MR cancels Colombo Port Tender

Colombo: President Mahinda Rajapaksa has cancelled the controversial tender for the Colombo Port’s new terminal, intensely fought by local and global giants while fresh bids are to be called soon.

Sources said that the move by the President follows allegations of favouritism and various drawbacks and differences of opinion over the process, as well as conditions in the Request for Proposals. It is learnt that the Attorney General’s Office too had cautioned the President, while at least two bidders have taken the matter up in Courts as well. There are also various warnings issued by shipping experts over actual interests of bidders or consortia partners.

The South Harbour will certainly be the largest development project in Sri Lanka’s history, with a total investment estimated in excess of US$ 1 billion. The country is already nearly two years late with the project, and further delay would seriously threaten Colombo port’s hub status in the future. It was estimated that, if work starts in early 2008, the first phase could be completed by 2011.

In the run up to the awarding, there was allegation that global giant Hutchison Ports of Hong Kong was being favoured, going against the recommendations made by the Cabinet-Appointed Negotiating Committee (CANC) and the Technical Evaluation Committee(TEC).

According to the TEC report, the joint venture between business tycoon controlled Aitken Spence and Port of Singapore Authority (PSA) consortia was ranked number one with 78 marks, while Hutchison Port Holdings came in second with 69 marks and the joint venture between Hayleys-Carsons and the French-based CMA-CGM was placed third with 60 marks.

In their financial proposals, once again, the Aitken Spence-PSA came first, quoting US$ 195.6 million in net present value of the minimum royalties to be given to the SLPA, while the second bidder, Hutchison quoted US$ 173.5 million, and the third bidder quoted US$ 99 million. Following the evaluation, the TEC recommended Aitken Spence-PSA joint venture as the preferred bidder entitled for the award of the contract. However, the SLPA recommended Hutchison, based on its own strategic assessment, Hutchison was best suited.

Other bidders included John Keells Holdings-South Asia Gateway Terminals (which manages the Queen Elizabeth Quay in Colombo port) in partnership with Pembinan Ridzai Berhard, the owning company of Malaysia’s successful Westport; and global carrier Hanjin Shipping with its local agents Navigation Maritime.

Sources said that a high level team from the ADB, was in town last week, where the decision to cancel the Tender for the Terminal, was discussed, since the multilateral donor has committed US$ 300 million for the construction of the Breakwater. The release of funding was on the condition that the government maintains an open and competitive bidding for the Terminal and issuance of letter of invitation to negotiate the concessions with the most qualified bidder.

Following the decision to cancel the Terminal Tender and call for fresh bids, the ADB team has reportedly agreed to reconsider the condition, subject to approval from its Executive Board.

Though the process on Terminal Tender would be started afresh, the government is keen to proceed with the Breakwater, contract for which has been awarded to Hyundai.

The specific project to which Expression of Interests were originally called, involves building a Terminal with three berths that could handle around 2.4 million Twenty-foot Equivalent Units (TEU). Industry experts estimate the Terminal to cost around or over US$ 500 million.

This year, the Colombo Port is estimated to handle around 3.5 to 3.7 million TEUs. This is a satisfactory growth compared with slightly above 3 million TEUs posted in 2006 and 2.5 million TEUs in 2005.