Islamabad Airport outsourcing: No exemption to ministry from PPRA rules

ISLAMABAD: The Public Procurement Regulatory Authority (PPRA) has refused to grant special exemption to Ministry of Aviation from PPRA rules for outsourcing of operations and maintenance of Islamabad Airport under P3A Act 2027, well-informed sources told Business Recorder.

On June 26, 2024 , Managing Director (PPRA), Hasnat Ahmed Qureshi presented the proposal and informed the Board headed by Secretary Finance, Imdadullah Bosal that Ministry of Aviation had requested the PPRA Board to recommend grant of exemption under Section 21 of the PPRA Ordinance, 2002 to the Federal Government, from the applicability of Rule-36 of Public Procurement Rules, 2004, allowing second round of financial bidding of the PPP project for outsourcing of operations and maintenance of Islamabad Airport.

MD (PPRA) requested the Secretary Aviation to explain the matter before the Board. Secretary Aviation stated that in a meeting held in December, 2022 under the Chairmanship of Prime Minister of Pakistan, it was decided to outsource operations and management of airports of Pakistan under the Public Private Partnership Act 2017 (P3A Act). In this regard Islamabad, Karachi and Lahore airports were identified for outsourcing in the first phase.

Islamabad Airport outsourcing: PPRA board to consider aviation ministry’s proposal today

Subsequently, International Finance Corporation (IFC) was appointed as Transaction Advisor under the P3A Act. In order to guide and steer this process, a Steering Committee was constituted by the Prime Minister on June 14, 2023.

The Steering Committee held ten meetings in which, inter alia, project scope and state support required for attracting investment was decided. It was also decided that Islamabad airport project shall be taken as the first project to be outsourced while Karachi & Lahore airports would also be taken-up subsequently.

After required due diligence and obtaining approval from ECNEC, Islamabad Airport outsourcing project was advertised for international competitive bidding specifying July 15, 2024 as the last date for the submission of bids as well as opening of technical bids.

The Secretary Ministry of Aviation further stated that they have followed Single Stage-Two Envelope procedure in terms of Rule-36 of Public Procurement Rules, 2004.

The Technical proposals shall be opened on July 15, 2024. During Steering Committee meeting held on June 13, 2024, it was suggested that a second round of bidding may be proposed to obtain full value for this concession and to minimize the chances of re-bidding.

The proposed second round of financial bidding is not expressly provided under the Public Procurement Rules, 2004 but it does not run contrary to transparency and competitive principles of procurement.

The Steering Committee as a result of detailed deliberations and discussions gave the following decision “Steering Committee approved Second Round of Financial Bidding as proposed with the modification that in the second round only top two highest bidders of the first round will be asked to participate and submit their revised financial bids. Pakistan CAA (PCAA) will announce the reference price before the start of the second round; and if none of the two parties participates in the second round, their bids in the first round shall be considered as final offers from their side.”

The matter was deliberated in detail by the PPRA Board. One of the Board members asked why the Ministry of Aviation submitted request for grant of exemption under Section 21 of the PPRA Ordinance, 2002, whereas the referring Ministry had explicitly stated that the subject transaction was being carried out in accordance with the relevant provisions of Public Private Partnership, 2017 (P3A Act). Moreover, the P3A Act, in terms of Section 29, explicitly override the applicability of Public Procurement Regulatory Authority Ordinance, 2002, and the rules and regulations made thereunder.

Secretary Ministry of Aviation responded that as the rules and regulations regarding mechanism of procurement have not yet been framed, therefore, the Ministry had no other option except to follow the procedure prescribed in Public Procurement Rules, 2004.

One of the Board members pointed out that the implementing agency (Ministry of Aviation) was authorized to formulate RFP in contradiction with the Public Procurement Rules, 2004.

In response, Secretary of the relevant Ministry stated that in order to ensure transparency and to get maximum value of the transaction, the Steering Committee had decided to use second round of the financial bidding.

Another Board member highlighted that if there was an express provision available with regard to overriding effect of the P3A Act over PPRA Ordinance, 2002, then Ministry of Aviation, being the implementing agency, should follow relevant laws, rules and regulations made thereunder.

As discussion continued, one of the Board members also observed that Ministry of Aviation being the implementing agency, has to follow the applicable law and should not shift the responsibility to another forum.

Another member of the Board opined that Ministry of Aviation should not incorporate PPRA provisions in their RFP document as the implementing agency was applying P3A Act which expressly overrides PPRA regal framework.

After detailed discussion, PPRA Board unanimously decided that the request of the Ministry of Aviation with retard to grant of exemption under Section 21of the PPRA Ordinance, 2002, is not tenable as the Ministry of Aviation being the implementing agency is following P3A Act, 2017, which expressly overrides public procurement Regulatory Authority Ordinance, 2002. Hence, Ministry of Aviation should seek recourse from the relevant fora.

Copyright Business Recorder, 2024