ISLAMABAD Ministry of Water and Power challenged the findings of audit report and claimed on Wednesday that the contents of the report were not true. According to a press note issued from the Ministry and sent to TheNation in response to a story published in TheNation on April 8 under the caption $557m corruption found in five power projects, the Ministry meets the criteria while awarding contracts of Rental Power Projects. However, the Audit Report on Accounts of Water and Power Development Authority Audit Year 2009-10 revealed that authorities did not abide by the rules and regulations while awarding these contracts. According to Para 17.4 (Page no 233), as per Rule 23(1) of Public Procurement Rules, 2004, procuring agencies shall formulate precise and unambiguous bidding documents. PEPCO published Tender Notice for Invitation of Proposals for 150 MW Rental Power Plant at 220 KV Grid Station Nishatabad, Faisalabad, on October 10, 2007. In response to the tender notice, three bidders submitted their proposals. Out of the three bidders Mis Techno Engineering Service (Pvt) Limited Islamabad gave his bid with two options as under: Option/Proposal No. 1 -MAN B&W Equipment Commissioning of the plant based on MAN B&W Equipment to be completed within eight (8) months from the date of issuance of Letter of Award (LOA) with fuel cost component Rs 5.363 per kwh. However, sponsors would try to minimise the time on a best effort basis. Option/Proposal No.2 -Sulzer/Wartsila Equipment Commissioning of the plant based on Sulzer/Wartsila Equipment would be done by May 15, 2008, provided the issuance of LOA, signing of contract and release of advance payment were completed by December 31, 2007 with fuel cost component Rs 6.268 per kWh. Against option No.1 Mis Techno Engineering Service (Pvt) Limited, Islamabad was the lowest bidder but this option was not considered as it did not meet the COD criteria that was May 15, 2008. The option No.2 met the Commercial Operation Date (COD) criteria, accordingly bid price was accepted in spite of third position in price ranking and letter of acceptance was issued on January 22, 2008. Subsequently it was cancelled and revised LOA was issued on January 24, 2008 wherein the bidder was required to provide 150 MW (net) at mean site conditions, based on Diesel Generating Sets operable on RFO fuel, of appropriate Make & Size and configuration acceptable to the Buyer instead of Sulzer/Wartsila Equipment as quoted in option No.2 of the bid. The contract was signed on February 14, 2008. As per contract documents the cost of fuel component was agreed at Rs 6.268 per kwh as offered in option No.2. With change of type of machinery fuel cost component was not adjusted. The unit has come into operation and no addendum was issued to decrease the rate to Rs 5.363 per kWh. This would result in loss of Rs 3,139.409 million, which needed to be looked into. The matter was taken up with the management on November 19, 2009 and referred to the Ministry on December 21,2009. It was discussed in DAC meeting held on February 9, 2010. The management explained that fuel cost component would be decided after heat rate test at the time of Commercial Operation Date (COD) as per decision of NEPRA. Audit contended that the rate of fuel component agreed and stipulated in the contract amounted to Rs 6.268 per kwh (Option No.2). DAC directed to provide revised reply along with supporting documents. No response was received till the finalisation of the report. The matter needs to be expedited, Auditors suggested. On award of rental contract without competitive bidding, Ministry claimed that it followed rules and regulations. However, According to Para No # 17.5 of audit report: i- According to Rule 12(2) of the Public Procurement Rules, 2004, all procurement opportunities over two million rupees should be advertised on the Authoritys website as well as in the other print media or newspapers having wide circulation. The advertisement in the newspapers shall principally appear in at least two national dailies, one in English and other in Urdu. ii- According to Rule 50 of Public Procurement Rules, 2004, any unauthorised breach of these rules shall amount to mis-procurement. Two rental service contracts were awarded to MIs Alstom Power Rentals and General Electric Energy at contract price of 103.016 million US dollars and 113.620 million US dollars respectively without inviting tenders and advertisement in September, 2006. The rate of rental charges was 3.133 US Cents per kwh in both rental power plants. In comparison the rate of rental charges awarded to MIs Pakistan Power Resources after competitive bidding was 2.725 US Cents. Hence, the rate of rental charges in case of unsolicited bid was in excess of 0.408 US Cents than that of competitive bids. Due to excess rate of rental charges in unsolicited proposals national exchequer sustained loss of 63.832 million US dollars. NEPRA also took cognisance of the higher rates while approving tariff petitions. NEPRA further observed that Northern Power Generation Company Limited would be responsible for the loss. Similarly another rental contract named Naudero-I was also awarded on April 2, 2009 against unsolicited bid resulting in loss of 35.621 million US dollars. The matter needed to be investigated to fix responsibility for the violation of Public Procurement Rules, 2004, causing loss of 63.832 million US dollars equivalent to Pak Rs 5,425.72 million. The matter was taken up with the management on November 19, 2009 and subsequently discussed in the meeting held on December 19, 2009, it was replied that unsolicited bids were accepted with the approval of ECC on the proposal of Ministry of Water & Power. The reply was not tenable as three rental contracts were awarded in violation of Public Procurement Rules, 2004, which needed to be investigated to fix the responsibility for the loss. The issue was referred to the Ministry on December 21, 2009 and discussed in, DAC meeting held on February 9, 2010. The management explained that there was a considerable gap between the solicited and un-solicited bids as such those were not comparable. Further it was explained that NEPRA while deciding the rental charges of un-solicited bids, it was suggested that in future the best course would be International Competitive Bidding (ICB): DAC directed to give revised reply, along with supporting documents. No response was received till the finalisation of the report. The matter needs to be expedited.