Tender process turns awkward

The power ministry is set to seek decision of the cabinet's purchase committee to either cancel an on-going power tender because of controversy surrounding it or award its contract to a Chinese consortium that created the controversy.

This move is very unusual because the ministry is supposed to seek approval of one specific proposal from the purchase committee instead of offering it with contradictory choices, says a power ministry official.

The official explains that the ministry is doing so as there is tremendous pressure to award the contract to the Chinese consortium. But as there are strong allegations about manipulating the tender process to favour that Chinese consortium, the ministry is not willing to take the onus of this decision.

This tender to build a 200 to 300 megawatt dual fuel power plant in Khulna was floated in mid 2015. The Power Development Board (PDB) selected Chinese consortium Harbin-Jiangsu as the lowest bidder in August, but the decision was instantly challenged by some co-bidders, officially and unofficially.

When the bid was opened on July 13 last year, the read out price of Harbin-Jiangsu was $292 million to construct the power plant. But this price is higher than that of five other bidders. For instance, Shanghai Electric-Alsaldo consortium offered $183 million.

The bid was also participated by Chinese Guangdong Power Engineering Co, Guangdong Electric Power Design Institute with French Alstom, Bangladeshi Energypac with Chinese Hubei Electric Corporation and Chinese Dongfang Engineering Corporation with Greek JP Avax consortium.

While different Chinese companies unofficially lodged complaints against the PDB's selection of Harbin-Jiangsu as the lowest bidder, Greek company JP Avax complained about the bid categorically to the Prime Minister's Office.

As the complaint had strong argument, the power ministry late last year had almost made up its mind to cancel the tender process. It was at that time the Chinese embassy wrote to the ministry not to cancel the bid and award the contract upon re-evaluating the bids of the bidders.

With these pressures, the ministry sought the decision of the state minister for power whether they would cancel the tender (and go for a fresh one) or award the contract to Harbin-Jiangsu. On February 4, the state minister asked officials to discuss the matter thoroughly.

The discussion followed last Sunday only to conclude that this matter should be left with the purchase committee. Accordingly, the ministry is now preparing a summary of proposal for the purchase committee's approval.

BASIC COMPLAINTS

Greek J&P-AVAX formally complained to the PMO: “We feel that there is an effort within the authority to try to accept and evaluate the consortium of Harbin-Jiangshu and bring them in the position of the preferred bidder which did not offer the guaranteed data as per tender specifications, and therefore should be immediately rejected.”

The letter, signed by Theodoros Arseniou, director of energy of J&P-AVAX SA, said the Harbin-Jiangshu consortium's offered price was $27 million higher than that of J&P-AVAX SA's.

The company also complained that the PDB wrongly calculated the “heat rate” of Harbin-Jiangsu's power equipment. Other bidders informally echoed the same complaint.

The Harbin-Jiangsu proposed to produce 357MW electricity, but the other bidders followed the tender limit of 300MW. One of the requirements said the tender evaluation committee would not consider the proposal if any company proposed to generate less than 200MW or more than 300MW. The excess power produced would not also be used for evaluation of per kilowatt power cost.

But the PDB calculated Harbin-Jiangu's per kilowatt-hour power cost on the basis of the “heat rate” of 357MW although it was showed as a 300MW plant. Consequently, the PDB calculated Harbin-Jiangshu plant's heat rate at 6,382 kilojoules per kilowatt-hour, which should have been 7,784 kilojoules.

In power plant technology, a higher heat rate means it is less energy efficient. Therefore, the PDB evaluation showed Harbin-Jiangshu's plant to be more energy efficient and cheaper than it actually was.