Wednesday, July 24, 2024
BusinessBudget snag thwarts housing enterprise

Budget snag thwarts housing enterprise

Downgrades purchase order due to shortage of finance

After a year of controversy over the purchase of tons of re-enforcement bars for government housing projects, the Addis Ababa Saving Houses Development Enterprise made yet again another significant revision on the its purchase order frustrating suppliers working with the Enterprise.

It is to be recalled that The Enterprise has floated a local competitive tender to purchase 222,000 metric tons of re-enforcement bars in May, 2016. Following that, it went ahead with the bid process and awarded the contract to three local suppliers.   

However, in the latest letter it had issued this month, the Enterprise informed the three suppliers that it has revised the purchase order once gain and told them that it is able to purchase only 20,000 metric tons, about 9 percent of original purchase order, cut the remaining 200,000 tons.

In addition, it ordered the companies to supply the consignment at a price which was offered a year ago, rejecting price variation claims by the suppliers.

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The latest tender and revision are being amended for the second time. It is to be remembered that the first time the Enterprise floated the tender, its standing purchase order was 150,000 tons.  

By the time, the tender managed to attract five local manufacturing companies out which three won contract.

During the bid, a local company called C & E Brothers came ahead with the lowest offers for most of the rebar, in accordance with their size.

Consequently, C & E has managed to secure the largest chunk out of the total supply contract. It gave the lowest offers of 17.71 Br, 17.11 Br, 17.11 Br and 17.24 Br for steel bars with diameters of 12mm, 14mm, 16mm and 20mm, respectively. The company has made a total offer of 2.2 billion Br.

Following C & E, East Steel was awarded for only two sizes–eight millimeters and 10mm. For those two sizes, amounting 5.6 million kilograms and 33.8 million kilograms, East Steel listed the lowest price offer of 718.4 million Br.

The third company, Steely RMI offered the lowest price of 22.9 Br per kilogram for 1.3 million Kilograms six millimeter rebar.

The one year old steel purchase was made for 38,790 houses that are under construction as well as for new housing projects.

However, this purchase as well as the award could not proceed because of the budget limitation faced by the Enterprise and changes in the payment scheme for contractors and suppliers participating in the housing project.

Following these changes, the awarded companies could not supply the 222,000 tons of the rebar since the Enterprise has decided to extend the delivery time to June, 2017. But, once the suspension has elapsed the Enterprise announced its decision to revise it purchase order yet again.

“We have now informed the companies that as of now our demand and financial capacity allows us to purchase around 20,000 tons of bars form the awarded suppliers,” a senior official form the Enterprise told The Reporter.

So far none of them have responded to our request, said the same source.

In addition to that, the Enterprise wants the awarded companies to supply the rebar with similar price which they listed a year ago.

This latest amount is only for 40,000 housing units which are under construction.

“We are not sure about building new houses for the next fiscal year,” according to the same official. “We have to wait for the approval of the cabinet.”

Under the 40/60 scheme, 1,292 houses which were said to have been completed last year have not yet been transferred. Close to 164,000 people are registered in this scheme.

Over the past one year, global price of steel rebar have changed significantly. In May, 2016, it was sold from 9.14 birr to 10.1 birr, per kilogram, according to the London Metal Exchange.

The same source also shows that the price as of May, 2017 has reached 10.4 birr to 10.75 birr, per kilogram.

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