Competition Commission of Pakistan (CCP) has declared evaluation of Utility Stores Corporation's (USC) IT project as flawed and recommended that proceedings should be initiated against USC for discriminating with local IT companies, well informed sources told Business Recorder.
Minister for Industries and Production Ghulam Murtaza Jatoi had conveyed to the management of USC to revise the Request for Proposal (RFP). He also directed that the procurement process should only be taken to the next level after duly addressing the concerns of all stakeholders.
The deprived parties had brought non-exhaustive list of concerns to the knowledge of the Minister as follows: (i) RFP apparently favours a foreign solution by putting the local bidders at a disadvantage which clearly is a violation of IT Policy; (ii) sub-clause ix of the clause 4.2 (prequalification) unfairly attempts to eliminate local ERP products. Similarly, criterion for granting marks to local and foreign companies in not balanced; (iii) USC plays a critical role in disaster relief operations in the country. In this context , the preference for cloud-based solutions may be carefully re-examined; (iv) RFP does not specify the number of users and licences required to run the ERP which may have serious implications in terms of hidden costs of the project; (v) RFP gives more weightage to ERP whereas RMS is relatively a much larger component of the project; (vi) insertion of mandatory clause of ISO-9001 certification appears to be only a tool to eliminate competition, as it is not generally in practice in the IT industry of Pakistan; (vii) services of an independent and capable IT consultant should have been hired for the preparation of a comprehensive FRP ensuring maximum competition and best possible technical solution at minimum cost; and (viii) timeline for submission of bids was not adequate and needs to be extended in order to invite more bids.
The sources said, soon after a letter had been written by PSO to Minister for Industries and Production to the Managing Director USC, a Deputy Secretary of the Ministry, Sikandar Masood asking the MD to make a presentation to the Minister on RFP but he refused to obey the instructions of the Ministry and stated that he has been barred by the BoD to do this.
Two Islamabad-based companies have approached the Minister for Industries, Secretary Industries, National Accountability Bureau (NAB), Transparency International (TI) Pakistan and CCP. One company has also approached Islamabad High Court (IHC).
According to one of the complainants, PPRA rules say that there needs to be a minimum of two financial proposals after technical evaluation is complete to be accepted as a legitimate bidding process.
The issue has also been discussed in Senate Committee on Industries and Production, headed by Senator Hydat Ullah Khan. CCP, source said, conducted a detailed inquiry into the processing of the project on the complaint of two Islamabad-based IT solution parties.
According to the inquiry report product evaluation criteria clause 1 states: "Should be a pre-integrated cloud solution owned and offered and managed by single principal directly covering updates, upgrades and future enhancements of the proposed ERP solution (elaborated in the cloud section as well as referred to cloud definition at clause Cloud Services). IAAS 10 marks (Infrastructure and VMs are being managed by Principal, however Middleware, Data, Runtime, Data, Runtime and application is being managed by its partner) PAAS 20 marks (Infrastructure, VMs and middleware are being managed by Principal, however Data, Runtime, and application is being managed by its partner) SAAS 30 marks (Infrastructure, VMs, middleware, Data, Runtime, and application are being managed by Principal). Product evaluation criteria clause 2 says that local and global references of ERP cloud offered as software as service (SAAS) 5 points for each reference (total marks 30)".
CCP's inquiry says that it appears that the solution/product evaluation criteria award greater marks/weightage to cloud service experience. Even if the mandatory pre-qualification criteria allow for the participation of local firms the evaluation criteria is designed so as to favour larger global vendors with experience in cloud services. Although USC has subsequently allowed for a JV highest marks will be awarded to a vendor that offers the solution on a SAAS model (i.e. principal managing the entire solution). Similarly as per clause 2 a vendor who has ERP cloud experience both locally and globally would score high marks. Cloud is a relatively new technology with very few firms having ERP cloud experience. Greater marks for local and global references appear to favour international firms since it is obvious that a global player would have more references and experience in this regard and since this model is relatively new especially in Pakistan local firms would not have much experience. Therefore, this places local vendors at a competitive disadvantage as compared to international vendors.
CCP says it appears that clauses 1 and 2 of the solution/product evaluation criteria place local vendors at a competitive disadvantage as compared to international vendors and are a prima facie violation of Section 3(3)(e)read with Section 3(2) of the Act which constitutes a violation of Section 3(1) of the Act.
Based on the findings of inquiry, It appears that clauses 8 and 9 of 4.2 selection criteria-pre-qualification (mandatory clauses) are unfair and restrict competition in the relevant market by foreclosing entry by other players and are therefore, a prima facie violation of Section 3(3)(a) and (g) read with Section 3(2) of the Act which constitutes a violation of Section 3(1) of the Act.
It also appears that USC has designed the mandatory pre-qualification criteria focusing on cloud services which form only a small part of the overall tender/project a majority of which deals with ERP/retail management system. The focus on experience in managing cloud services excludes a majority of local as well as foreign vendors from participating in the tender. Therefore, it appears prima facie that clauses 5, 6 and 16 of 4.2 selection criteria-pre-qualification (mandatory clauses) are unfair and restrict competition in the relevant market by foreclosing entry by other players and are therefore, a prima facie violation of Section 3(3)(a) and (g) read with Section 3(2) of the Act which constitutes a violation of Section 3(1) of the Act.
While concluding inquiry the CCP team observes that it appears that clauses 1 and 2 of the solution/product evaluation criteria place local vendors at a competitive disadvantage as compared to international vendors and are a prima facie violation of section 3(3)(e)read with section 3(2) of the Act which constitutes a violation of section 3(1) of the Act.
In view of the preceding findings, the CCP inquiry team has proposed that proceedings may be initiated against USC in terms of section 30 of the Act for a prima facie violation of Section 3(1) of the Act.