Meter manufacturers prevent TCN from Completing Bid on $150m World Bank Loan Sequel to the alleged procurement process breach by Transmission Company of Nigeria (TCN) over the $500m Distribution Section Recovery, local meter manufacturers have once again moved to halt the opening of the bids.
As a result, the group recommended that the Minister of Power, given the current administration’s renewed hope program, encourage businesses to minimize importation to build a sustainable local manufacturing capacity to create much-needed employment at this time.
The association’s request is coming just as the Federal High Court Sitting in Kano will on Wednesday, October 18, 2023 commence hearing on the matter between the incorporated Trustees of Association of Meter Manufacturers of Nigeria (AMMON) in Suit No: FHC/KN/262/2023 and Transmission Company of Nigeria TCN, NERC, Federal Ministry of Finance, Budget and National Planning, Federal Ministry of Power and Bureau of Public Procurement.
The association had filed a motion exparte on Tuesday, October 3, 2023, praying the court to grant an interim injunction restraining the 1st Defendants and Respondents from taking any steps, or any further steps towards the conclusion of the bid Procurement process.
The Process is in respect of the Supply and Installation of Smart meters to (11) Distribution Companies advertised by TCN on March 30th, 2023 and which conclusion date was set for 5th October, 2023.
Presiding Judge, Justice A. M Liman also granted an Interim Injunction restraining the defendants from terminating, interfering, frustrating, or canceling the due performance or execution of the award of the contract between the TCN and members of AMMON.
Despite the order of the Judge, TCN went ahead to open the bid on the 5th day of October 2023. Justice Liman while granting the application of AMMON had said that it is subject to an undertaking as to the damages, should it turn out that the application was not meritorious.
He equally granted that the Motion on Notice shall be moved on the 18th Day of October, 2023 while stating that if the motion is not ripe for hearing on the date for hearing due to fault of the Plaintiff or his counsel, the Interim order shall automatically lapse.
Interestingly, TCN had sought and secured a $155m loan from the World Bank for the National Mass Metering Project (NMMP).
TCN however, advertised for bids for phase 2 of the project for only foreign companies without protecting the interest of Local Manufacturers.
In a letter of protest and reminder to the Minister of Finance and Coordinating Minister of Economy Chief Olawale Edun, the Association of Meter Manufacturers of Nigeria (AMMON), the group reminded the Minister that even as there is a subsisting court order to the bid opening slated for Thursday, October 13, 2023, the TCN insists on violating the procurement process.
In the letter signed by Engineer Ademola Agoro the Acting President and the secretary, Engineer Duro Omogbenigun, AMMON referred to “their correspondences to the Ministers of Finance, Budget, and National Planning on the 17th of April 2023, and letter to the Permanent Secretary Finance (dated 7th June 2023, presented their grave concerns on the systemic violation of the procurement act insensitivity and misalignment with local content directives as contained in Executive Orders 2 and 5”.
The 36 Members Company Association explained that the Distribution Section, Recovery Program (DISREP) is a $500 million loan facility by the World Bank approved by the Federal Executive Council (FEC) for the supply of and installation of 1,250,000 fully Built Unit (FBU) Smart meters to the 11 Distribution Company (Discons) in Nigeria.
The bulk metering procurement process at the cost of $120 million is managed by the Project Management Unit (PMU) of TCN and supervised by (BPE) on behalf of the Finance Ministry.
The tender notice for the International competitive bidding (ICB) was issued on the 30th day of March 2023 with the submission deadline on 17th May 2023”.
The Association of Meter Manufacturer of Nigeria (AMMON) is the umbrella body of Local Meter Manufacturers and Assemblers (LMMAs) with the sole objective of full domestication of all meter supply chain and currently boast a significant Local capacity in the manufacturing of key parts and assembly of all CKD/SKD components of smart meters spread across the Federation. (Since the commencement of the bidding process, AMMON, persistently drew the attention of the office of the Chief of Staff (OCoS), Federal Minister of Finance (FMF), Federal Minister of Trade and Industry (FMITI), Federal Minister of Power (FMoP), Nigerian Electricity Regulatory Commission (NERC), Transmission Company of Nigeria (TCN), Bureau of Public Enterprise (BPE) and all relevant stakeholders that the tender notice is completely prejudicial to the 35 local meter manufacturers, who have been unlawfully hindered from participating in the procurement process and the multiple violations and deviations from the Procurement Act (2007) and also Executive Order #3 (Support for Local Content) and Executive Order #5 (Promotion of Nigerian Content).
Upon receipt of the Association’s letter, as conveyed by the CoS, the FMF organised a stakeholder committee meeting on 25th July 2023, chaired by the Permanent Secretary Finance (PSF) and attended by representatives of FMITI, TCN, NERC, BPE, NBET, DMO, CBN, and AMMON to provide a constructive platform for stakeholders to chart a path to address the concerns. At the meeting, AMMON pointed out that, 5 areas unfairly impact Local manufacturers including,
Importation of Fully built Units (FBU), Provision granting 45% import duty waiver to foreign bidders, Huge Financial Performance and Experience criteria that eliminate LMMAs in favour of foreign OEMs and Limited Number of Lots.
The inclusion of the overly punitive criteria according to AMMON is completely unrealistic, untenable considering that TCN is a Market participant and fully aware of the lingering liquidity and meter market activity”.
The stakeholder meeting was also notified that the bid requested solely for the importation of FBU (with a 45% import duty waiver) had deliberately overlooked the existing reality of the abundant availability of CKD/SKD already imported by AMMON, which puts the patriotic venture by AMMON at a huge disadvantage, placing the valiant and patriotic investment at risk of collapse.
It is worthy to note that AMMON has relied solely on commercial bank loans with no direct intervention or support from the FGN”.
AMMON stated that TCN, as understood published the bid without due consultation with the Borrower and wasn’t duly reviewed by other relevant stakeholders (e.g. NERC etc). Reference to relevant documents of the bank on this matter indicates that the objective is to revive the nation’s power sector by granting access to power to about 80 million Nigerians by guaranteeing the financial viability of the distribution companies so that they “Become job creators along with local meter providers who will be encouraged to participate in the DISREP operation, either alone or in partnership with international providers”.
It also became clear that “the DISREP Procurement Strategy as contained in the Loan Agreement, allowed for both International Competitive Bidding (ICB) and National Competitive Bidding (NCB), since “…there are a good number of prepaid meter manufacturers” in Nigeria. Therefore, the unilateral adoption of the ICB approach by TCN (with a proviso for a 45% duty waiver), contradicts the Loan Agreement and the Procurement Act (PART VI – Section 24 “…. effects public procurement by offering to every interested bidder, EQUAL simultaneous information, and OPPORTUNITY to offer the goods and works needed). This principle is further clarified and supported by the standard practice of the “slice and package approach” as prescribed in the Procurement Procedures Manual (Section 69.1(b)), to encourage the development of domestic capacity”.
The meeting resolved that an inter-agency team should conduct a field inspection of the existing facilities of AMMON to ascertain the actual capacity and status of readiness of local entities and to provide a factual basis to enable FMF to propose credible and realistic recommendations for a mutual resolution of the matter. Therefore, TCN agreed to issue a notice of suspension of the bid process while AMMON agreed to halt or withdraw the court proceedings.
Loom a request bidder of the World Bank Procurement to submit bids on October 5, 2023. Unfortunately, TCN took this rash and unliteral action despite the amiable overture of AMMON and without waiting for the conclusion of the report, consultation with the Borrower and/or BPP.
AMMON also stated that to prevent permanent and irreversible damage to our investment we are compelled to notify you of the multiple violations of the Procurement Act (2007) and/or another critical breach of the DISREP Loan Agreement, including; Lack of Borrower Consent and Evidence of BPP review BEFORE Bids are Invited, Non-Implementation of “Slice and Package Approach”, Provision of 45% Import duty waiver expiry: Invalid Information in Bid Contents and No Equal Opportunity and Omission of “Ex-Factory or Off-the-shelf” in Margin of Preference (ITB 33).
To determine the 30% for labour and raw materials in a Purchasers Country and when compared with the description of Group A provided in Section 133 – Pricing of International Bids (Public Procurements (Goods and Works) Regulation 2007), the words “Ex-Factory or Off-the-shelf “are omitted in the published Bid and the 30% estimation is restricted to “EXW price” only.
The direct implication of the “off-the-shelf” omission is that the majority of AMMON are excluded from being classified under Group A which will diminish their opportunity and offer unfair advantage to the foreign suppliers who are privileged and fall into all three 3 cases, considering that the second condition requiring engagement in manufacturing/ assembling since bid submission date is a mere formality.