Sunday, October 25, 2020

A porous deal leaking millions of Pula

In terms of its contract with the Botswana Power Corporation, Doosan Heavy Industries & Construction is to get P2.4 billion for refurbishing the Morupule A power station. However, sources say that the South Korean company will end up making a lot more because of a “porous contract.”

Doosan got the Morupule A contract on the determination that the price it charged was the lowest. How the company came into the picture was completely unconventional. When the Morupule A tender was floated, four companies – Fluor Daniel Holdings (Botswana), Jeffer, Mitsubishi Hitachi Power Systems Europe Service, and SK Engineering & Construction – submitted bids. 

Although the technical evaluation report, which was prepared by an international engineering company called Lahmeyer International, adjudged SK’s bid to be “the most complete, detailed and responsive”, the company didn’t get the job because it had quoted a ridiculously high price. In the circumstances, the tender was nullified but after some time, the four companies that had been shortlisted were invited to re-tender. 

Only SK and Mitsubishi responded, with the former quoting a total net tender price of US$338.69 million and the latter $374.08 million. Following clarification meetings between BPC officials and representatives of both companies, the prices were adjusted to $339.45 million for SK and $379.18 million for Mitsubishi. 

Midway the tendering process and in contravention of Botswana’s public procurement regulations, Doosan approached the ministry with an unsolicited bid. The government would end up focusing solely on Doosan, with then Minister of Minerals, Energy and water Resources, Kitso Mokaila, saying that the company provided the most attractive price. In the end, Doosan signed a contract to refurbish Morupule A at a cost of P2.4 billion. A year later, this contract is said to be giving managers on both sides a headache with every indication of turning into a migraine. 

Whereas companies that were in the formal bidding process spent a considerable amount of time inspecting the plant in order to determine how much work needed to be done, Doosan did such inspection in a much shorter period of time. The former are said to have flown in teams of engineers from overseas who inspected the plant “from cable to cable” while Doosan’s own team undertook a two-week inspection and later produced an inadequate report that in some parts referred to what BPC engineers had told the Doosan inspection team. 

On the basis of this inadequate inspection, Doosan quoted a price it would come to regret when the refurbishment started in earnest.

“The detailed inspection came only after the contract had been signed. It was only then that the company realised that the P2.4 billion it had quoted didn’t correspond to the amount of work that it had to do,” says a source.

The inspectors found that some of the equipment in the plant (like steam headers) were, from a safety point of view, damaged beyond repair.

Doosan also realised that there was no option of cutting corners because its crew is supervised by a joint team of BPC’s own employees and consultants from Lahmeyer International, the owner’s engineer. 

Reportedly sitting in an office at the Doosan headquarters in Seoul is a “contract agreement manager”, a legal eagle whose main responsibility is to identify loopholes in the BPC-Doosan contract and relay his findings to the team in Morupule. 

One loophole that Doosan identified is that the contract is not specific about the scope of the refurbishment. For example, it does not say that doors and windows should be replaced and walls painted. The result has been that Doosan has insisted on extra payment for doing essential non-engineering work that is not specified in the contract. 

A source says that as a result, Doosan has been making “claim after claim after claim” outside the agreed P2.4 billion.  The refurbishment is far from complete and by the estimation of one source at the Ministry of Minerals, Energy and Water Resources, there is an ironic likelihood that BPC will end up paying more than it refused to pay the companies that bid the first time because it considered them expensive.

Some four months ago, a prohibitively expensive transformer at the plant burnt to ashes and there is now a stalemate between the two parties with regard to who is responsible. The contract itself is said to be unclear on who has legal custody of the plant and the matter is to be resolved through arbitration in Mauritius. If BPC loses, it will replace the transformer at a minimum cost of P6 million and a maximum cost of P8 million.

The contract does not cover one very important aspect. The official language of South Korea is Korean and on account of its colonial past, Botswana is an English-speaking country. From what Sunday Standard learns, the contract has no provision for an official English-Korean interpreter which is said to be creating problems at official project meetings between BPC and Doosan officials. A source says that at some of these meetings, Doosan officials have conversed amongst themselves in Korean.

BPC made another misstep. When the project started last year, the Corporation assigned project management functions to an employee who has no professional competence in that field. This mistake was recently corrected when he was replaced by a professional project manager, a South African who is said to have international project management experience. Not too long ago, the man is said to have been working in the Middle East where there is a construction boom. In the South African’s first few days on the job, a project meeting was held and at the end of it, he is said to have exclaimed with some dejection: “Eish! This contract is porous.” Ideally, a professional project manager should have been hired at the start of the project.

Next to Morupule A is the ill-fated Morupule B into which government poured billions of pula and was continually short-changed by the Chinese company that built, operated and maintained the plant. A source says ominously: “We are headed for another Morupule B with Morupule A.”

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