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Petitioner: Messrs PRESSON MANUFACTURING LIMITED And Another VS Respondent: SECRETARY, MINISTRY OF PETROLEUM AND NATURAL RESOURCES And 2 Other
Court Name: Lahore High Court Judge(s): Iftikhar Hussain Chaudhry Title:Messrs PRESSON MANUFACTURING LIMITED And Another vs SECRETARY,
MINISTRY OF PETROLEUM AND NATURAL RESOURCES And 2 Other Case No.: Writ Petition No.849 of 1994 Date of Judgment:1994-10-04 Reported As: 1995 MLD 15 Result: Petition dismissed Judgment ORDER This mini-trade war rages over supplying of a mini-liquified Petroleum Gas Plant to Oil and Gas Development Corporation (OGDC), a corporation set up under the aegis of Oil and Gas Corporation Ordinance, 1961. The plant is to be installed at an OGDC operated oil-field in Fimkassar, a small village located in the backyard of Punjab in the District of Chakwal about 60 K.Ms. Away from Islamabad. 2. OGDC successfully struck oil in Fimkassar. But when oil is recovered from earth, it does not come out alone; with it comes gas also. The more affluent flare it away but the less plentiful put it to a better use by compressing and filling it in gas cylinders to be burnt in homes. About Rs.4 lacs worth of gas was (and is) going up in flames every day at Fimkassar and the OGDC planned to adopt the second option. As out-put projections warranted a mini-LPG Plant only, the OGDC invited bids in January 1993, from Manufacturers/Stockists of the eligible source countries for supply of Mini-LPG Plats. The invitation to bid (Annexure "A") for convenience, is reproduced here:--- "INVITATION TO BID FOR PROCUREMENT OF MINI LPG PLANT: (1) Sealed technical and financial proposals are hereby invited under International Competitive Bidding Procedure from the Manufacturers/Stockists of the Eligible Source Countries for supply of MINI LPG PLANT. (2) The proposals must be irrevocable based on from FOB and C&F Karachi by sea. Prices should remain valid for at least 120 days from the date of opening of Tender. (3) The bidders are required to submit a bid bond alongwith commercial proposal in shape of Bank Guarantee, Pay Order. Demand Draft of Cash Deposit to the extent of 2% (Two per cent.) of total
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C&F value of the bid, valid for 150 days, as per tender documents and furnish a certificate with technical proposal that the required bid bond is submitted. (4) The successful bidders will-be required furnishing a performance Bank Guarantee to the extent of 10% of total contract value as per tender documents. (5)The sealed technical and financial proposals alongwith technical literature must be dropped in the sealed tender box kept in the Office of Dy. Chief Procurement (Foreign), Oil and Gas Development Corporation, Building No.14-Q, Markaz F.8, Islamabad (Pakistan), on or before March 15, 1993 up to 10-30 hours, Pakistan Standard Time (deadline for submission proposals). (6) The sealed technical proposal for the subject material will be opened on March 15,1993 at 11-30 hours in presence of the bidders or their authorised representatives who may wish to attend the bid opening. The financial proposals whose technical proposals have been accepted will be opened on the date and time decided upon and announced." 3. A dozen concerns responded to OGDC invitation and submitted bids on two envelope system; one containing the Technical Proposals and the second, the Commercial Proposals. The OGDC was to process the Technical Proposals first, and commercial proposals were, thereafter, to be confined to only those bidders who would pre-qualify, on the basis of technical proposals. March 15, 1993 deadline for submission of bids was extended to 29th April 1993 when the bids for technical proposals were opened in the presence of parties. The evaluation of bids resulted rejection of all bids excepting those of: M/s. Seemba Wang Singapore M/s. Presson Canada M/s. Petrosin Singapore who were found to be technically responsive bidders, or to use a more earthly phrase, technically suitable. M/s. Petrosin like other firms were informed by OGDC through a E.x message dated 19-8- 1993 that they had been technically selected, and invited the Firm to attend the bid-opening of Commercial Proposals on 28-8-1993. The document of commercial bids revealed the following FOB prices quoted by the technically responsive bidders:--- M/s. Semba Wang Singapore US $ 9,383 Million M/s. PressonCanada US $ 5,852 Million M/s. PetrosinSingapore US $ 5,143 Million Bid of M/s. Petrosin turned out to be the lowest of all the three firms. 4. The battle between the lowest and second lowest bidder heated up after the commercial bids were opened. M/s. Presson found a mentor in the Ministry of Petroleum and Natural Resources, under whose administrative control OGDC is and on their asking/OGDC submitted, a report on 11- 10-1993 with covering letter of the same date which reads: "Mr. Khurshid Anwar, Deputy Secretary, Govt. Of Pakistan Ministry of Petroleum & Natural Resources, Islamabad. Sub: OGDC'SFIMKASSAR MINI LPG FACILITY TENDER ENQU IRYPROC=WF/PROCESS-331 FIIVIKASSAR 1/92. This is with reference to your letter No. 6(157)/93-II dated 5-10-1993 on the above subject. The doubts raised by M/s. Presson on experience, capability and responsive of M/s Petrosin were critically reviewed and a brief report is attached for your information. Processing of the case has been completed and the job is ready for award to the financially lowest responsive bidder. (Sd.)
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(Arif Kemal), Executive Director (P&E) "M/s. Petrosin turned out to be lowest technically responsive bidder being cheaper by US $ 7,09,000 (Rs.21.27 Million at exchange rate of Rs.30 to a dollar) as compared to the second lowest bidder. No objections or comments were received from M/s. PRESSON on the criteria for evaluation of responsiveness of the three bidders until commercial bids were opened and prices were known." "4. Referring to the technical and engineering capability of M/s. Petrosin it is to be stated that M/s. Petrosin have been a supplier of various processing plants to OGDC for several years and there is no evidence to justify PRESSON'S statement of petrosin not having in house engineering capability " After mentioning names of various manufacturers, which M/s. Petrosin had advised the OGDC to be banking upon, the report says: "All the above manufacturers by Petrosin are well known manufacturers of International standing and repute having more than 10 years experience." 5. This report probably did not satisfy the Ministry of Petroleum and Natural Resources (Hereinafter, the Ministry) and quite an inquest followed wherein OGDC sought, during October-December, 1993 considerable clarifications from Petrosin about its inception, its capabilities and standing. While OGDC was carrying out this exercise, the Ministry by a letter dated 6-11-1993 (Annexure "D.3" with rejoinder) asked the OGDC that since M/s. Petrosin was not qualified in terms of tender enquiry, the OGDC "may not award the contract to M/s. Petrosin under these circumstances." The OGDC was advised: "If not barred by the tender procedures, OGDC may consider the next lowest, technically qualified bidder to avoid delay which would be involved in re-tendering." OGDC in response to this directive informed the Ministry vide letter dated 15-11-1993 about 10 years' experience of Petrosin and stated that Petrosin was listed among OGDC preferred vendors which formed part of Fimkassar tender documents and advised the Ministry: "Since Petrosin is supplying major manufactured equipment of suitable vendors having 10 years of manufacturing experience, and it is also pre-qualified for pressure vessels as per tender documents and also being commercially lowest bidder, it cannot be legally debarred for award of contract for Fimkassar LPG Plant. Under such circumstances, re-tendering cannot be applied legally, and if this exercise is undertaken, there is likelihood for delay of at least one year in the installation of Fimkassar LPG Plant." 6. The Secretary of the Ministry, in order to stop this internecine was constituted a committee consisting of Joint Secretary (Dev), D.G. (Gas), D.G. (PC), Chairman OGDC and Executive Director (EP). OGDC. The committee unanimously decided to award the contract to M/s. Petrosin vide report dated 26-1-1994 (R.III with the written statement filed by respondent No:2) which reads as: Confidential Islamabad 26th January, 1994. A committee constituted by the Secretary, Ministry of Petroleum and Natural Resources consisting of J.S. (Dev) DG (Gas), DG (PC), Chairman OGDC and Executive Director (E&P) OGDC reviewed the working paper prepared by OGDC (copy attached), ITB documents, original offers of the two bidders M/s. Presson and Petrosin and letters of OGDC to M/s. Presson advising them to match their bid price to that of the lowest evaluated bidder without any change in the scope of work as given in their bid in line with the ITB requirement and thereof the response of M/s. Presson. (2) J.S. (Dev) stated his doubts about the eligibility of Petrosin (which was to supply some 10 to 15 per cent. Of the equipment) since it did not have the minimum, stipulated manufacturing experience. The representatives of OGDC categorically stated that Petrosin was eligible since it was
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included in the "preferred List of Vendors" in the ITB documents and therefore the company is considered to have met the technical specifications. (3) In view of the above the committed unanimously agreed with OGDC's view that M/s. Presson failed to match their bid price to that of lowest evaluated bidder without change of scope of work and that M/s. Petrosin, vide their Telex No.PET/7116 dated December 31, 1993 have confirmed that they shall place order for pressure vessels in accordance with OGDC tender and that a manufacturer meeting OGDC's acceptance and Petrosin will obtain OGDC's approval before placement of this order the contract for the supply of LPS plant for Fimkassar be awarded to M/s. Petrosin, the lowest evaluated bidder. Jehangir Bashir Dr. Gulfraz Ahmad, J.S. (Dev.)Chairman' OGDC Muneer AhmadArif Kemal DG (Gas)ED (E&P) OGDC Shahid Ahmed DG PC." 7. The Ministry refused to oblige and advised the OGDC to award the contract to second lowest bidder vide letter dated 26-12-1993 (R/V), and later by a letter dated 15-2-1994 (R-V/5) virtually ordered that "OGDC should negotiate and award the contract to the second lowest bidders but eligible company, M/s. Presson of Canada. Feeling the squeeze, OGDC invited M/s. Presson to renegotiate the terms and conditions of the contract in order to match the price quoted by M/s. Petrosin. Negotiations followed, minutes whereof are placed with the petition and M/s. Presson offered a discount of US$135,000 to OGDC. While this was going on in the cool offices of OGDC, M/s. Petrosin filed Writ Petition No.164/94 in this Court seeking intervention in the matter. Interim relief was granted on 7-3-1994 in terms that the contract might not be awarded to any party if fait accompli had not occurred till then. Later the writ petition was disposed of with the following order on 7-5-1994: "Dispute in this Constitutional petition arises out of the proceedings for grant of contract for installation of a mini-LPG plant at Fimkassar, 60 miles towards South East from Rawalpindi, which contract is to be granted by the respondents Nos. l, 2, after the receipt of various bids and processing thereof presently there are two bidders left in the filed, namely the petitioner and the respondent No.3 who are contesting for grant of the aforementioned contract. (2) Before a final decision could be taken by respondents Nos. l, 2 in the matter, the petitioner filed this Constitutional petition claiming therein that he having offered the lowest rate is entitled to the grant of contract in question and respondents Nos. l, 2 have no lawful authority to the grant of the same to respondent No.3 who had offered higher rates. (3) After filing of replies by the respondents and rejoinder thereto preliminary arguments have been heard. During the course of arguments it has been admitted by the learned counsel for both the parties and is also clear from the original record produced before me, that issue of grant of contract has not finally been decided as yet. (4) In view of the above factual position after arguing this case at some length under instructions from their clients, learned counsel for all the parties agree and pray that issue of grant of contract the question shall be finally decided by the competent authority within three weeks w.e.f. Today after giving full opportunity of hearing to the parties, who may raise all the objections/contentions available to them under the law including the objections/contentions which have been raised in the pleadings of the present Constitutional petition, orally and if they so desire in writing as well. Order accordingly. Writ petition stands disposed of/decided in the above terms. As the main writ petition has been fully decided/disposed of, stay order granted by this Court vide order, dated 7-3- 1994 stands vacated.
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(Sd.) JUDGE." 8. After the decision of Writ Petition No.164 of 1994, a five-member committee was constituted to decide the issue in terms of order-dated 7-5-1994 of this Court. The report of the Committee, at pages 42--50 of the petition favoured M/s. Petrosin by 4:1 and recommended that "contract may be awarded to the lowest bidder namely M/s. Petrosin." Some excerpts relevant to submissions of the parties, from the report dated 27-6-1994:--- Para.9.Ii The bidding procedure was generally followed by the OGDC. (iii)The provisions of clause 2.3 under instructions to bidders are vague and are contrary to the vendor list which is part of ITB and also are not part of summary rejection criteria. Further, clause 2.3 does not provide that a bidder should be a manufacturer. It provides that manufacturer of the goods being quoted must have at least 10 years' experience in the designing and manufacturing of the items. iv (b) Instructions to bidders particularly clause 2.3 was not considered by OGDC as a criteria for determination of responsiveness of the bidders. Even M/s. Petrosin and PRESSON did not mention about their experience in the summary while submitting their proposals as required under clause 2.3 of ITB iv(d) Criteria for minimum acceptance level have not been defined in the bid document. iv(e) Comparative statement showing strength, weaknesses and deviation of the respective bidders was not established. (10)---.Both the parties were suggested to submit their commercial bid afresh on the same scope of work. ......M/s. PRESSON did not agree to their offer while M/s. Petrosin agreed with the proposal. (11)------..The committee is of the view that provision of clause 2.3 are not part of summary rejection criteria. (13) The main objection of M/s. PRESSON in the oral and written statement is that M/s. Petrosin is not eligible/qualified for bidding which is not valid on the basis that provisions of clause 23 are not part of summary rejection criteria. Further, M/s. Petrosin has submitted the list of hydrocarbon plant and equipment as required under clause 14 of the summary rejection criteria. Each issue raised by M/s. PRESSON against M/s. Petrosin has no merit for disqualification and have been clarified in the findings of the committee detailed in Annexure `A'." Alongwith the report, a paper containing detailed discussion of various issues raised by M/s. PRESSON and M/s. Petrosin was also enclosed. One member of the committee, Deputy Secretary of the Ministry dissented from the other four members of the committee. His opinion reads as under:- -- (a)To gloss over this issue and to set new ground rules by inviting fresh bids from only these two companies without defining the parameters is not correct. (b)Clause 2.3 of tender document clearly states that "Manufacturers of the goods being quoted must have at least 10 years' experience in the designing and manufacturing of the items". Documents in support of the above must be submitted with the bid. (c) According to OGDC, M/s. Petrosin would manufacture 10-15% of the critical components (e.g. Pressure vessels) of the LPG plant. Petrosin did not have the prescribed experience. The list of plant Petrosin provided to OGDC (after opening of the bids) did not show a single complete LPG plant. Although it was included in the list of preferred vendors which was an annexure to the main document) it did not meet the basic eligibility criteria described above even if it is given the benefit of the period when it was a division of another company.
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(d) Petrosin confessed (during discussions) that clause 2.3 of the bid document was not complied. However, they presumed that it was not required as their name was included in the "preferred vendor list." Documents in support were not presented. (e) Petrosin had supplied three dehydration plants (which simply remove associated water from gas). The plants are not classified as Hydrocarbon Proceedings Plants, which include LPG plants also. (f) The evaluation should not be based on only summary rejection criteria. Other instructions to bidders should also be followed strictly. (Sd.) (Khurshid Anwar), Deputy Secretary (D), Member 27-6-1994." 9. This is the history of events forming back-drop for filing the present Writ Petition by M/s. PRESSON Manufacturing Ltd. OGDC-respondent No.2 and M/s. Petrosin-respondent No.3 filed written statements. M/s. PRESSON filed rejoinders to the writ statements and thereafter the petition was heard in motion. Learned counsel for respondent submitted some additional documents/letters during arguments, which have been placed on record. Learned Standing Counsel also submitted specimen tender documents. These tender documents consist of nine sections. Section 1 deals with introduction. Section II gives Design Basis. Section III is about Process and Utility Systems. Section IV is regarding detailed scope of work. Section V contains instructions to bidders. Section VI is about Commercial Proposal. Section VII gives specifications and also contains list of vendors for critical equipment. Section VIII is drawings and Section IX contains Annexure , ---A--- which is pro forma of schedule of requirement/bill of quantity. For purpose of this petition section V containing Instructions to Bidders (hereafter, ITB) is relevant. Clause 2 of section V prescribes eligibility requirements and reads as:--- 2.1The bidder must be national of country maintaining bilateral trade relations with Pakistan. 2.2Material and equipment 'to be supplied under the contract must be produced in and supplied from a country maintaining bilateral trade relations with Pakistan. 2.3Manufacturer of the goods being quoted must have at least 10 years' experience in the designing and manufacturing of the items. Documents in support of the above must be submitted with the bid. 2.4Local agents of the foreign suppliers must be registered with the office of Imports and Exports, Government of Pakistan and they must submit photo-copy of valid Registration alongwith their bid. Clause 17 relates to modification of bids. Clause 19 is about determination of responsiveness and reads as:--- 19.1 After opening the bids, the purchaser will determine whether each bid is substantially responsive to the requirements of the Bidding Documents. 19.2 For the purpose of this clause, a substantially responsive bid is one, which conforms to all the terms and conditions of the Bidding documents without material deviation. A material deviation is one which being inconsistent with the bidding documents, affects in any substantial way the scope, quality or prescribed delivery schedule or which limits in any substantial way, the purchaser's rights or the bidder's obligations under the contract. 19.3 ------------------------------------------.. 19.4 The purchaser may waive any minor non-conformity or irregularity in a bid which does not constitute a material deviation, provided that the waiver does not prejudice or affect the relative standing order of any bidder. Clause 23 is about bid evaluation and award of contract and reads as:
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23.1 For the purpose of determining the lowest evaluation bid, factors other than price, such as guaranteed delivery period, direct installation costs, reliability and efficiency of the equipment, financial standing of the bidder, availability of service and spare parts, proximity of bidder's repair facilities etc. Will be taken into consideration. 23.2 ....................................... 23.3 The company shall inform the successful bidder of its intent to enter into a contract. The contract shall be executed subject to the satisfactory negotiation of the terms and conditions of the contract., Clause 27 is about Notification of award and reads as: 27.1 Not later than expiration of the period of bid validity prescribed in bidding Documents, successful bidder will be notified in writing that his bid has been accepted. The Notification of award will constitute the formation of contract. 27.2 Upon the successful bidder's furnishing of a performance Bond/Bank guarantee, the purchaser will promptly notify the unsuccessful bidders that their bids have been unsuccessful and will return their bid bonds. Clause 29 is regarding signing of contract. Clause 30 prescribes Criteria for Summary Rejection (Commercial) as well as Criteria for Summary Rejection (Technical) and sub-clause 14 reads as 14. Full details with complete address of hydrocarbon proceeding plants and equipment supplied by the-bidder during the last five (5) years. Second part of Section V lays down conditions of contract and is not relevant for the purpose of this petition because the moot point herein is the award of contract and not the contract itself. Section VI is about Commercial proposal. Rest of the tender documents are not relevant for the controversy. 9. Learned counsel for the petitioners submitted that OGDC is a statutory corporation established under Oil & Gas Corporation Ordinance, 1961 and is amenable to the Constitutional jurisdiction of this Court and by virtue of subsection (3) of the section 4 of the Ordinance, the Federal Government can giv, directions or instructions on question of policy to Board of Directors of OGDC. It was further submitted that Instructions to Bidders contained in tender documents have the force of statutory rules as these were issued in consultation or under instructions of the Government and as such were binding on the OGDC and the parties concerned. He has further submitted that deviation from the terms of invitation to bid, or instructions to bidders is not permissible and is violative of Article 25 of the Constitution. Enlarging this argument, learned counsel has stated that Clause 2.3 of ITB was mandatory provision and respondent No.3 did not fulfil it and as such was not eligible to submit bid and its bid should have been rejected under the Criteria for Summary Rejection. According to the learned counsel M/s. Petrosin had quoted 10-15% of goods to be supplied to OGDC under the contract which would be Petrosin made and the Company being less then 10 years old was thus ineligible to submit bid. It was also submitted that M/s. Petrosin did not fulfil sub-clause 14 of Criteria for Summary Rejection (Technical) and on that count too, was disqualified to take pact in the proceedings. According to the learned counsel the awarding of contract to M/s. Petrosin was violative of fundamental rights and was also against law and was unreasonable. He relied upon AIR 1979 SC 162 and 1993 SCMR 2158, another judgment from Indian jurisdiction. 10. Learned Standing Counsel for Federation of Pakistan has submitted that OGDC was fully competent to award the contract and as a matter of fact, under the terms of the tender documents, the award of contract had already been notified to M/s. Petrosin who have submitted Bank-guarantee performance bond and contract for all intents and purposes stands awarded. Learned counsel appearing for respondent No.3 has submitted that matter in controversy relates to awarding of contract, which is not justiciable in the Constitutional jurisdiction of this Court. He
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submitted that writ suffers from laches inasmuch as M/s. Petrosin were found technically responsive as far back as August 1993 and M/s. PRESSON did not raise any objection on its eligibility. According to the learned counsel the petition suffers from lashes at two stags; first when the M/s. Petrosin were found technically responsive and secondly when the contract was awarded to the firm on 18-7-1994. The petitioner approached the Court after about one year in the first instance and after six weeks after the contract was awarded and according to him this was fatal to its case. It was further submitted by the learned counsel that OGDC was fully competent to evaluate the bids and determine the fitness of a party for awarding the contract and the Ministry had absolutely no concern…
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