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Costly RPCL deal drains out $25m

Dutch firm seeks $28m more; restricted re-tender for power plant services

Sharier Khan
To renegotiate a costly and redundant past contract with a Dutch company, the Rural Power Company Ltd (RPCL) is holding a restricted re-tender for a long-term service agreement (LTSA) to run its three 70 megawatt
power units in Mymensingh.
If this re-tender produces price offers cheaper than that of the Dutch company, the RPCL will get the scope to save a lot of money required to carry out such a contract for inspection of RPCL's power units, and providing
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repair services and refurbishment.
Back in 2001, during the period when the RPCL had signed a series of costly and secretive deals on the basis of unsolicited negotiations to favour a certain businessman, it had signed a 15-year LTSA with Dutch company Thomassen and Turbine System (TTS).
First phase of the contract expired in October last year costing the RPCL around S 25 million. The contract dictates that the RPCL must consider the second phase of this deal to remain in force till 2015, for which the TTS sought another $28 million.
As this offer seemed very costly, the RPCL board checked market trend of LTSA by late last year and got two price offers from two other service companies--one demanding euro 15.7 million and the other euro 9.8 million.
"These offers differed so grossly that we decided to seek
a fresh offer for LTSA through a restricted tender seeking only the original equipment manufacturer," said a RPCL high official. He added that to filter out inexperienced contractors, the company made the tender restricted.
The tender was opened on June 10 and it will be closed on June 24.
An LTSA contractor's job is to inspect gas turbines of a power plant after 8,000 hours of operation, conduct gas inspection after 24,000 hours and major inspection after 48,000 hours. In addition, the contractor has to respond to any problem of the plant within 48 hours of notice
While such work may seem necessary, the LTSA deal was made when the RPCL already had a 15-year operation and maintenance (O&M) contract with Lahmayer International Pally Power Service (LIPPS) from 1999 to look after RPCL's two unit 140 MW power plant. Job description of the LTSA
and O&M contracts is almost identical.
Now ousted and sued, the LIPPS was also given the O&M contract on the basis of an unsolicited negotiation. Each year it drew Tk 27 crore till 2005. Now the same job carried out by the RPCL staffs costs a mereTk 5 crore.
The nature of various such unsolicited contracts officially surfaced when the government in 2006-07 reconstituted the RPCL management, giving it the mandate to clean up its operation and end the era of massive irregularities.
RPCL’s tender for repairing power unit
The RPCL last week also floated a tender for repair of one of its 35 MW GE power units in Mymensingh that abruptly broke down on June 6. The RPCL expects that this unit can be repaired within 90 days.
This unit broke down after 55,000 hours of service because of production defect.
Previously another 35 MW GE power unit broke down similarly in January 2006. We know that a similar GE power unit of the Power Development Board's Shahjibazar plant broke down twice," said a high official.
The RPCL will send for repair the unit that broke down in January 2006, which is being preserved. The unit was replaced by purchasing a brand new one.
"The unit that broke down on June 6 has remained untouched as our insurer--Sadharan Bima Corporation-has not given us clearance for inspecting it to find out exactly why it broke down," the official said.
This disruption however did not affect the RPCL's power production. Though it could generate up to 210 MW power when everything was alright, the plant has been producing around 110 MW at best due to inadequate gas supply.