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Chinese company gets huge contract for solid waste landfill project
View(s):China Harbour Engineering Company Ltd (CHEC) has won a US$90.48mn contract to design and build the solid waste sanitary landfill in Aruwakkalu, Puttalam. The contract, which costs LKR1.63bn in addition to the dollar fee, was signed on December 29 last year. The project–which falls under the purview of the Ministry of Megapolis and Western Development–entails the construction within 18 months of transfer stations (for solid waste) at Kelaniya and Aruwakkalu, railway connectivity lines and the landfill.
The award ran into controversy during the bidding process. The technical proposals of just two out of seven bidders were accepted. They were CHEC and M/s Kolon-Hansol-KECC Joint Venture from South Korea. The other five were dismissed as “technically non-responsive”. The financial proposals of CHEC and Kolon-Hansol KECC were evaluated. A Standing Cabinet Appointed Procurement Committee (SCAPC) recommended the award of the contract to CHEC. Kolon-Hansol KECC took its case to the Procurement Appeal Board (PAB) which is based at the Presidential Secretariat.
The appeal said CHEC had not met the mandatory criteria to be eligible for consideration: namely that the bidder must either have landfill design experience or submit its application with a joint partner who had such expertise. Additionally, CHECH did not provide documentary evidence of its eligibility and qualifications to perform the contract; no joint venture agreement or letter of intent to enter into such agreement; and no bid security or bid security declaration. All were mandatory requirements.
The three-member PAB found merit in the appeal. The main criterion for the tender was design experience in sanitary landfill. While CHEC had submitted a letter indicating its intent to establish a consortium for the project with Southwest Municipal Engineering Design & Research Institute, it was valid only for three months and had expired at the time of evaluation. The letter was not supported by other legal documents.
The PAB observed that CHEC submitted a bid security only in favour of itself. The tender requirement is that: “If the JVA [joint venture agreement] has not been legally constituted into a legally enforceable JVA at the time of bidding, the Bid Security or the Bid Securing Declaration shall be in the names of all future partners named in the letter of intent.”
While another applicant had been rejected by the Technical Evaluation Committee (TEC) on similar grounds, CHEC sailed through the evaluation with a score of 947 point out of 1000. The PAB noted that the TEC in its bid evaluation report had failed to give its comments on the general/specific experience of the selected bidder despite having done so for the other six. This was “strange”, it said. The PAB also questioned the cost estimates provided by Kolon-Hansol KECC and CHEC, saying they showed “consideration high percentages of unfavourable deviation from the expected total cost estimate” which was US$70mn. CHEC’s price was US$100.96mn while Kolon-Hansol KECC cited US$106.349mn.
The PAB concluded that both CHEC and Kolon-Hansol KECC had not fulfilled the conditions in the bid document. However, three out of the five rejected parties had met the mandatory requirement of proving design experience on sanitary landfill but were rejected “on not fulfilling lesser critical areas such as not giving full details of personnel, equipment, subcontractors and manufacturers, etc.” The PAB recommended opening the other five financial proposals; obtaining required clarifications from all bidders; and allowing the SCAPC to negotiate with the bidders who met the essential specifications “with the objective of obtaining a realistic offer, to ensure a tenderer is found within the acceptable cost range”.
As directed by the PAB, the unsuccessful bids were opened in the presence of SCAPC members, a spokesman for the Ministry told the Sunday Times. The parties were not invited because “there was no direction given by the PAB to invite the failed bidders to be present at the opening”. The offers were appropriately evaluated, the spokesman said. But no negotiations were conducted with the failed bidders as their “overall responsiveness was below the acceptable level”. CHECH qualified for because it submitted a letter of intent to form a consortium with the Designer, Southwest Municipal Engineering Design and Research Institute of China (SMEDRIC). Records submitted by the bidder showed that SMEDRIC fulfilled the experience requirement specified in the bidding document.
CHEC together with its design partner, SMEDRIC, scored 947 according to the evaluation criteria specified and predefined in the bid document. The bidding documents did not require the submission of a bid security in the names of all partners if it is in the form of a consortium, the spokesman also claimed. “The PAB has the right to submit its opinion based on its own analysis,” he said. “However, in the case of this procurement, the responsiveness of the bid submitted by CHEC was clearly established giving sufficient clarifications.”