Award of major energy contract: Ministry fails to get approval from ECC

Petroleum Ministry has reportedly failed to get approval from the Economic Co-ordination Committee (ECC) to award EPC contract of Gwadar-Nawabshah LNG terminal and pipeline project to Chinese company without open competitive bidding until Law Ministry and PPRA clear the proposal, well-informed sources told Business Recorder.
Giving the background, the sources said, Petroleum Ministry had submitted a summary on the revised implementation strategy of the Gwadar Nawabshah LNG Terminal and Pipeline Project for ECC''s consideration. The ECC in its meeting held on December 15, 2016 decided that since the PC-I of the project had been approved by the CDWP and ECNEC, therefore, clarification and amendment (if any) regarding the project are required to be placed before the CDWP/ECNEC for consideration.
The sources said, pursuant to the ECC decision a meeting was held under the chairmanship of Minister for Planning, Development and Reforms, Ahsan Iqbal to discuss the latest ECC directions and seek guidelines and way forward on the Gwadar Nawabshah LNG Terminal and Pipeline Project and North South Gas Pipeline Project on January 2, 2017.
Finance Division and Planning, Development & Reform Division furnished comments on the minutes of the meeting. It was decided that GNGP is an ''ECNEC approved project'' and any amendments therein will be approved by ECNEC. After ECNEC approval ISGS is authorised to sign the EPC agreement with CPP. It was noted that Rs 25 billion had already been earmarked from the GIDC for the project. Any further amount, if required, can also be allocated from GoP funds. It was also decided that MP&NR will submit a summary for the ECC on: (i) exemption of the Project, being a Government-to-Government Project, from PPRA in accordance with Rule 5 of the PPRA rules read with the Public Procurement Regulations, 2011; and (ii) sovereign guarantee will be issued by Ministry of Finance/Govt. of Pakistan.
According to Petroleum Ministry, governments of Pakistan and China entered into a Government-to-Government Framework Agreement on April 20, 2015 during the visit of the President of China to Pakistan. The G to G Framework Agreement was approved by the Prime Minister of Pakistan under rule 16(2) of the Rules of Business, 1973 and advised to place the agreement before the Cabinet for its formal approval. The Cabinet also approved the Framework Agreement on July 15, 2016. Subsequently, the Framework Agreement was extended for a period of one year with the mutual consent of the parties.
According to sources, in accordance with the requirements of the PPRA Ordinance, 2002 read with PPRA Rules 2004, procurement of goods or services by government can only be undertaken pursuant to competitive bidding process. Rule 5 of the Public Procurement Rules, 2004, however, provides "whenever these rules are in conflict with an obligation or commitment of the Federal Government arising out of an international treaty or an agreement with a State or Sates, or any international financial institution the provisions of such international treaty or agreement shall prevail to the extent of such conflict".
To invoke rule 5 of the Public Procurement Rules, 2004 the procedure has been enshrined under regulation 3 of the Public Procurement Regulations. 2011 which states " whenever a sponsoring Ministry/Division is of the view that prospective procurements are required to be made by invoking rule-5 of Public Procurement Rules, 2004, it shall bring a case to the ECC after undertaking due consultations with the stakeholders Ministries/Divisions/Departments etc. as prescribed in the Rules of Business. 1973 the ECC shall consider such case s and authorise, or otherwise the sponsoring Ministry/Division whether or not to proceed in terms of rule-5 of the Public Procurement Rules, 2004".
After highlighting the relevant rules Petroleum Ministry submitted a summary to the ECC on February 13, 2017 with following recommendations: (i) ISGS is authorised, in pursuance of Rule 5 of the Public Procurement Rules, 2004, to award EPC contract to CPP of China along with other ancillary agreement(s) without resorting to open competitive bidding process enshrined under the Public Procurement laws; and (ii) issuance of sovereign guarantee by GoP against the loan facility being provided by China.
The ECC discussed the proposal and deferred it with the direction to the Petroleum Ministry to examine all legal aspects of the proposal in consultation with Law Ministry and PPRA.