MAHB denies asking Jacobs to step aside in aerotrain tender selection

This article first appeared in The Edge Malaysia Weekly, on June 14, 2021 - June 20, 2021.
MAHB denies asking Jacobs to step aside in aerotrain tender selection
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MALAYSIA Airport Holdings Bhd (MAHB) has denied suggestions that it had asked consultancy firm Jacobs to “step aside”, pending the award of a tender for an aerotrain system contract at Kuala Lumpur International Airport (KLIA).

Market talk had swirled that Jacobs had been sidelined from the selection process of the winning bid, and that it had not been involved in the evaluation process and in assisting MAHB to decide on the best bid for the contract, dubbed “Design, Supply, Installation, Testing and Commissioning for Automated People Mover (APM) and Associated Works at KLIA International Airport”. The tender closed on Nov 2 last year.

In an email response to The Edge, MAHB says, “MAHB had appointed Ch2M, which was subsequently bought over by Jacobs, as the project management consultant for our aerotrain replacement project.

“It is common in a large project of this scale to appoint a third party to provide project management consultancy services to help manage risks and achieve the best outcome for the project. As a project management consultant, Jacobs’ scope of work ranges from the development of user requirements up to implementation project management, including conducting the technical evaluation for all submitted bids. This scope of work has not changed since their appointment by MAHB,” the airport operator explains.

Meanwhile, Richard Hilldrup, Jacobs regional solutions director – Rail, Asia, tells The Edge in an email response: “As a policy, Jacobs does not discuss client-related matters, and in this case, we are also precluded by an NDA (non-disclosure agreement) to discuss the project.”

The allegations that Jacobs had been sidelined from the selection process comes on the back of complaints by certain quarters questioning MAHB’s bidding process. The initial requirements in the tender documents did not specify the type of aerotrain preferred — either self-propelled or cable-propelled, also known as pulley models. However, after the close of bids last November, MAHB made amendments to the tender via a letter in March this year, asking specifically for bids with cable-propelled systems as well.

Although MAHB clarified questions on the tender process and the subsequent amendment a few weeks ago, saying it was “to clear any confusion or doubt that may arise”, some of the parties involved in the tender termed the amendments as an afterthought and sought a retender, which the airport operator is opposed to.

To put things in perspective, having Jacobs, an international consultant, involved in the selection of the winning bid could help allay concerns and possible questions over the integrity of the aerotrain tender.

At the heart of the tender is MAHB’s existing aerotrain, which began operations in 1998 and underwent an upgrade in 2011. After more than two decades, indications are that MAHB and KLIA are in need of a new aerotrain facility.

The Edge understands that the aerotrain tender attracted as many as five bidders: MMC Corp Bhd, partnering Japan’s Mitsubishi Heavy Industries; Malaysian Resources Corp Bhd (MRCB), in a tie-up with Leitner-Poma of America Inc; Pestech International Bhd, in a joint venture with Canadian outfit Bombardier; privately held Hartasuma Sdn Bhd, in partnership with Austrian company Doppelmayr Seilbahnen GmbH; and local outfit SMH Rail Sdn Bhd.

It is understood that the Pestech-Bombardier, MMC-Mitsubishi and SMH Rail bids involve self-propelled aerotrain systems, whereas MRCB-Leitner and Hartasuma-Doppelmayr are cable or pulley system bids. The existing aerotrain used by MAHB at KLIA is a self-propelled system. The cable-propelled or pulley system aerotrain does have its fair share of proponents, however, as it is regarded as cheaper and has been successfully employed in large airports worldwide.

Thus far, the Pestec-Bombardier bid is understood to be favoured by some at MAHB, but a decision has yet to be made. The Edge understands that the bids range from just below RM600 million to more than RM750 million, with the cable-propelled or pulley system being considerably cheaper than the self-propelled aerotrain models.

The Edge understands that, with costs being a key issue, the bidders were given three options: one, MAHB pays for the entire job upfront; two, 40% of the contract value is paid upfront and the remainder at a later date; and three, the bidding party bears all costs and undertakes the design, build, operations and maintenance, with the transfer (of ownership) and repayment done over a five- or 10-year duration, on a staggered basis.

While the third option requires little capital outlay from MAHB, it requires the bidder to have a strong balance sheet to undertake the project.

MAHB is among the world’s largest airport operators, managing 39 airports, including five international airports in Malaysia and one in Turkey. The company’s latest financials have been ravaged by poor passenger numbers because of the Covid-19 pandemic, which makes costs an even more imperative consideration.

For 1QFY2021, MAHB suffered a net loss of RM221.3 million on the back of RM336.91 million in revenue. For 1QFY2020, it suffered a net loss of RM20.39 million on the back of RM933.84 million in sales.

Although MAHB incurred losses in the previous five consecutive quarters, it retained earnings of RM1.71 billion as at end-March this year. During the period in review, MAHB had cash and cash equivalents of RM931.72 million, RM4.53 billion in long-term borrowings and RM106.79 billion in short-term debt commitments.

Its stock closed last Friday at RM6.40, which translates into a market capitalisation of RM10.62 billion.

 

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