6 June 2013

Contractors who fail to meet the existing deadline to complete their works for klia2 project will be penalised. In a statement yesterday, Malaysia Airports Holdings Bhd (MAHB) said it would not grant any extension of time for contractors to complete the klia2 project; and therefore liquidated ascertained damages (LAD) will apply to contractors that are behind schedule.

The airport operator made it clear yesterday that no extension is necessary because extensions were granted to contractors that had already accounted for all the design changes requested by all stakeholders of klia2 up to now.

“MAHB will continue to work closely with the affected contractors to resolve their problems in the most amicable manner for all parties concerned,” MAHB said.

MAHB said it believes the cause of the delay, despite repeated commitments, was insufficient resources to complete the work according to its programme and deadline.

MAHB noted that it cannot determine a new opening date for klia2 until a detailed work programme and resource planning by the affected contractors “can be scrutinised by the project management team and consultants”. Such details have yet to be submitted, it said.

MAHB pointed out that the scrutiny of the detailed work programme and resource planning is to enable the group to be convinced that there will be no “further slippage on the committed date of completion as had happened in the past”.

The new low-cost carrier terminal (LCCT) was scheduled to open on June 28, the 15th anniversary of the opening of Kuala Lumpur International Airport (KLIA).

MAHB has yet to reveal which contractors have not completed works on time.

On Tuesday, Bina Puri Bhd executive director Mathew Tee said the joint venture of UEM Group and Bina Puri was seeking an extension of time until September or October to complete additional works for the klia2 project.

Tee told the media he was confident Bina Puri would not be obliged to pay compensation for its failure to meet construction deadlines as the delay was caused by the changes made to the design of the terminal.

With MAHB’s latest stance on extension on time, Bina Puri and UEM Group may encounter a totally different scenario now.

It is learnt that the joint venture’s LAD are estimated at around RM200,000 per day or RM6 million a month effective June 28. The joint venture is responsible for the construction of the terminal and satellite buildings as well as several sector piers to the sides of both buildings.

MAHB, which took over the project from KLIACS (formerly a unit of Ministry of Finance) in September 2011, has been blamed for several delays to the project. TheLCCT’s original opening date was in September 2011. Its initial price tag was RM2 billion.

“We would also like to confirm that at this point that all variation orders have been addressed and as of now, with the overall project being 90% completed, the cost is still below RM4 billion,” the statement said.

The ballooning costs are mainly because MAHB expanded the scale of the project and more facilities have been added to the terminal.

“The low-cost airline industry has gone through a dynamic phase … its original business model has evolved significantly to what it is today. We had to take into account all stakeholder requirements in order to support the future of low-cost airlines in building klia2,” the statement said.

For instance, the revised layout of the terminal is more than 70% larger at 2.766 million sq ft can accommodate 45 million passengers per year.

The original budget did not include an automated baggage handling system, which AirAsia Bhd later requested. In addition, AirAsia, which will be the biggest user of klia2, asked for more aircraft stands and a longer runway for its jumbo jets to land, according to sources familiar with the project.

AirAsia’s request for an automated baggage handling system alone delayed the project by one year as contractors had to demolish some structures and redo the construction.

However, AirAsia boss Tan Sri Tony Fernandes did not shoulder the blame for the delay and increase in costs, instead he has been finding fault with the klia2 project, although the carrier’s requests contributed to the higher costs and delays. AirAsia has declined to comment.

Fernandes initially refused to operate from klia2. The airline has yet to build its headquarters and aircraft support service centre at klia2. Without the support maintenance centre, it would be costly for AirAsia to operate at klia2, should the terminal open anytime soon, according to an industry consultant.

However,CEO Aireen Omar on Tuesday commented that the delay of klia2 was a disappointment as passenger volume has exceeded the existing LCCT capacity of 20 million per year.

On the congestion at the existing LCCT, MAHB said it had already discussed action plans with AirAsia and the other airlines to manage the capacity issue.

“We will continue to engage them to minimise any inconvenience to passengers. The LCCT is part of the KLIA airport system, hence will be able to leverage the overall KLIA capacity,” the airport operator said.

This article first appeared in The Edge Financial Daily, on June 6, 2013.

Source: theedgemalaysia.com

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