The recent controversy over the award of the multi-billion dollar double-tracking railway project stunningly highlighted the great folly of Malaysian government's system of awarding contracts by negotiation, not by open tenders.

Indian Railway Construction Co. (Ircon) and China Railway Engineering Corp. (CREC) were given letters of intent in the middle of last year to construct the northern segment and southern segment respectively of the proposed electrified double-tracking railway project that covers the length of Peninsular Malaysia.

This proposed Malaysian rail-line is part of the ambitious concept of the Trans Asia-Europe rail-line that starts from Singapore, traverses through Kunming (China) and Siberia (Russia), and ends in Europe. The idea was conceived during a summit meeting of Asian and European leaders a decade ago, and Malaysia (headed by former premier Mahathir Mohamad) was proposed as coordinator to spearhead the Asian sector.

Following the said letters of intent, Ircon and CREC submitted bid prices that totaled RM42 billion (for a total length of 636 km).

A few months ago, a new bidder (MMC-Gamuda consortium) appeared on the scene to submit a much lower price of RM14.5 billion. Facing such competition, Ircon-CREC revised its total bid price initially to RM24 billion, and eventually to RM20 billion.

Days later, MMC-Gamuda suddenly announced on Oct 22 that it received the letter of award from the government on the previous night (Oct 21) (Is it not strange that government mail delivery should take place at night?).

Interestingly, there was allegation that Ircon-CREC submitted a joint bid of RM14.3 billion in the morning of Oct 22. Even more interesting was the question of why the award of this contract was rushed through in such abrupt manner, only days before former prime minister Dr Mahathir Mohamad relinquished his post as PM, without even allowing any time for negotiation to take place on Ircon-CREC's latest offer?

And why was the award deemed so urgent that the government could not even wait for the rudimentary courtesy of informing the governments of India and China respectively, of its intention to award the contract to an alternative bidder on price consideration?

After all, Ircon and CREC's participations were arranged as government to government deals whereby India and China were obliged to purchase Malaysia's palm oil in equivalent values, and both these companies are state-owned entities.

Equally intriguing was the fact that the important task of announcing the government's final decision was left to the bidder. The party that awards the contract, the transport ministry, remains silent to date. That makes one wonders: who made the final decision? When was the decision made? Why is the ministry silent?

Apart from the bizarre circumstances under which this contract was awarded, which speak for itself as regards the integrity of the political leadership, what alarms and pains Malaysians is that the biggest project ever undertaken by this country should have been awarded in such a haphazard and thoroughly unprofessional manner.

It thoroughly exposes the government's present system of awarding major contracts through negotiation of prices with pre-determined contractor as an utterly nonsensical and unacceptable practice, unimaginable in a democracy in this modern age. It is a system fraught with opportunities of corruption by government officials and profiteering by contractors.

There is simply no substitute for open, transparent and fair tenders to ensure the best deal for the taxpayers highest quality for the least cost. Forsaking this system for negotiation with selected contractor by any government could only mean one thing attempt for illegal self-endowment at the expense of the taxpayers.

Take the case of this railway contract. Just look at the way the price tumbles from RM42 billion to 24 billion to 20 billion to 14 billion. If there had been no competition, would the price have gone down to such level? Even at 14 billion, we cannot be sure this is fair price, as there as has been no open tenders. How can we be sure that we are getting the best quality at the least cost, unless we have in place a creditable system of open and fair tenders?

Tendering system aside, there is still the fundamental question of economic viability for this project. Mindful that this proposed Malaysian double-tracking project is only a tiny portion of a grand design that straddles the two continents (SingaporeKunmin sector alone is already 5,000 km long), one cannot help but wonders what is happening in other participating countries (Thailand, Cambodia, Laos, Vietnam and China) while Malaysia is rushing for the completion of its portion in four years' time.

Suffice to mention that many big gaps exist in these territories, particularly in Cambodia and Laos, for which there is no sign that the relevant construction would be undertaken in the foreseeable future. As such, it is prudent to assume that, for the purpose of making our financial projections, we will not enjoy the benefit of the anticipated influx of traffic from our northern neighbours arising from future completion of double tracking in these territories.

KTM, the state-owned railway company which owns and operates the Malaysian railway, has been running in heavy losses from time immemorial due to poor efficiency and low traffic volume. Needless to say, the future completion of the electrified double-tracking project, which drastically increases traveling speed, will attract higher volume of passengers and goods traffic, and boost revenue.

The big question is, to what extent would this increase in revenue offset the costs of the huge capital outlay needed to complete the entire double-tracking project?

Total capital costs would have to include the central sector from Seremban to Ipoh, which is still under construction, in addition to the proposed northern sector and southern sector currently being awarded to MMC-Garuda. Total costs would then easily exceed RM25 billion, including land acquisition costs.

The financing cost (or opportunity costs) for this amount should be in the vicinity of RM2 billion per year or RM5.5 million per day. This amount has to be added to the operating costs and depreciation of fixed and moveable assets, to ascertain the project's financial viability.

It is not difficulty to see that making profit from this gigantic investment is a monumental challenge that perhaps few investors would even dream of contemplating, unless of course the completion of the Malaysian section is timed to coincide closely with the simultaneous completions in other territories.

As with all other mega projects implemented in the Mahathir era, there has been no public consultation over the obviously premature commitment of this investment. It is highly doubtful whether the government has done the necessary calculations to satisfy itself that the implementation of this project will not bring catastrophic financial consequences that may burden taxpayers for generations to come, as it has done with other mega projects.

With the present change of guard to a new prime minister, we have hopes that impending catastrophe of this dimension could be avoided.

We have already lost much ground in the race to compete and excel in this fast globalising arena under the previous leadership. It is high time we stop the rot by plugging massive hemorrhage of our resources, discarding corrupt and wasteful system of procurement, and injecting some good sense to restore rationality to the management of this country.