Alleged favouritism: SSGC awards tender to ‘highest’ bidder

Gas consumers to face additional $50m burden, SSGC denies accusations.

ISLAMABAD:

The utility giant – Sui Southern Gas Company (SSGC) – is allegedly involved in awarding a $20 million-contract of liquefied petroleum gas (LPG) - air mix plants to a favourite firm by accepting their single bid.

The Economic Coordination Committee (ECC) had already approved a summary to inject 150 million cubic feet per day (mmcfd) of LPG-air mix gas in the system that will put 29% additional burden of increase in gas prices on all type of consumers.

The SSGC was in process of awarding the contract of to a firm Dynamic Engineering to build the plants. According to contract, two LPG-air mix plants will be installed at Port Qasim and the contract awarded to Dynamic Engineering is projected to put an additional burden of $50 million on gas consumers on the back of higher operating costs, while ignoring the bid of Gulf Horizon whose quote was the lowest.

Sources said that Gulf Horizon was knocked out by the evaluation committee despite being a bidder with the least operating cost. An official of the SSGC said that its bid for single project of co-mingling was the lowest. However, it was interested in both projects of co-mingling and dedicated systems therefore, it was technically not given the contract.

When contacted, SSGC Acting Managing Director Zuhair Siddiqi said that Gulf Horizon was not interested in taking up the single contract, but wanted both co-mingling and dedicated projects of the LPG-air mix plants. Later, they had written a letter claiming to be a lowest bidder. He also ruled out that SSGC was going to award contract based on a single bid. He said that operating cost of Dynamic Engineering’s proposal will be lower than Gulf Horizon based on combined systems. He also added that an independent consultant had evaluated the bids.

Sources in the SSGC said that the award of contract based on single bid was pointed out by the Secretary Petroleum Dr Waqar Masood in a meeting held on December 4, 2012. After seeking briefing from SSGC officials, Masood had observed that under the existing circumstances, the project award will be based on a single bid. He argued that SSGCL was to implement the LPG-air mix projects strictly under the Public Procurement Rules, 2004 and SSGC’s regulations. “Therefore, SSGC should justify the awarding while ensuring compliance of said rules,” Masood added.

An official of the SSGC said that secretary petroleum had also noted with concern that Gulf Horizon sent a letter on November 22, 2012 to chairman of the SSGC, claiming to be the lowest as well as technically responsive. Masood had directed the managing director of SSGC to respond to the letter.

The SSGC head informed that the utility company invited bids as per the Public Procurement Rules for two LPG-air mix plants. He informed that out of the seven bids, Gulf Horizon and Dynamic Engineering were the most complaint and were evaluated in detail by the SSGC committee.

The committee determined that Gulf Horizon’s proposal on co-mingling system is though acceptable to SSGC, but technically non-compliant since they do not comply to the critical requirement of conformance of design reports that mingled the synthetic natural gas (SNG) with natural gas. However, he said that Dynamic Engineering’s proposals are in conformance with SSGC’s tender requirements and have been determined technically compliant to the committee.

The head informed that recommendations of the SSGC committee were being submitted to the board of directors for award of contract to Dynamic Engineering.

Sources maintained that Dynamic Engineering offered a compressed air system that will use a bank of 12 large compressors with electric motors that have a combined capacity of approximately 5-6 megawatts (MW).

Gulf Horizon offered a compressed air system to use only three compressors with electric motors that have a combined capacity of approximately 3-4MW. According to cost comparison, Dynamic Engineering’s proposal will lead to cost $50 million to gas consumers due to higher operating cost over the expected life of an SNG system during 15-25 years.

Published in The Express Tribune, December 20^th, 2012.