Saturday, March 5, 2016

Daylight Robbery In Coal Tender Award

From The Sunday Leader - by Ifham Nizam
Swiss Singapore Overseas to become the lowest bidder after being one of the highest bidders in the first evaluation

Energy experts believe it is high time the country adhered to strict procedures in awarding coal tenders, spot tenders and long term tenders unless the Ceylon Electricity Board (CEB) Board of Management handled this on their own.
The good news is that it was none other than Prime Minister Ranil Wickremesinghe who put an end to anymore coal power plants at a recent discussion in parliament where Power and Renewable Energy Ministry Secretary Dr. Suren Batagoda spelled out the plan. When contacted, CEB Chairman Anura Wijepala told The Sunday Leader that they have no option but to inform the government procurement arm Lanka Coal Company (LCC) about their requirement.

Background of the coal clash
The cabinet committee pulled a fast one and kicked the lowest bidders out by having a second evaluation to help Swiss Singapore clinch the recent deal. This was after the first evaluation by TEC recommended awarding to Noble Resources as the lowest bidder.
The tender was opened on June 11 and evaluated on June 13. Noble Company was invited for negotiations on June 17. Swiss Singapore wrote a letter to Standing Cabinet Appointed Procurement Committee (SCAPC) on June 29 asking for changes in the evaluation criteria by removing two major conditions which were in the original tender document. These conditions were discussed at two pre-bid meetings and the officials confirmed that there won’t be any changes and the bidders must follow the tender document stipulations.
SCACP, accepting a letter from Swiss Singapore who was the fifth lowest on the TEC report hurriedly met the same day of receiving the letter and instructed TEC to do the second evaluation requested by Swiss Singapore. SCAPC should have read the main tender document clause 5.4 and 5.5 which strictly prohibits all bidders from contacting any agencies involved in the evaluation process from price bid opening stage to contract award. Any effort by a bidder to influence LCC in LCC’s bid evaluation, bid comparison or contract award decision may result in rejection of the bid. SCACP overlooked the conditions of the main tender document, took the law into their own hands and made sure that Swiss Singapore was given the tender. The procurement board meeting held on August 5 in its report clearly mention in their observations: “Which among others state selecting Swiss Singapore to award the tender over the original lowest bidder is a blatant violation having provided specific criteria for price evaluation to accommodate size variations tender award should be made in line with such formula and thereafter not complying with said requirement in making the re – evaluation of the price proposals of the bidders is a violation. It is also added that at the first evaluation made by TEC Noble Resources had become the lowest responsive bidder. Thereafter, the SCACP contrary to their earlier decision requested the TEC to re-evaluate excluding adjustment of size for Swiss Singapore to be the lowest. Therefore, recommendation of the SCACP to award the tender to Swiss Singapore is incorrect.”

Bids opened in June
The price bids were opened on June 11, 2015 and the Technical Evaluation Committee (TEC) submitted their report to the Standing Cabinet Appointed Procurement Committee (SCAPC) on June 13 recommending Noble Resources Singapore as the lowest responsive bidder and to award the tender to Nobel.
SCAPC agreeing with the TEC decision invited Noble Resources for negotiations on June 17 and requested Nobel to reduce their price furthermore. Nobel explained to SCAPC that they had given their best price and were not in a position to reduce further.
According to informed sources, from June 17 to June 29 nothing happened; “SCAPC members were sleeping. Suddenly the sleeping dogs woke up on June 29 when they received a mutually agreed letter from Swiss Singapore requesting SCAPC to remove two criteria from the original tender document.”
“Can anyone believe that SCAPC immediately summoned an emergency meeting on the same day, June 29, and instructed TEC to re-evaluate the price bid excluding one of the specific criteria that Swiss Singapore requested? As a result of this illegal second evaluation, Swiss Singapore became the lowest and Nobel became second,” an official noted.
A senior official of the CEB confirmed the tender documents were prepared by professionals including top engineers from the CEB. There were pre-bid meetings held for bidders to clarify and make sure that they were aware and clear before they submitted their bids.
Amendments were done when necessary and all bidders were informed. Even the criteria that were removed after the evaluation were discussed at two pre-bid meetings and the Tender Committee very clearly stated there would not be any change. Swiss Singapore with other bidders were present when this was announced and also minuted.
Despite all this, the Tender Committee has broken all the rules of government procurement policy, insulting the honoured Procurement Appeal Board (PAB) members consisting of Justice Hector Yapa, going against the decision of the PAB report which very clearly mention that PAB does not endorse the recommendation made by TEC/SCACP to award the contract to Swiss Singapore.
Furthermore they have mentioned that SCAPC had entertained the Swiss Singapore letter on June 29 contrary to the clause 5.4 and 5.5 of the ITB which clearly mention any effort taken by a bidder to influence in the bid evaluation process may result in rejection of the bid. However, instead of being rejected it was embraced by SCAPC members for reasons better known to them.
Damning information reveals that there were two spot tenders floated and Liberty won both. The third spot tender was advertised and cancelled by the Ministry Secretary. The Secretary then got a Cabinet memo to award Swiss Singapore 330,000 MT at USD 51.96 (Swiss Singapore’s second spot tender price which is 0.60 cents higher than Liberty, the present supplier) to be supplied from November to December. At the second spot tender Swiss Singapore’s bid should have been rejected due to it breaching yet another tender policy by not being a sealed and hence, ‘tamperable’ bid.
At that time all other bidders protested but after a phone call was made by Lanka Coal Company to a senior Power and Renewable Ministry official, permission was instantly given for Swiss to participate. When we contacted a high official at Liberty they confirmed that they could still supply at USD 51.96 or even less.

Loss in excess of Rs. 2 billion
Swiss Singapore are also being awarded a further 1,900,000 MTs at a price of USD 58/ MT versus the current price supplied by Liberty of USD 51.29.Therefore the total loss to the country is in excess of Rs. 2 Billion.
The other participants in this tender have filed cases in the Supreme and Appeal courts. In one case already taken up at the Supreme Court,a bench comprising the Chief Justice allowed the case to proceed.
All the participants when contacted said they rely upon the court either reversing or cancelling the award to Swiss Singapore on the basis that it was at best fraudulently achieved, and at worst, coal is already being supplied at a cheap market price effectively and without issues.
Power and Renewable Energy Ministry sources said that the CEB will not run short of coal even if Swiss Singapore is kicked out.
According a senior official of the Coal Power Project Phase 11, there are sufficient stocks. Therefore there is no need for Swiss Singapore to supply in January since their award is illegal due to the malpractice of the SCAPC.
The Sunday Leader learns that the SACPC has also decided to suspend the three international companies, namely Noble Resources who won the main tender as per the TEC first report, Liberty Commodities who won both spot tenders and Suek International from participating in the future spot tenders until the court cases are finished.
“This is another way of blocking competition and paving the way for their favourite to get another order. One should understand that these three international companies have not gone against the Sri Lankan government but are only seeking justice for the injustice the SACPC has done by violating the laws of the procurement act,” an official said.
He added, “We hope justice will prevail and this type of thing is not allowed to happen. This will be a talking point in the international community that will bring put credibility and investor confidence at stake.”
One European bidder when contacted told The Sunday Leader that they are disgusted at the way this tender was handled.
“Do you expect a company who was unsuccessful in a tender to buy over the decision makers and violate the country’s procurement procedure without any fear and finally succeed in winning the tender kicking out the genuine winner? Isn’t it daylight robbery? This is a good example for the country to see how international tenders are done allowing ministry secretaries to decide what they want,” the official pointed out. Senior Engineers of the CEB said that coal procurement is totally managed by Lanka Coal Company and the Ministry and not by the CEB. LCC is a 100% government owned company in which the major shareholder is the CEB. Other shareholders are Shipping Corporation and Ports Authority.  “As coal procurement is happening outside the CEB, we have almost no control over these transactions,” said Ceylon Electricity Board Engineers Union (CEBEU) President Athula Wanniarachchi.
Wanniarachchi added that in the recent past there were many media reports regarding manipulation of tenders. “Unfortunately we have had only a faint idea on this procurement since the inception of this company. Very few of our members are in Technical Evaluation Committees (TEC) but legally they are not supposed to provide information to TUs.  Anyway this manipulation had been done not in TEC level but higher levels (Tender Boards, Appeal Board and Cabinet) in which none of our members are functioning.”
Wanniarachchi said that as far as they knew, former Power and Energy Minister Patali Champika Ranawaka had a number of issues with then Secretary M. M. C. Ferdinando over the manipulations in coal procurement and it ended up with him losing his cabinet portfolio. He added that strangely there were no media reports over tender manipulations at that time. “We believe there is a considerable improvement now compared to the past,” he added.
Coal procurement is one of the biggest continuous procurements in the country. Being the relevant union, CEBEU stresses the importance of handling this through a competitive and transparent mechanism.
He stressed, “We are also very keen on this as every single rupee paid unnecessarily adds to the cost of electricity generated in Norochcholai Power Plant and is ultimately paid by poor customers. Also all coal supply for future coal plants in the country will also be managed by LCC. So it is very important to streamline the process at least now.” The CEBEU Chief said that their proposal is that the procurement of coal should be managed by CEB for better control and be less vulnerable to outside pressures from politicians and business mafia.
If required LCC could manage only the shipping and unloading of coal at Puttalam for a reasonable price. If CEB manages the procurement, trade unions have more opportunity to intervene to reduce corruption. The LCC has less than 10 employees who do some paperwork on the procurement which can easily be transferred to the CEB.  “Even now we have found we are paying an unnecessarily high price to the Shipping Corporation for the transportation of coal. We came to know that the previous government purchased two ships for the Shipping Corporation for coal transportation and the first one is reaching the country shortly. We have suspicions that we are paying for inefficiencies and corruption in the Shipping Corporation.” Meanwhile, Power and Renewable Energy Minister Ranjith Siyabalapitiya said that coal tenders are more transparent now.
He said that as he stated in parliament recently, coal has been bought from the same organisation/firm during the last five years and the methodology or the system practised was unmethodical.
He agreed that there were a number of problems in the past when it came to awarding of tenders especially during the past five years. According to him, a system was introduced to call tenders only from registered coal suppliers. Since 2009, tenders have been called to purchase coal for the first coal fired power plant in Norochcholai in Puttalam.
He said that none of the tenders were awarded according to recommendations of the tender board appointed by the Ministry of Power and Energy. He stressed that things were on the right track after resolving the issue with the recommendations of the committee appointed by President Maithripala Sirisena.

Sufficient coal in stocks
Officials point out that when there was sufficient coal (150,000MT), another 330, 000 MT was procured through a spot tender by Swiss Singapore in December and another 100,000MT by Liberty Commodities. The country now has sufficient stocks.
The CEB Chief meanwhile said they had decided to stick with a 50-50 policy. In other words, he recommends both spot tendering and term tendering to make ensure a smooth operation.He also said that the tender is process is handled by the Ministry and Lanka Coal Company and the CEB makes the order.
Meanwhile, some officials say the coal scandal is now a complete farce and has embarrassed the nation and the new government which promised fairplay and good governance.

The tender process has been flagrantly violated. Incredible changes have occurred after the tender opening so as to allow Swiss Singapore Overseas to become the lowest bidder after being one of the highest biddersin the first evaluation, an official said.

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