Opening LC for defaulting firm: Transparency International challenges TCP decision

Transparency International Pakistan has challenged the decision of the Trading Corporation of Pakistan (TCP) to open a letter of credit (LC) with a firm that recently had reneged on meeting its delivery date for import of 50,000 tons of white sugar, which had resulted in termination of the contract, Business Recorder has learnt.
TCP Chairman Anjum Bashir, while talking to Business Recorder vehemently defended the decision and said he had done nothing wrong by opening the LC. "I faced unprecedented pressure from outside the TCP to grant extension to the defaulting party, but I did what I believe was right. I cannot refuse to open a new LC as the party can take me to court," he said.
He, however, did not mention the name of the quarter (government or private) which reportedly pressurised him to secure the deal. According to Transparency International Pakistan Chairman Adil Gilani, he had made it clear to one of TCP's Directors that the case would be referred to National Accountability Bureau (NAB) if he did not refrain from taking money in the name of Commerce Minister, who allegedly secured him the job in the TCP.
Transparency International Pakistan is also concerned with TCP amending rules to extend benefit to those 'favoured' few despite the fact that all procurements of TCP are to be handled in accordance with Public Procurement Rules 2004. On December 13, 2005, TCP had signed an MoU with TI Pakistan for transparent application of procurement Rule and adherence to the Integrity Pact.
Transparency International Pakistan in a letter to TCP Chairman, a copies of which have been sent to NAB, PAC Chairman, Commerce Minister, Chairman of National Assembly standing committee on commerce, and Managing Director of PPRA, stated that prequalification option available in Public Procurement Rules 2004 is to be used for special reasons only ie in case of procurement of expensive and technically complex equipment to ensure that only technically and financially capable firms having adequate managerial capability are invited to submit bids.
Such prequalification shall solely be based upon the ability of the interested parties to perform that particular work satisfactorily. But TCP in 2006 started using prequalification option in all procurements, which resulted in cartelisation of groups.
On January 31, 2009, Transparency International Pakistan reminded the then TCP Chairman that "tendering of transportation of 1 million ton pre-qualified bidder shall have equipment capability for handling 1 MT, and the procedure adopted by TCP is to award contract in packages to various bidders at the lowest quoted rate. This system is known to all enlisted bidders, and is open to making a cartel, as explained in our 23 January 2009 letter".
This resulted in the elimination of pre-qualification from TCP procurements by the former Chairman. However, so maintained the letter, the firms involved in cartel formation in TCP continued their efforts, and with your posting they have been able to get the TCP procurement changed to old system of pre-qualification.
According to the TI Pakistan TCP can not call tenders from pre-qualified bidders for more than one tender. For every procurement TCP shall pre-qualify bidders, as it involved financial and equipment capacities of the firms, which changes from contract to contract. In the financial category, bidders' capacity to handle contacts of specified values of procumbent, like 50,000 tons of sugar, require Rs 2.4 billion capacity. We quote two Rules which shall be adhered to by TCP.
18. Disqualification of suppliers and contractors.- The procuring agency shall disqualify a supplier or contractor if it finds, at any time, that the information submitted by him concerning his qualification as supplier or contractor was false and materially inaccurate or incomplete.
19. Blacklisting of suppliers and contractors. The procuring agencies shall specify a mechanism and manner to permanently or temporarily bar from participating in their respective procurement proceedings, suppliers and contractors who either consistently fail to provide satisfactory performances or are found to be indulging in corrupt or fraudulent practices. Such barring action shall be duly publicised and communicated to the Authority:
This situation was reported to arise due to the default of few lowest bidders in sugar viz. Sadan General Trading ( STG). In such cases according to PPRA Rules the bid security which is up to 5 percent of the value of contract shall be forfeited by TCP, and contract should be awarded to next lowest responsive bidder. And if the bid security of the bidder was not genuine, the bid shall have been declared non-responsive and other bids shall have been evaluated.
The news published in Business Recorder of 9 April 2010 stated that Sadan General Trading (STG) defaulted on 50,000 tons of sugar contract awarded at $585 per ton, and the tender was scrapped in April 2010. The TI letter recommends that the firm not be allowed to participate in future sugar bidding, being a defaulter.
But instead, STG has been entertained in the subsequent TCP tender, and has been awarded sugar import contract at $649 per ton. This implies an additional cost of $64/ton, a cost that would be borne by the exchequer which will suffer a loss of Rs 268.8 million. The TI letter urged TCP to immediately restore open tendering for all procurements, and clarify the status of the reported loss of Rs 268.8 million.
"We would also quote for your information Rule 2 (f), "corrupt and fraudulent practices" includes collusive practices among bidders (prior to or after bid submission) designed to establish bid prices at artificial, non-competitive levels and to deprive the procuring agencies of the benefits of free and open competition and any request for, or solicitation of anything of value by any public official in the course of the exercise of his duty," the letter concluded.