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TMI Blog2011 (10) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner has failed to establish its claim to a price preference. The Bid Evaluation Criteria required inter alia, the submission of a certificate in original of the statutory auditor of the bidder indicating through various details that no more than fifty percent of the work measured in terms of value has been subcontracted to foreign bideders. Moreover, the certificate had to be submitted with the unpriced bid. According to ONGC and the Third Respondent (to whom, a decision has been taken to award the contract), the certificate issued by the statutory auditor of the Petitioner did not fulfill the conditions laid down in the Bid Evaluation Criteria. Moreover, the certificate was not furnished with the unpriced bid. 2. The First Respondent issued a notice on 28 May 2010 inviting tenders for a SubSea Pipeline Project, described as being for "B193 Field Development". The Bid Evaluation Criteria were contained in Appendix A6 of the bid document. Bids were required to be submitted under a two Bid System as per Clauses (10) and (11) of PartI of VolumeI of the bid documents. Clause 25 of the Bid Evaluation Criteria stipulated as follows: "The tender docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten percent over the lowest acceptable foreign bid. The Price Preference clause is as follows: "C5) Price Preference/Purchase Preference a. Price Preference Domestic Bidders would be entitled to a price preference of ten percent (10%) over the lowest acceptable (quoted) foreign bid subject to domestic bidders providing all evidence necessary to prove that they meet the following criteria: (i) is registered within India, (ii) have majority ownership by nationals of India and (iii) not subcontract more than 50% of the Works measured in terms of value to foreign contractors. For (iii) above, an original certificate from practicing Statutory Auditor engaged by the company (bidder) for auditing their annual accounts indicating therein various details, which could establish that no more than 50% of the works measured in terms of value has been subcontracted to foreign contractors must be furnished along with unpriced bid. It must be noted that above information so furnished, if at any stage, found wrong, incorrect or misleading, will attract action as per rules/law." Clause D3 of the Bid Evaluation Criteria stipulated that in the event of there being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t subcontract more than 50% of the work measured in terms of value to foreign contractors. The observations of the Tender Committee in that regard were that "the certificate submitted by the statutory auditors M/s.S.R. Batliboi does not clearly bring out about the subcontracting" and that the certificate made a reference only to the foreign cost component. The Tender Committee was in that context, referring to a certificate that was furnished by the Petitioner of their statutory auditors, S.R. Batliboi & Co. on 16 August 2010. The auditors' certificate was to the following effect: "We have received from the Company a working of the budgeted cost of the proposed Project that bifurcates the cost between its local and foreign components. In terms of the said working of cost, and using exchange rate of Rs. 46.50 for USD, the foreign cost component is less than 50% as verified based on the attached Annexure." The Tender Committee noted that there was a difference in the language of the certificate submitted by the Petitioner for the present tender and for the previous tender and that it was prudent to examine the subcontracting arrangement indicated by the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that all documents which were required to be furnished along with the unpriced bids were not furnished by the Petitioner. The Petitioner was found not to have submitted a certificate to establish that the value of the work subcontracted to foreign contractors was not going to be in excess of 50%, together with the unpriced bid. The IEM furnished a supplementary opinion of 2 December 2010 to the effect that requirement for securing a 10% price preference had not been fulfilled by the Petitioner. 6. After submitting representations on 5 and 8 December 2010 to the IEM, the Petitioner challenged in writ proceedings before this Court under Article 226 of the Constitution, the proceedings before the Second Respondent, the IEM, on the ground that it has not been furnished with an adequate opportunity of representing its case. On 7 February 2011, this Court disposed of the Writ Petition in terms of an order passed by consent. The consensual arrangements between the parties contemplated that (i) A copy of the recommendation made by IEM would be given to the Petitioner; (ii) The Petitioner would be at liberty to furnish to the First Respondent further material on the recommendation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23.11.10 with recommendation to award the work to M/s.PLL subject to matching the price with L1 and providing an explicit conformity certificate of subcontracting to qualify for Price Preference. After submission of agenda brief, one of the bidders M/s.Swiber Offshore Construction Pte.Ltd., Singapore made representation to IEM. Therefore, the case was not taken up by the EPC on 24.11.2010. Vide opinion dated 02.12.2010, IEMs had concluded that on interpretation of clause 10.3 of ITB and read with clause C5a of the BEC, the requirement for securing 10% price preference has not been fulfilled by the Consortium of Punj Lloyd Limited and PTPunj Lloyd, Indonesia. A Writ Petition was filed by M/s.Punj Lloyd Limited in the High Court. As per the court verdict, the subject Petition is disposed of by a direction to the effect that the Petitioner would be at liberty to furnish to the First Respondent such further material that may have a bearing on the recommendation of the IEM and on the question as to whether the Petitioner is entitled to a price preference under the tender condition. The Tender Purchase Committee while considering the report of the IEM would be at libert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to raise this point not having raised it before the IEM in its representation dated 19 February 2011. Similarly, the Division Bench held that the Third Respondent was not entitled to question before the Court the sufficiency of the certificate of the statutory auditor furnished by the Petitioner. For these reasons, the Division Bench came to the conclusion that the reasons furnished by the First Respondent for rejecting the offer of the Petitioner and for denying the Petitioner the benefit of the price preference was arbitrary. The award of the contract to the Third Respondent was accordingly set aside and rule was made absolute. 9. The judgment of the Division Bench was carried in appeal before the Supreme Court both on behalf of the First Respondent and the Third Respondent. By a judgment dated 27 July 2011, the Supreme Court held that the Division Bench was not right in coming to the conclusion that the First and Third Respondents were precluded from questioning the validity of the certificate and the sufficiency of the documents appended by the Petitioner. Accordingly, the Supreme Court was of the view and Counsel appearing for the parties agreed that it would be appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted by the statutory auditors of the Petitioner was based on a bifurcation of the cost between its local and foreign components and was clearly not in terms of Clause C5 of the Bid Evaluation Criteria which required a certificate to establish that not more than 50% of the work measured in terms of value has been subcontracted to foreign contractors; (ii) The Tender Committee, in its initial recommendations, as well as the Engineering Services division had opined that there was a considerable amount of uncertainty as to whether the activities under the contract would be performed by the Petitioner or by other contractors as a result of which the Committee had proceeded to estimate that between 32.10% to 54.87% of the work under contract would be performed by foreign contractors; (iii) The Tender Committee while recommending the award of the contract to the Petitioner had, however, required an explicit conformity certificate of subcontracting thereby recognizing that the certificate which had been submitted by the Petitioner was not in conformity with the tender conditions; (iv) The Executive Procurement Committee was fully apprised of all the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of a claim of price preference by a domestic bidder; (ii) Clause 11.1 of the Invitation to bid contains provisions in regard to the techno commercial bid and required a disclosure of all subcontracts; (iii) The provisions of clause 25 of the Bid Evaluation Criteria as well as Clause C5 leave no manner of doubt that the documents required for claiming a price preference were to be submitted with the unpriced bid. The Petitioner having failed to do so, its bid was not compliant; and (iv) The certificate of the statutory auditor submitted by the Petitioner contained a bifurcation of cost between foreign and local components and was not in compliance with the tender conditions. 13. The rival submissions now fall for determination. 14. The First Respondent had invited bids for the award of a contract for its Subsea Pipeline Project on the basis of international competitive bidding. Bids were required to be submitted in two folders. The unpriced techno commercial bid had to be submitted in the CFolder through the ebidding portal, while the priced bid was required to be submitted in the RFx Folder. The Bid Evaluation Criteria in Appendix A6 contained cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish the fulfillment of this condition, Clause C5 requires an original certificate from a practicing statutory auditor engaged by the bidder for auditing its annual accounts indicating various details which would establish that not more than 50% of the work measured in terms of value has been subcontracted to foreign contractors. Clause C5 contains a specific requirement that such a certificate had to be furnished along with the unpriced bid. The conditions on which a price preference was made available to domestic bidders were essential conditions of the tender. The object and purpose of the conditions was to ensure that a price preference should be availed of by a bidder who can be regarded as a genuine domestic bidder. The manner in which that condition was required to be established was through the submission of a certificate of a statutory auditor. The requirement that the certificate of the statutory auditor should be submitted together with the unpriced bid was not an unessential or ancillary condition, but was a condition which lay at the heart and foundation of the price preference clause. The Petitioner cannot be heard to urge that the instructions to bidder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was that the entitlement claimed by the Petitioner to the benefit of a price preference under Clause C5 was required to be evaluated strictly on the touch stone of whether they had complied with the provisions of Clause C5. 16. Plainly, in our view, the Petitioner failed to do so for two reasons. Firstly, the Petitioner did not submit a report of the statutory auditor indicating that not more than 50% of the work measured in terms of value would be subcontracted to foreign contractors along with the unpriced bid. Counsel appearing on behalf of the Petitioner, however, submitted that the failure to do so would not result in the invalidation of the bid in view of Clause 27 of the Bid Evaluation Criteria. Now, Clause 27 stipulates that offers of a certain kind would be rejected and among them in subclause (b) are offers which are not submitted in an eform through the eprocurement engine, except documents mentioned in Clause 25 of the Bid Evaluation Criteria. The argument, however, fails to take notice of the position that a failure to establish the condition required to avail of a price preference does not result in the invalidation of the bid or the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner did not clearly bring out the extent of subcontracting and that it mentioned only a foreign cost component. Despite this the Tender Committee proceeded to make its own assessment noting that there was a lot of uncertainty on whether certain activities would be performed by the Petitioner or by others. The Tender Committee, when it recommended the award of the contract to the Petitioner, nonetheless required the Petitioner to match the price of the lowest bidder and to provide "an explicit conformity certificate of subcontracting as deliberated earlier". This itself is an indication of the fact that the Tender Committee was conscious of the fact that the certificate which was submitted by the Petitioner was not compliant. 18. Clause 11.1 of the Invitation to bid adverted to the contents of the unpriced techno commercial bid. Subclause (g) thereof requires a disclosure in relation to subcontracting as follows: "g) A description of the Bidder's facilities which he proposes to deploy for execution of works in sufficient details and clarity to enable the Company to make an evaluation and comparison of the tender. If any part of the Works is proposed to be sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GC) for execution of laying of SubSea Pipeline and platform modifications for MHN ReDevelopment plan, phaseII project. The procedures were performed solely to examine the below mentioned information based on the documents and records maintained by the Company and are summarized as follows: 1) Obtained the management's proposed plan to sub contract the work to contractors for execution of laying of SubSea pipeline and platform modifications for MHN ReDevelopment plan phaseII project. 2) Obtained the management's proposed plan to sub contract the work to foreign contractors for execution of laying of SubSea pipeline and platform modifications for MHN ReDevelopment plan, phaseII project. 3. Verified the arithmetical accuracy of percentage of the work proposed to be sub contracted to foreign contractors in comparison to total value of work to contractors. Based on above procedures, we report that the value of works proposed to be subcontracted to foreign contractors does not exceed 50% of the total value of the work." The certificate dated 12 December 2009 contains a clear reference to the proposed plan to subcontract work to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors as required would result in disclosure of the price bid. The submission which is urged before the Court, therefore, is completely hypothetical and does not warrant acceptance. 21. For these reasons, we are of the view that the Petitioner has failed to make out a case for interference of this Court under Article 226 of the Constitution. In a matter involving the award of a contract by a public authority or a body subject to writ jurisdiction, the Court has to consider as to whether the decision making process suffers from an illegality, irrationality or procedural impropriety. The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made in Tata Cellular v. Union of India. (1994) 6 SCC 651 These principles were reiterated by a Bench of three Learned Judge of the Supreme Court in Siemons Public Communication Pvt.Ltd. vs. Union of India, AIR 2009 SC 1204 where the Supreme Court held as follows: "When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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