The CCP on Friday issued notices to Dredging International (DI), Jan De Nul (JDN), M/s China Harbour Engineering Company (CHEC) and M/s China International Water & Electric Corp (CWE). These companies appear to be involved in collusive tendering for the projects of deepening and widening of navigational channel of Port Qasim and deep water container terminal of Karachi Port Trust.
According to the commission's inquiry report, the collusive tendering by the foreign companies in the dredging sector of Pakistan for obtaining dredging contracts and quoting exorbitant rates for the projects is harmful to the public procurement agencies such as PQA and KPT, thereby forcing them to pay supra-competitive prices, which is not only anti-competitive but also cast direct and immediate impact on public expenditures and therefore on taxpayers, directly and indirectly. Foreign companies by collusive tendering not only rule out the possibility of competitive bidding but also create barriers for the local companies to enter, which results in loss to the public procurement agencies and closure of any possible employment opportunities for the public at large.
It is therefore, recommended that proceedings under Section 30 be initiated against these companies on account of the said contraventions mentioned in the conclusions and in light of the public interest surrounding the case, the CCP added. In its enquiry report, the CCP opined that the practice results in loss to the public procurement agencies and closes possible employment opportunities for the public at large.
The enquiry report is prepared pursuant to the suo motu notice taken by the CCP on a Business Recorder report dated May 4, 2009, wherein it was reported that some international dredging companies have formed a cartel to qualify for the bids of dredging 45 kilometers long navigational channel of Port Qasim to the extent that it gets an all-weather 14-metre draught by 2010.
The report further revealed that the practice is not only harmful to the public procurement agencies such as PQA and KPT and thereby forcing these agencies to pay supra-competitive prices, which is not only anti-competitive but also have a direct and immediate impact on public expenditures and therefore on taxpayers. "Foreign companies by collusive tendering not only rule out the possibility of competitive bidding but also create barriers to entry for the local companies, which results in loss to the public procurement agencies and closure of any possible employment opportunities for the public at large," the report maintained.
The CCP report further added that ports play an important role in the economics of the nation and provide a crucial link between land and sea transport. They also have an important social function, through the provision of jobs both directly and indirectly.
More findings of the report are as under:
Moreover, the dredging activities carried out at the ports are to enhance the capacity and the efficiency of the ports, which ultimately contribute to the economy. In view of the foregoing, it is therefore, recommended that proceedings under Section 30 be initiated against these companies on account of the contraventions mentioned in the conclusions and in light of the public interest surrounding the case.
Karachi Port Trust took the initiative of bracing itself to handle and cater for fifth and sixth generation ships in the year 2007-08. This involves the development of deep draught berths and due to its strategic location Keamari Groyne was the natural choice.
The berths were to be built at 18 m depth, with 3.75 km of quay wall. Provisions of 10 berths have been made in the Karachi Port Trust's long term plan. The project was to be carried out in phases and on public private partnership. Cost of the project was US $1087 million. Karachi Port Trust was supposed to share US $345 million.
Only M/s China Water & Electric International Corp & M/s China Harbour Engineering Company participated in the bidding process and the KPT Project was awarded to M/s China Water & Electric International Corp. The proposed rates (average) that stand at Rs 310/- per cubic meter for dredging and Rs 187.50/- and Rs 447/- per cubic meter for the disposal of 24 million and reclamation of 8 million cubic meters dredged material, respectively.
The rates offered by M/s China Harbour Engineering Company, the only competitor of M/s China Water & Electric International Corp in bidding process, stand, however, far greater at Rs 660/-, Rs 281.50/- and Rs 444.70/- for the same three jobs.
In 2007-08, Port Qasim Authority also planned to undertake deepening and widening of the channel to achieve an all-weather 14-metre draught in the 45-km long navigational channel by 2010.
The PQA project was awarded to M/s China Harbour Engineering Company, who offered the lowest bid and it was Rs 10.2 billion self-financed dredging contract. Later the bid was scrapped allegedly at the behest of Dredging International, who was the second lowest bidder for the project.
Subsequently, Port Qasim Authority in December 2008 cleared M/s Dredging International for maintenance dredging at Port Qasim by 4.5 million cubic meters (cms) at Rs 314 per cm against Rs 211/- of the last year. Other bidders M/s Jan De Nul, M/s Van Oord and M/s China Harbour Engineering Company also came with higher rates of Rs 1.52 billion, Rs 1.51 billion and Rs 2.02 billion, respectively.
Subsequent to the scrapping of the earlier tender for the Deepening and Widening of Navigational Channel of PQA, the project was re-advertised in March 2009 and tenders were invited from the companies.
The scrapping of capital dredging bid and the awarding of maintenance dredging tender to DI was also highlighted by the media in various news items of which the Commission took cognisance and appointed the enquiry officers for the matter, the inquiry report added.
From analysis of the material available on the record, and the patterns of bidding by CHEC and CWE, it is concluded that prima facie CHEC and CWE are not competing with each other in their allocated territories ie, CHEC is not competing with CWE in KPT and submitting cover bids, and CWE is not competing with CHEC in PQA, either by not submitting a bid or submitting a cover bid, which is in violation of the provisions of sub-section (1) of Section 4 and in particular clause (b) of sub-section (2) of Section 4 of the Ordinance. It is concluded that prima facie CHEC and CWE are submitting cover bids for each other in PQA and KPT, which is in violation of the provisions of sub-section (1) of Section 4 and in particular clause (e) of sub-section (2) of Section 4 of the Ordinance.
From perusal of the material available on the record, it is hereby concluded that CHEC, DI and JDN have entered an agreement for submission of a single joint bid, the aim and object of which is to prevent, restrict or reduce competition within the relevant market and thus is prima facie in violation of sub-section (1) of Section 4 and in particular clauses (a) & (e) of sub-section (2) of Section 4 of the Ordinance, inquiry report added.