Over Rs400m scam uncovered in AJK hydropower project

Official accused of easing rules to award contract to selected company.

ISLAMABAD:

The minister in charge of Power Development Organisation (PDO), Azad Jammu and Kashmir (AJK) has alleged that the organisation’s managing director extended favour to a Chinese company in the award of multi-billion-dollar 48-megawatt Jaggran-2 hydropower project.

The minister in charge, Chaudhry Mohammad Yasin, said he had received information that the managing director was involved in committing professional dishonesty by taking sides and supporting a particular group.

“The MD is also guilty of clash of interest by renting his home to consultants for personal benefits,” he said.

Talking to The Express Tribune, PDO Managing Director Muhammad Mushtaq said the matter was with the board of directors which would take a decision. He refused to comment further.

According to documents available with The Express Tribune, a multi-million-rupee scam came to light in the award of foreign-funded 48MW Jaggran-2 hydropower project to a selected Chinese firm by the PDO in violation of Public Procurement Regulatory Authority (PPRA) rules.



Yasin wrote a dissent note over gross procedural violation in granting the contract to China International Water and Electric Corp Pakistan (CWE), which would cause a colossal loss of over Rs400 million.

According to the documents, the scam was brought to the notice of board of directors in its meeting on July 4. Six members of the board were against the award of contract to CWE while only five were in favour. Thus, a minority decision was imposed.

Four members backed the award of contract to the lowest bidder, Sinohydro, while two voiced concern over transparency of the entire bidding and evaluation process and called for inviting fresh bids. The difference between the first and second lowest bidder was Rs410 million.

The documents revealed that the contract award process lacked transparency since the beginning as prequalification criteria were eased twice. In the bid documents, approved by the consultants in consultation with the PDO managing director and also given the go-ahead by Agence Française de Développement (AFD), average annual construction turnover was fixed at 150 million euros.

After the issuance of bid documents, CWE and Sinohydro called for a reduction in the average annual construction turnover from 150 million to 100 million euros. The PDO MD asked AFD to bring down the ceiling and relaxed the criteria after approval of AFD.

When the evaluation committee opened the bids, CWE did not qualify because of low average annual turnover of its local partner. The PDO MD again recommended AFD to reduce the criterion in the range of 12% to 25% from 100 million euros. This was also in violation of PPRA rules.

The total base cost of the project is estimated at Rs6.579 billion, though the cost of bid items in PC-1 is put at Rs4.771 billion. An amount of Rs1.767 billion is included from miscellaneous items, which are not permissible except for Rs254.083 million, which is provided for transportation and equipment erection.

Cost escalation will be payable during implementation if bid prices are escalated, thus, this provision cannot be included in the award of contract.

The evaluation report finalised by the committee was sent to AFD for approval on January 8 this year. AFD gave provisional green signal on February 3.

Afterwards, CWE reduced its offered price by 2% in a letter addressed to the PDO MD on February 11. This was included in the agenda of the board meeting.

Under PPRA rules, a company is not allowed to enjoy discounts after the opening of bids. In this regard, the PDO MD decided to get NOC from AFD without board’s approval.

Published in The Express Tribune, July 26^th, 2014.

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