRT Planning’ by Risen Jayaseelan which appeared in a major newspaper on 5th Oct 2010. The purpose of my writing this piece is to forewarn the public and the Government that the way this proposed project is being considered by the Government is basically wrong and may well end up with tax payers having to pay a much higher toll rate than justifiable.
This warning is not only for the MRT project but for all 131 projects that are being envisaged under the Economic Transformation Programme (ETP) which is supposed to transform Malaysia into a high income nation. Basically I see no change at all in the current procurement procedure which has been used before in large concessions. The results of the evaluation and bidding procedure for mega projects such as the current MRT, the power provided by IPPs, toll roads, and the Selangor water supply have seen the consumers being forced to pay unreasonable rates because the bidding and tender process has been riddled with opportunities for rent-seeking, corruption and wastage. Besides, cheaper and more efficient alternatives have not been fully considered by the Government.
I was shocked to read that the Chairman of Land Public Transport Commission, Tan Sri Syed Hamid Albar, has said that the technical study of the proposal submitted by Gamuda and MMC would be completed by the end of the month and that following it, LPTC would submit their report to the Government for approval.
I would like to ask how in the first place can the LPTC know that this proposal is the best in terms of technology and costing? It is impossible for LPTC to do an honest job if they have only one proposal to study and they do not have at least several other proposals to compare with.
As we know, the cost of this MRT project will be several billion ringgit. Negotiating with only one consortium, Gamuda and MMC, is likely to encourage corruption and waste, and is against all elementary principles of good economic governance. The price can be 10, 11 or 12 billion ringgit. Who is there to decide whether a costing of 10 billion ringgit is in the best public interest and will provide full value for Malaysians and not the project developers?
The sum provided by the only bidder is like taking a figure out of a hat. We are talking about billions of ringgit involved. Are there saints in the evaluation committee or project developers who do not like big money? The amount of money involved is so enormous that even saints will surely be tempted.
The public must demand that the Government stops this method of award. It is the height of economic foolishness to award a concession or monopoly on a first come first served basis. Mega project awards should not be given out on the basis of service that is dished out in restaurants. If we do that, we will end up with a lethal case of economic poisoning of the Malaysian consumer.
The Best Way to Evaluate Tenders
The best way in terms of award of tenders is for Government to follow the guidelines as established by the World Bank. Incidentally these procurement guidelines are easily available over the website and are even applied in some of the most corrupt countries of the world in an effort to reduce corruption. It does not cost us even one sen to adopt them.
Firstly, the Government must engage a reputable engineering consulting firm which has experience with similar projects to put up a proposal and to open the project bidding to all contractors to tender. All the contractors must be prequalified based on both 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 prequalified, the Government tender board has only to look at the tendered price. Always award the contract to the contractor who submits the cheapest tender assuming that all the other criteria are met. It is important not to allow anybody from the Government to negotiate with any contractor to avoid corruption.
Finally transparency and accountability requires that all documents on the proposal and other 131 projects in the ETP be placed in the public sphere – not just limited information but detailed and full breakdowns in accordance with international best practices.
If we want to reach the status of a highly developed nation, we must immediately implement the standards of economic good governance, accountability and transparency that come with it.