Monday, December 6, 2021

PPADB advises BPC to suspend Morupule A tender

The Public Procurement and Asset Disposal Board (PPADB) has “advised” the Botswana Power Corporation (BPC) to “suspend the tender progress” to refurbish the Morupule A Power Station.

As part of effort to beef up power security, BPC plans to bring back Morupule A into service. The power station was mothballed in 2011 following the commissioning of Morupule B. The process to demothball Morupule A began with four companies (Fluor Daniel Holdings (Botswana), Jeffer, Mitsubishi Hitachi Power Systems Europe Service and SK Engineering & Construction) submitting bids for the refurbishment tender.

Although the technical evaluation report, which was prepared by the owner’s engineer, 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 for Mitsubishi. Midway the tendering process, a third company ÔÇô Doosan Heavy Industries & Construction (DHIC) from South Korea, came into the picture. The latter approached the ministry with an unsolicited proposal. Along the way, BPC offloaded SK and Mitsubishi while actively considering Doosan’s proposal.

It turns out that last month, SK complained to PPADB about the manner in which this tender was handled. The Board took the matter up with BPC which, according to a PPADB letter, indicated that it was addressing the complaint within its internal structures.

“The Board advised BPC to suspend the tender progress whilst resolving the complaint in line with procedure,” says the PPADB letter which was signed by the Board Secretary, Masingoaneng Ramodimoosi.

The letter further advises SK that in the event that it is dissatisfied with BPC’s decision, it may lodge a written appeal to the PPADB Board. In making its case, SK will most likely state that Lahmeyer International expressed confidence about “a commercially viable project outcome” and it recommended that BPC should “consider only these two tenderers” ÔÇô SK and Mitsubishi.

“Limiting the process to these two bidders only without starting a completely new tendering process would allow implementing the project within the shortest possible time frame,” Lahmeyer says in its final re-tender evaluation report which in another part, recommends that SK and Mitsubishi should be invited to submit alternative bids.

This drama plays itself out against a situation where power supply has yet to stabilise. On Thursday and Friday, some parts of Gaborone experienced loadshedding. According to the 2015/2016 edition of the Rand Merchant Bank’s “Where to Invest in Africa” report, electricity outages in Botswana average 10.3 hours a month. The power supply situation in Botswana partly accounts for the quality of the country’s infrastructure being placed in a category of ‘Top 5 Deteriorators’. The other four countries are Benin, Libya, Tunisia and Egypt. Like Botswana, the quality of overall infrastructure in these countries has declined badly over the past years. For investors this is bad news because poor infrastructure increases the cost of doing business.

“In many cases, we find that our clients are more concerned about the challenges of doing business than growth and market size, and therefore they place greater emphasis on the risks associated with the different operating environments Africa offers,” the RMB report says.

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