LAHORE, Sept 5: Despite a severe financial crunch, Wapda has squandered at least Rs323 million on a single purchase of three-phase transformers.

The authority had recently floated a tender for eight 220/132KV three-phase transformers despite having a surplus of two such transformers, which it had purchased in 1999-2000 but had not been able to install anywhere. Six more were in the pipeline, four from a Chinese company called the CCPG and two from Siemens, which would be used in two projects being run on a turn-key basis.

This careless shopping spree took a turn for worse when throwing all procedural legalities out of window, the authority increased the order from eight to 17 without any justification. Thus it raised the cost of an already questionable purchase from Rs280 to Rs603 million, which had to be paid in foreign exchange.

According to the details, Wapda floated an international tender (No 6-WOR) for eight three-phase and four single-phase 220/132kv auto-transformers late last year. The tender was opened on January 18, 2002. Five companies took part in the bidding: the China National Machinery & Equipment, China; the Expanding Edge of the USA and Zait Handel, Austria; the Hyundai Corp of South Korea; the Xian Electric Machinery and China National Electric Wire & Cable of China.

Interestingly, the order for eight identical transformers was split into two — LOT-I and LOT-II — for unknown reasons. About the logic of this division, a bidder said: “It helps Wapda “accommodate” more than one companies and strengthen its bargaining position viz-a-viz any stubborn bidder. Otherwise, splitting an identical order is not only against international bidding practices but also deprives Wapda of quantity discount and increases the price unnecessarily.” When contacted, a Wapda spokesman said that it encouraged competition by attracting more companies to the bidding process. He did not elaborate as to how putting the transformers under a single head discouraged prospective bidders.

However, the evaluation process ran into snags when three departmental committees forwarded three different recommendations.

The engineers recommended the Xian Corp as the lowest bidder for LOT-I and II and Ziat Handel for LOT-III (single-phase transformers). Although they pointed out some glaring technical discrepancies in the Ziat Handel bid, they “advised” the authority to “rectify them and accommodate” the company.

The project authority questioned (letter no CED/D-220/68/27393-95) the logic of this “accommodation”. It recommended Zait Handel for Lot-I and III and Xian Corp for Lot-II.

The Central Contract Cell (CCC), which is only authorised to ensure procedural requirements, came out in favour of the Xian Corp for LOT-I and II and declared that none of the bids was satisfactory for Lot-III.

The most interesting part of this evaluation process remains the diversity of opinion among the technical people. “It is easy to decipher the reasons behind this confusion,” says an insider. Different stakeholders pulled and pushed evaluators in different directions. Since the authority was not able to make up its mind, it decided to cancel the tender and invite another one.

The new tender was opened on July 12, 2002. There were five bidders: Electroputere, Romania; Xian Electric Machinery, China; Shenyang Transformer Co, China; Hyundai Industries, South Korea and China National Machinery & Equipment Corp, China.

This time a consensus emerged from the very beginning, claimed a source in the authority. All three components of the process showed “willingness to recommend” certain companies. The engineers recommended the Xian Corp for the LOT-I and II and Shenyang Transformers for LOT-III. The project authorities put their weight behind the engineers too.

However, the Central Contract Cell (CCC), while accepting the version of engineers and the project authorities, threw another spanner in the works when it overstepped its authority and recommended: “In view of inflow of discounts after the opening of bids, it is proposed that the authority may constitute a committee to negotiate with all technically and commercially responsive bidders in the shortest possible time to obtain the best price and delivery period.”

The issue took another turn when a meeting was convened to decide the fate of the CCC’s final report (CCC-1999/1785-92). The authority came out with a decision that did not have any procedural or legal basis. The authority at a meeting on June 4, 2002, instead of ordering eight (LOT-I and II) transformers to the Xian Corp as recommended by the evaluators, reduced the order to five at a cost of $2.969 million. As if that violation of rules was not sufficient, it ordered another five transformers to the Hyundai Heavy Industries. Interestingly, Hyundai had not been recommended by anybody.

“In fact the whole game was played to accommodate Hyundai,” claimed one of the affected parties. Others had been given the order only to keep them quite and not to move the court and scuttle the process, he added.

The sordid affair did not stop here. Offer for another five three-phase transformers went to Shenyang which had been recommended for LOT-III. The tender for LOT-III was cancelled arbitrarily and converted into one for three-phase transformers which was again a clear violation of the rules.

A novel way was adopted to place what the authority called an Educational Order. “Nowhere in the world additional demand is created through an educational order,” said another source. The beneficiary — the Hattar-based Heavy Electrical Complex (HEC) — had neither applied for the order nor qualified for it. Only Wapda could explain as to how it could have placed this order to HEC without any justification, he lamented.

When asked to comment on the whole affair, a Wapda spokesman said the authority could decide whatever it wanted to. He conceded that Wapda did have a surplus of two transformers which, he said, would be installed shortly.