They move court, allege opaque and unfair process

Karnataka Power Corporation Ltd. (KPCL), whose liquefied natural gas-based power project at Bidadi has remained on the drawing board for more than a decade, finds itself in the middle of a raging controversy for the manner in which it had evaluated the bids for the engineering, procurement and construction (EPC) contract.

The contract for the 700 MW project, awarded to Swiss power equipment multinational Alstom on December 4, 2012, has been challenged in the Karnataka High Court by two of the losing bidders, Larsen & Toubro Ltd. and Tata Projects Ltd., both of whom have extensive experience in executing such projects.

Although L&T emerged as L1, the lowest bidder, — quoting Rs. 2,021.51 crore, around Rs. 193.89 crore lower than Alstom’s quote — it was edged out because KPCL followed a tender evaluation process that was unfair, non-transparent and “arbitrary and discriminatory”. In its petition, L&T said KPCL made “errors in calculations” and “deviated” from the methodology prescribed in the tender documents.

The tender evaluation process for power projects is different from those for commodity procurement by government departments or public sector agencies, explained an industry source. “Since there are only a few manufacturers of power generation equipment, and since the technology is mostly proprietary in nature, the technical parameters for the equipment would vary,” he said. The price quoted by bidders has to be “adjusted” in order to “standardise” the bids so that they can be “evaluated on a common platform that is fair and transparent”.

Three covers

Each bidder was required to submit three separate covers — the bid security, a technical and unpriced commercial bid and a separate cover with the price bid. Tata Projects, which emerged as L1 when the KPCL invited bids for a 1,400 MW gas-based project in 2010, which was later scrapped, alleged that the evaluation process was vitiated by the KPCL opening the price bids on October 10, 2012, without evaluating the technical bids. “This is clearly wrong because it enables the KPCL to adjust the price bids before establishing a level playing field fair to all participants,” said an industry source who did not wish to be named. L&T alleged that the KPCL, by tweaking parameters that were part of the tender specifications, favoured Alstom. It alleged that the calculation of the long-term parts management (LTPM) scheme, to ensure that the EPC contractor supplies adequate spares, was adjusted to favour Alstom. Tata Projects went further: it alleged that both Alstom and L&T had edged ahead only because of the arbitrary criteria the KPCL adopted, failing to provide a level playing field because of its “completely non-uniform evaluation platform”.

Fast-forwarded

Documents in the possession of The Hindu reveal that the KPCL bidding process was rushed through, despite warnings from a KPCL board member. On December 4, 2012, when the KPCL board decided to award the contract to Alstom, the member sought “clarifications” from the bidders before the “placement of orders”. Unaware that the KPCL had already decided to award the contract on December 4, L&T wrote to KPCL again on December 28 hoping its “concerns” would be examined by the KPCL before it awarded the contract. Energy Minister Shobha Karandlaje, a close associate of the former Chief Minister B.S. Yeddyurappa, who is likely to step down soon, can expect the controversy to dog her even after she breaks ranks with the BJP. Her attempts to distance herself from the contract are not likely to be convincing because, as KPCL vice-chairperson, she could not have been unaware of how the board reached its decision.

Apprehensions

The documents show that the losing bidders had alerted senior government officials, a month before the contract was awarded, expressing their apprehensions about the evaluation process. A senior Tata Projects officer wrote to Pradeep Singh Kharola, Principal Secretary to the Chief Minister, on November 22, 2012, pointing out critical “deviations” in the evaluation process. Subsequently, he wrote to Chief Minister Jagadish Shettar, who is also KPCL Chairperson.

Repeated attempts to elicit a response from KPCL Managing Director M.R. Kamble proved futile, as did attempts to reach Ms. Karandlaje.