Preparations for building a $35-billion mega refinery on the west coast have run into trouble even before reaching the drawing board as the government watchdog, Central Vigilance Commission, has initiated paperwork for a CBI probe into alleged bias by project consultant and navratna Engineers India Ltd in selecting the agency for conducting the feasibility study.
Sources said the CVC was preparing for a CBI investigation into EIL’s selection of Dubai-based IHS for the market and pricing study as EIL had ignored its internal enquiry report that said the selection violated both the tender procedure and technical evaluation of bids. IHS does analytics for clients on strategy and operations across the entire energy value chain, mainly oil and gas. According to EIL officials, it was awarded the 12-week study contract for US $973,000 (about Rs 6.2 crore).
Last week, the CVC sent a two-member team to EIL to collect all documents related to the tender. “This is the usual practice before handing over the probe to CBI,” said a CVC official. The pre-feasibility study of pricing for crude, as well as marketing of fuel products and petrochemicals is crucial as this report would establish the project’s viability.
The CVC’s intervention came in the wake of a May 4 report by EIL’s Independent External Monitors (IEM) recommending cancellation of the tender for hiring IHS after it found “procedural as well as evaluation irregularity” in its selection. The IEM is a two-member committee of former bureaucrats and technocrats and assesses contracts and tenders independently on receiving complaints. The IEM said that EIL did not follow transparency in the way it framed the letter inviting bids. However, instead of following the recommendation of its own inquiry panel, EIL decided to proceed with awarding the contract to IHS.
In fact, EIL chairman and managing director Sanjay Gupta tried to close the issue saying that there had been “no supplementary” from the IEM “to settle the matter”. “A closure report on the subject must be finalized quickly to amicably resolve the subject. This may be treated as urgent please,” he wrote on July 21. However, the IEM’s May 4 report was categorical that the tender be cancelled in the public and EIL’s interest. Its first reasoning was that EIL floated the online tender to a handful of agencies approved by the project promoters — which went against government guidelines stipulating issuing advertisement for seeking expression of interest before preparing the shortlist of vendors.
The IEM quoted Clause 2.1 of ‘Policies and Procedures of Employment of Consultants’ which says that in consultancy contracts above Rs 50 lakh, the agency must issue an Invitation for Expression of Interest ad in at least one national newspaper and the Ministry’s website for preparing the shortlist. EIL’s restricted tender resulted in only three companies participating.
When un-priced bids were opened on March 21, bids had come in only from IHS, Argus Singapore and Delhi-based Frost & Sullivan. Argus did not make it on technical evaluation and a month later, IHS was selected — even though it had quoted a fee four times that of Frost & Sullivan – because of higher points on technical evaluation.
The IEM probe concluded that even this technical evaluation process was faulty. “IEMs are of the opinion that IHS has been given double marks for the market study overseas and 15 marks have been additionally added to IHS in the technical evaluation. If correction is made in the technical evaluation, the highest marks scoring between the two firms will change tilting the balance towards Frost & Sullivan,” it said in its report to the CVC.
When contacted, an official authorized by EIL CMD said that the “limited enquiry” was done to include only those who had their own database as the study was crucial for establishing the viability of the refinery-cum-petrochemical complex for the next 30 years. The enquiry was sent to eight firms who the joint venture promoters — Indian Oil, Hindustan Petroleum and Bharat Petroleum — thought were suitable for a “comprehensive study”, said the EIL official authorized to respond to the queries by The Indian Express. The official, who requested that he not be named, said that the IEM makes recommendations on various tender processes and it is for the EIL management to decide whether to follow their advice.
“As per our assessment, we are confident that the procedure was transparent and there was no discrepancy in the tender evaluation process,” he said, adding that another reason for not heeding IEM’s advice was that refloating the tender would lead to delays which could not be allowed considering the project’s schedule. Another alleged violation pointed out by the IEM was that the tender was opened in the absence of the bidders and points scored by each of them was not announced at the time of opening the bids. As per Clause 25.1 of the letter inviting bids, EIL should have read out the technical points scored by the shortlisted firms as well as their quoted price at the time of opening the price bids on April 13.
Instead, Frost & Sullivan was informed five days later. EIL gave the bidders precisely a 42-minute notice to attend the opening of the price bid on April 13. “Though EIL have technically satisfied the requirement of procedure, but it is contrary to the spirit of ensuring transparency under tendering procedure,” the IEM noted.