Ineligible company to get gas plant deal

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Under the influence of a corrupt nexus, Sylhet Gas Field Company Ltd (SGFL) is set to sign early next month a Tk 113 crore highly technical gas processing plant installation deal with a disqualified Chinese company ignoring the project consultant’s strong reservations.

Accepting the Chinese plant would be a “total disaster”, the consultant observed.

Represented by Sahco International, Chinese Petrochemical International Company Ltd (also known as Sinopec), which is being awarded contract for this project, does not even have the basic understanding about how to install a gas-to-natural gas liquids (NGL) processing plant, said a highly placed source quoting observations of the project’s European consultant.

The globally renowned consultant (its name not mentioned on request from the source) in its evaluation report on the Chinese bid clearly said Sinopec would not be able to deliver the end-product from the offered plant because its designs are grossly flawed.

But despite such strong reservations, the SGFL, which is financing the project from its own accounts, has asked the Chinese company to furnish its performance guarantee (PG) in the first week of next month so that it can sign the contract.

The consultant had determined at least 50 major deviations in Sinopec’s technical proposal to set up the plant and sought 160 clarifications. The consultant observed that the Chinese bid grossly deviated from the tender specifications which cannot be corrected by mere clarifications.

Instead of disqualifying its bid following the project consultant’s recommendation, the SGFL board early last year formed a four-member committee to “evaluate” the clarifications. The convenor of this committee was a senior Petrobangla official who had served the SGFL as its managing director in 2005, in the earlier phase of this project.

This committee sketchily okayed the clarification so that the SGFL could justify awarding contract for this project against the opinion of the consultant. Even this committee’s report questions experience records of Sinopec.

Late last year, a top energy ministry official called a representative of the consultant and suggested him to recommend in favour of the Chinese company. The consultant filed its final report but with hand-written reservations expressed in separate sheets attached to it.

“The guardians of the SGFL in connivance with a business lobby has undermined national interest. If the SGFL-Petrobangla committee is so competent to evaluate clarifications of the Chinese bidder, why did it appoint an international consultant? Whose interest is being served by such handling of this tender?” one source questioned.

SGFL officials however claimed to The Daily Star that the consultant was “biased” to another bidder– Thermo Designs Engineering of Canada. They could not explain how the SGFL drew the conclusion about bias since the same consultant disqualified the Canadian company in the first tender on this project that was floated in 2005. They also could not answer why the SGFL was so determined about awarding contract for the project to the Chinese company when so many questions still remain unanswered.

“The government must immediately stop the contract awarding process and scrutinise the whole tendering process anew. Or else it will become a diplomatic issue between Bangladesh and China, which is uncalled for,” said a senior Petrobangla official.

This situation could have been avoided if there was a true check and balance between the energy ministry and Petrobangla’s subsidiary SGFL. “Unfortunately, the SGFL board is headed by a high official of the ministry, and there is no room for check and balance since all SGFL decisions are always owned by a high official of the ministry,” he pointed out.

Background
Under this project — Kailastila Molecular Sieve Turbo Expander Processing Plant– the SGFL would daily produce 16 barrels of Natural Gas Liquid (NGL) and about nine barrels of associated condensate using 45 million cubic feet per day (mmcfd) gas.

The first tender for this fractionation plant project was floated in May 2005. Though such a technical project demands that the SGFL seek a contractor with international experience of installation of such projects, its tender criteria did not put such restrictions so that Chinese companies, which are new in this field, can enter the competition.

According to a competent source, 12 companies initially expressed interest but hectic lobbying by business groups and corrupt politicians drove away most of the bidders and only four participated in the bid. These four companies are Sinopec (represented by Sahco), PT of Indonesia (backed by Haris Chowdhury, political secretary to immediate past PM), Thermo Designs Engineering of Canada and Astra-Evangelista of Argentina.

“The project consultant disqualified all the bids. The Argentinean and Canadian companies submitted incomplete bids and their offers were summarily rejected while Sinopec and PT bids were found technically non-responsive,” said the source.

The project was re-tendered in January last year and this time three offers were dropped by Sinopec, Thermo Designs and Astra-Evangelista. “The Indonesian company did not participate as Haris Chowdhury lost interest in the bid due to pressure from the business lobby that was mounted through another top influential bureaucrat of the Prime Minister’s Office,” he mentioned.

By February last year, the consultant came up with its evaluation of the bids declaring Astra-Evangelista and Sinopec as non-responsive and recommending Thermo Designs of Canada.

“On Thermo Designs, the consultant’s remark was that this company fully understood the requirements of the tender documents and their technical proposal complied with the requirements,” the source said.

Gross Deviation

The consultant’s February 26, 2006 report on Sinopec’s proposal pinpointed hundreds of gross flaws. For instance, the Chinese company named Survey, Design and Research Institute of ZPEB for designing the major plant components. The consultant noted that this was an institute, not a bidder or a qualified partner. There was no documentary evidence about the institute’s experience or capability or even its existence or its relationship with Sinopec.

The Sinopec computer process simulation revealed that the company was confused about understanding the tender requirements. “The bidder’s proposal assumed a design basis which did not conform to the tender document. And in so doing, the bidder’s design was unable to confirm the NGL product specification as specified in the tender,” the source said quoting the consultant’s report.

“Sinopec was so callous in filing its documents that in its introductory remarks it stated, we also declare and ensure that we will indulge in any political activities in Bangladesh during the execution of the project…,” he added.

The consultant’s recommendation on its bid stated clearly that Sinopec’s technical proposal has a “grand process design deviation, major material deviations and contradictions. It has plenty of material exclusions as per tender clauses. It is not technically responsive and cannot be accepted.”

In addition, its bid was declared “summarily rejected” due to non-compliance with several tender clauses, plus the bidder’s proposal did not establish its eligibility as per the tender terms.

Sinopec’s technical proposal “cannot be made technically responsive by mere clarifications only”, the consultant said, adding that Sinopec has to re-do the whole exercise to qualify.

Sources alleged that Sinopec simply copied the technical proposal of Thermo Designs Engineering (TDE) which it had submitted in the first tender in 2005. This allegation is substantiated by the report of the SGFL committee which noted, “The process descriptions stated by TDE and Sinopec International are similar.”

SGFL’s bid to overturn consultant’s report
While the consultant submitted negative reports on Sinopec, the SGFL tender committee made a positive technical evaluation of the Chinese company. The two views were placed before the SGFL board headed by a senior energy ministry official on March 29, 2006. To resolve this difference of views, the SGFL board formed a four-member committee “to examine the points of differences and to put forward comments/recommendations on the evaluation.”

This committee headed by a Petrobangla official said, “None of the three bids fully complied with the summary rejection criteria. All of them some way or other deviated from tender stipulations.”

In its report filed on May 8, 2006, the committee said it found that the bidders generally met tender requirements on experience as evidenced by statements and reference letters from users. The committee however could not ascertain their authenticity.

“This means, the bidders may have given false records of experience, and this committee is not taking the responsibility of such records,” said a source.

The committee concluded, “Subject to re-verification of work experience through ICB (International Competitive Bidding) that an opportunity may be given to them (the bidders) to fully meet the tender requirements by correcting deficiencies and waiving exceptions without any change in financial offers, in an attempt to avoid retender and consequential delay in implementing the project.”

By this remark, the committee accommodated Sinopec’s 160 clarifications.

Consultant’s final views
Following this committee report and SGFL’s subsequent decision to go ahead with the Chinese bid and put aside the Canadian bid, the project’s consultant added a few more pages to its original report.

The consultant clarified that it had not been biased to the Canadian bidder, as alleged by the SGFL, saying it had recommended in favour of the bidder that fully understood the requirements of the SGFL and is capable of delivering the plant.

Reiterating that Sinopec was not technically qualified for the project, the consultant said, “it will be a total disaster” if the SGFL accepted the Chinese or the Argentine plant.

The tender was held in a two envelop system in which the bidder submits technical bid and financial bids separately. If it is qualified technically, the financial offer is opened. Therefore, the consultant did not consider the price offer of Sinopec against that of the Canadian company. Price comparison cannot be made between a technically responsive and non-responsive bidder. Price will be compared if there is a comparison between an apple and an apple, one source pointed out.

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