Coal tender under Supreme Court scrutiny
Posted on May 11th, 2016

By C. A. Chandraprema Courtesy The Island

* SC considers coal tender a matter of public interest

* PAB confirms bidder had improper communication with Tender Board

* Petitioner alleges cabinet was misled by Power and Energy Minister

In the old days when people spoke of corruption by those wielding political power, it was almost always a case of accepting commissions from the beneficiaries of contracts and deals with the government. However after the present ‘yahapalana’ government came into power, shady deals have acquired a mind numbing complexity such as the treasury bond scam. Another scam no less complex is the controversial coal tender issue which is now before the Supreme Court being heard by a three member bench comprising Chief Justice K Sripavan, and Justices Priyasath Dep and Upali Abeyratne. The case will be heard again on 25 May 2016. The SC has called on the Minister of Power and Energy and the other respondents in the case all of whom belong to the government, (and the Petitioner as well) to make submissions relating to two questions based on the facts of this case.

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1. If there is a public wrong caused by a public authority or the State which is contrary to the constitution or the law, can the court ignore such contravention and dismiss the application purely on the basis of an objection taken by the respondents based on the requirements of locus standi?

2. If there is a misuse of public funds, does the rule of law require the court to protect the public interest and to direct the executive organ of the government to act within its limits and make the rule of law meaningful and effective ignoring the requirements of locus standi?

The submissions are to be made before 20 May 2016 in time for the next hearing on 25 May. We can see from the very questions posed by the SC that this is one fundamental rights case that is going to make judicial history. The term locus standi means the right to bring an action, to be heard in court, or to address the Court on a matter before it. Why the concept of locus standi has become an issue in this fundamental rights application is because the petitioner Messers Noble Resources Ltd is a company registered in Singapore and not in Sri Lanka. So the government which is a respondent in this case had argued in court that this foreign company does not have the locus standi to be able to petition the Supreme Court alleging a violation of fundamental rights. The questions posed to the respondents by the SC clearly indicates that there are other issues that may override locus standi objections. The facts of this case are as follows.

The Norochcholai power plant requires 2.25 million tonnes of coal per annum and when a tender is awarded for a full three years’ supply as has been the practice, the amount involved at the current exchange rate would be in excess of Rs. 60 billion. A cabinet paper dated 16 September 2015 submitted by the Minister of Power and Renewable Energy recommended the awarding of the contract for the supply of coal to Swiss Singapore Ltd against the recommendation made by the Procurement Appeals Board to cancel the tender and to call for fresh bids. The Minister of Power and Renewable Energy had stated in the relevant cabinet paper that from July 2009 onwards, Messers Noble Resources Ltd had been challenging the award of the coal supply contract either in the Procurement Appeals Board or in courts and somehow continuing to be the coal supplier.

The present controversy arose with regard a tender floated on 2014.06.18 to procure 6.75 million tonnes of coal required for a three year period. The Technical Evaluation Committee (TEC) and the Standing Cabinet Appointed Procurements Committee (SCAPC) had recommended the lowest evaluated bidder Swiss Singapore Ltd. However Noble Resources Ltd had appealed against this decision to the Procurement Appeal Board (PAB) which had recommended the cancellation of the tender and calling for new bids. The cabinet paper recommended the overriding of this decision handed down by the PAB stating that four previous tenders were challenged in that manner and the government was not able to make a decision during the past five years. The cabinet paper recommended that a long term contract for the supply of 4.5 million metric tonnes be awarded to Swiss Singapore Ltd at USD 68.72 per metric tonne and for the procurement of 2.25 million metric tonnes of coal on the spot tender procedure through the Standing Cabinet Appointed Procurement Committee.

Noble Resources Ltd of Singapore has filed a fundamental rights petition in the Supreme Court against this cabinet decision stating that the Technical Evaluation Committee had evaluated the bids relating to this tender and recommended the grant of the contract to Noble Resources Ltd. But another bidder Swiss Singapore Ltd had made representations to the Standing Cabinet Appointed Procurement Committee about two of the criteria specified in the bid document. The SCAPC directed the TEC to remove these two criteria for evaluation from the bid documents and to evaluate the contract without them. Based on the change in the evaluation criteria the TEC had determined that Swiss Singapore Ltd is the lowest bidder.

The criteria in the bidding document that were changed relates to the granular size of the coal to be supplied. The authorities generally avoided purchasing the more powdery coal as that resulted in some of it being blown away in the wind during loading and unloading and during transport, resulting not only in a wastage of coal but also in considerable environmental damage given the quantities of coal involved. Hence the acceptable granular size had been fixed at anything between 10 mm and 50 mm. The lower granular size limit was among the two criteria removed from the bidding documents so that more powdery coal would be accepted. Noble Resources has stated in their petition to the Supreme Court that considerable environmental damage will in fact result if this tender is awarded to Swiss Singapore Ltd.

Noble Resources pleaded that the Standing Cabinet Appointed Procurement Committee cannot make changes in the evaluation criteria after the bids are opened and a bidder has no right to communicate with the SCAPC or the TEC about the tender. The Procurement Appeals Board comprised retired Justice Hector Yapa, Mr P.A.Prematilleke and Mr C.Maliyadde had agreed with the position taken by Noble Resources Ltd. The PAB confirmed that at the first evaluation made by TEC, Messers Noble Resources Ltd. had become the lowest bidder and TEC recommended the awarding of this tender to Nobel Resources Ltd and the SCAPC had agreed with that recommendation. The Procurements Appeal Board observed that thereafter, the SCAPC contrary to their earlier decision had requested the TEC to re-evaluate the bid excluding the specific criterion in relation to granular size. As a result of this re-evaluation Swiss Singapore Ltd. became the lowest bidder making Noble Resources Ltd., the second lowest bidder. Therefore, the PAB stated that the recommendation of the SCAPC to award the tender to Swiss Singapore Overseas Enterprises Pvt. Ltd. was incorrect.

The PAB also observed that the recommended bidder, Swiss Singapore Ltd., had communicated by their letter dated 29.06.2015 with the Chairman of the SCAPC and that the contents of this letter shows that an attempt has been made to influence the evaluation procedure in relation to the price adjustment to be made on account of the variation of the size of coal. The PAB therefore recommended to the Cabinet of Ministers to cancel the tender and call for fresh bids after making changes to the tender conditions, if necessary.

The petitioner raised before the Supreme Court the question of the minister in charge of the subject having deliberately misled the cabinet by not revealing in full all the material facts relating to this tender. The answers that the respondents and petitioners in this case will file before the SC in the next few days and the conclusion that the SC arrives at may make judicial history in this country in relation to the awarding of government tenders.

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