ISLAMABAD: The Public Procurement Regulatory Authority (PPRA) has recommended the Federal Government to exempt procurement of two second–hand vessels by Pakistan National Shipping Corporation (PNSC) from applicability of public procurement rules section 21 of PPRA Ordinance, 2002, well informed sources told Business Recorder.
The Board, which granted approval to PNSC proposal, has also decided that the PNSC shall forward a case through its line Ministry for insertion of a new rule defining mechanism for carrying out procurement of second-hand used vessels in future.
The PNSC, in a letter of February 02, 2023 sought permission of the Authority for the procurement of second-hand vessels, crafts, ships, and associated equipment/ machinery through negotiated tendering under Rule 42(d)xii) of PP Rules, 2004.
Procurement of used vessels: PNSC unlikely to get permission as PPRA opposes proposal
The Chairman (PNSC) apprised the Board that PNSC has been providing sea transportation for imported crude oil by utilizing its fleet of second-hand used vessels which were procured from time to time. He further highlighted that the profits generated over the last two decades are testament to the fact that these used vessels brought value for money to the Corporation.
One Board Member highlighted that the shipping industry has different market dynamics as compared to the aviation industry as general life span of a commercial ship is much more than that of a commercial aircraft.
PPRA Management highlighted that one of the principle of procurement enshrined under Rule 4 is value of money which inter-alia requires the features of reliability, after sales service and upgradability in the object of procurement and the same could not be justified in the procurement of second-hand goods due to the rapid pace of technology advancement.
One of the Board Members opined that there should be provision in public Procurement Rules, 2004 for procurement of second-hand object or class of objects such as ships and aircrafts etc. He further proposed that PNSC may approach PPRA through its line Ministry for introduction of a separate rule regarding procurement mechanism of second-hand used vessels.
As such, the Board Members resolved that till finalization of the public procurement rule containing mechanism for procurement of second-hand used vessels, PNSC may be allowed exemption to procure two second-hand vessels to immediately replenish their ageing fleet.
PPRA Management, in its comments opposed the proposal, saying that it could not be justified in terms of the value for money.
On February 2, the PNSC apprised that since 2002, they are providing sea transportation for crude oil being imported into Pakistan from the Arabian Gulf and therefore hold strategic importance in terms of Pakistan’s national and energy security.
In order to cater to the said requirements, PNSC has been purchasing second-hand vessels due to low initial investment involved if compared with the price of new vessels and immediate return of investment as second-hand vessels could be put on service immediately upon procurement whereas new ship construction takes about two to three years. These procurements are carried out in accordance with SOPs devised by the PNSC which include publishing broad parameters of the ship in the print and electronic media for inviting offers from the owners through Baltic Exchange enlisted brokers.
The PNSC highlighted that its procurement process is transparent and such second-hand vessels bring value for money which can be ascertained from the profits generated by the Corporation during the last two decades. PNSC has forecast regular induction/replacement of three to four ships annually to replace its ageing fleet and to meet the country’s economic and national interest.
According to PPRA, Rule 42(d) (ii) is an alternate method of procurement whereby a procuring agency may engage in negotiated tendering due to technical or artistic reasons or the reasons connected with protection of exclusive rights or intellectual property.
The proposed procurement of vessels neither involve technical solutions which are non-obvious for others nor patentable inventions having unique technical solution(s) for the shipping industry. Therefore, the said Rule is not applicable in the proposed procurement.
The PPRA further argues that shipping is one of the sensitive industries which requires periodic assessment and ageing management of the fleet. Regarding procurement of used vessels and equipment/machinery, the PNSC should consider that quality is priority and safety is the overriding priority as per provisions of the International Maritime Organisation (IMO).
Each ship has its own maintenance manual having well defined maintenance schedule incorporating the provisions of proactive and preventive maintenance. Therefore, before purchasing such used ships, there is a need to explore their maintenance history.
Copyright Business Recorder, 2023