LRT3 main contractor faces over RM800mil in delay costs

NST Tue, Apr 28, 2026 08:00am - 1 hour

The main contractor the Light Rail Transit Line 3 (LRT3) could face over RM800 million fine as delays in the final stages of completion continue to accumulate. Pic courtesy of Prasarana.

KUALA LUMPUR: The main contractor the Light Rail Transit Line 3 (LRT3) could face over RM800 million fine as delays in the final stages of completion continue to accumulate.

Transport Minister Anthony Loke said the final enforceable penalty, or liquidated and ascertained damage (LAD), amount against Setia Utama LRT 3 Sdn Bhd will only be determined upon project completion, after which the standard dispute resolution process will apply.

Loke told Business Times via a statement that the LAD mechanism exists for good reason, and accountability must be upheld across the delivery chain.

The ministry expects Prasarana Malaysia Bhd to administer the contract firmly and in accordance with its terms, he added.

"As I have stated previously, my intention in disclosing the LAD figure in Parliament is firstly for parliamentary accountability, and to signal that there are real consequences for delays of this nature, and that accountability applies across the entire delivery chain, from the main contractor down to subcontractors," Loke said, without specifying when the project is expected to be completed.

The LRT3 project, Malaysia's largest light rail development to date, spans 37.8km from Bandar Utama to Johan Setia, with key interchanges at Bandar Utama (MRT Kajang Line) and Glenmarie (LRT Kelana Jaya Line).

Setia Utama could not be reached for comment at the time of publication.

Setia Utama was awarded a RM2.47 billion contract by Prasarana in March 2025 for reinstatement works on the LRT3 line from Bandar Utama to Johan Setia.

The scope includes five stations, two electric bus depots and rolling stock supply, making it a key package in the overall system delivery.

However, attention has increasingly turned to delay-related costs.

Loke previously told Dewan Rakyat that the LAD had reached RM474.8 million as at Dec 31, 2025, following delays beyond the extension of time deadline of July 10, 2025.

The penalty is imposed at RM2.73 million per day, or 0.024 per cent of the contract value, with an initial delay of 174 days recorded up to end-2025.

As at April 27 this year, an additional 117 days of delay has been recorded, bringing total delays to 291 days. This implies a further RM315.9 million in LAD for 2026, lifting total accrued penalties to about RM790.7 million.

Originally targeted to begin operations on Sept 30, 2025 after reaching 98.63 per cent completion, the project has since faced further slippages due to challenges in final-stage system integration and commissioning.

In February, Loke had said the delayed LRT3 line is set to be operational by June this year.

On whether the government would enforce the full LAD amount or consider waiver or renegotiation, given the scale of the penalties, Loke said decisions on LAD enforcement, including any dispute resolution process that follows project completion, rest with Prasarana as the project owner, not the ministry.

"What the ministry can say is that it does not support any arbitrary waiver of penalties that are contractually owed.

"That said, it would be premature to state a final figure at this stage, the definitive sum can only be determined upon project completion, after which contractors may raise formal disputes contesting portions of the liability, particularly where delays can be attributed to factors outside their direct control.

"This is standard practice in large infrastructure contracts and will be handled through the established dispute resolution process. Prasarana will manage that process in accordance with the contract," Loke said.

He said Prasarana, as project owner, is responsible for contract administration and enforcement, while the ministry's role is limited to oversight and policy direction.

On the causes of the latest delays, Loke said updates from Prasarana indicate the delays are rooted in system integration challenges, as a result of two interrelated factors.

"Firstly was the delay in the readiness of the signalling systems for the testing and commissioning phase. Secondly was faults arose during the fault-free run phase.

"Here, approximately two-thirds of faults related to the signalling system while the remaining one-third was primarily related to the rolling stock."

He noted that physical construction has largely been completed, with stations completed last year, trains delivered earlier and core infrastructure in place.

The remaining challenge lies in ensuring that all systems operate seamlessly as an integrated network.

"The fault-free run testing, which was originally planned for two months, extended to six months. Some response times in addressing these issues were not as swift as expected, which contributed to the extended timeline.

"These are not uncommon challenges in complex rail integration projects globally, but they underscore the need for closer contract management, which the Prasarana is actively pursuing," Loke said.

To mitigate further delays, he said Prasarana has intensified oversight of the remaining testing and commissioning phases, with closer monitoring of both cost and schedule implications.

"Prasarana is monitoring both the cost and schedule implications closely. The LAD mechanism exists precisely to protect the public interest in situations such as this, it is the contractor who bears the financial burden of the delay, not the government or the public," Loke said.

He added that the project is now in its final trial operations phase, with a revised opening date to be announced once outstanding testing requirements are satisfactorily completed.

Safety and system reliability, he said, will not be compromised for the sake of meeting earlier timelines.

Contractors have also been instructed to improve response times for technical rectifications, as the ministry and Prasarana work to prevent further prolongation of the final delivery stage.

Within the broader LRT3 project structure, most civil works have been completed, including the 9.2km Package GS07&08 through Klang, delivered by Sunway Construction Group Bhd in 2024.