PAC tells NEA to scrap solar plant contract

Published On: August 2, 2017 09:58 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 1: Public Accounts Committee (PAC) of the parliament has directed the government to scrap the decision of the contract award of solar project of 25 megawatts to a Chinese company, citing the decision was against procurement law. 

The committee on Tuesday asked the Ministry of Energy and Nepal Electricity Authority (NEA) on Tuesday to scrap the contract process and initiate a fresh tender to install solar power plants in the premises of Kulekhani reservoir in Makwanpur district and Devighat Hydropower Project in Nuwakot district.  

These two would be the largest-capacity solar plants of NEA so far. On May 16, the NEA management had decided to award the contract to Risen Co Energy Limited at the price of approximately Rs 3.88 billion (US $ 37.9 million plus NRs 13.5 million), although the bidder ranked fourth in the financial proposal. The parliamentary committee said that awarding the contract to the fourth bidder was illegal. 

The bid amount is broken down into US dollars and Nepali rupees for purchase of goods from international market and making payments in Nepal, respectively.

PAC Chair Dor Prasad Upadhyaya said that they found flaws in the contract selection process as the lowest bidder was not given the contract. 

“There are other bidders with equally good technical qualifications as that of the selected bidder, but the contract was given to this company in a premeditated way,” Upadhyaya said, adding that the decision was against the Public Procurement Act. 

The lowest bidder Pingao and Heron JV, another Chinese company, had quoted about Rs 3.4 billion (US $ 29.7 million and NRs 274 million). 

The difference between the quoted amounts of the lowest and the fourth lowest bidder is approximately Rs 480 million.

Both the bidders included in their quotes value added tax and one percent customs tax on import of equipment and solar panels. 

NEA management had decided on the contract after receiving no objection letter from the World Bank, which has financed the solar project as part of the Grid Solar and Energy Efficiency Project. 

Toward the end of his tenure, former managing director of the NEA Mukesh Kafle had decided to award the contract to the second lowest bidder but the decision was not accepted by the World Bank, citing lack of sound technical proposal by the bidder. 

Three evaluation committees--two of the NEA and one of the World Bank experts--had reevaluated the contract and chosen Risen Co Energy Limited for setting up the solar plants. The Bank had endorsed the evaluation.

 The NEA had called the bid in April 2015, but like several other bids, this also drew controversy and now it has almost come to an end by the PAC’s decision. The PAC had asked the government two weeks ago to put the decision on hold until further decision. 

Several of the government procurement processes, mainly in the development projects, have drawn controversies over suspicion of corruption. Generally, there is subjective marking for evaluation of the proposals. The dispute is mainly on whether to pick the lowest bidder or the one with better technical capacity. 

Going by the trend of recent years, the contract award does not generally go to the lowest bidder, and that brews controversy.

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