SCI loses contract for ONGC's offshore vessels

Vol 7, PW 12 (27 Aug 03) People & Policy

Call it stupidity or plain greed! State-owned Shipping Corporation of India last month priced itself out of a tender to manage 15 of ONGC's offshore supply vessels.

Instead the three-year contract went to Indian private company South India Corporation, which quoted an annual management fee of Rs24.6cr ($5.1m). By contrast, SCI quoted Rs92.8cr ($19.3m) - almost four times as much! Unclear is why SCI pitched its rate so high.

Its action is even more bizarre considering ONGC had already nominated it to operate and maintain 16 of its total fleet of 31 offshore supply vessels on a 'cost plus basis'. Last year, ONGC floated a global tender to hire a contractor to manage the remaining 15 vessels.

A key ONGC requirement was that the chosen contractor should manage all 15 vessels. Eleven companies bought tender documents but ONGC disqualified three in the preliminary stage.

Only SCI and South India Corporation submitted offers by the initial January deadline. ONGC later extended the deadline to June and on11th June opened the technical-commercial bids to discover that both SCI and South India Corporation had qualified.

But when the price bids were opened a week later, ONGC found that South India Corporation had bid almost a quarter of the price offered by SCI. Its low bid was surprising given that - as a private company - it does not enjoy several of the advantages that PSUs enjoy.

For instance, unlike SCI, South India Corporation would have to submit a bid bond, performance bond and a safe custody bond. After the price bids were opened, ONGC compared the South India Corporation quote per ship with what it is already paying SCI to manage the other 16 vessels and found that it is paying SCI 36% higher than South India Corporation for the contract to manage the remaining 15 vessels.