New rules: OGDCL finds way to hire costliest contractor

New evaluation criterion gives highest bidders for any project an equal chance of winning the contract.

ISLAMABAD: The Oil & Gas Development Company Limited (OGDCL) may now opt for the highest bid on multi-million-dollar energy projects.

OGDCL has come up with a novel idea that has the potential to open up the field to institutionalised corruption in the most transparent and upfront manner. From now on, the highest bidders for any multi-million-dollar project will stand an equally good chance of winning the contract.

A new evaluation criterion has been introduced in the selection process according to which a bidder’s price will account for only 30 per cent of the marks whereas 70 per cent marks will be awarded for his technical proposal.

The new rules of the game will be applicable as of now for the award of the Kunnar Pasakhi Deep (KPD) project. Innovations in the official rules will enable many powerful players in the country, including energy tycoons and political actors, to get a piece of the pie.

If this decision is put into  effect, it will be the biggest violation of Pakistan Procurement Regulatory Authority (PPRA) rules ever, as well as of the policies of OGDS, which make it binding on any government body to award a contract to the lowest bidder.

OGDCL has invited tenders for the Kunnar Pasakhi Deep Tando Allah Yar Integrated Development Project. The estimated cost is approximately $400 million, and tenders will be received by OGDCL on December 23, 2010.

This field is located about 25 kilometres east of Hyderabad. Facilities will be set up adjacent to OGDCL’s existing Kunnar Gas Processing Plant, which has the capacity to produce 340 million cubic feet of gas daily.

Bidders able to obtain a minimum of 75 per cent marks on their proposals will be declared technically qualified and therefore eligible.

Hence, a technically-qualified bidder who is quoting the cost price of US$400 million may lose out to a bidder quoting, say, US$900 million as the new evaluation system is skewered to award higher numbers to the second bidder on the basis of his technical proposal.

An OGDCL board director has revealed that he is considering handing in his resignation ever since he has become aware of the new scam at OGDCL – given that, recently,  NICL directors have been imprisoned for tainted land purchase deals finalised with the board’s approval,.

He said that a bidder had brought this scam to the attention of the management, which called an “emergency” meeting of the Board of Directors to get their approval to protect itself.

The board decided in a resolution that, “For the selection of EPCC Contractor, Management to formulate a rationalised Bid Evaluation Criteria in line with the evaluation criteria in practice of international organisations, other E&P companies and without violating PPRA Rules.

Henceforth the evaluation criteria being a Management function need not be referred to the Board.”

He showed a copy of the board’s resolution dated October 8, 2010, available with The Express Tribune.

When asked why the board did not abort the attempt at potential fraud, the director said that the instructions had infiltrated the company from the top. Since the board did not want to give its approval at the management’s behest, it gave the direction that such matters not be referred to the board in future.

He disclosed that the entire board of directors is appointed at the recommendation of the Minister of Petroleum.  Whatever orders he communicates through the MD are approved by the board. He also said that the OGDCL Chairman is now Secretary Petroleum – a first in OGDCL history.

Once the bidding is in progress, it is expected that the LPG component of the project will be outsourced to a private company.

In the emergency meeting, the board was asked to approve the decision that potential bidders finance the project.

The real motive was to award the rights to the LPG deal for securing financing for the KPD project.

It is widely known within the petroleum sector who will qualify for this project and its most lucrative component, nearly 387 tons of LPG per day, he told this correspondent.

The gas field was discovered nearly seven years ago. Successive governments obstructed its exploitation till they could extract millions of dollars in commission from overpricing and award the rights of the LPG deal to a pre-selected party, said a senior commercial manager at OGDCL on condition of anonymity.

Published in The Express Tribune, December 21^st, 2010.