East Coast road contract to China Railway leaves questions unanswered – Goolsarran

Columnist Anand Goolsarran says that the recent controversial award of an East Coast road contract to China Railway raises several issues including the restriction of bidding to only Chinese companies.

Goolsarran in his accountability column in today’s Stabroek News said that the restricting of the bidding process to only Chinese companies is not in line with the Procurement Act which prohibits discrimination against contractors and suppliers on the grounds of nationality.

China-funded projects like the Hope to Belfield, East Coast road are increasingly coming with the stipulation that Chinese contractors be employed and this requirement is now clashing with local laws.

The award of the US$46.9M contract to China Railway First Group Ltd evoked sharp concerns after Stabroek News reported that Cabinet had rejected advice from the National Procurement and Tender Administration Board (NPTAB) that the contract should be awarded to another bidder, China Harbour Engineering Co.Ltd (CHEC), which is the contractor for the Timehri airport expansion project, at a cost of US$60.4M.

While the government used the US$13.3M differential as grounds for its objection to the NPTAB’s advice, other sources have told Stabroek News that a former senior government official had lobbied Cabinet for the contract to go to China Railway. The sources say the lobbyist wanted to keep China Railway invested in Guyana as it was the intended builder of the shelved Amaila Falls hydropower project which the government wants to resuscitate. The sources say under Cabinet pressure the NPTAB’s evaluation committee would have had little choice but to comply and alter its recommendation. This is one of the reasons why the opposition had been pressing for Cabinet to be taken completely out of the procurement process.

Goolsarran raised several other issues. Noting that the Government signalled that the bidding procedures were restricted to Chinese companies because financing was expected from China Exim Bank, Goolsarran argued that Section 5 of the Procurement Act specifically outlaws a procuring entity from “imposing any criterion, requirement or procedure with respect to the qualifications of suppliers or contractors that discriminates against or among suppliers or contractors or against categories thereof based on nationality. In addition, Section 7 provides for suppliers or contractors to participate in procurement proceedings without regard to nationality.”

Neither the NPTAB nor the government has said anything about this.

Stabroek News had also reported that three of the four bids were incomplete. The only complete one was the bid that the NPTAB eventually recommended to Cabinet but which Cabinet declined to provide its no-objection for. At one stage, sources say, the NPTAB had been contemplating having a re-tender done because of the incompleteness of the three bids but did not proceed with this.

Dissecting the government’s argument that its withholding of the no-objection was founded on the principle of going to the lowest bidder once prequalified, Goolsarran drew a distinction between the lowest bid and the lowest evaluated bid. He pointed out that Section 36 of the Procurement Act caters for all evaluation criteria in the tender documents for the procurement, in addition to the price, to be quantified in monetary terms. He said that the Evaluation Committee is then required to use only these criteria to determine which tenderer had submitted the lowest evaluated tender. He noted that it does not follow that the lowest bid will be the lowest evaluated bid.

Golsarran, a former long-serving auditor general, also said that the government’s explanation of its no-objection appeared to ignore the anomaly posed by the engineer’s estimate for the project. He noted that the engineer’s estimate is usually the government’s best estimate for the project. In the case of this project, China Railway’s bid was a whopping US$10.4M below the engineer’s estimate of US$57.3M. Goolsarran said that if the lowest bid is significantly below the engineer’s estimate, this would indicate that either “the estimate was faultily prepared or the lowest bidder has under-estimated the cost of the works. The NPTAB felt that the latter was the case since the lowest bid was US$10.4 million below the Engineer’s Estimate. This is a reasonable position to take and would justify NPTAB’s reservations about the bidder’s ability to complete the works at the tendered price.”

Goolsarran noted that not only is there a risk of shoddy work from tenders significantly below the engineer’s estimate but there is also a tendency by contractors to recover the additional amounts by variation orders and sometimes the project becomes more costly. Goolsarran said that if the costs are not recouped there is a tendency to undertake works below the specifications, leading to substandard work.

He queried why the NPTAB’s evaluation committee had not opted for another bidder, China National Machinery Import Export Co. Ltd whose bid was under the engineer’s estimate and closest to it. Neither the government nor the NPTAB has said anything about this. The fourth bidder, China State Construction Engineering Corporation was roughly US$14M over the engineer’s estimate.

Now that the award has been made, Goolsarran said that he hoped that (a) there will be no variation to increase the cost of the works; (b) the works will be executed strictly in conformity with the specifications contained in the contract; and (c) there will be no undue delay in the completion of the works.

Over the years, many government projects have suffered from cost and time overruns.

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