Assam consultancy dilemma for ONGC

Vol 14, PW 4 (12 Aug 10) Exploration & Production

Humiliating anti-corruption investigations await India’s state-owned companies unless they pick the lowest bidder.

But PETROWATCH learns this strict rule has left ONGC with a major dilemma. When price bids were opened at the end of June in a tender to hire a ‘back-up’ consultant for ONGC’s Rs2500cr ($542m) Assam Renewal Project, all present were shocked by Canadian infrastructure company SNC Lavalin’s low bid.

SNC claimed it could review 6000 engineering drawings submitted by Assam Renewal Project consultant Mott MacDonald, for just Rs2.6cr ($563,418) and within 22,500 man-hours. This was way below ONGC’s own internal project cost estimate of Rs12.7cr ($2.8m).

SNC’s rock-bottom quote was also just about a quarter of that offered by the next-lowest bidder Delhi-based Saipem Triune, which quoted Rs8.2cr ($1.7m) and 60,050 man-hours. Next was Essar Engineering with a quote of Rs9.5cr ($2m) and 77,000 man-hours followed by IndianOil Tanking with Rs9.8cr ($2.1m) and 105,000 man-hours and finally Peabody & Mukesh with Rs10.9cr ($2.3m) and 57,500 man-hours.

Under ONGC’s own rules, the Canadian company should win the contract. But rival bidders are crying foul.

“Minor variations can be tolerated,” says an observer, “but such a wide gap between SNC and rivals means something is wrong somewhere. They probably didn’t properly understand the assignment.

It’s impossible to study 6000 detailed engineering drawings, visit sites in Assam, and attend review meetings with ONGC in Delhi and Mumbai within 22,500 man-hours and for Rs2.6cr.” If ONGC awards the contract to SNC, he adds, it risks getting shoddy work.

But if it doesn’t, corruption authorities could query it for rejecting the lowest bidder. Our source suggests ONGC’s best solution is to scrap this tender then reissue it after clearly specifying the minimum number of required man-hours within the tender terms.

As of last week, ONGC still hadn’t decided whether to award the contract to SNC.