Hyundai 'Price Preference' battle with Punj

Vol 15, PW 7 (06 Oct 11) Exploration & Production

South Korea’s Hyundai is locked in battle with Punj Lloyd over an ONGC contract that once more thrusts to centre-stage the controversial 10% ‘price preference’ bias that helps Indian contractors beat foreign competitors.

At stake is a prestigious multi-million dollar contract to lay 113-km of interconnecting pipelines at the WO-16 marginal fields offshore Mumbai. Hyundai was lowest bidder on September 16, quoting just $93.86m against Punj’s quote of $103m.

But as an Indian company, Punj lost no time in invoking ‘price preference’, ensuring its win. Hyundai refused to give up and took its case to ONGC’s Independent External Monitors: Arvind Varma, VK Agarwal and VK Shunglu.

Hyundai said Punj would “add little value” to the assignment because it needs to import most of the materials - a charge Punj supporters hotly deny. “Punj Lloyd is well-established with previous experience of ONGC offshore contracts,” we hear.

“Punj owns its own barges and will be coating the pipes in its own yards so it will certainly add value.” Unclear is when ONGC’s monitors will rule on Hyundai’s complaint.

Another component of the WO-16 project is likewise mired in controversy. Houston-based J.

Ray McDermott made a stupid mistake when it openly indicated its $164m price for a job to build four ‘well-head platforms’ and ‘processing facilities’ in the technical bid submitted on July 14, leading to instant disqualification. But on August 30, lowest bidder Hyderabad-based SEW Infrastructure with Malaysia’s Ramunia quoted $191.9m, some $27m more than McDermott’s disqualified bid! To muddy things further, ONGC last month inexplicably asked SEW to extend the validity of its price bid until October 10.

“ONGC officials are getting anxious,” we hear. “The difference between McDermott’s disqualified bid and SEW’s quote is too big; no one wants to face anti-corruption probes for awarding the contract to SEW.