HAL Offshore still waiting for Sobhasan LoA

Vol 26, PW 11 (18 May 23) Exploration & Production

More than six weeks after opening price bids, ONGC shows no sign of issuing an LoA to the lowest bidder HAL Offshore to upgrade and redevelop the Sobhasan fields at its Mehsana asset in Gujarat.

This, we are told, is because when ONGC opened price bids on March 31 (2023), the second lowest bidder and newcomer to the Indian market JSC Golla emerged as a priority Class-1 contractor, while Mumbai-based HAL turned out to be a Class-2 contractor. Under government rules to encourage domestic manufacturing, companies bidding for projects from state-owned companies should quote a minimum of 50% local content to be categorised as Class-1.

Such contractors receive a 20% price preference advantage over the lowest bid if it is from a Class-2 contractor without enough local content in its offer. But to win the contract, any Class-1 contractor must match the Class-2 contractor's price.

JSC Golla pointed this out to ONGC on April 1 (2023) in a formal letter. "Authorised representative of M/s JSC Golla Engineering Private Limited witnessed the opening of the price bid as per the schedule," wrote JSC Golla director Venkatachalam Gedupudi to ONGC manager Pranjal Pandey.

"Further, it was observed that M/s HAL Offshore Limited has mentioned local content as 0.7% only and therefore, in line with clauses 40.1 and 40.2 of the Instruction to bidders (purchase preference make in India policy), M/s HAL Offshore Limited is a non-local supplier, whereas we, JSC Golla Engineering Private Limited being the Class 1 local supplier may be allowed to match down the prices quoted by HAL Offshore." When price bids were opened, HAL quoted Rs767.22cr ($109m) for the job, followed closely by JSC Golla at Rs777.37cr ($111m).

Far behind were Kalpataru Power Transmission at Rs854.32cr ($122m), Megha Engineering at Rs860.22cr ($123m), and Afcons at Rs1102.35cr ($157m). All prices include GST.

JSC Golla's two-page letter stresses that its "total lumpsum price" is Rs777,37,10,868 while HAL's total lumpsum price is Rs767,22,81,939 "which is 1.3% less than the price quoted by M/s JSC Golla Engineering Private Limited. Therefore, we are eligible for purchase preference (under the government's) Make in India policy."