LPG/NGL extraction project: PPRA Rules violation to cause over $46 million loss

Violation of Public Procurement Rules 2004 in multi-billion dollar tender for the contract for LPG/NGL extraction project in Kunnar-Pashakhi field would cause a loss of $46.7 million to the government exchequer.
Adviser, Transparency International Pakistan (TIP), Syed Adil Gilani in a letter sent on February 11 to the Chairman, Oil and Gas Development Corporation Ltd, Muhammad Ejaz Chaudhry has brought to his notice several issues, which were not clarified during the briefing given to the Public Accounts Committee on February 8 relating to the allegation of "corrupt and fraudulent practices" by OGDCL in manipulating award of contract to M/s. JJVL as was identified by TIP in its letter of December 17, 2011.
According to TIP, following issues have not been clarified by OGDCL "which gives credence to the allegations of collusive practice in this procurement published in newspapers." Evaluation Report has not been posted on PPRA website, which is a violation of Rule No 47.
The unsolicited proposal given to OGDCL, according to M/s JJVL letter dated July 2011, Annex A-I of OGDCL reply dated 8-2-2012, confirms that JJVL had offered to pay to OGDCL $100 million in two years if M/s JJVL is awarded the unsolicited Contract. This should have been the minimum price acceptable to OGDCL in the bidding process. According to OGDCL reply dated 8-2-2012, based on the negotiated deal on the basis of single tender with M/s JJVL, OGDCL will save a total of $53.3 million in two year. Inquiry needs to be held against the officers of OGDCL and JJVL for the loss of $46.7 million to OGDCL when comparing the tendered cost with the unsolicited odder of M/s JJVL dated July 2011.
In OGDCL clarification published in The NEWS of 18th December 2012, OGDCL stated that it would lose $ 40 million in two years if this project were not implemented. In presence of M/s JJVL offer to OGDCL dated July 2011 of $ 100 million profit in two years, why OGDCL has given this statement of loss of only $ 40 million in two years?
Single tenders are normally not allowed under PPRA Rules, except when following conditions are met by the procuring agency.
i. Public Procurement Rules, 2004 don't put any limit on number of tenders/ bids received in response to tender notices provided that the procurement opportunity has been advertised in the prescribed manner. The single bid may be considered if it meets the evaluation criteria expressed in tender notice and is not in conflict with any other rules, regulations or policy of the Federal Government. However the procuring agency should make a decision with due diligence and in the light of Rule 4 "Principles of Procurement".
ii. Whenever a procuring agency is confronted with such a situation whereby the rate quoted by the single bidder cannot be compared so as to declare it as the lowest rate or otherwise it may make a prudent decision. While making a decision, the following factors may be kept in view: - a. The comparison of price of the goods works or services if procured during the current financial year. b. Market price of the goods works and services to be procured.
c. In case abnormal Increase in prices is observed, the procuring agency may like to re-advertise the procurement opportunity, if time permits.
iii Re-advertisement would be a preferred option. Direct contracting could also be used provided it meets the prescribed condition for direct contracting.
Transparency International Pakistan is of the view that: A- The allegation of collusion between OGDCL and M/s JJVL as reported in the press reports of 16th& 17th December 2011 needs to be inquired for violating PPRA procedure of negotiating the contact at lower value of $ 53.3 million, when the same party has offered to OGDCL $ 100 million in July 2011. OGDCL should have negotiated for more than $ 100 million already offered by JJVL in July 2011.
B- This procurement is against PPRA requirement, that in case of single tender, quoted prices should have been based on current market value, and the same company M/s JJVL which quoted $ 100 million in July 2011 has been awarded Contract at a reduced cost of $ 46.7 million, at $ 53.3 million.
C- This procurement has caused a loss to exchequer of $ 46.7 million.
D- Under Rule No 7, Integrity Pact, 10 times fine $ 467 million has to be recovered by OGDCL.
Copies of the letter have been forwarded for information and appropriate action on the violation if it is true, under the Laws of Pakistan: Chairman Public Accounts Committee, Islamabad, Chairman, NAB, Islamabad, Minister of Petroleum, Islamabad, Auditor General Pakistan, Islamabad, Registrar, Supreme Court of Pakistan, Islamabad, and Managing Director PPRA, Islamabad.