Scam in the making: Tender for locomotives favours US companies

Bidders accuse Railways of taking kickbacks in purchasing locomotives.

ISLAMABAD:

High-ups of Pakistan Railways have allegedly hatched a plan to pocket millions of dollars in kickbacks in procurement of 150 locomotives through another “tailor-made” tender that only suits American suppliers.

It is the second such attempt to allegedly deprive the country of millions of dollars as the Lahore High Court earlier scrapped a similar US-specific tender. After that, the Railways re-tendered the project in the first week of August with September 24 the closing date for submitting bids.

In a pre-bid conference held here on Tuesday, the potential bidders made hue and cry against attempts by the Railways to procure engines at exorbitant prices in return for kickbacks, said sources privy to the development. These bidders have already written letters in this regard to the ministers of finance and railways, secretaries for finance and railways and principal secretary to the prime minister, but to no avail.

The conference participants threatened to take the Railways again to the court if it did not withdraw the conditions favouring US companies, they added. These bidders want to purchase railway engines from German, French, Russian and Chinese manufacturers.

A known German locomotive manufacturer, Bombardier, has already excused itself from participating in the bidding due to “the tailor-made tender”. The company wrote that “the terms [of the tender] are still very biased towards products of US suppliers such as General Electric and Electric Motive Diesel.”

Sources said Reliance International and Company Chief Executive Officer Sameer Baig, a potential bidder, accused Railway officials of attempting to deprive the country of millions of dollars. According to sources, he asked the Railway officials to get the tender condition waived from the prime minister, instead of arranging the “drama of competitive bidding”.

When contacted, Baig confirmed that he raised the issue of transparency during the pre-bid conference.

The cost of 150 locomotives is estimated to be $450 to $500 million and the Executive Committee of National Economic Council (Ecnec) has already approved Rs55.4 billion PC-I of the project.

Sources said the new tender clearly favoured Illinois-based manufacturer Electro-Motive Diesel Company (EMD), which was evident from tender documents. The previous tender was favouring General Electric, another American manufacturer.

GE had actively lobbied to win the tender and wrote a letter to Finance Minister Dr Abdul Hafeez Shaikh, which paved the way for approval of the Rs55.4 billion PC-I, prompting experts to question the approved cost.

According to the bid documents, the bidder or manufacturer should have supplied at least 500 locomotives over the past five years – a condition that only suits American firms. In the previous tender, the limit was 150 locomotives.

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The Railways also preferred radial bogies that limited the competition to EMD of the US. It has assigned seven marks for this requirement in the technical evaluation of bids. The Railways also inserted a condition asking the bidders and manufacturers to obtain a certificate from the American Environment Protection Agency.

Sources said a politician belonging to an allied party of the government was playing the role of a front man for both, the EMD and high-ups of Pakistan Railways. Despite repeated attempts, Railway officials were not available for comments.

To keep Chinese suppliers away from the tender, sources said, the Railway high-ups have assured the Chinese that they will facilitate Beijing in striking a deal for supply of 75 locomotives. This issue has lingered on for a long time.

Published in The Express Tribune, September 7^th, 2011.