Govt agrees to RM155mil settlement with former Sabah Pan Borneo Highway project partner

KUALA LUMPUR: The government agreed to pay a one-off settlement sum of RM155 million to Borneo Highway PDP Sdn Bhd (BHPSB) following the 2019 termination of its contract for the Pan Borneo Highway Sabah project.

Works Minister Datuk Seri Alexander Nanta Linggi said the cabinet agreed to the payment to resolve the company's disputed claim after the termination.

He said this in a written parliamentary reply to Isnaraissah Munirah Majilis (Warisan-Kota Belud).

Isnarraissah asked for a net breakdown of the 5.5 per cent management fee paid to the project delivery partner (PDP), and the amount and breakdown of reimbursable costs and other payments.

Nanta said a total of RM700.99 million was paid to BHPSB during the PDP period, in line with the contract.

Of that, RM66.917 million, including tax, was the management fee, calculated at 5.5 per cent of progress payments to work package contractors.

The remaining RM634.073 million, including tax, was reimbursable costs. They comprised RM448.360 million paid to consultants, RM146.389 million in operating expenditure, RM16.638 million in capital expenditure and RM22.686 million in Goods and Services Tax (GST).

Nanta said the cabinet agreed in principle on Dec 19, 2018, to end the PDP agreement under clause 28, "Termination on National Interest."

A termination notice dated April 22, 2019, took effect on Sept 22, 2019, he said.

BHPSB was appointed under an agreement dated April 11, 2016, between the federal government, the Sabah government and BHPSB to manage Phase 1 of the project, covering about 706km and 35 work packages.

The decision to use the PDP model was made by the Economic Council on Aug 24, 2015, as was done for the Sarawak section of the highway and the Mass Rapid Transit project, he said.

Nanta said the model was designed to shift implementation risks and the daily management burden from the government to the appointed company, which was also required to meet project completion timelines and cost targets.

He said the Works Ministry and the Sabah government remained committed to completing the project as planned to enhance connectivity, spur the economy, and benefit the people of Sabah.