Mohmand Hydropower Project: AGP smells a rat in award of contract

ISLAMABAD: The Auditor General of Pakistan has alleged that the contract of Mohmand Hydropower Project to M/s CGGC-DESCON (JV) was awarded without adequate fair competition.

The AGP, in its audit report of FY 2019-20, said that as clarification of PPRA “whenever a procuring agency is confronted with such a situation whereby the rate quoted by a single bidder cannot be compared so as to declare it as the lowest rate or otherwise, it may make prudent decision.”

AGP said that while making a decision, the following factors may be kept in view: (i) the comparison of price of goods, works or services, if procured during the current financial year;(ii) market price of the goods, works and services to be procured and ;(iii) in case abnormal increase in prices is observed, the procuring agency may like to re-advertise the procurement opportunity, if time permits. Re-advertisement would be a preferred option.

Further, according to clause-1.5(iv) of Wapda procurement and contracts manual, “for projects which include procurement on the basis of ICB, the advertisement shall be published in foreign newspapers, journals and websites. Such invitations may also be forwarded to embassies and trade representatives of countries of likely suppliers and contractors.”

In the office of General Manager/Project Director, Mohmand Dam Hydropower Project, it was noted that Wapda advertised an open invitation for bids on November 23, 2017 for the construction of civil works including design, supply and installation of electrical & mechanical works and hydraulic steel structures.

In response, two Joint Ventures namely M/s CGGC-DESCON JV) and M/s FWO-Power China (IV) submitted their bids up to closing date. As per Technical Evaluation Report, M/s FWO-Power China (IV) “was declared technically qualified and their financial bid was technically non-responsive” and their financial bid was returned un-opened. M/s CGGC-DESCON (JV) was technically qualified and their financial bid was opened and after evaluation and correction, total bid price was finalized as Rs 201.523 billion against PC-1 estimates of Rs 163.681 billion.

However, the bidder further reduced / discounted his bid from Rs.201, 523.48 million to Rs.183, 523.48 million. Scrutiny of the evaluation report and discounted bid prices of various components of the contract work revealed that the bid prices of three out of four components i.e. Lot-1 (access roads and project colony), Lot-2 (main dam works), Lot-3 (irrigation works) were substantially on the higher side as compared to PC-I estimates / ECNEC approved cost, at 31.88%, 26.73% and 8.31% respectively, except component of Lot-4 (supply and installation of E&M works) which was 27, 87% below the PC-I estimates.

However, according to financial evaluation report, the main reason for decrease in adjusted price bid for Lot-4 (E&M works) was the fact that the bidder had proposed Chinese Origin Manufacturers for almost all of the plants. Furthermore, different civil work costing Rs.6.039 billion under Lot-1 were awarded on lump sum job basis without any detailed measurement, measurement of the works and detailed quantity and basic unit rate, reasonability containing basic unit price and basic quantity unit. In the absence of details rates for a work / job could not be ascertained. As per ECNEC’s approval, the ratio of payment in US$ was 34.29% whereas as per bid price, the ratio was 49.38% thus, percentage ratio of US$ in the bid price was also increased from ECNEC’s approved ratio by 15.09%. As such the Employer would pay Rs.27.701 billion more in US$ instead of local currency and in addition, Rs.201. 523 billion against the PC-I estimates of Rs.163.681 billion would also be paid in the currency rate conversion loss.

Audit is of the view that project of such magnitude / value should have been awarded through international competitive bidding. In the absence of such diligence, international firms of the required experience couldn’t participate.

Resultantly, the work was awarded without adequate and fair competition.

However, the single technically qualified bidder with higher bid prices over PC-1 estimates was awarded huge quantity of work on lump sum job basis.

The project management was required to strictly follow the mentioned guidelines of the PPRA either to make rate comparison or re-advertise the work to ensure transparency and economy in procurement of the works. However, neither of the options were adopted.

Audit was of the view that non-adherence to the aforesaid instructions resulted in award of contract amounting to Rs 183.523 billion without rate comparison as required under PPRA and without international public notice.

The matter was taken up with the management in October, 2019 and reported to the Ministry in November, 2019. The management replied that Wapda widely advertised for open invitation of bids in pursuance to PPRA rules in two national dailies Single stage – two envelope tendering procedure was adopted for the bidding and twenty three (23) firms purchased the tender documents. The bid submission date was extended 3-times by more than 5-months in total to encourage the bidders to participate in the bid. The pre-bid meeting was held on January 24, 2018 wherein 15 international and local bidders participated and 10 international and local bidders joined the project site which showed the advertising / publicity for the bid.

Two joint venture firms submitted their bids. M/s CGGC-DESCON (JV) was technically responsive and therefore, invited for opening of financial proposal, whereas, financial proposal of non- qualified JV of FWO-Power China was returned un-opened. Since, two bids were received under open competitive bidding procedure (single stage-two envelope), therefore, they cannot be categorized as single bid.

The reply was not acceptable because neither wide publicity was carried out, as required under Wapda Procurement & Contract Manual, nor the responsibility of rates was ascertained.

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