Tender 'rules bent' to award power plant contract

Amid allegations of tender manipulation, Bangladesh Power Development Board (BPDB) has recommended awarding a Chinese consortium involving controversial Harbin Electric International the job to construct a 200-300 megawatt power plant in Khulna.

Co-bidders have brought allegations that the BPDB was unduly favouring the Chinese joint venture Harbin and Jiangsu Eastern Company and was set to award the contract by breaching the tender terms and conditions. These co-bidders include Chinese Shanghai Electric with Italian Alsaldo, Chinese Guangdong Power Engineering Co, Guangdong Electric Power Design Institute with French Alstom, Bangladeshi Energypac with Chinese Hubei Electric Corporation and Chinese Dongfang Engineering Corporation with Greek JP Avax consortium.

Harbin-Jiangsu had quoted $292 million to construct the power project, while Shanghai Electric-Ansaldo consortium offered $183 million -- standing as the lowest. Four more bidders quoted prices less than that of Harbin-Jiangshu as per BPDB's read-out price announcement on July 13 this year. However there are other factors that contribute to the evaluation of the bidders' proposal and determine whose bid is the lowest. 

As per the tender requirements, the contractor will arrange the finance for the project for the government.

According to official papers, the BPDB's tender evaluation calculates the per kilowatt project cost of Harbin-Jiangsu at $1,022 -- this is the highest among all the six bidders. The lowest per kilowatt construction cost of $718 was offered by Shanghai-Alsaldo.

But surprisingly, the evaluation committee ranked Harbin-Jiangsu as the lowest bidder by giving it high marks on its financial and other components of proposal.

On August 24, the BPDB recommended to award the dual fuel combined cycle power project to the Harbin-Jiangsu consortium.

The Greek firm J&P-AVAX formally wrote a letter to the prime minister last month, complaining about the anomalies that took place in the tender evaluation.

The company said: "We are of the firm opinion that our consortium is the preferred bidder if the authority evaluates the offers as per the tender specifications."

"Unfortunately, we feel that there is an effort within the authority to try to accept and evaluate the consortium of Harbin-Jiangshu and bring them in the position of the preferred bidder which did not offer the guaranteed data as per tender specifications, and therefore should be immediately rejected."

The letter, signed by Theodoros Arseniou, director of energy of J&P-AVAX SA, said the Harbin-Jiangshu consortium also offered a $27-million higher price than J&P-AVAX SA.

The J&P-AVAX SA letter sought the prime minister's intervention in resolving the issue. It also threatened to take legal actions in order to protect its rights. The Prime Minister's Office (PMO) sought the ministry's comment on the letter. Accordingly the ministry sought the version of the BPDB.

The BPDB Chairman replied that the Harbin-Jiangsu consortium turned out as the lowest responsive bidder in case of technical and financial proposals evaluation. The bidders' proposals were evaluated in line with rules and regulations. The proposal (of the consortium) under consideration is not contrary to the rules and regulations, he wrote in the letter.

BPDB floated the tender in May this year. The deadline for submitting bid proposal was July 2, which was later extended to July 13. Twenty-four companies or joint ventures initially bought tender documents, but only seven submitted bid proposals.

QUESTIONS ABOUT TENDER EVALUATION

The Harbin-Jiangsu consortium proposed to produce 357 MW of electricity, but the tender limit was 300 MW, a condition the other bidders followed. One of the requirements said the tender evaluation committee would not consider the proposal if any company proposed to produce less than 200 MW or more than 300 MW.

Clause 25 of the tender term described that "…Excess Net Output of more than 300 MW at site conditions shall not be considered for evaluation of per kW cost."

 This means that if a bidder proposes more than 300 MW, the additional production capacity will not be considered in the evaluation. But it did not happen while evaluating the proposal of the consortium, said a number of bidders.

In case of the Harbin-Jiangshu's offer, the BPDB committee calculated the potential cost of per kilowatt-hour of electricity on the basis of the "heat rate" of 357 MW—while showing it as a 300 MW plant. Consequently, the BPDB calculated Harbin-Jiangshu plant's heat rate at 6,382 kilojoule per kilowatt-hour when it should actually be 7784 kilojoule.

In power plant technology, a higher heat rate means it is less energy efficient. Therefore the BPDB evaluation showed Harbin-Jiangshu's plant to be more energy efficient and cheaper than it actually was.

Co-bidder J&P Avax in its complaint letter to the Prime Minister noted this anomaly saying, "It means this bidder, acting against the tender specification, is trying to offer a much larger combined cycle power plant output in order to be evaluated at the better heat rate…. This is not allowed by the tender specifications and therefore this tenderer should be excluded from any further step of the evaluation…."

According to a complaint filed with the power ministry, this anomaly alone will pass a hidden cost of at least Tk 500 crore on the country.

Besides, another bidder alleged that the BPDB miscalculated the interest rate of at least one bidder to give Harbin an upper hand in the financing part of the project. In this case, it refrained from using its formula to calculate the net present value of the debt servicing cost for one bidder, while using the same for Harbin-Jiangshu.

This bidder had proposed to mobilise funds from three sources. While calculating how much the BPDB would pay back for the loan from these three sources in 30 instalments, the BPDB did not take into consideration currency devaluation for all three sources. It just considered devaluation of funding from just one of the three sources. This resulted in making its loan proposal unattractive.

But Harbin-Jiangshu's financing proposal was calculated properly.

PERFORMANCE RECORD OF HARBIN

Harbin repeatedly made the headlines back in 2005 when it completed the 80 MW Tongi power plant with more than 450 technical glitches. The plant tripped on the day of inauguration and continued to perform poorly for the next couple of years.

During the caretaker government regime, a corruption case was filed against Tarique Rahman's friend Giasuddin Al Mamun, charging him of taking bribe in exchange of the Tongi contract to Harbin.

In 2006, Harbin was blacklisted by state-run Eastern Refinery Ltd for failing to install and launch a 3 MW power plant.

The tender document also mentions that if a company, jointly or individually, failed to show satisfactory result in setting up any power plant in Bangladesh, its proposal would not be taken into account by BPDB.

 In 2014, the BPDB had disqualified Harbin in the 400 MW power project in Bibiyana for submitting false information. As per the tender evaluation report of the BPDB, Harbin had claimed that it had experience of building a 400 MW power plant citing an experience certificate. But the BPDB found out that the 400 MW plant consisted of two power plants built in different times.

RESPONSES FROM AUTHORITIES

Minhajuddin Ahmed, a member of BPDB, and head of the tender evaluation committee, did not receive mobile phone calls or reply to messages. 

BPDB Chairman Khandker Maksudul Hassan did not receive phone calls or reply to messages sent by The Daily Star.

Power Secretary Monowarul Islam said the project proposal would come to his division before it goes to the cabinet committee on purchase for final approval. "We will look into it if there is any anomaly."