LAHORE: The railway authorities’ arbitrary decision rejecting the only but quite lucrative offer by a joint venture (JV) of local and foreign investors for the Royal Palm Golf & Country Club lease is likely to deprive the loss-making Pakistan Railways of a consistent valuable stream of income from the club.

The JV comprising Hashoo Group’s Pakistan Services Ltd, Platinum Construction Ltd, Warm Waters Advisory and Golfscape LDA Portugal (that is billed to invest $15 million in foreign direct investment in Pakistan) had offered 25 per cent higher one-time upfront premium and annual rentals than the reserve price for the club’s lease for a period of 25 years, giving significant financial advantage and benefits to the railways.

The JV had offered Rs427.56m as a one-time upfront premium against the benchmark of Rs400m and Rs458m as annual rentals against the benchmark of Rs360m. (This is pertinent to note here that Lahore Gymkhana pays just Rs5,000 to the Punjab government in annual rent.)

The bidder had also agreed to pay a variable fee equivalent to 5pc of the annual gross revenue from the club. On top of this, it would pay 20pc of membership fee for members exceeding 1,000 but less than 2,001 and 45pc for members exceeding 2,001 but less than 4,000.

It may deprive PR of consistent valuable stream of income from the club

Besides, the investor would construct 100 rooms with three-star hotel facilities. According to the lease documents, the annual fixed fee -- or rentals -- is also subject to an increase each year at the rate of 5pc on compound basis to be paid to the railways on a quarterly basis.

The JV was the only company out of 11 investors, which had initially shown interest in leasing the club and obtained the tender documents, to have made an offer. The bid has been rejected despite the JV having qualified both technically and financially, and an extension of the bid validity period for 180 days on the request of the railway authorities on Nov 19 last year.

A technical evaluation committee consisting of senior railway officials, a representative of the Lahore Gymkhana Club, a Board of Investment official, and a UHY Hassan Naeem & Co (consultant) representative had qualified the JV. The JV had scored 86.35 points against a minimum threshold of 70 for technical qualification, according to the documents provided to Dawn.

Similarly, the financial evaluation and the rate assessment committees comprising senior railway officials had also found the bidder’s financial proposal “justified and higher than the fixed benchmarks” (or reserve price) of upfront premium and annual rentals proposed in the tender documents after a detailed analysis and evaluation of the offer.

The bidding process was initiated by Pakistan Railways in January 2022, under the supervision of the Supreme Court in the light of the court’s express directives through its order in April 2019, and the bid opened in May last year.

The court had directed the railways to initiate an international tendering and completing process for the club within three months. Subsequently an implementation bench was constituted to monitor compliance. The tender documents were prepared and published in consultation with AF Ferguson & Co, Nespak and UHY chartered accountants in January 2022.

During a hearing on December 4, 2024 the Supreme Court judge Justice Amin-ud-Din Khan was also informed about the details of the bidding process and technical approval of the sole bid through the additional attorney general, with commitment that the financial approval would be considered within three weeks.

However, the railway’s directorate of property & land informed the JV on January 13 this year that the management committee of the Club had rejected its offer for the lease. In a separate letter issued the same day, it said “the committee is pleased to reject the offered bid exercising powers under the Rule 33(1) of the PPRA Rules 2004 and clause ITB 23 (2) of the bidding documents.”

However, the directorate did not cite any reason for rejection of the bid despite the fact that the procurement law requires a solid justification for any cancellation. At the same time, the procurement law also provides through its Rule 4 that the “procuring agencies, while engaging in procurement, shall ensure that the procurement are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical”.

When the JV demanded that the railways provide them the detailed reasons for the rejection of the bid, the directorate replied on January 15 that the “bid was unanimously rejected by the management committee on the grounds of being non-competitive and less beneficial to the railway”.

This was in spite of the fact that senior railway officials who had evaluated the bid as members of different technical and financial evaluation committees had unanimously recommended approval of the financial bid of the JV because they had found the offered bid “much higher than the fixed/variable benchmarks” and a “reasonable and competitive offer”. They also said it “gives positive indication towards the successful completion of the project over the lease period.”

The JV also requested the directorate that it may be advised about the appropriate forum/authority where it could submit a grievances and redressal case under its right granted by the PPRA Rules. The request was also turned down straightforwardly, saying the grievance is not maintainable.

On Jan 22, the JV wrote to the managing director of PPRA, seeking advice on how and where to proceed further in accordance with the procurement laws.

“Specifically, we seek advice on the appropriate course of action for filing the grievance Representation regarding the rejection,” the bidder asked. The PPRA is yet to respond.

The bid was rejected in the wake of a letter sent by the JV to Railways Secretary Syed Mazhar Ali Shah and copied to the DG/national coordinator of the SIFC, railway minister, parliamentary committees on railway, the prime minister’s office and senior railway officials on Jan 7 to express its concern over the inordinate delay in the award of the contract despite approval of its technical and financial proposals.

“There exists no lawful basis for delay, annulment or tendering of the process,” the letter stated.

A source suspects that the decision reflected the resistance from the railway authorities to the transfer of the club’s management to a private sector company in spite of the supreme court directives to the contrary.

The railway secretary/chairman Mr Shah did not respond to the calls and a text message sent to seek the department’s version.

Published in Dawn, January 30th, 2025