PMTL—NORTEL CONTRACT CHALLENGED 

 

Alcatel contended that they had been declared the most compliant.

From SHAMIM A RIZVI
Islamabad
Jun 19 - 25, 2000

A public welfare organization of Gujranwala, under public interest litigation, has filed a writ petition in the Lahore High Court asking for court order to restrain Pakistan Telecommunication Mobile Ltd. (PTML) from opening a letter of credit in favour of Nortel of Canada in connection with the award of contract for US$ 60 million project for mobile phones. The petitioner has taken a stand that the project was not at all required and it was an unnecessary burden on the resources of Pakistan and it has been awarded in a most hush hush manner in violation of all rules and regulations of international tendering and bidding at a much higher cost ignoring lower bids offered by many much more reputed and sound companies in the world telecommunication sector.

PTML is a 100% owned subsidiary of Pakistan Telecommunication Corporation Ltd (PTCL), a corporate body wholly owned by the Federal government of Pakistan which itself is on the list of privatization. There is no justification to invest such a huge amount on a new project specially under the circumstances when all the three international companies i.e. Paktel, Instaphone, and Mobilink who have been given licences by the PTCL to provide mobile phone service in Pakistan have suffered heavy losses in their operation in Pakistan, Mobilink is stated to have suffered a loss of Rs.300 million, Instaphone of Rs 700 million and Paktel of Rs.200 million. How PTML can be expected to operate on profit while competing with these international giants and how PTCL can justify to invest such a huge amount (US$ 60 million) from the resources of a cash starved country in such a risky project. Moreover the circumstances under which the project has been awarded to Nortel of Canada are most untransparent. According to the petitioner, Nortel had originally offered to complete the project in 36.5 million dollar but later they were allowed to raise the bid amount to 60 million dollar causing a net loss to the nation of 23.5 million dollars.

The Division of the Lahore High Court has admitted the petition for hearing and issued notices to secretary Ministry of Communication Government of Pakistan, PTCL and PTML Islamabad.

It has been stated in the written petition that the petitioner, Pakistan Citizens Foundation, represented by former Chief Editor Pakistan Times turned lawyer, Mr. Maqbool Shariff Advocate, is a public welfare organization devoted to the cause of service to the people of Pakistan and it is a non-profit making organization engaged in social welfare and has set up a number of hospitals and dispensaries and support the sick and needy through financial assistance. It is also a watch-dog on any excesses made by the executive and administrative authorities on the rights of the people of Pakistan.

That in 1998 P.T.C Limited decided to launch a new company under the name and style of Pakistan Telecommunications Mobile Limited for the purpose of providing mobile telephone facilities throughout Pakistan in a phased manner. Pakistan Telephone Mobile Limited was set up as 100% owned subsidiary of the PTCL. Earlier the PTCL had granted licences for mobile telephones to the Mobile, Instaphone and Paktel companies. Each of these companies were given to understand that no further licences would be granted to any other company in future but this commitment was not fulfilled and after grant of licence to the Mobilink the process was repeated in the case of i) Instaphone and ii) Paktel.

PTML decided to launch a turnkey project for commissioning GSM, the latest technology in telecommunications for mobile telephones. The turnkey project included promotion of network design, supply and back up equipment and the commissioning of 5 lac subscribers base over a five-year period. The finances for this massive project were to be made available by the Habib Bank Limited of Pakistan on interest.

PTCL invited all the leading GSM world companies for pre-qualification for the project. In response to the invitation of the authorities, the following world renowned companies participated for being pre-qualified for the project:

a) Siemens of Germany.

b) Alcatel of France.

c) Ericsson of Sweden.

d) Nokia of Finland.

e) Motorolla of United States of America.

f) Nortel of Canada.

For that purpose of assessing as to which company should be pre-qualified to take part in the competition, another exercise was started mainly for their assessment. In August, 1999, the PTCL/PTML decided to pre-qualify technical consultants which in turn were to be asked to assess the various competitors. International Consultants were asked to obtain the term of their reference for performing the tasks of preparation of bidding documents of the turnkey project and the network equipment suppliers including creation of financial arrangements.

Competition

About one dozen technical consultants participated in the competition to select the technical consultants. Omnitel of Finland was selected for the purpose and was appointed consultant for the above mentioned job.

The technical consultants namely Omnitel completed the task of evaluation of the bidders at a cost of US$ 2,55,000/- approximately. It gave a presentation to the PTCL/PTML Board of August 2,1999 and gave a report and assessment of the bidders. The consultants advised that Alcatel, Ericsson, Siemens — were the most compliant whereas Nortel and Nokia were non-compliant and therefore did not have to be considered. Having completed their task Omnitel left Pakistan. The investigation and assessment by the technical consultants were not to the liking of the PTCL/PTML and presumably they were not happy with the outcome. Presumably they wished to oblige a competitor other than that recommended by the Consultants which was contrary to the principle of transparency and across the board accountability apart from the fact that it was against the RFP.

Instead of following the advice, recommendation and assessment of their own consultants the Federal Secretary, Ministry of Communications decided to nominate a new Evaluation Committee which substituted the earlier committee that had recommended the acceptance of the recommendations of Omnitel. The new committee went to the extent of nullifying the herculean efforts put in by Omnitel at a fabulous cost of more than US$ 255,000. It embarked upon restarting the process of evaluation all over again. This was not acceptable to the Omnitel which insisted that it had already completed the assignment and had been paid for it and had left Pakistan after completion of the job and no additional work would be undertaken by it. The insistence of the authorities gained momentum. At this Omnitel agreed subject to payment of another fee of U.S. dollars 150 million to re-do the same work that had already been done. The request of the Omnitel was agreed to and it was asked to evaluate once again the bidders in conjunction with the members of the new Evaluation Committee at a cost of another US$ 150 million. Once again the same clarifications and questionnaires were sent to the different competitors and they were called in turn to make presentations of their bids. It is pertinent to point out that according to the international norms and the understanding with the bidders they were not to be allowed to improve their prices after the opening of the quotations. The new Committee decided to bypass all these international standards and concepts of transparency and allowed the bidders to modify their prices after the bid price was known to every one.

That the Omnitel in connection with the new Committee referred to above, submitted a fresh report declaring Nokia of Finland to be the most compliant company and highly recommended for the award of the contract. The consultants also recommended, Siemens, Ericsson and Nortel. Alcatel was not recommended.

Initially Nortel of Canada had made a bid for US$36.50 million, but after negotiations, rather than decreasing the value of their bid, the award of the contract was in the neighbourhood of US$ 60 million. Nortel has been allowed to increase its bid for not less than US$23.50 million. It may also be noted that Nokia which had better international references than Nortel had offered to perform the same job for US$ 45.00 million.

Alcatel having better references than Nortel and having already established a network in Pakistan offered to do the same at a price of US$ 47 million. Ericsson, Nokia, Alcatel all complained about the violation of rules, regulations and procedure, vide letter dated 14.12.1997. Alcatel moved Pakistan government that the international tender regulations had been violated and that Alcatel was being ignored inspite of the clear assessment by the consultants of the PTCL/PTML. Alcatel contended that they had been declared the most compliant.