About one month ago, The Star reported that the Penang Mass Transit Master plan budget has increased from Rm 27 billion to Rm 46 billion. My sole purpose of writing this piece is to advise the Penang State Government not to follow the Barisan National Government of giving out large contracts without open competitive tender.
In 1970 when the new economic policy was introduced our GDP per capita was at par with Singapore, Taiwan and South Korea. Today Singapore is 3 times our GDP per capita, Taiwan and South Korea are twice our GDP per capita.
How could they progress faster than us in spite of the fact they have practically no natural resources? They even have to import timber and palm oil from Malaysia.
The biggest culprit is that the BN Government has been giving out large contracts without open competitive tender. For example- the North South Highway which was awarded more than 30 years ago to a Bumputra Company under the control of UMNO has not stopped toll collection. The toll rate has been constantly increasing even though the number of road users has been increasing. If you visit Taiwan, you can see that there is no toll road.
Malaysians are getting fed up with the Government’s failure to reform the tender system as well as to check corruption and abuse which is costing us billions of ringgit annually, and bleeding the country’s finances dry.
Implement the World Bank’s Procurement Guidelines
The World Bank has a procurement guidelines which all the borrowers have to follow. The guidelines includes the system of calling tenders. It is a system which has helped to prevent corruption even in the most corrupted countries in the world.
The borrower must engage a reputable engineering consulting firm which has had experience with similar projects to put up a proposal and to 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 prequalified 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 prequalified, 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 have plagued all mega projects in the country.
On the tender opening day all contractors and the representatives of 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.
Besides the Bank’s guidelines, I would like to propose the following safeguards since open tenders alone will not ensure a fool proof 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 3 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 role of a 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
In summary, 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. Such a system of open procurement is effective and can bring change even to the most corrupt country.
Why is it not followed and why do we still have the system of negotiated tenders which was established by former Prime Minister, Dr. Mahathir, and which opened the door to corruption on a grand scale in the country is a question any fool can answer. It can be safely said that hundreds, if not thousands of billions of ringgit have been lost because of this system of negotiated tenders and its associated abuse and cronyism.
The Penang State Governments must remember that the opposition has been criticizing the BN Government for giving large contracts without open competitive tender.