Relief as HPCL drops Vizag reverse auctions

Vol 20, PW 17 (18 May 17) Midstream & Downstream

No one likes reverse auctions - especially contractors who detest the idea their margins will be squeezed.

After intense lobbying contractors interested in HPCL's Rs18,000cr ($2.8bn) plan to upgrade and raise the capacity of its Vizag refinery from 8.33m t/y to 15m t/y are a happy lot. Each of the tender notices sent out by HPCL and project consultant Engineers India confirms that, "reverse auction methodology will not be applicable." Winners will instead be chosen using conventional methodology where the contract is awarded to the lowest bidder.

In a reverse auction contractors are given a fixed time - usually one hour - to quote a price lower than the lowest bidder whose identity is kept secret. "Reverse auctions result in unfair cut-throat competition," says a likely bidder.

HPCL's original plan to hold reverse auctions was fiercely opposed at a pre-tender meeting on October 19 and 20 last year and it seems HPCL paid attention. By July 11 HPCL and EIL want bids for an estimated Rs2000cr ($311m) Vizag EPCC-2 package to set up a Full Conversion Hydrocracker Unit to convert gas oil feedstock to High-Speed Diesel and LPG.

Likely bidders include L&T, Essar, Cinda with CTCI, Technip, Tecnimont, and Hualu Engineering & Technology. On April 24, HPCL invited bids by June 20 for a Naphtha Isomerisation unit, which converts naphtha to other products, worth around Rs700cr ($109m).