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There is also cloud of corruption hanging over the lowest bidder - Shimizu-Nishimatsu-UEMB-IJM. Nishimatsu, a main player in the consortium - is being investigated by the Japanese government for allegedly bribing a Thai official to secure a contract in Bangkok and for operating a political slush fund in Tokyo.

The Abdullah administration did not envisage getting caught in this quagmire when tenders were called for the project. The Ministry of Energy, Water and Communications came up with an international competitive bidding scheme to select international consultants who would scrutinize the bids.

The government wanted to ensure that the process was transparent and was keen to use it as the benchmark for open tenders in Malaysia.

After a lengthy process, four groups were short-listed for the project.

One group pulled out at the tender bids of the three remaining consortiums was opened in April last year.

The Shimizu-Nishimatsu bid was the lowest at RM1.31 billion, followed by Taisei-HRA Teguh at RM1.46 billion and Kajima Corp at RM1.47 billion.

On the face of it, the Shimizu-led consortium should have been awarded the contract because it submitted the lowest bid. But there was one snag: it had submitted a conditional bid.

Under international tender process, any company that submits a conditional bid should be disqualified. This is because the price quoted in the conditional bid could change substantially.

In this case, Shimizu submitted a conditional bid which calls for the consortium to be compensated in the event that during the tunneling process, it encounters rock strength higher than it estimated. Independent geological reports suggests that the rock strength in the Titiwangsa Range is higher than what Shimizu's cost estimates were based on.

This led government officials to believe that the administration could end up with a variation order of several hundred million  ringgit if it awarded the tunnel project to the Shimizu-Nishimatsu consortium.

The Malaysian Insider has learnt that the Cabinet and the Ministry of Energy, Water and Communications approved giving the project to the Taisei consortium in August but there objections from the Japanese International Cooperation Agency, which insisted that the project must go to the lowest bidder.

Since then, there has been behind-the-scenes wrangling with Malaysia stressing that it would not bow to pressure from JICA.

Fearing a full-scale diplomatic fallout, JICA urged the Malaysian government to negotiate with Shimizu and urge them to remove the "variable component' of their bid. In short, Shimizu will not be able to claim more than RM1.31 billion.

But till today, the contract has not been awarded because of the threat of legal action and also the problems engulfing Nishimatsu in Japan.

The Japanese government has banned Nishimatsu from bidding for public works projects in Japan. Also, even if the federal government goes ahead and awards the project to Shimizu, it is unlikely to take off anytime soon.

The reason: the two other consortiums which bid for the project could initiate legal action on the basis that many guidelines of the international tender process were not followed by the lowest bidder.

This includes a clause which states that "no change in the price or substance of the Bid shall be sought, offered and permitted.''

The only way out of this jam for the Malaysian government is to stick to the rules of the international tender process, and not to buckle under the pressure of JICA or any other Japanese agency.

After all, the Pahang-Selangor water transfer project was supposed to be the benchmark for open tenders in the country.

Sad indictment of the government if we cannot even get the template off the ground.