PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS AUTHORITY

PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS AUTHORITY REPORT ON THE APPLICATION FOR ADMINISTRATIVE REVIEW BY M/S ABB LIMITED IN RESPECT OF THE PROCUREMENT OF LUZIRA 33/11kV SUBSTATION CIVIL AND ELECTRICAL WORKS ENTITY: UGANDA INVESTMENT AUTHORITY (UIA) APPLICANT: M/S ABB LIMITED JUNE 2010 Page 1 of 16

TABLE OF CONTENTS ACRONYMS 3 10 BACKGROUND 4 20 LEGAL PROVISIONS APPLICABLE 9 30 METHODOLOGY 9 40 PPDA FINDINGS ON GROUNDS RAISED 10 The switchboard /Switchgear offer 13 The switchboard offered by the BEB 205kV, not 33kV 14 50 OBSERVATIONS 16 60 CONCLUSION 17 70 DECISION OF THE AUTHORITY 17 80 CORRECTIVE MEASURES 18 LIST OF ANNEXES Annex 1: Addendum Number 1 Annex 2: Application to the Accounting Officer Annex 3: Response from the Accounting Officer to the Application Annex 4: Annex 5: ABB Application to the Authority Negotiation Page 2 of 16

ACRONYMS AAR - Application for Administrative Review AO - Accounting Officer BEB - Best Evaluated Bidder CC Contracts Committee EC - Evaluation Committee GIS - Gas Insulated Substations HPDU - Head Procurement and Disposal Unit ITB - Instructions to Bidders kv - Kilovolts MAC - Management Advisory Committee PDE - Procuring and Disposing Entity PDU - Procurement and Disposal Unit PPDA - Public Procurement and Disposal of Public Assets Authority PPDA Act - Public Procurement and Disposal of Public Assets Act PPDA Regs - Public Procurement and Disposal of Public Assets Regulations SF 6 UIA Sulfur Hexa Fluoride Uganda Investment Authority Page 3 of 16

10 BACKGROUND 11 Uganda Investment Authority in the bid notice dated June 16 2009 invited bids for the construction of 33/11kV substation civil and electrical works in Luzira industrial park 12 Four addenda were issued, the first two were on extension of bid submission dates, the third on changes in the design and scope of works and the fourth on changes in the switch gear and charter substation 13 A pre-bid meeting was held at UIA Boardroom on 12 th January 2010 and recorded on PP Form 33 including the site inspection 14 Issuance of solicitation documents was recorded on PP Form 30 and the record indicates that 16 providers were issued with the bids 15 Receipt of bids closed on 24 th February 2010 at 11:00am and the closing was witnessed by the HPDU and secretary CC as per the record on PP Form 34 Only six (6) bidders returned the bids 16 Bid opening was held publicly on 24 th February 2010 at 11:05 am at UIA Boardroom and the attendance was recorded using PP Form 35 17 On the 25 th February 2010, the Contracts Committee approved the following evaluation team: i) Mr Dennis Tumusiime Chairperson/ UIA ii) Mr Mweru Michael Member/ UEDCL iii) Mr Mugabira Michael Member/ UIA Page 4 of 16

iv) Mr Serwaadda Isaac Member/ UMEME v) Mr Hilgard Nei Consultant /Advisor vi) Ms Mutenyo Agatha Member/ UIA vii) Mr Hamza Galiwango Member/ UIA 18 Out of the 6 firms that submitted bids, only 2 firms M/s ABB Limited and M/s Chint Electric Company Ltd reached the financial evaluation stage All the 6 passed the preliminary evaluation Four firms M/s Spencon Services Ltd, International Energy Technic, Patronics Services (U) Ltd and Priority Electrical Engineering Ltd were disqualified at technical evaluation stage hence could not proceed to the financial evaluation stage 19 The Evaluation report signed by all the members recommended M/s Chint Electric Company Ltd as the Best Evaluated Bidder at a total contract price of Shs 1,217,593,428 and USD 1,453,720, both figures totalling to equivalent of Ug Shs 4,038,748,739 ABB Limited was the second ranked bidder at Shs 4,407,803,336 110 The Evaluation report was approved by the Contracts Committee on 29 th March 2010 and authorised the Evaluation Committee members to undertake postqualification of M/s Chint Electric Company Ltd 111 On 9 th April 2010 a request for client references was sent to three companies in China on projects that M/s Chint Electric Company Ltd had implemented 112 The post qualification evaluation report signed by all the members on 19 th April 2010 recommended M/s Chint Electric Company Ltd for award of the contract at a total contract price of Shs 1,217,593,428 and USD 1,453,720 taxes inclusive Page 5 of 16

113 A Negotiation plan was proposed by the Chairman of the Evaluation Committee, Mr Dennis Tumusiime on 19 th April 2010 114 Seven (7) members of the negotiation committee were nominated by HPDU Mr Michael Mugabira on 20th April 2010 115 On 21 st April 2010, the Contracts Committee approved the post qualification report and awarded the tender for construction of Luzira 22/11kV substation Civil and Electrical Works to M/s Chint Electric Co Ltd at a cost of Shs 1,217,593,428 and USD 1,453,720 116 The Entity issued a notice of the Best Evaluated Bidder dated 21 st April 2010 with removal date of 7 th May 2010 The BEB notice was copied to other bidders and all acknowledged receipt 117 In a letter dated 22 nd April 2010, M/s ABB requested for an Administrative Review to the Accounting Officer The complainant alleged that Addendum 1 of 2 nd February 2010 (Annex 1) amended the specification of the switchboard as follows the 11kV switchboards shall be indoor, air insulated and the 33kV switchboards shall be SF 6 insulated That the above mentioned amendment called for bidders to specifically offer GIS switchgear on 33kV, and hence a bidder that did not satisfactorily demonstrate that their offer consists of GIS switchgear on 33kV should have been disqualified That ABB was aware that M/s Chint Electric Co Ltd does not manufacture GIS switchgear in the 33kV range The complainant wanted to know who the manufacturer for the 33kV GIS offered by M/s Chint Electric Co Ltd was, the country of manufacturer and the model, type and designation offered by M/s Chint Electric Co Ltd (Annex 2) Page 6 of 16

118 The Accounting Officer, UIA in a letter dated 30 th April 2010 responded to the Appeal for Administrative Review However, she did not indicate whether the Application by M/s ABB was rejected or upheld but implied that the process would continue for negotiations with M/s Chint Electric Co Ltd The Accounting Officer s response did not specifically address the issue of the 33kV switchboards to be GIS switchgear The Accounting Officer attached an appendix showing specific areas where the complainant s bid was non-responsive and the response of M/s Chint Electric Co Ltd the Best Evaluated Bidder (Annex 3) 119 In a letter dated 3 rd May 2010 received by the Authority on 4 th May 2010, M/s ABB applied for Administrative Review to the Authority against the decision of the Accounting Officer, UIA arguing that the UIA s response did not address issues raised by the complainant (Annex 4) 120 On 7 th May 2010, the Authority directed the Entity to suspend the procurement process and submit the procurement action file to the Authority for an independent review 121 On 12 th May 2010, the Authority received further clarification dated 11 th May 2010 from M/s ABB on their application in response to PPDA s request for information from the bidders 122 On 13 th May 2010, the Accounting Officer submitted to the Authority the procurement action file 123 On 14 th May 2010, in compliance with Regulation 347 (4) (c) of the PPDA Regulations, the Authority sent communication to all the other bidders who participated in this tender informing them of the Application for the Page 7 of 16

Administrative Review and requesting them to submit any relevant information they might have on the procurement M/s Chint and M/s ABB submitted representations to the Authority 20 LEGAL PROVISIONS APPLICABLE 21 The Public Procurement and Disposal of Public Assets Act No 1 of 2003 22 The Public Procurement and Disposal of Public Assets Regulations No 70 of 2003 23 The Public Procurement and Disposal of Public Assets procurement Guidelines 30 METHODOLOGY In investigating the Application for Administrative Review the Authority adopted the following methodology: 31 An analysis of the following documents: a A copy of invitation to bidders b Bid document c Record of bid opening d Minutes of the pre-bid meeting e Bid proposals submitted by all bidders f The evaluation report g Minutes of the Evaluation Committee h Negotiation plan i Decisions of the Contracts Committee j Notice of the Best Evaluated Bidder k Decision of the Accounting Officer to M/s ABB application for Administrative Review l Submissions of the parties at the Administrative Review Hearing: Page 8 of 16

i M/s Chint Electric Company Limited m Any other correspondences on the procurement action file 32 PPDA convened an Administrative Review Hearing with the two parties: UIA and Ms ABB Limited on 21 st May 2010 to present their respective cases 33 Technical consultation was sought on 24 th May 2010 with M/s Power Networks (U) Ltd, Engineers and Management Consultants to understand the technical terminologies contained in the appeal, the bid document and the technical offers submitted by the bidders 40 FINDINGS OF THE AUTHORITY ON GROUNDS RAISED BY THE APPLICANT In the Application for Administrative Review to the Authority dated 3 rd May 2010 and further clarification dated 11 th May 2010, M/s ABB stated that: UIA asked for GIS on 33kV From the information in tables filled in and the extracts of tender evaluation, UIA seem to be waiving this requirement during the evaluation In this case the evaluation is not comparing like with like, because there is a fundamental price difference between the two technologies If this requirement is waived, then a chance should be given to all bidders to offer non-gis technology Further clarification dated 11 th May 2010, M/s ABB stated that, during the tendering process, UIA issued an addendum dated 2 nd February 2010, stating Page 9 of 16

among other items, 11kV switchboards shall be indoor, air insulated and the 33kV switchboards shall be SF 6 insulated Specifically, M/s ABB Limited pointed out the following issues in the application to the Authority as were contained in the UIA administrative review response: a Performance versus detailed required compliance specification: The complainant stated that the evaluation seems to confuse SF 6 insulated switchgear (GIS) and the SF 6 breaker That the Chint Switchgear is not SF6 insulated ( Gas-Insulated), that is why it is withdrawable and equipped with an SF 6 breaker Further more, from the documents attached by UIA in the response, that it also clear that the voltage offered by Chint is 205kV, which does not conform to 33 kv, which is required b Submission of Brochures As UIA have stated in their response, submission of brochures was optional, as stated in the tender document, and we have no comment on the issue c Negotiation issues identified If you refer to the tender document, section 43, subsection3; the document gives the tender the option of either submitting test certificates with the tender document, or testing the equipment and submitting test certificates on manufacture d Conflict of interest As stated in our tender submission, we are committed to the highest standards of good business ethics, which ABB and ourselves subscribe to Page 10 of 16

At the hearing of 21 st May 2010, M/s ABB Limited clarified that their only ground of appeal is on the technical specifications which is covered under (a) above Therefore, this administrative review report does not address b-d issues that came up at the point of response by the Accounting Officer 41 Ground of appeal: That the requirement for GIS was of material importance for the specification on the 33kV; and that from the response of UIA, it is clear that Chint did not offer GIS That it is also clear that Chint s voltage for the 33kV switchgear is 205kV, which is also a material deviation The information given by M/s Chint Electric Co Ltd under item 2 (33kV Switchgear), sub-item 14 (model and type designation), where Chint offered KYN61-205 gives all information to the evaluation team to render the bidder non-responsive, on the basis of offering non-gis technology, and 205 kv instead of 33kV Findings of the Authority: In order for the Authority to establish whether there is merit in the complaint of the applicant, the Authority analysed the bid document with its Addendum 1, the evaluation report and submissions by M/s Chint Electric Co Ltd and UIA s procurement action file The Authority has made findings on the allegations of the switchgear breaches on principle requirements of 33kV as follows: Ground 1(a): The 33 kv switchboard /Switchgear offered by the best evaluated bidder (M/s Chint Electric Co Ltd) is not SF6 (Gas Insulated), a non- GIS Technology Ground 1(b): The switchboard offered by the best evaluated bidder (M/s Chint Electric Co Ltd) is 205kV, instead of 33kV Page 11 of 16

Ground 1(a): Whether the 33 kv switchboard /Switchgear offered by the best evaluated bidder (M/s Chint Electric Co Ltd) is not SF 6 (Gas Insulated), a non- GIS Technology The Addendum number 1 amending the bid document required clause 35 of page 4-25 to delete the switch board shall be indoor air insulated and replace with The 11kV switchboard shall be indoor air insulated and the 33kV switchboard shall be SF 6 insulated The Authority has established that SF 6 is the type of gas commonly used in switchgears, and UIA in amending clause 35 of the bidding document, bidders were required to offer a 33kV switchgear that is SF 6 insulated instead of airinsulated that they had initially required before the Addendum M/s Chint Electric Ltd technical data sheet did not indicate anywhere that they are offering SF 6 switchgear but rather indicated an offer of a SF 6 circuit breaker A circuit breaker is a component in the switchgear The Authority established from the negotiation plan (Annex 5) that it was noted that whereas the bidder (M/s Chint) indicated in the technical data sheets their compliance to the requirement of the 33kV switchboards shall be SF 6 insulated, the brochures they submitted of 33kV switchboards were not conforming to SF 6 specifications which was contradictory The negotiation parameters were to seek clarification from the Provider (M/s Chint Electric Co Ltd) to confirm their commitment to the requirement that the 33kV switchboard shall be SF 6 insulated and that the 33kV circuit breaker shall be of the SF 6 type From the above statement, the Authority concludes that UIA was aware that the BEB- M/s Chint Electric Co Ltd did not meet the requirement of SF 6 switchgear but the evaluation Page 12 of 16

team was silent on the switchgear s non-compliance by M/s Chint Electric Co Ltd s bid The entity s response during the administration review at entity level was that the requirement for SF 6 is item number 121 and offers from M/s ABB Limited were of Vacuum/VD4 while M/s Chint Electric Co Ltd offers were of SF 6 The Authority reviewed technical data sheets and established that 121 was on the circuit-breaker insulation which is one of the components under item number 2, the 33kV switchgear Indeed item 121, which is the circuit-breaker, UIA specified SF 6 but the addendum was on both items 2, the 33kV switchgear which shall be SF 6 (Sulphur HexaFlouride) insulated and 121, the 33kV circuit breaker which shall be SF 6 Insulated On this matter of circuit breaker versus the switchgear, the Authority s finding is that the complaint is on item 2, the switchgear but not on item 121, the circuit breaker Authority s decision on ground 1 (a) of application: The Authority finds merit in the ground of application based on the fact that M/s Chint Electric Co Ltd did not comply with the requirement of offering 33kV switchgear SF 6 Insulated The ground is therefore upheld Ground 1(b): Whether the switchboard offered by the best evaluated bidder (M/s Chint) is 205kV, instead of 33kV This ground was not originally addressed to the Accounting Officer, UIA but was raised when the complainant applied to the Authority, as a result of the response from the Accounting Officer The Authority established that in the Accounting Officer s response to the administrative review, she annexed the technical data sheet of Chint Electric Page 13 of 16

Company Limited of model and type designation of the Switchgear as KYN61-205, where 205 means rated voltage The Authority established from the technical data sheet submitted by M/s Chint page 6, item 14 the model and type designation of the Switchgear as KYN61-205, where 205 means rated voltage (kv) The same data sheet page 6, item 21 indicate rated voltage as 36kV Also M/s Chint s bid contained a brochure which indicates switchgear as KYN61-405 (Z) Metalclad movable AC switchgear, where 405 indicate rated voltage The Authority established that M/s Chint s technical bid has three contradicting figures on rated voltage ie 205 kv, 36 kv and 405 kv The evaluation team rated the bidder, M/s M/s Chint Electric Co Ltd compliant However, the Authority concludes that since there were three contradicting units of voltage rating in the same bid, the entity should have sought clarification from the bidder since a rated voltage lower than 33kV would not conform to the 33kV switchgear Authority s decision on ground 1(b) of application: The Authority finds merit in the ground of application based on the fact that M/s Chint Electric Co Ltd bid contained three contradicting figures on rated voltage and one of them 205 kv would not conform with the 33kV switchgear The ground is therefore upheld Page 14 of 16

50 OBSERVATIONS 51 Procedure adopted for negotiations The Authority has noted that negotiations are not held, though it was recommended in the evaluation report The negations plan was also developed However, the entity erred to issue the notice of best evaluated bidder before the negotiations were concluded PPDA Reg 223 (1) provides that a PDU shall submit a recommendation for award of a contract to the Contracts Committee after completion of the evaluation process and any post-qualification and negotiation process PPDA Reg 224(1) states that a PDE shall within five (5) days of the decision of the Contracts Committee to award a contract, display a notice of best evaluated bidder The Authority therefore finds that posting of the Best Evaluated Bidder Notice was pre mature since negotiations had not been conducted 52 Efficiency and Economy The Authority held technical consultation with M/s Power Networks (U) Ltd, Engineers and Management Consultants who indicated that the technology required by UIA of switchgear that is SF 6 insulated and circuit breaker that is SF 6 insulated for a low voltage 33kV power station is rather expensive and does not promote principles of efficiency and economy Page 15 of 16

60 CONCLUSION The Authority concludes as follows: (a) M/s Chint Electric Co Ltd did not comply with the requirement of offering 33kV switchgear SF 6 Insulated as required by Addendum number 1 of the bidding document (b) M/s Chint Electric Co Ltd bid contained three contradicting figures on rated voltage and one of them 205 kv would not conform with the 33kV switchgear that was required by the Entity 70 DECISION OF THE AUTHORITY In accordance with Section 91 (4) of the PPDA Act and PPDA Regulation 347, the decision of the Authority is that the application of Administrative Review by M/s ABB Limited is upheld The decision of the Authority is based on the findings of the Authority in 40 above Accordingly the Accounting Officer is required to- Re-Evaluate all the six (6) bids that were received using a different independent evaluation team taking into consideration the requirements of the bid document including all the addenda to the bidding document issued to bidders Cancel the Notice of the best evaluated bidder as was displayed and issued to bidders on 21 st April 2010 Inform all bidders of the cancellation of the Notice of the best evaluated bidder Re-fund the Administrative Review fee of Shs 1,000,000 to M/s ABB Limited in accordance with PPDA Guideline No 6 of 2003 Page 16 of 16