Port deal in stormy seas

Explosive allegations are fuelling the fire of the already highly controversial Colombo South Port Terminal Project. Complaints have been made that Sri Lanka Ports Authority (SLPA) Chairman Saliya Wickramasuriya, has allegedly misled and misrepresented information to the SLPA Board in promoting Hutchison Port Holdings over PSA Aitken Spence.

In a complaint dated February 11, 2008, an unnamed ‘Port employee’ has told the Commission to Investigate Allegations of Bribery or Corruption, that Mr. Wickramasuriya has not only concealed facts but misrepresented and misled the Board of Directors of the SLPA in obtaining its recommendation to the Cabinet Appointed Negotiating Committee (CANC) on Hutchison Ports.”

The complaint goes on to detail that the “position enumerated by the SLPA Chairman at the Board meeting did not take into consideration several factors.” An official from the Bribery Commission confirmed to The Sunday Times that the complaint had been received and normal procedures would be followed.

The CANC, which concluded that PSA Aitken Spence was the successful bidder, in contrast to the SLPA Board which recommended Hutchison, has now asked for clarification on the matter from the Attorney General's Department.

Mr. Wickramasuriya told The Sunday Times that as the Chairman of the SLPA and a member of the CACN, he has to remain silent with respect to the evaluation. He also said that all the information surrounding the port project is being considered and a decision has not yet been finalized. He said he had not seen the letter sent to the Bribery Commission and therefore, could not comment.

In December 2007, the SLPA board had compiled a report at the request of the CANC. The report said that “based on the information presented to them, the SLPA Board is of the opinion that, at this time, the greatest coincidence of long-term objectives between the SLPA and the short listed bidders, and therefore the greatest chances of realizing the full potential of our unique geographical location, exists in a partnership with Hutchison Port Holdings.”

Informed sources told The Sunday Times that PSA Aitken Spence, which was invited to participate in negotiations for the project later found out that the SLPA had recommended Hutchison despite the offer from Hutchison being unsolicited and outside of the tender document parameters.

They alleged Mr. Wickramasuriya misled the SLPA Board by hiding certain information on the company. The sources said that after PSA Aitken Spence found out about the unsolicited offer by Hutchison, they too submitted their own unsolicited offer but the SLPA Board was not informed.

It was also revealed to The Sunday Times that six bids were submitted in May 2007 for the port project and the Project Evaluation Committee evaluated the technical bids in which the bidders had to score a minimum of 60 points to remain as viable contenders.

PSA Aitken Spence came out on top with 78 points followed by Hutchison scoring 69. The sources said it was made clear that the company offering the highest annual guaranteed income over a 35 year period, also known as the net present value on the royalty, would win the contract. PSA Aitken Spence offered the highest annual guaranteed income over the 35-year period. The sources said that according to the tender document, the proper procedure after the bidders had been ranked, was to call for negotiations starting with the bidder that scored the highest points, in this case PSA Aitken Spence. If the negotiations are not successful, the bidder with the second highest score is to be called. However, Aitken Spence has still not been called for negotiations.

A SLPA Director told The Sunday Times he had received a copy of the letter sent to the Bribery Commission. When asked about the allegations regarding Mr. Wickramsuriya, the director said that “as a board member, I can tell you that there is no influence over the tender from our Chairman.”

However, he said he could not speak on behalf of the technical evaluation committee and the CACN. He added that discussions had been held regarding the project but that he did not get the 'feeling' that there was any interference.

The director said that according to his understanding, Mr. Wickramasuriya did not have stakes in Hutchison. In the complaint to the Bribery Commission, the unnamed port employee charges that Mr. Wickramasuriya deliberately concealed the fact that the Hutchison offer was unsolicited and that there was also an unsolicited proposal submitted by PSA Aitken Spence.

“What is important to the government and in the national interest is the value of the royalties the government is to receive from the Operator which is a function of both Teus and the Royal Fee per Teu,” the complaint stated.

“Comparing like with like, the unsolicited proposal of Hutchison gives a net present value of US$ 248 million on royalty whilst the unsolicited proposal of PSA Aitken Spence yields a net present value of US$ 256 million which is clearly the best net present value. If the SLPA Board is not considering this offer, it is clearly not acting in the national interest.”

The complaint also alleges that Mr. Wickramasuriya did not tell the Board that a fully owned subsidiary of Hutchison was found guilty by the Supreme Court of Indonesia for having engaged in anti-competitive practice. The complaint states that the Court of Appeal in Sri Lanka has granted leave to proceed against Hutchison Ports on the question of its eligibility to tender as it has been found guilty by the Supreme Court of Indonesia for engaging in anti-competitive practice in which Mr. Wickramasuriya has been named a respondent.

The unsolicited proposal of Hutchison Ports was not read aloud by the Additional Secretary of the Ministry of Ports and Aviation at the financial opening on October 11 2007. Regulations state that 'a bid whose rectification would affect unfairly the competitive position of other bidders presenting substantial responsive bids will be rejected by the CANC.'

The ‘Port employee’ also states that though Mr. Wickramasuriya has referred to Hutchison as having been precluded from owning and managing ports in India, he did not specify the reasons which are security concerns of India. Around 70 percent of the volumes handled in the Port of Colombo are transshipment of which about 80 percent originates to and from Indian ports.

The employee is alleging that Mr. Wickramasuriya “concealed the risk we would be faced with in attracting Indian traffic due to security concerns of India which would be threatened if Hutchison Ports tied up with the SLPA as recommended by the Chairman SLPA.”

The complaint also describes the role played by Scott Wilson, the Project Consultant on Engineering and detailed design, is not only questionable but unethical due to the fact that Mr. Wilson was instrumental in preparing the bid document of Hutchison. The letter is alleging Mr. Wilson was brought in at the request of Mr. Wickramasuriya in breach of all commercial norms, without prior approval from the Board of Directors.