Port tender terms give local consultants a short shrift

Govt-owned port authorities need to revisit qualification criteria to at least ensure tender terms are transparent and fair so that local firms are not left in lurch


India’s state-owned ports will roll out a large number of consulting jobs with similar nature of work as part of the government’s ambitious ‘Sagarmala project’ to modernize existing ports and to build new ports. Photo: Hemant Mishra/Mint
India’s state-owned ports will roll out a large number of consulting jobs with similar nature of work as part of the government’s ambitious ‘Sagarmala project’ to modernize existing ports and to build new ports. Photo: Hemant Mishra/Mint

Public tenders are most often riddled with the unthinkable, sometimes it defies logic and at times it is even bizarre. It is also not unusual to find those left out of such auctions cribbing over being ignored. But this one deserves a few words.

Some of India’s homegrown consulting engineering firms fear that they will be left out of mandates for preparing detailed project reports (DPRs) and project management consultancy (PMC) work for new port projects planned by the Indian government.

At stake is consulting business worth a few crores of rupees for work as critical as DPRs and PMCs.

India’s port authorities entrusted with the task of farming out DPR and PMC work to private firms have included qualification criteria for an initial set of one-to-two projects that are detrimental to the participation of local consultants.

Prospective bidders should have global experience in providing consulting services in respect of preparation of DPR and/or PMC services for ports having an estimated project cost of more than Rs.6,000 crore which has been successfully implemented in the last seven years, according to the tender terms.

Eligible assignment for key personnel of a bidding firm to be considered will be work done in a functional port handling container volume not less than 2 million twenty-foot equivalent units (TEUs) in FY15. A TEU is the standard size of a container and a common measure of capacity in the container business.

These two stringent tender criteria exclude local port consultants from participating.

To be sure, India has not built a port with an investment of more than Rs.6,000 crore in the last seven years.

Moreover, global experience shows that the construction cost of port infrastructure in developed markets such as North America, Western Europe, Australia, Japan, South Korea and the Middle East are five to seven times higher than in countries such as India, China, Sri Lanka and Indonesia, to name a few.

Hence, a Rs.6,000 crore project experience for an overseas consulting firm in developed markets is equivalent to a Rs.1,000-crore project experience in the Indian market by a local firm.

To buttress this point, a 50 million tonnes (mt) coal terminal developed by Adani Ports and Special Economic Zone Ltd (APSEZ) at Mundra port in Gujarat involved a capital cost of Rs.1,800 crore, while the capital cost of 50 mt coal handling infrastructure at Abbot Point in Australia was Rs.11,000 crore.

To put international experience as a qualifying criterion has no meaning as all Indian ports are catering to export-import (EXIM) trade and, as a result, are international gateways.

The second eligibility criteria also put local consultants at a disadvantage simply because till date there are only two ports in India which handle more than 2 million TEUs—Jawaharlal Nehru port near Mumbai and Mundra port in Gujarat.

Thirdly, the eligibility of a bidder is scrutinized solely on the strength of the overseas company. As such, there is no incentive for an overseas consultant to take on an Indian partner whose experience in any case is not taken into account while measuring eligibility.

The emphasis in these tenders is to set the qualifying criteria in terms of value of work and not on scope of work.

It is thus clear that the tender terms are framed in such a way to only attract global consultants and to keep out potential Indian firms from bidding, though using local expertise to deal with local issues would be beneficial, given the nature of work and surveys/investigations required for the project.

India’s state-owned ports will roll out a large number of consulting jobs with a similar nature of work as part of the government’s ambitious ‘Sagarmala project’ to modernize existing ports and to build new ports.

Local consultants say that the current qualification criteria, if unattended, will create a benchmark for other port authorities, and Indian consultants will not be able to participate in similar works expected in near future.

While the National Democratic Alliance (NDA) government has been going all out to support local firms through the ‘Make in India’ slogan, thereby pushing global firms to share technology and expertise with India firms as a mandatory requirement for participation in tenders floated by state-run firms, the tendering process for port consulting completely ignores this call.

India’s home-grown consulting firms have, no doubt, added value to the port sector and synergized the growth of port volumes to reach about 1 billion tonnes. To disregard the expertise built by local firms over the last two decades would belittle that contribution.

The government-owned port authorities need to revisit the qualification criteria to at least ensure that tender terms are transparent and fair so that local firms are not left in the lurch.

P. Manoj looks at trends in the shipping industry.

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