State Procurement Board in tender furore

By Phillimon Mhlanga

THE State Procurement Board (SPB) has been caught in the eye of the storm once again amid revelations that it breached procurement regulations by restricting a tender for the construction of 300 megawatts (MW) solar plants in Matabeleland South Province to six bidders who had earlier participated in a failed bidding process.

Investigations by the Financial Gazette revealed that instead of opening the tender to everyone, the SPB restricted the tender to China Jiangxi Corporation (CJC), Intratrek (Private) Limited, Afriven Investments, ZTE Corporation, No.17 Metallurgical Construction and Lanlake Power who were invited to submit their offers before October 28.

The SPB, which usually uses an open tendering process whereby any interested supplier can submit a bid, has in this instance used the restricted process in which the government procurement agency handpicks candidates to express their interests in a proposed project. The preferred six contractors had early this year participated in the tender for the same project but failed to demonstrate their capacity to undertake the task, which will help alleviate the crippling power supply shortages in the country.

Industry players said using a restricted process where there is revised scope for three solar stations with capacity of 100MW each was ill-advised given that not even one solar specialist is participating in this tender process. SPB chairman, Charles Kuwaza, confirmed the development, saying: “These six you are talking about are original bidders who have been invited back because there are problems regarding specifications of the project.”

“Last year, we started with open tendering process but now government considers this as an urgent job and this is the reason we have restricted our process to the same players who initially participated in the process.” In January, the results of the tender declared CJC as the winner to construct a 100MW solar plant in Matabeleland South after a tender was floated in September last year.

But a controversial decision was then taken to bring in two losing bidders, namely Intratrek, owned by flamboyant Harare businessman, Wicknell Chivayo, and ZTE Corporation, without re-advertising the tender as required by law.

The explanation given for the inclusion of the two losing bidders was that although the initial tender was for 100MW, the scope of the project was expanded to 300MW and Intratrek and ZTE were accommodated to cater for the additional 200MW that was not part of the re-advertised tender specifications.

CJC’s bid price was US$183,7 million while Intratrek and ZTE Corporation’s bid prices were pegged at US$248 million and US$358,2 million respectively. Intratrek and ZTE were incorporated into the project on condition that they reduced their price to match the US$183,7 million put forward by CJC.

No.17 Metallurgical and Lanlake Power’s bid prices were at US$323,3 million and US$224 million respectively, while Afriven Investments’ bid price was US$281 million. A procurement expert said SPB should have opened the tender to other bidders soon after the Zimbabwe Power Company (ZPC) indicated that it wanted variation of projects from the initial 100MW to 300MW.

The expert argued that the decision to take the tender to the same players instead of inviting bigger players was pulling the nation down and feared the preferred bidders would not have the capacity to undertake the project.

“The decision to restrict the tender process to the same players who have initially proved that they have no capacity to undertake the project was ill-advised. Efficient processes benefit the government. Normal formal tender is concluded within 90-120 days from approval of tender documents to award. But from January (2014) when the Intratrek issue was applied, Kuwaza’s decision to allow for a negotiation process that is not covered by the law was ill-advised,” said the procurement expert.

“(But) nine months have been lost and the country has lost an opportunity to attract other potential suppliers for the project’s revised scope for no apparent good reason.”

On July 31, 2014 the SPB cancelled the proposed solar project after CJC requested to increase the project price from US$184 million to US$207 million under the pretext that the increased cost was due to inclusion of duties and taxes which was proved to be not true as these costs were already part of its original bid at about US$184 million.

“The company, China Jiangxi Corporation, requested for price increase post tender award from US$183 708231.51 to US$207 116 364.51 under the pretext that the increased cost was due to inclusion of duties and taxes. The reasons for increased costs were not justifiable and in contravention of Section 39 (1) (b) of the Procurement Act with the net effect of rendering the perceived EPC Contract null and void,” said SPB principal officer, Cledwyn Nyanhete, in correspondence seen by this newspaper.

“Accordingly, through PBR 0001J of July 17, 2014, the State Procurement Board resolved that; PBR 0001 of January 16, 2014 in favour of China Jiangxi Corporation Ltd for funding, engineering, procurement and construction of 1x100MW solar power project at Gwanda/ Plumtree be and is hereby cancelled for failure by the winning bidder to maintain their original tender price of US$183,708,238.51 (inclusive of duties and taxes).”

ZPC failed to agree with Intratrek and ZTE, the two companies that had been considered for the additional 200MW. Intratrek requested for variation of technical partner and costs for the project. “Intratrek Zimbabwe wrote to SPB proposing for variation of technical partner from Greenfield SolarEuropa GmbH of Germany to Chint Electrical Limited of China,” said Nyanhete.

“The technical evaluation at tender had not considered the capacity of the alternative partnership between Intratrek Zimbabwe and Chint Electrical Limited of China as the option had never been part of Intratrek Zimbabwe’s proposal in the first instance.

“The accounting officer (of Intratrek) had indicated in the request of January 30, 2014 that Intrartek Zimbabwe had agreed to match the price of the lowest bidder to specification; it turned out that the bidder had not confirmed the same understanding. Varying Intratek Zimbabwe’s technical partner post facto, apart from being unfair to other bidders, was a serious departure from the mandated negotiations. The accounting officer is also proposing variation of sites post facto.”

Accordingly, the SPB resolved through PBR 0001E of June 5, 2014 that Intratrek Zimbabwe’s request for its direct appointment for the Gwanda 100MW Solar EPC Project at a contract sum of US$216 691 699.00 be and is hereby rejected for failure to follow material conditions of the negotiating mandate and overlap of Sites with awarded tender.

“Subsequently, at meeting No. 27/2014 held on July 17, 2014, the SPB noted that Intratrek through its letter dated July 3, 2014 has acceded that the parties have failed to reach an agreement for the additional EPC Solar Project within the stipulated time period. We therefore note that the negotiations have failed.”

On July 31, 2014, SPB also cancelled a board resolution PBR 0001B of February 13, 2014 for additional 100 MW Solar EPC Project to be undertaken by ZTE Corporation.

“The SPB, having noted the Accounting Officer (ZTE)’s confirmation that the mandated negotiations have failed has through PBR 0001M of July 31, 2014 resolved that the Accounting Officer’s request for cancellation of PBR 001B of February 13, 2014 for negotiations of two additional 100MW Solar EPC Contracts with Intratrek Zimbabwe and ZTE Corporation at the benchmark price of the lowest bidder to specification, be and is hereby granted for failure by the parties to conclude, contract negotiations.” Financial Gazette