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Mishandling costs country IDA credit worth $40 million

By Toufique Imrose Khalidi
Petrobangla and Its infras tructure consultants took more than a year to decide on a contract which resulted in the non-utlllsation of the IDA credit for the project costing about 40 million dollar.
With the donor's refusal to endorse the terms of the contract after a second evaluation, with financial proposals revised, and the subsequent expiry of the closing date of the credit, the Government would now fund the project taking upon itself the risks of a possible cost escalation.
The AshuganJ natural gas liquids processing plan, when completed, will produce propaine. LPG, petrol, kerosine and high speed diesel.
Knowledgeable sources point accusing fingers at the consultants, the Pencol Engineering Consultants for their "unprofessional" handling of the evaluation of blds especially the technical proposals.
A glance through the chronology of events starting from the floating of tender to the award of contract : The World Bank approved "two-step" tender documents for international competitive bidding were issued on July 8,1990. Technical proposals were received from five tenderers on October 10,1990. A Petrobangla evaluation committee, with overall assistance of the infrastructure consultants, In its report on February 10, 1991, recommended that financial proposals be invited from three bidders, namely : 0
Colt Engineering Corporation. Canada : 2) SPIC-SMO, India, 3) Larsen and Toubro Ltd., India.
The short-listed tenders were asked to submit their fl nanclal proposals by July 2,1991, but the date was later deferred to July 24, 1991.
The evaluation team completed its evaluation of bidders on August 28. 1991 and found that the Colt Engineering quoted the lowest bid.
After obtaining clearance from the World Bank, the Cabinet Sub-Committee's approval was sought for awarding contract to the Colt. As offer validity was due to expire November 21, 1991 and since the Cabinet Committee's approval was not yet in hand, Colt was requested on November 19 to extend the validity by 24 days and update the contract award status, a request the Canadian company opted to ignore.
Instead, the company offered extension of validity upto February 1992, provided Petrobangla agreed to enhance cost of the project by 5,557 million US dollar, a 16 per cent rise. Meanwhile, on November 30, the Cabinet Subcommittee's 'approval for awarding the contract to Colt at the originally tendered fixed price lump sum (FPLS) was received.
The Canadian firm was called for pre-contract negotiations and a series of discussions was held from December 10 to 19 between the company
and Petrobangla', Project Implementation Unit (PIU) and consultants Pencol with the objective of concluding a contract at the originally tendered FPLS.
At the discussions, the PIU and Pencol agreed to many concessions, both minor and major, which sources say are deviations from the tender's commercial conditions and technical specifications, in an attempt to induce Colt to agree on a contract at the originally Tendered FPLS.
The significant deviations arc 1) reduced liability — particularly the contractors' liability Is limited to Insurance coverage only whereas tender stipulates otherwise, 2) reduced liquidated damages for delayed completion — five per cent instead of ten per cent required by the tender. 3) sixmonth moratorium for applica tion of liquidated damages, thereby effectively offering a 30-month completion period Instead of 24 months, 4) major technical deviations — in NGL fractionation and production specification.
However, Colt's intransigence ultimately led Petrobangla to consider awarding the contract to Colt at an enhanced price, a situation World Bank refused to endorse. The extra money was to have been paid by Petrobangla.
The Bank said that the post tender increase was not acceptable and that any direct payments to contractor beyond the scope of World Bank's
credit would constitute "misprocurement".
Consequently, dialogue with Colt was stopped and the con tract could not be signed.
In a subsequent summcrisa-tion of the December 10-19 discussions, Ihc Pencol, the consultants, stated .
. the design work has significantly deficient areas . .
". . . both contractually and technically (the Colt offer) not compliant with tender documents and it must therefore' be concluded that a mandatory . tender was not submitted . . . '
"... It seems that Colt tendered on the basis of submitting the lowest price by ma ■ nipulating the conditions of contract .... thereby anticipating being able to get to the negotiation table with a view to Increasing their price . . . the techniques adopted were certainly in contradiction to the spirit and letter of the tender documents ...
. . hence it could be construed that at the time of submitting the financial proposals the actual tender submitted was not mandatory and therefore the submission should be totally rejected . . . "
Subsequently, to avoid pos sible budget overruns, the PIU. with the approval of World Bank, invited the three "technically substantially re sponsivc" tenderers to submit revised financial proposals
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