Penang Watch

It is sad to see how the cost of building 2nd Penang Bridge has kept rising up, up and again-with the people looking on helplessly.  These are very simple ways to cut costs significantly:

1.if the span over the sea is costly (3.32bil) why not build the bridge (if it must be built) closer to the current bridge -and then let the `bridge' continue as a coastal highway to where the current planned exit is, to let it serves its real estate development functions there? That easily cut the bridge span and related cost by 50%! 

2. Where is the cost saving from cutting off the 2 `o's from the mid-span of the original bridge design (ie the 2 restaurant cum look-out points)? Those circular, double storey construction complete with concrete Pinang trees and concrete `pearls' look expensive. But it seems that cutting them off didn't save anything at all! Care to explain? The cost saving may (guestimate only) come to RM200mil ie about 5% of the total construction costs!

3. Design and concept cost run into RM285mil -that is  6.63% of project cost of RM4.3bil. This is very high compared to other construction cost where design and concept cost constitute 1-2% of the entire costs of any construction. Look like some fats can be trimmed here! 1% of the construction cost come to Rm43mil. This can save another 5% of construction!

4. Yet if cost saving is made a primary objective there are many areas to cut the fats from the overinflated costs especially the `management' costs, the `sub contracting margins' and all other corruption costs. That may constitute a big slice of the official construction costs. 

From the above easily the costs cutting can potentially bring the cost down to 30% -without compromising the Bridge's integrity at all. Such cost cutting can be achieved if there is open tender -ie if the Govt don't insist to use the project to fatten a few cronies!

Cost rising further for second Penang Bridge

PENANG, July 2 — Construction giant UEM Berhad (UEM) went on a charm offensive today to convince mainstream media editors that some progress has been made on the construction of the Second Penang Bridge.

Datuk Ahmad Pardas Senin and other senior officials also attempted to make a case for the higher cost of the crossing. Government officials have told The Malaysian Insider that the cost of the bridge will be capped at RM4.3 billion but UEM officials today said that the cost is inching closer to RM4.58 billion and could rise even further, citing the spike in raw materials.

It is understood that the UEM estimate includes the controversial development fee of RM285 million which the government is not keen to pay to the government-linked company, especially as the Economic Planning Unit of the Prime Minister's Department has decided against awarding the concession to manage the bridge and collect the toll to UEM.

Instead, the government will have an open tender before appointing a company to operate and maintain the bridge and collect toll on its behalf.

Government officials opted for this model because the Ministry of Finance is funding the bridge through soft loans and there is the belief that the toll should go towards servicing the loan. Also, not giving the concession to UEM will save the government some RM18 billion over four decades.

In the past, the government has had to make up the shortfall to concession holders when the latter were not allowed to raise toll rates as spelt out in the contract.

UEM told the media editors in a briefing in Penang that the land portion of the crossing will cost RM997 million while the sea portion is RM3.32 billion. They added RM285 million for design, concept and preliminary work.

This cost estimate is likely to face some opposition from Finance Ministry officials and the task force headed by Tan Sri Zaini Omar. Industry sources say that the six-kilometre land portion can be built for RM700 mil, even taking into account a healthy profit margin, instead of RM997 million.

Also, though UEM is claiming RM285 million for design and concept, industry sources say that the design and concept of the crossing was developed by China Harbour Engineering Company (CHEC), UEM's partner. China provided a US$800 million loan to finance the bridge construction.