Misperception clouding Penang Forum’s view of transport plan

The Penang Forum steering committee’s statement about the Penang Transport Master Plan (PTMP), published by Free Malaysia Today today, has again misled the public by alleging that the project has failed because it involves land reclamation through a joint-venture (JV).

As often announced by Penang state officials, the reclamation is part of the financing method for PTMP.

The federal government has not been forthcoming in offering financial grants to fund the PTMP. The loan guarantee to build the Light Rail Transit (LRT) has also been cancelled by Putrajaya.

In order to build a reliable public transport system in Penang, the state government has to find ways to kick-start the project.

Forming a JV company to begin the planned land reclamation work is a huge step towards realising the PTMP, which unfortunately had been misperceived by Penang Forum.

Nevertheless, misperception is not alien to Penang Forum.

When the PTMP included the LRT line, BRT line, and monorail line to provide a better public transport system at Seberang Perai, the Penang Forum misperceived it as cost inflation.

When the Penang government used request-for-proposal (RFP) to call for tender – the same procurement method employed and recognised as open tender by the United Nations, World Bank, and the World Health Organization – the Penang Forum claimed that the RFP was not an open tender.

When the world’s foremost authoritative organisation on climate change, the United Nations’ Intergovernmental Panel on Climate Change reported that “land reclamation is mature and effective technology and can provide predictable levels of safety” to fund climate adaptation projects (Special Report On The Ocean and Cryosphere In A Changing Climate), the Penang Forum protested against reclamation, denying it as climate action.

With such a track record of misperception, and in view of Penang Forum’s recent statement on PTMP, one wonders if the group has completely lost it?

Of direct negotiations and open tenders

The heated exchange over direct-negotiated projects in the recent parliamentary sitting has once again raised question over the status of “request for proposal” (RFP) as an open tender method.

The criticism over the nature of RFP as open tender stemmed from the ignorance of classification of procurement approaches.

Any procurement method subjected to competitive submission of tender is “open”. This is in contrast with procurement that is directly awarded without involving the evaluation of various submitted proposals.

Open tender can be done in several ways, one of which is RFP. To borrow the classification from biology, open tender is genus while request for proposal is species.

The advantages of open RFP include the early identification of risks and benefits of the different proposals. RFP also allows for creativity and pushes for innovative solution.

Bidders can develop their best proposal for the project, while the project owner gets to evaluate the various counter-plans to choose the most suitable one.

RFP is not only a competition for the best price, but more importantly, a battle for the best solution within the stipulated specification.

In other words, RFP is a multidisciplinary procurement process that takes into consideration a range of factors and various aspects (environmental, economic, social, governance) in the decision-making process.

International institutions such as the World Bank, United Nations, Asian Development Bank, and World Health Organization use the RFP as open tender for their procurement need.

Penang was one of the earliest administrations in Malaysia that adopted the open RFP when the method was rarely practised in the public sector. Academician Goh Ban Lee had remarked the adoption was “new thinking” and “very refreshing.”

The Penang Transport Master Plan is one of the projects planned through open RFP. The tender was advertised and the public was invited to bid. A total of 55 local and international companies responded to the RFP, with six submitting their proposal.

Today, various government-linked institutions such as Bank Negara, Prasarana Malaysia Berhad, Malaysia Digital Economy Corporation, and Penang Port Commission are issuing open RFP to invite bidders to submit their proposal.

Not all procurements can be openly tendered. Items that are required in an emergency, copyrighted or specialised cannot be tendered.

Otherwise, the practice of open tender should be required for public infrastructure projects as much as possible in order to obtain the best solution for the people.

Is ‘open Request for Proposal’ an open tender?

In today’s interview with Penang Chief Minister Chow Kon Yeow, the BFM interviewer asked about the allegation that the Request for Proposal (RFP) used to award the Penang Transport Master Plan was not an open tender.

It is very unfortunate that such misinformation is being propagated by certain NGOs and critics against the project.

The chief minister has rightly replied that the RFP used for the project was “an open tender by any definition.”

There are several types of open tender. Each type is employed according to the scale and limitation of the project.

Let’s say you are hungry and desire a burger. Regular open tender is like going to the pasar malam and coming back with the cheapest burger.

RFP on the other hand is like holding a contest, and inviting all the pasar malam burger stalls to participate. The stall that makes the tastiest burger and at the best price — but not necessarily the cheapest — gets the prize.

The main difference between the two is that price is the primary consideration in a regular open tender whereas other factors come into play in RFP.

RFP allows bidders to offer their own proposals, with room for innovation. This tendering method was first employed by the Penang state government in 2010 to develop landmark and restore heritage sites.

Goh Ban Lee, a former associate professor at Universiti Sains Malaysia, has this to say about RFP:

“I find the RFP idea very refreshing and interesting. If it is left to state planners or architects, it will only be one design. Generally, planners working in the civil service, as government officers, follow the normal procedures and plans and rarely take risks.

“However, by opening it up to the private sector, it will provide a myriad of ideas and, with competition, the bidders strive to give their best shot — and the sky is the limit to their innovation... This is new thinking, it... gives the state government the pick of the best proposals. Ultimately, the state government decides and picks on the best options offered.”

RFP can be either closed or open. Closed RFP is like holding a contest where you only invite one burger stall to participate. No need to guess who’s the winner. No alternative to be considered or compared.

Open RFP, on the other hand, is an invitation to anyone in the market to bid or tender for the job. It is competitive, as the submitted proposals will be evaluated with alternatives.

World Bank uses open RFP for its global meetings, management programs, data centre, digital entrepreneurship, and many others.

Open RFP is sometimes used interchangeably with the phrase “open tender” by other international institutions such as the United Nations (UN). In UN’s Development Programme’s procurement notice, “open tender” is bracketed as “RFP.”

“Open request for proposal tender” is similarly employed by a Queensland government's project and the National University of Singapore Society. (See attached photo)

Whether it is Penang Transport Master Plan, World Bank, UN, Australia, or Singapore, open RFP is internationally recognised as open tender.

Penang state government employed open RFP for Penang Transport Master Plan to look for the Project Delivery Partner. Fifty-five local and overseas companies expressed interest, with six submitting proposals through the open RFP.

The consultancy and audit firm KPMG was appointed to provide independent evaluation of the six proposals for their technical expertise and funding model. The delivery partner was appointed based on the evaluation and recommendation.

As the chief minister said, this is by any definition an open tender.

Request For Proposal differentiates PTMP from other mega projects

There are some misconceptions that the PTMP is the same as other mega projects that should be reviewed, if not cancelled. Some have even lobbied all the way to the Prime Minister Office and the Council of Eminent Persons against PTMP.

These misconceptions are based on the wrong understanding about PTMP. It is therefore important for the public to know the uniqueness of PTMP in order to discern properly.

What sets the PTMP apart from other mega projects is the use of an open tender process known as Request For Proposal (RFP). The RFP is a type of open tender that allows for competitive evaluation among different innovative proposals before a decision is made.

The RFP differentiates PTMP from other projects, such as the RM81 billion East Coast Rail Link (ECRL), that do not use open tender. 

Regular open tender and RFP

There are several types of open tender. Each type is employed according to the scale and limitation of the project. I will only elaborate on the tender processes related to PTMP.

Let's say you are hungry and desire for a burger. Regular open tender is like going to the pasar malam and coming back with the cheapest burger.

RFP on the other hand is like holding a contest, and inviting all the pasar malam burger stalls to participate. The stall that makes the tastiest burger and at the best price - but not necessarily the cheapest - gets the prize.

The main difference between the two is that price is the primary consideration in regular open tender whereas other factors come into play in RFP.

RFP allows bidders to offer their own proposal, with room for innovation. This tendering method was first employed by Penang state government in 2010 to develop landmark and restore heritage sites.

Goh Ban Lee, a former associate professor at Universiti Sains Malaysia, has this to say about RFP:

“I find the RFP idea very refreshing and interesting. If it is left to state planners or architects, it will only be one design. Generally, planners working in the civil service, as government officers, follow the normal procedures and plans and rarely take risks. However, by opening it up to the private sector, it will provide a myriad of ideas and, with competition, the bidders strive to give their best shot — and the sky is the limit to their innovation... This is new thinking, it... gives the state government the pick of the best proposals. Ultimately, the state government decides and picks on the best options offered.”

Closed and open RFP

RFP can be either closed or open. Closed RFP is like holding a contest where you only invite one burger stall to participate.  No need to guess who's the winner. No alternative to be considered or compared.

Open RFP, on the other hand, is an invitation to any one in the market to bid or tender for the job. It is competitive, as the submitted proposals will be evaluated with alternative.

Double open RFP for PTMP

Penang state government employed open RFP twice for PTMP. Let's call this double open RFP.

Double open RFP is like, you want to open a restaurant, but first you hold a contest to choose a restaurant consultant to advise you what food to serve. Say the winning consultant's choice is burger. Next you hold a second contest to choose the chef who can prepare the best burger.

For PTMP, the first open RFP was conducted to appoint a consultant to prepare an initial study of building an integrated transport infrastructure in Penang. Many criteria were set, one of which is that the project has to have a funding mechanism.

The first open RFP began on 12 March 2010 and ended on 30 April 2010. There were six companies that applied. They were AECOM Perunding Sdn Bhd, Melewar Metro Penang Sdn Bhd, Jurutera Zaaba Sdn Bhd, Systra MVA Singapore Pte Ltd, Perunding Trafik Klasik Sdn Bhd, and AJC Planning Consultants Sdn Bhd.

On 27 April 2011, the RM3.2 million project was awarded to AJC Planning Consultants Sdn Bhd, which was set up by Halcrow, Singapore Cruise Centre, and AJC. The cost was shared between the Northern Corridor Implementation Authority (NCIA) and Penang state government at RM1.5 million and RM1.7 million respectively. The consultant produced a recommendation with estimated cost of RM27 billion.

The second open RFP was carried out from 15 August 2014 to 16 December 2014, and was then extended to February 2015, looking for the Project Delivery Partner (PDP) to implement PTMP. 

Fifty-five local and overseas companies expressed interest, with six submitted proposal through the open RFP. Among them were Gamuda, IJM Corp, MMC Corp Bhd, Scomi Group Bhd, and WCT. The consultancy and audit firm KPMG was appointed to provide independent evaluation of the six proposals for their technical expertise and funding model. 

Based on KPMG's evaluation, on 14 August 2015, SRS Consortium (formed by Gamuda, Loh Phoy Yen Holdings, and Ideal Property Development) was appointed as the PDP.

SRS Consortium was selected after it went through the competitive open RFP.

Open RFP is internationally recognised as open tender

Despite the open and transparent nature of the RFP used in PTMP, there are deliberate allegations stating that the RFP is not open tender.

For example, Lim Mah Hui and Ahmad Hilmy wrote that, “In RFP, bidders are not placed on a level playing field. The criteria for bidding under the RFP are not transparent or necessarily consistent. Clearly, RFPs are not open tenders...”

They also argued that “the best way to evaluate open tenders is for a government to follow the guidelines established by the World Bank,” implying that the World Bank does not practice RFP.

They are mistaken. As mentioned above, the RFP used in PTMP is open tender. Moreover, World Bank itself uses RFP and even has its own standard guidelines for RFP. This method is used by World Bank for its global meetings management programs, data center, digital entrepreneurship, and many others.

Open RFP is sometimes used interchangeably with open tender by other international institutions such as the United Nations. In the United Nations Development Programme's procurement notice, “open tender” is bracketed as “RFP.” (See the photo below.)

"Open request for proposal tender" is similarly employed by a Queensland government's project and the National University of Singapore Society.
 

Whether it is Penang's PTMP, World Bank's guidelines, United Nations' procurement notices, Australia's project, or Singapore's institution, open RFP is internationally recognised as open tender.

Lim and Ahmad have therefore misinformed the public. Their misinformation has been taken up and disseminated by others such as the Consumers Association of Penang.

Both Lim and Ahmad may have preferred the regular open tender over against open RFP because of their concern for the cost. They want the cheapest transport infrastructure. But given our local road condition, geography, socioeconomic outlook, and other considerations, the cheapest is not necessarily the best for Penang.

Neither is the most expensive proposal the best. Therefore, the open RFP was necessary to enable the state government to evaluate different proposals with different estimated cost and suggestion, based on independent review, to decide the best for Penang.

As a competitive and transparent tendering process, open RFP allows for innovative solution at a reasonable cost. This sets apart PTMP from other mega projects.