The government might cancel a power contract to a Chinese consortium delaying the 200 to 300 megawatt Khulna dual fuel power project by around a year.

The contract process has generated a series of complaints accusing the tendering authority of unduly favouring controversial Harbin Electric International over other bidders.

A competent source in Power Development Board (PDB) told The Daily Star that the PDB in August had recommended awarding the Khulna 200 to 300 megawatt dual fuel power project to Harbin and Jiangsu Eastern Company. But the decision came under scrutiny of the power ministry based on several categorical complaints by co-bidders.

“It's likely to be re-tendered soon,” said a PDB official referring to the decision pending with the power ministry.

As a good number of project bidders were Chinese, the Chinese embassy in Dhaka earlier this month expressed concern over the issue. It urged the government not to re-tender the contract and to make a professional decision to award the contract to the deserving lowest evaluated bidder.

In its letter to Prime Minister's Energy Adviser Tawfiq-e-Elahi Chowdhury, the embassy said, “...there are some kind of complaints regarding the evaluation and the award of the Project, which might prompt you to consider re-tendering or even cancelling the Project.”

“We are very worried that if the project be cancelled on the basis of news report about the complaints among the bidders, it might on one hand encourage them by doing so, and on the other hand cause negative impact on the good potential bidders and the financial institutions who are deeply involved and committed for the success of the project and make them hesitated in participating the future projects.”

The letter added that China would appreciate if the authorities reviewed the project in line with the terms and conditions of the tender and made “professional decisions to award the contract to the deserving lowest evaluated bidder.”

Re-tender of the power project might delay its implementation by around a year, officials said.

A number of Chinese companies with partners from Bangladesh and other countries participated in the tender process. The firms include Chinese Shanghai Electric with Italian Alsaldo, 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.

Harbin-Jiangsu had quoted $292 million to construct the power plant, while Shanghai Electric-Alsaldo consortium offered the lowest bid of $183 million. Four more bidders quoted prices less than that of Harbin-Jiangshu as per the PDB's read-out price announcement on July 13 this year.

The tender requirements specified that the contractor will arrange funding for the project on behalf of the government.

According to official papers, the PDB's tender evaluation calculated the per kilowatt project cost of Harbin-Jiangsu at $1,022, the highest among all the six bidders. The lowest cost of $718 was offered by Shanghai-Alsaldo.

But the evaluation committee ranked Harbin-Jiangsu as the lowest bidder by giving it high marks on the financial and other components of its proposal.

This prompted different bidders to lodge complaints. As most of the bidders are Chinese, they informally lodged complaints with the power board and the ministry. 

However, the Greek firm J&P-AVAX formally complained: “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 PDB floated the tender in May with a bid deadline of July 2, which was later extended to July 13. Twenty-four companies or joint ventures initially bought tender documents, but only seven of them submitted bid proposals.

TENDER EVALUATION CONTROVERSY

The Harbin-Jiangsu proposed to produce 357 MW electricity, but the other bidders followed the tender limit of 300 MW. One of the requirements said the tender evaluation committee would not consider the proposal if any company proposed to generate less than 200 MW or more than 300 MW. 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 357 MW although it was showed as a 300 MW 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.

Some co-bidders drew the attention of the power ministry on the issue. One of the complaints filed anonymously claimed that this anomaly alone would pass a hidden cost of at least Tk 500 crore on the country.

But the PDB argued with the ministry that there were nothing wrong with the evaluation and Harbin-Jiangshu was found to be the lowest on the basis of considering all the aspects of their proposal.

Harbin repeatedly made the headlines back in 2005 when it completed the 80 MW Tongi power plant with more than 450 technical glitches. The plant tripped on the day of inauguration and continued to perform poorly for the next couple of years.

During the tenure of the last caretaker government, a corruption case was filed against Giasuddin Al Mamun, friend of BNP leader Tarique Rahman, accusing him of taking bribe in exchange of awarding the Tongi plant contract to Harbin.

In 2006, Harbin was blacklisted by the state-run Eastern Refinery Ltd for failing to install and launch a 3 MW power plant.