MRT3 project delivery approach to transform the construction sector, revitalize the economy

MASS Rapid Transit Corporation Sdn Bhd is currently conducting an open tender process for the four main contract packages of the MRT3 Circle Line (“MRT3”).

The tender briefing for the Project Management Consultancy (PMC) package was carried out early last month and the tender briefing for the three Civil Main Contractors packages was completed last week.

Before the tender process started, MRT Corp had started work on the reference design project in the first quarter of 2021. The MRT3 alignment corridor has been established as part of this reference design.

Unlike the Putrajaya Line MRT2 project which only has one turnkey main contractor in Tier 1, the MRT3 project will appoint five Tier 1 main contractors to lead the implementation.

MRT3 construction activities will be further distributed in Tier 2 to many medium and small construction companies as Work Package Contractors (WPC).

Similar to the MRT1 and MRT2 projects, the appointment of WPC MRT3 will be carried out through a tender exercise starting next year. Therefore, there will be many opportunities for local construction companies to participate, regardless of size.

For now, the focus is on appointing a civil prime contractor in Tier 1. Based on the terms of the tender, there may be six to nine companies, which will eventually be awarded as civil prime contractors in three different joint ventures or consortia.

Compared to MRT1 and MRT2 projects, more companies will be able to participate in Tier 1 in MRT3 projects.

For all major civilian contractor packages, Bumiputera’s participation is mandatory. Industry players must form a joint venture or consortium with the Bumiputera construction company.

In addition, all bidders are required to submit economic improvement proposals to catalyze economic activities outside the construction sector.

A mandatory element of the tender process is for all partners in the joint venture (JV)/consortium to declare their Final Beneficial Entitlement through a formal statement.

The concept of beneficial ownership is not limited to ownership through ownership interest in a legal entity but goes beyond the ownership structure, in accordance with the Suruhanjaya Syarikat Malaysia Guidelines for the Reporting Framework for Beneficial Ownership of Legal Entities.

It covers both from the perspective of ownership and control. The minimum percentage required for an Effective Bumiputera End Benefit Entitlement is 31% for CMC301 and CMC302, and 20% for CMC303.

The percentage of Bumiputera’s division of labor in Tier 2 will be at least equal to Bumiputera’s Effective Final Benefit Entitlement in the respective package.

“It is our intention to have Bumiputera players capable of participating in the MRT3 project and more importantly they should be active members of their JV/consortium with their own scope of work,” said MRT Corp CEO Datuk Mohd Zarif Hashim.

The responsibility for synchronizing construction work activities has been delegated to PMC. Although there will be no guaranteed liquidation compensation (LAD) imposed on the PMC, the PMC will be given a KPI and there will be a penalty for not complying.

“This new approach to project delivery and contracting strategy is the culmination of MRT Corp’s decades of experience as an asset owner and project developer,” said Mohd Zarif.

“MRT Corp is confident in the capabilities and resilience of Malaysian construction players and their supporting ecosystem.” – June 13, 2022

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