GAIL nets low rates in Kochi pipe-laying tender

Vol 15, PW 11 (01 Dec 11) Midstream & Downstream
     

GAIL officials were laughing all the way to the bank last week, after concluding the company’s first-ever ‘reverse auction’ for a pipeline laying contract.

PETROWATCH learns 12 companies fought among themselves, over three nerve-wracking days to November 23, to win contracts to lay GAIL’s proposed 24-inch diameter, 948-km pipeline from the upcoming 5m t/y Kochi LNG terminal in Kerala to Mangalore and Bangalore in Karnataka. On the morning of November 24, newcomer Tecpro Systems was found to be lowest bidder for two of eight ‘sections’ into which GAIL has divided the Kochi pipeline project.

A consortium of newcomer Fabtech Projects & Engineers and Zen Gas was lowest bidder for another three sections; while Corrtech International was lowest for one section; and Punj Lloyd was lowest for another section. GAIL’s Project Management Consultant MECON is still compiling a list of winners.

But GAIL will issue a fresh tender for ‘section 6’ of the project, where an unnamed nervous bidder apparently quoted a laughable low quote of Rs10.3cr ($1.97m): clearly a typo. “The average bid for the other seven sections was Rs77cr ($14.7m),” says a bidder.

“GAIL’s board will need to approve a re-tender for ‘section 6’, after it issues Letters of Intent (LoIs) to the winners of the seven clear sections (expected within the next two weeks).” Nevertheless, GAIL is still pleased as some of the lowest bids submitted were apparently up to 30% lower than its own internal estimates for the project.

“We are satisfied with the outcome of the reverse auction,” says a GAIL source. “But the best measure of success will be if contractors actually complete the project.

” He admits that some winning bidders might find it difficult to carry out work if they suddenly discover the rates they quoted were too low. In a reverse auction, companies compete online to lower their original price bids.

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