PNSC: COSTLY IT CONTRACT

The contract awarded to the SES is highly expensive than the competitive products available in the international market

By SYED M. ASLAM
April 15 - 21, 2002

The financially troubled Pakistan National Shipping Corporation has awarded a whopping Rs 50 million IT contract to a foreign company for a job that could have been done right here in the country at a less than one-fifth of the price.

Informed sources told PAGE that the contract for a fully integrated Global Positioning System (GPS) to be installed on eight of total 14 PNSC vessels including the software, hardware, equipments and accessories is given to a Greek company named SES. The vessel management software will enable PNSC and its agents to keep in touch with its vessels worldwide for speedy response and tracking.

The sources said the contract awarded to the SES is not only costly compared to similar locally developed package but is also doubled the competitive products available in the international market. Sources alleged that the Corporation floated an international tender but frivolously selected the SES despite participation by many local companies who quoted much lower prices.

"The awarding of this huge contract to a foreign company at such an unbelievable price not only deprived the local IT companies of a sizeable job but has also sent ripples of discontent among the software industry which yet remains devoid of a local base. It is sending all kinds of wrong signals to local software industry despite government assurance that it will be given the first priority.

"Not only the contract is expensive it will also cost heavily to PNSC in maintenance costs — $ 3000 per month per vessel compared to as low as $ 400 per month per vessel if done locally. This translates into operating expenses of $ 24,000 per month or $ 288,000 per year which at current exchange rate means an additional expense of Rs 17.28 million for the fledging Corporation."

Sources said that the job will be implemented in three different phases. In phase one the Ship Management Department will be computerized while in the second the specialized and integrated software package will be developed. In the last and the final phase the system will be installed on the vessels. "The PNSC has divided the payment in these various phases to disburse the maximum funds without attracting attention."

Sources said that the GPS system basically supports two-way communications between the offshore offices and ships to better vessel management system. "Many local companies only find out that the PNSC has decided to award the contract to a foreign company and that too at such a high price and some of them have also approached the relevant authorities to express their concerns."

Awarding the expensive contract — in term of both the initial investment and huge maintenance costs as discussed above — to a foreign company for a job that could have been done at a much lower price within the country as well as outside makes little sense for PNSC whose accumulated losses almost equalled its paid-up capital on December 31, 2001 — Rs 1.126 billion or a negligible Rs 16 million more its paid-up capital of Rs 1.143 billion.

Without questioning the importance of the ship-management system and its relevance to merchant marine navigation, awarding the contract to a foreign company at much above the going prices hardly makes any sense for PNSC which managed to revert back into black on December 31, 2001. According to the un-audited accounts for the half year PNSC earned an operating profit of Rs 226 million compared to a loss of Rs 38 million during the comparative period in the previous year. Similarly it managed to earn a pre-tax profit of Rs 289 million compared to a pre-tax loss of Rs 357 million in the comparative period in the previous year. The PNSC also managed to earn a post-tax profit of Rs 257 million compared to a post-tax loss of Rs 357 million during the comparative period the previous year.

During the half-year ended December 31, 2001 PNSC lifted 3.409 million tons of cargo (including 2.463 million tons of crude oil) compared to 4.118 million tons of cargo (including 3.292 million tons of crude oil) in the corresponding period the previous year. It also earned a slightly less revenue of Rs 2.498 billion compared to Rs 2.513 billion.

The PNSC blamed the reduction in volume of cargo and value of revenue on the shrinking of world trade saying that ‘Currently, over 300 container vessels of all sizes are idling worldwide with no gainful employment. Recovery is not foreseen until well into the year 2003."

With such predictions of prolonged hard times, PNSC whose 14-vessel-fleet comprise ships which have long passed their economic life costing it heavily in repairs and maintenance the expensive contract for the installation of GPS ship-management system hardly makes any sense. More so, as a number of vessels are up for scraps.