UEM Land ... Jan 2009

The Shimizu Corp-led consortium has upped the ante in its bid to secure the tunnelling portion of the RM5 billion Pahang-Selangor Interstate Water Transfer project, for which it has submitted the lowest bid.

Sources say Shimizu and its partners UEM Builder Bhd, IJM Corp Bhd and Nishimatsu Construction Co are prepared to drop a controversial conditional variation order (VO) clause in their tender proposal to clear any doubts on their costing.

It is learnt that the consortium is waiting for the Malaysian government to call in the shortlisted companies to clarify their respective tender proposals.

The Shimizu consortium is expected to drop the VO in the tender clarification process. They are prepared to do that.

Shimizu dropping the VO clause would likely speed up the decision- making for the water project, one of the large construction jobs identified to stimulate the economy. Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak, who is bent on seeing the big project get off the ground soon, is expected to decide on the award in the next few weeks (Jan –Feb 2009).

It is learnt that the VO clause was put in to safeguard the consortium against any inaccuracies in the consultant’s study, particularly on the hardness of the rock. The tunnelling job will involve boring through a 44.5km stretch of the Titiwangsa mountain range.

The cost is somewhat based on the hardness of the rock. If the consultant’s study on the hardness of the rock is accurate, there will not be a VO. However, if the study is inaccurate and the rock is harder than stated in the report, then a VO will occur not only for Shimizu but any other consortium that undertakes the job.

The Shimizu-led consortium is locked in a close fight with a partnership between Taisei Corp and Malaysia’s HRA Teguh Sdn Bhd for the tunnelling job estimated at RM3 billion. A third proposal is from Kajima Corp that has gone in alone without a Malaysian partner.

Sources say Shimizu’s bid is RM150 million less than Taisei’s proposal. However, in the tender proposal, Shimizu has a conditional VO clause which has caused differences in opinion between the Ministry of Water, Communications and Energy and the Japan Bank for International Cooperation (JBIC) in awarding the job.

It is said that the ministry favoured the team of Taiseh and HRA Teguh because there is no VO in its proposal while JBIC was rooting for the Shimizu-led team because its bid was the lowest.

JBIC is in the picture as it is providing a loan of RM2.5 billion for the project. The loan is part of its Official Development Assistance programme under the New Miyazawa Initiative to assist developing countries.

It is learnt that if the VO is dropped, it could propel the Shimizu-led consortium to be the frontrunner to bag the large-scale, high-profile tunnelling contract.

The interstate water transfer project is part of a mega plan to resolve the shortage of water in Selangor. Other options such as the transfer of ground water from Perak were also mooted but the plans somehow never took off.