Construction cost, which has gone up to RM15bil, under tight scrutiny
PETALING JAYA: Prasarana Malaysia Bhd is considering taking over the construction of the Light Rapid Transit line 3 (LRT 3) from its project delivery partner (PDP) to curb its spiraling cost.
According to sources, the government is reviewing the project as cost has ballooned from the initial estimate of RM9bil in 2015 to more than RM15bil.
“The government is expected to make a decision on the project soon,” a source said.
Construction at the site had already reached 10%, with most of the work contracts awarded.
It is estimated that more than RM15bil worth of construction jobs had been farmed out to contractors, including a RM1.1bil underground package awarded to IJM Corp Bhd
in March.
The 37km extension line from Bandar Utama to Klang through Shah Alam, when it was launched in 2015, was projected to cost RM10bil, including RM1bil set aside for land acquisitions.
Reducing the size of the project would help to cut down cost. Other options being considered, sources said, included reverting to the turnkey model to complete the project.
In 2015, Prasarana appointed Malaysian Resources Corp Bhd (MRCB) and George Kent (M) Bhd as the PDP for the LRT 3 project at an approved construction budget of RM9bil.
The PDP fee for the LRT 3 project, at its construction cost of RM15bil, would amount to RM900mil.
Kenanga Research, in a report last Friday, said with most of the work packages for the LRT 3 having been awarded.
With the ongoing project cost review, Kenanga said there is uncertainty about the continuity of the LRT 3 project despite most of the contracts having been awarded.
It was likely that the construction cost has blown past its original target.
As the PDP partner, MRCB and George Kent are responsible for the design and construction of the LRT 3 project. The PDP partner will also assume the risk of cost overruns or delays.
However, despite the award of the PDP back in 2015, the total construction cost of the project has yet to be finalised.
Prasarana, which is a government-owned company, has the approval to raise up to RM10bil in debts to pay for the project. Bursting the budget would require the company to seek fresh Cabinet approval for additional funds.
“There is also a possibility that the project might be shelved given the current financial constraints,” one source said.
It is believed that that design changes to the original LRT 3 plan has contributed to the project’s rising cost.
For example, some of the 26 stations along the line were upgraded to accommodate new features and a bigger passenger capacity at a substantial increase in construction cost.
The cost of some stations have increased from an initial RM80mil to almost RM200mil.
The LRT 3 is the first project by Prasarana to be undertaken based on the PDP model that had been successful in delivering the Klang Valley Mass Rapid Transit (KVMRT) project.
The PDP model was introduced in 2012 for the construction of the KVMRT project, which was awarded to a joint venture (JV) between MMC Corp Bhd and Gamuda Bhd.
The JV was also awarded the PDP for the MRT 2 project in 2014 for RM28bil.
It is estimated that the construction cost of the project had shot past this budget cap at RM32bil currently.
It was reported that work progress on the project had reached 21% and is on track to be completed in mid-2022.
Kenanga said contractors’ earnings were at risk with the ongoing project cost review of the MRT 2 and LRT 3 projects.
“However, we are keeping our estimates at this juncture, as there is no clear indication on the reduction in cost for the projects,” the research house pointed out.
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