Airport and Aviation Services Ltd rocked by alleged irregular tender process

Further controversy surrounds Airport and Aviation Services (Sri Lanka) Ltd and this time for awarding a tender to a bidder that the Technical Evaluation Committee rejected

• The TEC report has recommended to award the contract to Sanken Construction
• Ministry of Ports, Shipping and Aviation sources state that this is the second major fraud the ministry employees have come across in the recent past
•  As per the TEC report, the bidder-who the PAB has recommended- had been declared by the TEC as technically non-compliant

Invitation for bids (Bid No: 113/ T/ 2023) to construct a new building at the BIA was called through newspapers in December 2023, under the International Competitive Bidding method. The bids were opened on January 26, 2024.  

Five bidders -Sanken Construction (Pvt) Ltd, a Joint Venture (JV) of Tudawe Brothers (Pvt) Ltd and China Harbour Engineering Company Limited (TB-CHEC), Maga Engineering (Pvt) Ltd, China Civil Engineering Construction Corporation and a JV of Consulting Engineers and Contractors (Pvt) Ltd and China Nautical Aero Technology International Engineering Corporation (CEC-CAIEC) submitted quotations.  
 
The TEC and SCAPC selected to award the contract to substantially responsive and the lowest evaluated bidder- Sanken Construction (Pvt) Ltd. 
 
Despite the TEC recommendation and the SCAPC’s approval, the PAB recommended JV of Consulting Engineers and Contractors (Pvt) Ltd and China Nautical Aero Technology International Engineering Corporation (CEC-CAIEC) to offer the tender.

On February 28 and March 14, 2024, Secretary Ministry of Ports, Shipping and Aviation, informed the four unsuccessful bidders to notify that their bids have been unsuccessful as their costs were higher than the selected bidder- M/s Sanken Construction (Pvt) Ltd.   

 

Another alleged fraud is said to have taken place at the Airport and Aviation Services (Sri Lanka) Ltd by way of awarding a tender to a bidder that the Technical Evaluation Committee rejected, citing further evaluation. This was due to noncompliance of requirements/ specifications of the tender document.

Invitation for bids (Bid No: 113/ T/ 2023) to construct a new building to enhance capacity for the benefit of departing passengers and improve the services provided at check-in, satellite boarding gates and baggage handling system (Package 1)  at the Bandaranaike International Airport (BIA) was called through newspapers in December 2023, under the International Competitive Bidding method. The bids were opened on January 26, 2024.

The procurement entity is the Ministry of Ports, Shipping and Aviation which has an earlier history for allegedly soliciting a bribe from a overseas Agency. 

In 2022, allegations were leveled against the Ministry of Ports, Shipping and Aviation for soliciting a bribe from Taisei Corporation Japan from the BIA expansion project but it was subsequently dismissed by the Bribery and Corruption Authority due to the lack of evidence. 

Awarding a tender to a bidder rejected by the Technical Evaluation Committee (TEC) raises questions amongst the Ministry officials whether this is the repetition of the 2022 fiasco. This action brought discredit not only to the Ministry, but also to the entire country. 

Five bidders -Sanken Construction (Pvt) Ltd, a Joint Venture (JV) of Tudawe Brothers (Pvt) Ltd and China Harbour Engineering Company Limited (TB-CHEC), Maga Engineering (Pvt) Ltd, China Civil Engineering Construction Corporation and a JV of Consulting Engineers and Contractors (Pvt) Ltd and China Nautical Aero Technology International Engineering Corporation (CEC-CAIEC) comprised the bidders who submitted quotations. 

As per the bidding document, a 15% of ‘Domestic Preference’ shall apply in bid evaluation for domestic bidders as per the Procurement Guidelines 2006 for goods and works and supplement 17 issued to the Procurement Manual. Supplement 17 amends Clause 7.9.5 of the Procurement Guidelines by increasing the 10% domestic preference to 15%.

Clause 7.9.5 (c) and (d) of the Procurement Guidelines sets out the criteria to decide who would receive the benefit of this ‘Domestic Preference Margin’. If it is a domestic JV, each individual firms shall be registered in Sri Lanka and should have more than 50% ownership by Sri Lankans.

In case of a JV between a local partner and an international partner, they aren’t entitle to the benefit of the ‘Domestic Preference Margin’ 

The Technical Evaluation Committee (TEC) and the Standing Cabinet Appointed Procurement Committee (SCAPC) selected to award the contract to substantially responsive and the lowest evaluated bidder- Sanken Construction (Pvt) Ltd. However the Procurement Appeal Board (PAB) headed by G.S. Withanage (who is also the Chairman of Civil Aviation Authority of Sri Lanka appointed by Minister Nimal Siripala de Silva) has offered the tender to the bidder who was technically not accepted for further evaluation by the TEC.

Despite the TEC recommendation and the SACPC’s approval given to the same, the PAB recommended JV of Consulting Engineers and Contractors (Pvt) Ltd and China Nautical Aero Technology International Engineering Corporation (CEC-CAIEC) to offer the tender.

As per the TEC/ SCAPC evaluation other unsuccessful bidders were JV of TB- CHEC, Maga Engineering (Pvt) Ltd, China Civil Engineering Construction Corporation and JV of CEC-CAIEC.

Be that as it may, following the TEC report dated February 20, 2024, and the SCAPC meetings held on February 28 and March 14, 2024, Secretary Ministry of Ports, Shipping and Aviation, K.D.S. Ruwanchandra- by letters dated March 18 (Ref. No. MPSA/ PRO/ AASL/ SCAPC/ 113/ T/ 2023)- informed the four unsuccessful bidders to notify that their bids have been unsuccessful as their costs were higher than the selected bidder- M/s Sanken Construction (Pvt) Ltd. But the Ministry Secretary for an unknown reason, failed to send this letter to the successful bidder.

This letter further states, ‘With reference to the bid submitted by you for the above bidding, I regret to inform you that your bid has been unsuccessful at the evaluation stage due to the cost which is higher than the selected bidder.

‘It has been intended to award the above contract to the substantially lowest evaluated bidder M/s Sanken Construction (Pvt) Ltd.

‘If any representations are to be made against the determination, you are hereby requested to submit it within seven working days of the date of this letter to the PAB.

‘This communication is in terms of the Government Procurement Guidelines 2006 of the Government of Sri Lanka’.
According to the TEC report (a copy of which is in possession of this newspaper) dated March 15, 2024, although the JV of CEC-CAIEC was given the opportunity to submit all required details, they weren’t in compliance with the requirements/ specifications of AASL.

The TEC report further states, ‘Since these non-compliance items are major important items, bidder JV of CEC-CAIEC has been considered as technically non-compliant, not responsive to critical, technical requirements mentioned in the bidding documents and cannot be evaluated of the departures from technical specifications of critical nature, which were major deviations, and the bid was not technically accepted for further evaluation.

‘Bids submitted by Sanken Construction (Pvt) Ltd, JV of Tudawe Brothers (Pvt) Ltd and China Harbour Engineering Company Limited (TB-CHEC) and Maga Engineering (Pvt) Ltd are in compliance with the specifications and they were considered for financial evaluation.

‘As indicated in the bidding document ‘Domestic Preference’ is applied for the relevant bids. Only Sanken and Maga are qualified for the ‘Domestic Preference’ as per Clause 7.9.5 (c) of the Government Procurement Guidelines.

‘As per Clause 7.9.5 (d) ‘joint venture of domestic firms’ are only qualified for the consideration of domestic preference for joint ventures. Hence JV of TB-CHEC was not considered for ‘Domestic Preference’.

‘After applying the domestic preference for relevant bidders, ranking according to the price was Sanken Construction, Maga Engineering and JV of TB-CHEC respectively’.

According to the TEC observations, the bid submitted by JV of CEC-CAIEC has major deviations. The bids submitted by the Sanken, Maga and JV of TB-CHEC were in compliance with all major technical specifications which were accepted.

Bids submitted by Sanken and Maga are within the engineering estimate which is Rs. 6.5 billion and JV TB-CHEC is also within 10% variation to the total estimated cost/engineering estimate. 

The lowest substantially responsive bidder is Sanken Construction (Pvt) Ltd. Hence the TEC report has recommended to award the contract to Sanken Construction.

Meanwhile acting on an appeal (No: PAB/2024/11) submitted by JV CEC-CAIEC  on March 26, 2024, the PAB, Secretary Ministry of Ports and Shipping has sent his observations on April 3, 2024 and the PAB arranged a meeting with the appellant on April 22, 2024.

After the said meeting, Ministry Secretary on the same day has informed the appellant the reasons for the rejection of their bid because the second partner of the JV CAIEC doesn’t have more than 50% ownership by Sri Lankans and therefore domestic preference was not considered as per Clause 7.9.5 of the government procurement guidelines.

In response, the appellant by letter dated April 29, 2024, has stated that the margin of domestic preference is applicable to them as per the criteria stipulated in the bid document. 

Despite all these observations, the PAB’s conclusions as stated in the PAB report- a copy of which is in the possession of this newspaper- has stated that it is not correct since CAIEC is only a partner of the JV and if a JV has more than 50% Sri Lankan ownership it is qualified for domestic preference as per Clause 7.9.5 of the procurement guidelines.

It further states, ‘ the JV between CEC-CAIEC operates on a 51:49 ownership structure with CEC holding 51% of the equity interest as the lead partner, this JV has the right to be considered for domestic preference.

‘Therefore CEC-CAIEC should be considered as a local bidder. Since this JV is the lowest bidder, it is not necessary to do adjustment for domestic preference in this procurement.

‘Since CEC-CAIEC was the lowest bidder before making adjustments to the domestic preference, M/s CEC-CAIEC should be considered as lowest evaluated substantially responsive bidder. ‘In order to determine the lowest evaluated substantially responsive bidder, TEC should only use evaluation criteria disclosed in the bidding documents. No additional evaluation criteria other than that were disclosed should be used during the evaluation.

‘In view of the observations and conclusions mentioned in this report, PAB is of the view that the recommended bidder Sanken Constructions (Pvt) Ltd, should not be considered as the lowest evaluated substantially responsive bidder and the Appellant M/s CEC-CAIEC should be considered as the lowest evaluated substantially responsive bidder’. 

Acting on information received from some of the fellow unsuccessful bidders, Managing Director/CEO Sanken Constructions, Eng. Ranjith Gunatilleke by letter dated May 28, requested Ministry Secretary to update him on the decisions taken at the TEC/SCAPC and the PAB to ensure transparency and adhere to the established timeline.

In his letter Gunatilleke further states, ‘Please note that even though Sanken Construction has been identified as the substantially responsive lowest evaluated bidder we were not informed of this outcome by you. On previous occasions, Secretary to the Line Ministry communicated such decisions to us directly. This deviation from the established protocol is a concern and warrants clarification.

‘Fellow bidders who took part in the bidding process of the aforementioned project, informed us that they had received letters from you that their bids have been unsuccessful and that Sanken Constructions has been selected as the substantially responsive lowest evaluated bidder.

‘In the meantime we reliably learn that JV of CEC-CAIEC has appealed against this decision to the PAB under Clause 8.4 of the Procurement Guidelines of 2006.

‘As per the Procurement Guidelines of 2006, we should have received the decision of the PAB and your corresponding information by April 16th or 17th. However it has been five weeks since then and we have not received any communication from you or the PAB regarding the awarding of this contract. This lack of information is causing significant concern and uncertainty about the status of the procurement process. We request an immediate update on the decision to ensure transparent and adherence to the established timeline’.  

Meanwhile, Gunatilleke has written to Secretary to the Cabinet of Ministers W.M.D.J. Fernando and Chairperson, National Procurement Commission Ms. Sudharma Karunaratne requesting the Cabinet of Ministers to refrain from making any final decision regarding the award of the project to CEC-CAIEC. The letter dated May 31, 2024 to Fernando and Karunaratne further states, ‘the procedure followed in this project is both irregular and illegal. According to Clause 8.2 of the procurement guidelines 2006, the Secretary to the Line Ministry must inform all bidders of the successful bidder’s selection and the intention to award the contract within one week of the recommendation of the SCAPC. This communication is crucial for maintaining transparency and fairness in bidding process. The failure to notify our company of the intention to award the project to us as well as the lack of notification regarding the appeal, coupled with the complete failure to afford a hearing to our company in the appeal process constitutes a clear violation of these guidelines. Such irregularities not only compromise on the integrity of the procurement process, but also expose the project to legal challenges and delays ultimately jeopardizing its successful completion. ‘Of the afore said procedural irregularities the most serious one is the failure to afford a hearing to our Company before the PAB, thereby completely breaching/ violating the principals of natural justice. This exclusion not only violates our right to a fair hearing but also casts serious doubt on the impartiality and fairness of the PAB’s decision making process. ‘Serious procedural irregularities and lack of transparency in public sector procurement processes can deter foreign and local investors, thereby effecting the country’s attractiveness as a business destination. Ensuring that the procurement process is conducted in a fair, transparent and legal manner is essential to maintaining the integrity and reliability of public sector projects, which ultimately contributes to the overall economic stability and development of Sri Lanka’.    

Since there was no response, Gunatilleke has sent an application on May 31, 2024, under the Right to Information (RTI) Act, to the Ministry requesting for the TEC report.

Responding to the request, Senior Assistant Secretary (Aviation) M.M.N. Somathilake has sent the requested details from which it came to light how the TEC in their report has stated that Sanken Construction is the lowest substantially responsive bidder and CEC-CAIEC has major deviation and their bid is not technically accepted for further evaluation.  

Following this, sources from Ministry of Ports, Shipping and Aviation on strict condition of anonymity told the Daily Mirror that this is the second major fraud the ministry employees have come across in the recent past. 

“We have a reasonable doubt regarding the PAB decision. When the procurement guidelines clearly says who is entitled for the “Domestic Preference’ and that JVs with foreign partnerships are not eligible for this benefit, the JV of TB-CHEC, did not go ahead with the process knowing well that they cannot fight against the procurement guidelines. The Chairman PAB was appointed by Minister Nimal Siripala de Silva.  Meanwhile Executive Director Sanken Construction (Pvt) Ltd, Eng. Susil Rodrigo told this newspaper how they were kept in dark by the Ministry Secretary from the initial stage by not notifying that they were the successful bidder as per the TEC recommendation. “By not notifying us about the TEC recommendation, we could not make representation to the PAB to air our suggestions when they overturned the recommendations made by the TEC and the SCAPC, which is in breach of the principals of natural justice. As per the TEC report, the bidder-who the PAB has recommended- had been declared by the TEC as technically non-compliant. Based on this, how could the PAB recommend to award the tender to a party that has not technically complied as per the procurement guidelines,” Rodrigo said. According to Rodrigo, Paragraph 4.2 of the TEC report, they have correctly applied the ‘Domestic Margin of Preference’ to the local bidders who were entitle for it. “The TEC report stands as a clear testimony to the fact that no other bidder other than Sanken, is lawfully entitled to be recommended to offer the tender which was agreed SCAPC. By excluding Sanken Construction from the appeal procedure adopted by the PAB, we were made unaware of the conclusions/ recommendations of the PAB.  The procurement appeal process followed by the PAB is completely flawed and tainted by substantive errors as well as procedural errors,” said Rodrigo.

Secretary not availble for comment

All attempts to contact, Secretary Ministry of Ports, Shipping and Aviation K.D.S. Ruwanchandra and Chairman PAB, G.S. Withanage were not successful. Although this newspaper left messages with their office staff with contact numbers to be used if they chose to respond, they failed to do so until this newspaper went for publication.