BTCL to lose $25m loan

The Bangladesh Telecommunications Company Ltd (BTCL) is set to lose a $25 million Japanese soft loan for a countrywide telecom backbone as it repeatedly failed to adhere to the donor's guidelines in awarding the project to the lowest bidder.

The loan offered by the Japan International Cooperation Agency (Jica) will be taken back after June 2 as the BTCL continues to insist on time extension and retendering instead of awarding the job to the lowest bidder, a Turkish company, Netas, according to official correspondences obtained by The Daily Star. 

In February, Jica wrote to the ERD describing how the BTCL was ignoring procedures adding that Jica would not reschedule the loan validity beyond June 2. The ERD wrote to the telecoms ministry to urgently take action in this regard. Even then the BTCL continued to talk about the retender -- prompting Jica to write to the BTCL chairman and the secretary of the telecoms ministry to ask the BTCL to “obey the law”.

In addition, Jica, in a critical letter to the Economic Relations Division (ERD), refused the request for time extension and asked it “to draw lessons from this example to avoid repeating similar cases in the future....”

Back in mid 2011, the BTCL floated prequalification tenders under Jica fund -- Lot A to set up a new telecom exchange and Lot B to set up an uninterrupted telecom network as part of the government's vision of a Digital Bangladesh.

Netas submitted its bid to prequalify with four-five others in the tender. BTCL repeatedly disqualified Netas from the process. At one stage it led to government arbitration, followed by a BTCL-initiated High Court case and finally a Supreme Court appeal. In all stages, the BTCL move was declared improper and Netas was found a prequalified bidder.

According to official documents, the BTCL cancelled the tender in 2013 and floated a retender in the following year. KT Korea and Netas participated in it and Netas was technically qualified by a seven-member technical evaluation committee (TEC) assisted by a sub-committee in which the project's consultant Japan Telecommunication Engineering and Consulting Service (JTEC) is a member.

Official documents show that while the BTCL floated the retender in February 2014, it had signed and approved the official estimate of $25 million on April 20, 2014. As per procurement rule, an agency must approve an estimate before it floats a tender.

The BTCL managing director in June 2014 forwarded the evaluation to JTEC instead of tabling it before the BTCL Board of Directors. The JTEC then disqualified Netas mainly on grounds that the Power of Attorney of Netas was false.

Keeping the board of directors out of the process, the BTCL chief then sought concurrence of Jica for selection of only KT on June 9.

Jica did not accept it and sought BTCL's clarification. In response, the BTCL presented some documents showing anomalies of Netas which Jica found to be distorted. While this exercise continued till September, the Bangladesh embassy in Turkey and the foreign ministry confirmed that the Power of Attorney of Netas was authentic and notarised. 

Soon afterwards the BTCL and its consultant JTEC in October and November separately reported to Jica that they have qualified Netas. They did not explain why Netas was previously disqualified. Jica immediately concurred selection of Netas and KT as qualified bidders.

Finally late last year, Netas and KT's financial bids were opened. The tender evaluation committee found Netas bid to be cheaper by Tk 32 crore than that of KT and recommended awarding the job to Netas. However, the price offer of Netas was 22 percent above the initial project cost estimate of 25 million dollars. The TEC noted this issue but pointed out that in the retender the BTCL had increased the volume of work without revising the initial estimate. The TEC also noted that the BTCL can either reduce the scope of work by discussing it with Netas or seek extra fund from the government to carry out the task.

Disregarding the TEC suggestions, the BTCL MD again refused to award the job to Netas on grounds of elevated project cost. He turned to JTEC that once again disqualified Netas and recommended retendering the project. This note was sent to Jica for concurrence.
Jica rejected the JTEC's recommendation and agreed with the TEC. It also suggested that BTCL might either arrange the additional fund, or negotiate with Netas to reduce the project cost by dropping some less necessary components.

The BTCL Managing Director repeatedly wrote to Jica directly as well as through the Economic Relations Division (ERD) to agree to go for a retender and extend the loan period.

Jica on May 7 wrote to the senior secretary of the ERD that “We cannot agree to your request for the extension of the disbursement period as a result of consultation with the government of Japan because, despite our series of requests, the BTCL did not take possible measures admitted in the JICA Procurement Guidelines to complete with the Lot-B as early as possible for which they failed tendering before. Even granting that the disbursement period were extended, we cannot have a clear prospect of completion of the project within the extended period.”

“Therefore, we recommend you to take necessary actions/formalities expeditiously so as to make the maximum disbursement within the current period... we would also like to ask you to draw lessons from this example to avoid repeating similar cases in the future in consultation with the ministry of posts, telecommunications and Information Technology and BTCL.”

When contacted, BTCL managing director (in charge) Mahfuz Uddin Ahmed said “I am fully aware of this development,” but refused to comment on the issue.

BTCL’S PERSISTENT MISHANDLING OF THE TENDER

Bangladesh government in June 2006 signed a Yen 8-billion (US 65 million dollars) loan agreement with Jica part of which is to build the country’s first national telecommunication grid that would ensure uninterrupted communication in and out of the country (by automatically switching to an alternative line when one line is disrupted). Once implemented this will provide broadband data service across the country and also open up the opportunity to earn foreign currency by offering internet bandwidth sell and transit to India.

The loan became effective from July 2008, after the government fulfilled Jica’s condition of turning the-then Bangladesh Telegraph and Telephone Board (BTTB) into the BTCL. The newly formed BTCL appointed a consultant for the project and went very slow till 2011.

In July 2011, the BTCL floated tenders for pre-qualification of bidders for lot A and lot B. While it went ahead with Lot A (the contract of which was later awarded to KT and Japanese Marubeni), the BTCL arbitrarily disqualified Netas in November 2011 saying that some documents of the company was improper.

The Netas turned to the Government Review Panel organised by the CPTU. The panel in its verdict in early 2012 said that the BTCL had improperly disqualified Netas by forging its evaluation report. 

The Government owned BTCL then went to the High Court challenging the Government Review Panel verdict. The court however upheld the Review Panel verdict in August 2012 with the observation that the BTCL had suppressed many facts while filing its writ petition and did not come in clean hand.

The BTCL then went to the Supreme Court, which in turn upheld the HC verdict and observations.

This compelled the BTCL to go for a retender in April 2014 with 3 prequalified bidders. KT Korea and Netas participated in it and were technically qualified by a seven-member technical evaluation committee (TEC). The TEC was assisted by a sub-committee in which the project’s consultant Japan Telecommunication Engineering and Consulting Service (JTEC) is a member.

The BTCL managing director in June 2014 forwarded the evaluation to JTEC instead of tabling it before the BTCL Board of Director. The JTEC that had earlier okayed selection of Netas in the evaluation process -- controversially disqualified it mainly on grounds that the Power of Attorney of Netas was false.

Keeping the board of directors out of the process, the BTCL chief then sought concurrence of Jica for selection of KT on June 9. Jica did not accept it and sought BTCL’s clarification on why Netas was disqualified. In response, the BTCL presented some documents showing anomalies of Netas which Jica found to be distorted. This exercise continued repeatedly till September.

By then the Bangladesh embassy in Turkey and the ministry of foreign affairs confirmed that the Power of Attorney of Netas was authentic. The BTCL however did not send this authentication to Jica.

As Jica was becoming irritated, the BTCL and its consultant JTEC in October and November separately reported to Jica that they have qualified Netas. They did not however explain why Netas was previously disqualified. Jica immediately concurred selection of Netas alongside of KT as qualified bidders.

On November 16, 2014, the BTCL opened the price offers of both bidders. The KT submitted a bid of Yen 3.03 billion plus Tk 36 crore for the job, while Netas offered Y 2.25 billion plus Tk 63 crore. After evaluation, the TEC found that the bid of Netas was cheaper than KT by Tk 32 crore.

The TEC recommended awarding the job to Netas as the successful bidder in December last year. However, the BTCL chief argued that the price offer of Netas was 22 percent higher than the estimated cost of the project and therefore there has to be another retender.

The TEC analysed the price and observed that it was already a retender. But during the retender the BTCL has added two costly vital components—uninterrupted backbone network all over Bangladesh and installing through three river crossings including the Padma. In general the scope of work has increased 2.5 times the first tender. All the while, the estimate of US $24.73 million dollars in the original tender and retender remained the same.

Considering this, the TEC suggested the BTCL to get more fund, or if there is no fund available, the BTCL may negotiate with Netas to reduce cost by slashing some scope of work.

But instead of following this suggestion, the BTCL chief again turned to JTEC—instead of tabling the recommendation to the board. Like before, the JTEC once again disqualified Netas—once again on ground that the power of attorney of Netas was false. The JTEC this time recommended retendering the project.

After this, the BTCL sent both the TEC and JTEC reports to Jica with the message that the BTCL cannot award the contract to Netas due to its high price compared to the initial estimate. Jica concurred to the TEC report and trashed JTEC recommendation. Jica ignored the BTCL’s suggestion saying that as per its agreement with the government, the government is supposed to provide extra fund in case a project cost goes up.

In the same month in December, the BTCL chief raised the issue at the board without tabling Jica concurrence or the Tec recommendation. He told the board that the project must be retendered and Jica should be conveyed this decision via the ERD.

In January, the ERD asked Jica to agree on retendering the project. The BTCL also wrote directly to Jica in the same line. But Jica replied to the ERD that it had given its decision last month, and asked the BTCL to explain why it did not negotiate with the lowest bidder, or why—along with documentary proof-- the Bangladesh government could not give it additional fund for the project.

The BTCL continued to talk about the retender—prompting Jica to write to the Chairman of BTCL and the secretary of the telecoms ministry to ask the BTCL to “obey the law”.

In February, Jica wrote to the ERD giving accounts of how the BTCL was ignoring everything adding that Jica would not reschedule the loan validity beyond June 2. The ERD wrote to the telecoms ministry to urgently take action in this regard.

But nothing changed ever since. The BTCL did not change its stance till date—prompting Jica to issue its letter of killing the loan.

In the meantime, it was learned from BTCL insiders that the official estimate on which MD, BTCL is pursuing re-retendering to Jica, Board of Directors and top authorities, was signed and approved by himself dated 20th April, 2014. But re-tender was advertised on 12th February and Tender documents were actually sold on 17th February of that year. Which procurement experts say is an impossible event as per Procurement act and rules.