ISLAMABAD - The Supreme Court on Thursday declared illegal and invalid the awarding of $124.9 million contract to Huawei Technologies for supplying security equipment to make Islamabad a ‘Safe City’.

A three-member bench - comprising Justice Nasir-ul-Mulk, Justice Asif Saeed Khan Khosa and Justice Sheikh Azmat Saeed - after hearing the constitutional petitions regarding the security venture in Islamabad with Huawei Technologies Co Ltd, had reserved the judgement on June 29, which was announced Thursday.

The 50-page verdict authored by Justice Azmat noted that the contract dated 29.12.2009 - illegal and invalid having been executed in violation of the mandatory provisions of the Public Procurement Rules, 2004, as the exemption there from purportedly granted under Rule 42 (c)(v) ibid - was based on extraneous and irrelevant reasons and therefore of no legal effect or consequence.

The judgment noted that the entire transaction was carried out in a non-transparent manner and for a cost, which appeared to be inflated. The government is directed to reinitiate the process for the procurement of the required equipment, software and services in a fair, just, rational and transparent manner, strictly in accordance with the provisions of the Public Procurement Regulatory Authority Ordinance, 2002 and the Public Procurement Rules, 2004 and the law.

The court said the Huawei Technologies, a Chinese entity, was at liberty to participate in the procurement process afresh.

The chairman of National Accountability Bureau (NAB) has been directed to initiate appropriate proceedings against those involved in illegal and invalid contract in accordance with law. “The government shall also take all necessary steps permitted by law to safeguard and protect itself from any liability under the contract dated 29.12.2009,” the judgment said.

The court observed that the learned counsel for the respondents as well as the Attorney General of Pakistan (AGP) had laid great emphasis on the fact that allegedly a sum of over US$ 68 million had already been disbursed and interference by the court might have serious pecuniary consequences for the government and also resulted in exposure to multiple litigation.

“We are afraid, if the contentions of the learned counsels are accepted, we would open the door to illegalities, arbitrariness and the squandering of public wealth,” said the judgement. It said that public functionaries merely by making a large upfront payment on the execution of an agreement would present this Court with a fait accompli perpetuating an illegality, which cannot be countenanced.

The court noted the contract was executed without any feasibility study as is obvious from the Technical Sub-Committee report dated 26.03.2010, where in paragraph (iv) of the report it has been stated that the work should have been done after a proper feasibility study.

It has also been mentioned in the minutes of the Technical Sub-Committee meeting dated 26.03.2010 that the cost of the equipment is almost three times the cost of the comparable equipment available in the market. Similarly, the cost of the software quoted was also higher in the same range of 1:3.

The said Sub-Committee estimated the cost of the project to be US$ 78 million. Thus, the cost of the project appears to be at least suspicious if not inflated especially in the absence of any due diligence conducted by the Ministry of Interior or any other government department. No material has been made available by the respondents in this behalf to this Court, even during the course of the proceedings.

The constant refrain of the Planning Commission and the Ministry of Information Technology that Request For Proposal (RFP) be issued and bidding be effected at least inter-se Chinese companies was ignored and eventually silenced. Thus, not only the contract dated 29.12.2009 was entered into in violation of the law in a non-transparent manner but was also at a cost which to say the least is suspicious if not vastly inflated.

The constitutional petitions have been filed to challenge the award of the Contract dated 29.12.2009. The contract was executed between the federal government through the Secretary, Ministry of Interior and M/s Hauwei Technology Company Limited. The Contract was for the procurement of goods, equipment and services for the purpose of establishing a Command Center and Network, initially at Islamabad for the total cost of US$ 124,719,018.