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BusinessPakistani company lodges complaint over contract cancelation

Pakistani company lodges complaint over contract cancelation

A multi-million birr wheat purchase by the Ethiopian government has ended up in controversy as Pakistan-based Shakeel & Company; a winning company in the latest 2.6 billion birr worth of wheat, filed its compliant to the Ministry of Finance and Economic Corporation this week.

The complaint from the company came following the termination of its contract signed with the Ethiopian Trading Business Corporation where Shakeel agreed to supply 400,000 metric tons (MT) of wheat.

In a letter signed by Mengistu Kebede, Chief Executive Officer of the Corporation on January 26, 2018, Shakeel was told that the contract was being terminated.

“Having notified through a letter of award and signed a contract on December 29, 2017 with our corporation to supply 400,000 MT milling wheat you not in a position to furnish performance bond as per the signed contract,” read the letter.

Following the award, the company was supposed to come up with a performance guarantee worth USD 10 million from a bank in Pakistan or elsewhere.

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In this regard, the Commercial Bank of Ethiopia (CBE) as a witness was given a mandate to facilitate and ensure the guarantee.

The failure to provide the performance guarantee led to the cancellation of the contract.

“So we kindly inform your esteemed company the cancellation of the contract as per the award given and  the Public Procurement and Disposal Service is informed by the copy of this letter for the measure to be taken,” according to the letter.

Prior to the cancellation, the company has requested the Service for 15 days of extension of submission of performance bond/guarantee from the contract signing. Shakeel attributed the reason that it was not able to submit the performance bond because there was no prior relationship between banks in Pakistan and the CBE.

In a letter dated January 22, Shakeel ask the Service to give the extension.

In addition to this, company sources told The Reporter that the company had also provided other alternatives such as submitting a bankers cheque as an alternative for the performance bond.

“We have submitted the bankers cheque in accordance with the contract agreement we have signed,” according to a source from the company.

Article 47 of the contact agreement between Shakeel and the Corporation reads that the supplier can submit a cheque from a reputable bank.

In this regard, Shakeel came up with a cheque worth 9.64 million dollars from HSBC Bank Middle East Limited payable to the Service.

However, this was also not accepted.

Company sources accuse the Service of interfering (for its interference) in the contract administration.

In a letter sent to the minister of Finance and Economic Cooperation, Abraham Tekeste (PhD), it stated that the Company had met with the director-general of the Service, and got no substantial results and was told that the final decision was in the hands of the Service.

Shakeel & Company finally requested the cancellation of the contract termination letter from the Corporation.

In the bidding process the Service is given a mandate to process the tender until awarding stage.

“We even ask to deposit the money in cash to either the Corporation or the Service’s account, said source close to the matter.

This latest purchase of 400,000 MT was meant for market stabilization.  The wheat was supposed to be distributed to more than 5,000 bakeries and 300 flour- mills.

It is to be recalled that by the time of the tender, Shakeel gave a total offer of 2.60 billion birr for all four lots whereas the second least offer came from Promising International with an average price of USD 246.07, per ton or a total offer of 2.657 billion birr.

At the time, the total offer from Shakeel was 700 million birr lower than another purchase made a month previously, and having equivalent quantity.

Following the cancelation, Yigezu Daba, director-general of the Service, told The Reporter that the Service has already re-tendered the bid.

On the other hand, in addition to its complaint to the Ministry, Shakeel has also made the same complaint to Public Procurement & Property Administration Agency, a regulatory body that oversees the Service.

“We have received the complaints and we are looking into the matter,” an official from the Agency confirmed to The Reporter.

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