Gerbang Strategic Action

Sun Tze Art of Business Strategy in action - Lessons Learnt?

If you claim $100 million, investigations and negotiations arising out from political pressures and habitual styles will end you with an agreed sum of maybe, 50%.

DRB-HICOM made a claim for $900 million for their Double Track project which was terminated and they end up being awarded $450 million.

At first, Gerbang Perdana was happy with $100 million claim. Somehow, PAC and political pressures forces the client to slash down the claim. So what do they do?

Samy must have help make them understand what is Sun Tze Art. He did that on various Privatised Expressways by first announcing a high too rate charges, example: $3.00 and then, finalised it to $1.50 (see: Pantai Expressway and Kesas). It was the same for IPPs.

So, Gerbang had learnt a lesson from him and now they had a claim for $360 million. Most probably, they will be getting $180 million (50%) which is 80% more than their earlier claim. Good? Smart?

Let's hear what Gerbang said:

Gerbang Perdana defended its RM360 million compensation claim for work done on the aborted half-bridge project. Chairman Tan Sri Razali Ismail said: "We are not making outlandish claims. The figures my company has put out have been properly looked at, thoroughly examined and were done in a fair and transparent manner. It’s up to the Government to deal with it."

On Sunday, Works Minister Datuk Seri S. Samy Vellu said Gerbang Perdana’s fresh claim for RM360 million compensation was inflated and "baseless". He said the company’s claim for the aborted half-bridge was RM100 million on March 3. The claim was compensation for 712 days of work done from February 2004 to Jan 18 this year. The company has till Tuesday to furnish documentary proof of the new claim of RM360 million.

Auditor-General Tan Sri Ambrin Buang said he would submit a report on the RM360 million compensation at the next Public Accounts Committee (PAC) meeting this month.

"We have only been asked to check whether in the past there has been similar cases of compensation. So we are checking. "However, the task given to the Attorney-General’s office did not include auditing of the claims," he said.

Interesting? Auditors only checking previous cases of compensation. Trying to draw an anology? Or trying to justify a strategic act?

Asked whether the amount claimed by Gerbang Perdana was fair, Ambrin said it was premature for him to comment as he had not seen the details.

PAC had earlier requested the Auditor-General to see if there was any justification for the RM360 million compensation for the aborted scenic bridge project to replace the Johor causeway by comparing with past compensations paid out.

DRB wins $425 million settlement

All the time, whenever there is a claim which the government disputed, the superintendent officer and the project team representing the government, stood on hard ground.

The government represented by the superintendent officer were prepared to go to court or arbitration to remedy.

But each time, when it was to be up for hearing, the government, advised by the attorney general office, would back off and sought out of court settlement; they call it compromise. In reality, they knew they would lose, because they didn't have enough supporting documents and evidence to back up their contention; impliedly, it was an admission of wrong and admission of a breach of contract.

It's no different this time.

DRB claimed variation order works for a balooned up sum of $900 million. They got $425 million bonus; courtesy of the government.

At first the S.O. stood firm to deny the claims as frivolous and vexatious. When the time to be present at the court of arbitration, they back out and sought refuge behind a compromised solution.

Why were they prepared to pay now, and such a hefty sum?

Is it the Syed Mokhtar factor?

DRB-HICOM is now in further talks with the Government on liquidated ascertained damages and the release of performance bond. It said is hopeful and positive that this matter will also be resolved soon.

DRB-HICOM Bhd, announced yesterday that the Government has finally agreed to pay RM425 million for additional works done on the Rawang-Ipoh electrified double-tracking rail project. The settlement is for the payment of variation order and loss and expense claims for the extra works, it told Bursa Malaysia Bhd yesterday.

The Rawang-Ipoh track forms part of the national railway firm Keretapi Tanah Melayu Bhd's RM14 billion project to lay parallel lines from Padang Besar to Johor Baru. DRB-HICOM, which is now controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, began work on the RM2.6 billion rail project in mid-2000 and was at first given until the end of 2002 to complete the stretch. The deadline was later extended to December 2004. The group was reported to have completed about 88 per cent of the 179km stretch. In June, the Government terminated the contract with DRB and appointed UEM Builders Bhd, one of the sub-contractors of the project, to complete the unfinished portion of the project.