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Controversy drags wheat supply

A 2.7 billion birr wheat purchase bid is unraveling with controversy while Public Procurement & Property Disposal Service (PPPDS) is in limbo over selecting a wining company to award the contract of supplying the 400,000 metric tons of wheat.

It is to be recalled that during the latest bid opening, on March 13, 2018, the latest frontrunner in the bid process, Promising International has found itself in a middle of a technical problem where it violated the technical requirement of submitting shipment quotations from both the Ethiopian Shipping and Logistics Service Enterprise (ESLSE) and another transporter of its choosing.

Unlike the remaining bidders that proposed to ship the wheat either using their own transporter (vessel) or using ships owned by ESLSE, Promising gave only one quotation price for a shipper excluding ESLSE from its bid proposal.

In the process of providing both alternatives, bidders are supposed to list transport costs by their own vessels and vessels from ESLSE.

At the time of the opening, bidders complained about this issue and argued Promising International was supposed to give both transport costs. In doing so, Promising should have had submitted pro-forma from ESLSE.

The tender document The Reporter gain access to reads that all bidders are required to provide transport price quotations for both ESLSE’s and their own vessels.

According to ITB clause number 12.6 (iii), freight costs must be offered in two options which is shipment of all milling wheat shall be by Ethiopian Shipping & Logistics Service Enterprise.

“The clause further reads that shipment of all milling wheat may be brought by the supplier’s vessel [provided that it can provide waiver from ESLSE].”

Moreover, a 20-year-old directive issued by the Office of the Prime Minister (OPM) and signed by Kassu Yelala, the then head of economic affairs department at OPM, has clearly indicated that any items imported by public offices shall be shipped by Ethiopian flag carrier ESLSE.

In fact, if ESLSE vessels were unable to reach ports of origin, the Enterprise can commission the service to another third-party company and in return earn commission payments from the later.

Despite this clear requirement in the tender document, Promising was allowed to proceed in the tender process, The Reporter learnt.

It is to be recalled that, a representative of Promising has responded during the financial opening in March 13, 2018, saying that it is not mandatory to have price pro-forma from ESLSE.

Promising – an internationally acclaimed grain trader – is very familiar to the Ethiopian market with a major role in supplying wheat for years.

It is to be recalled that, during purchases made a couple of months ago, Promising International along with a second company called Intrade won the bid at a total price of 3.3 billion birr.

According to multiple sources close to the bid, all bidders whose price offer opened were asked to extend their bid validity date since the initial date has already expired given the extended back and forth in the bid process.

In addition, The Reporter was able to confirm from officials of PPPDS that the Service has managed to get a wavier which will allow any winning company who will supply the wheat to ship the wheat using its own vessels.

Close sources to the bidding process, however, argues that the Service don’t have the power to ask for a waiver before it awarded the contract.

Yigezu Daba, general director of the Service, failed to answer to The Reporter’s enquiry regarding the controversies in the bid process and said that they are still processing the bid.

He further added that there will be USD six to seven million addition to the total price of the wheat compared to price offered by the least bidder, if ESLSE is given the chance to ship the wheat using its own vessel.

The transport cost listed by Promising is USD five million less than the price that might have been quoted by ESLSE to give the shipment service. But, counter-argument from close sources also claims that even if the transport cost from ESLSE is higher, the advantage will be to country since the Enterprise as one of the state-owned entities will have the chance to earn USD five million in revenue.

Even if ESLSE said it has no capacity to ship the wheat, it can commission the shipment to a third-party and collect millions of dollars as a commission, the same source maintains.

Furthermore, the winning company will discharge the wheat at port of Djibouti but if ESLSE was to ship the wheat, there is a high chance that the Enterprise might transport the bulk via multimodal system – shipping the wheat up to Addis Ababa. 

In fact, if winning companies are allowed to use their own vessels the government will incur additional cost to transport from Djibouti to Addis Ababa.  

The latest purchase of wheat was first awarded to a Pakistan-based company — Shakeel and Company Ltd — where the company was later disbarred from the bid. Shakeel was awarded to supply the same amount with 2.6 billion birr.

The Service has then refloated the bid inviting suppliers. In this respect, six known wheat suppliers in the international grain market have submitted their offer. From this, all suppliers’ offers except one were opened.

As the opening of the offers commenced, the second least offer came from ADM International— a US based company followed by Hakan Agro DMCC. In this respect, ADM and Hakan gave USD 269 and USD 272 per kilo, respectively. These two price offers include transport cost of the wheat if they are shipped using the seller’s vessel’s.

The wheat supply once awarded to the winning bidder, it will be brought to the country and distributed to more than 5,000 bakeries and 300 flour factories.

Given the extended bid process which was delayed for months, the country is already facing shortage of wheat.