Saturday, January 09, 2010
Govt’s attempt to rig bid for oil supply exposed
By Staff Reporters
Sat 09 Jan. 2010, 04:01 CAT
THE government's attempt to rig the bid for the supply and delivery of 1.4 million metric tonnes of crude oil in favour of Russia's LITASCO has been exposed.
Well-placed government sources have revealed to The Post that government, through energy minister Kenneth Konga availed the original tender document to LITASCO through its official Leon Hayward so that LITASCO could make or suggest some changes in its favour and disadvantage competitors.
But when contacted for comment, Konga denied any linkage to LITASCO although insiders said he had been working closely with Hayward from June last year when a Zambian businessman introduced LITASCO to President Rupiah Banda at State House.
During a meeting at State House in June, President Banda assured LITASCO that it would get a contract to supply crude oil to Zambia and he involved other government officials to work with LITASCO on this matter.
The sources said several meetings had been held in Johannesburg, South Africa and Lusaka between Konga and LITASCO through Hayward. The source said one of the meetings Konga held in South Africa was in the presence of a named official from State House.
“Discussions have been going on for some time and evidence is there to show that Mr Konga has been in touch with Leon Hayward on a number of occasions,” the source said. “So when the Ministry of Energy prepared the original tender document, Mr Konga availed it to Leon Hayward to make changes to the eligibility conditions in the bid document, which could make LITASCO the only one to meet the conditions. In his handwriting, Leon Hayward made some changes to the original tender document, making LITASCO the only firm that could meet the tender conditions.”
A comparison of the original tender document and the revised one, accessed by The Post, showed that the Ministry of Energy and Water Development and the Zambia Public Procurement Authority (ZPPA) made changes on all the points that Hayward disapproved.
On page four of the original tender document, Hayward underlined the 'eligibility bidders 2.2.1', which read: “Bids are invited from reputable Oil Trading Companies with more than five years experience in crude oil and/or petroleum products supply for the supply and delivery of 1, 260, 000 MT plus or minus 10 per cent of commingled petroleum feedstock in cargo lots of 60, 000-90, 000 MT at the buyer's option.”
In the revised tender document, which was made after Hayward's comments, the clause was changed to read: “Bids are invited from reputable oil trading companies with experience in crude oil and/or petroleum products supply for the supply and delivery of 1, 440,000 MT plus or minus 10 per cent of comingled petroleum feedstock in cargo lots of 60,000 - 90,000 MT at the buyer's option.”
On page six of the original tender document under bid prices, Hayward wrote: “Good!”
The bid price was, therefore, maintained in the revised tender conduct.
On page seven of the original tender document under documents establishing bidder's eligibility and qualifications, Hayward wrote: “new but good” and underlined it.
Consequently, this condition was also maintained in the revised tender documents.
On page 14 of the original tender document under award criteria, Hayward demanded changes.
In the original tender document the award criteria read: “2.27.1 the client will award contracts as follows: technically responsive bids will be ranked on the comparison of evaluated CIF Dar-Es-Salaam bid prices, for the 1, 260, 000 MT which will be the basis for award.”
However, Hayward wrote: “see over side.”
And on the over side overleaf, Hayward wrote the following suggestions: “The tender will be awarded to the bidder that: (a) is technically responsive, (b) lowest price. However: It is the client's right to place an emphasis on bidders who will serve the strategic requirements of the country in the long term. This includes bidders who owns refineries, produce and trade large volumes of crude oil and are substantial participants in the international oil trading market.”
On page 16 of the original tender document, where it was written: “ITB2.11, the price quoted shall be: CIF Dar-Es-Salaam”, Hayward commented: “Good”
On the same page of the original tender document, where it was written: “ITB2.15 Bid security shall be US$1million”, Hayward underlined it and wrote: “Question? Used to be $2 million.”
Consequently, this condition in the revised tender document was changed in line with Hayward's suggestion to read: “ITB2.15 bid security shall be US$2 million.”
In the original tender document, under preliminary evaluation, Hayward commented: “New good.”
On page 18 of the original tender document providing for bid security of US $1 million, Hayward underlined it and wrote: “$2million?”
This condition was consequently revised in the revised tender document in line with Hayward's suggestion.
It, therefore, read: “2. Bid security of USD 2 million.”
The other conditions in the original tender document under technical and financial evaluation, Hayward commented that they were new and good.
On page 19 and 20 of the original tender document under technical evaluation score card, it read:
Criterion: have traded in Zambia in the last one-year for at least 50 million USD.
Maximum point: 25.
Criterion: have a registered affiliate in Zambia.
Maximum point: 15.
Criterion: have an agency in Zambia.
Maximum point: 5.
Criterion: Must have a registered affiliate at Cargoes Entry Point (Tanzania).
Maximum point: 15.
Criterion: have an agency in the port of entry - Tanzania.
Maximum point: 10.
Criterion: at least five years in crude oil trading.
Maximum point: 10. ”
But Hayward wrote: “No! This is only for IPG.” IPG is LITASCO's main competitor and won the last tender against LITASCO.
Consequently, in the revised tender document, these conditions were deleted and only left those that were not objected to by Hayward.
Hayward rejected other conditions on the technical evaluation score-card, stating that they were “not practical.”
Therefore, about five maximum qualifications conditions that were rejected by Hayward were consequently left out in the revised tender document.
Hayward also rejected a condition which stated that, “Note 2: bids from sellers with no affiliate or without a registered company in Zambia will be considered non responsive.”
Following Hayward's suggestions, amendments were made to the original tender document by inserting his proposals to the final tender document.
When contacted on phone from Dubai this week, Hayward declined to comment.
“I am not allowed to talk to press on behalf of the company. We have people who do that for us,” said Hayward, who admitted that he is an employee of LITASCO.
Told that he was being contacted directly instead of the press officer because his handwriting was on the tender document, providing suggestions to the Ministry of Energy and Water Development on the changes LITASCO wanted to be made to the document, Hayward responded: “I don't know what you are referring to. But as I have said, I am not allowed to speak to the press on behalf of the company.”
And responding to a press query from The Post, Konga stated that he had no link with LITASCO.
“I refer to your query dated 4th January, 2010. Please note that I have no direct role in the selection of a supplier for Zambia's crude feedstock (oil) for 2010 to 2011. Procurement issues are handled by the Ministerial Tender Committee (MTC) chaired by the permanent secretary,” Konga stated.
“The tender document you referred to was submitted to the Zambia Public Procurement Authority (ZPPA) by the Ministerial Tender Committee (MTC), which in effect is a sub-committee of the Zambia Public Procurement Authority (ZPPA).
Upon receipt of the document, Zambia Public Procurement Authority (ZPPA), as per its mandate, thought that the selection criteria was not adequate and hence amended them, after which were given to prospective bidders, including LITASCO. This is a normal process at Zambia Public Procurement Authority (ZPPA), which is the overall authority over public procurement issues.”
Konga further stated that later on, ZPPA in consultation with the Ministry of Energy and Water Development agreed to amend the selection criteria, which was also circulated to all the bidders.
“As is the normal practice, the Ministry of Energy and Water Development, Zambia Public Procurement Authority (ZPPA) and interested prospective bidders met on 18th December, 2009 in a pre-bid meeting. During this meeting, prospective bidders further gave their comments on the tender document,” Konga stated.
“The proposals that the Ministry of Energy and Water Development and Zambia Public Procurement Authority (ZPPA) found acceptable have been incorporated as a further amendment to the bid document.”
Konga stated that the minutes of this meeting were available at ZPPA for public scrutiny.
“As you can see from the above, I have had no role in this process, other than giving policy guidance at the Ministry of Energy and Water Development. As per the regulations, the Ministry of Energy and Water Development has no direct contact with prospective bidders. All correspondence is through Zambia Public Procurement Authority (ZPPA),” Konga stated.
“The above, notwithstanding, you may wish to note that it is the Ministry of Energy and Water Development that is the client and, therefore, the client has the right to ensure that the result of the tendering process meets the interest of the country.”
Konga stated that was, however, done according to the laid down procedures.
“I, therefore, did not give any tender document to LITASCO. The document can be accessed by any third parties (other than the Ministry of Energy and Water Development and Zambia Public Procurement Authority) when they buy it from ZPPA. Given the fact that the document can be sold to anyone who wants it, it is in that sense a public document,” Konga stated.
“Please note that even if the Ministry of Energy and Water Development wanted, it is not possible to pre-select a supplier under international competitive bidding.
Further, note that until the closing date, it is not possible to tell what and the type of companies that will bid. How then would a person plan to disqualify companies that you do not even know?” Konga asked.
“As indicated above, the public procurement process is transparent enough to guard against acts that may lead to selection of a wrong supplier. Other than the process described above, there are other stages that lead to actual selection of a supplier. The actual evaluation is done by a committee whose work the Ministerial Tender Committee has to approve.
“Thereafter, the Zambia Public Procurement Authority (ZPPA) has to approve the Ministerial Tender Committee's recommendations. In any case, some details of the bids submitted are publicly announced at the time the tender closes.”
But a ZPPA source dismissed Konga's explanation.
“Instead of answering directly the question that you put to him, the minister started lecturing to you about tender procedures and actually lied that the document you have is a public one which can be accessed by anyone who can make comments on it,” the source said.
“The document that was passed to LITASCO by the minister was in a draft form and therefore does not qualify to be referred to as a public document. The two documents you are talking about do not have tender numbers. This shows that they are merely draft and not public documents. A public document is one with a tender number and is advertised. So let the minister give you the tender number on those documents to show that they are public documents.”
The source said President Rupiah Banda, using Konga, is determined to award the contract to LITASCO.
“Just wait and see, unless something fundamentally changes, this contract is destined for LITASCO and there is enough evidence to show that Mr Konga has been in touch with Leon Hayward of LITASCO,” the source said.
“The question is, why is Mr Konga only in touch with LITASCO and not other bidders or IPG, the current supplier? And why should the minister be involved in this process instead of the permanent secretary and other technocrats? The truth of the matter is President Banda is deeply involved in this using Mr Konga. Let them deny that they met LITASCO officials at State House in June last year and that from that time Mr Konga and officials from State House have met LITASCO at different times.
“And ask them where one of the President's sons is at the moment and what he is doing there. We know all these things. The President is determined to give this to LITASCO and Mr Konga is only implementing the boss' wish. That's why he in untouchable. Let the President deny meeting LITASCO and discussing this contract. That's why Chibuye the ZPPA director general was put there; it was for him to play the President's game as they are doing now: rigging bids.”