Bangladesh risks an additional US$31 million in public expenditure on the operation and maintenance (O&M) of its first Single Point Mooring (SPM) facility, raising fresh concerns over procurement compliance and the financial losses caused by the prolonged delay in bringing the major energy infrastructure project into operation.
The contract value was increased from US$128 million to US$159 million after taxes and VAT were added to the winning bidder’s original offer, despite tender provisions requiring such charges to be included in the quoted price, according to sources familiar with the procurement process.
Indonesia’s PT Pertamina Trans Kontinental (PTK) emerged as the lowest evaluated bidder with an offer of US$128 million, including VAT and taxes, and was subsequently awarded the contract.
However, the evaluation committee reportedly treated the amount as exclusive of those charges and added around US$31 million under the two heads, increasing the contract value by approximately 24.2 per cent.
The revision has raised questions about compliance with the tender conditions, which required bidders to incorporate all applicable taxes, VAT, duties and other charges into their prices.
Clause 27.9 of the Invitation to Tender (ITT) stipulated that such costs had to be included in the submitted prices. PTK also declared in its bid documents that its offer complied with the ITT requirements, according to documents reviewed by UNB.
The General Conditions of Contract (GCC) further stipulated under clause 18.1 that the contractor would be responsible for taxes and duties.
Clause 62.2 stated that the contract price would not be adjusted for such costs unless explicitly provided for in the contract.
Industry insiders said adding taxes and VAT after evaluating the bid appeared inconsistent with these provisions and effectively pushed the contract value beyond the bidder’s original offer.
“The tender required all applicable taxes, VAT, duties and other charges to be incorporated into the unit rates and total bid price,” an industry source familiar with the procurement process said.
A senior Bangladesh Petroleum Corporation (BPC) official acknowledged that additional amounts had been added to PTK’s bid value.
The official said the taxes and VAT were included following recommendations from a consultant on the Public Procurement Rules (PPR), but declined to provide further details.
Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman described the findings as “a clear cut violation” of public procurement rules and the specific provisions of the tender document.
He said it was unprecedented for the value of a service contract, such as the operation and maintenance of the SPM facility, to be inflated retrospectively in violation of provisions designed to prevent such adjustments.
The government sometimes waives VAT on high-value machinery and equipment for infrastructure projects under special consideration, he said.
However, he argued that there was no scope for similar treatment in a service contract in which VAT and taxes were required to be included in the bid.
Iftekharuzzaman also raised concerns about possible collusion between officials responsible for the contract and the international contractor to facilitate kickbacks and benefit from the prolonged failure to bring the facility into operation.
He urged the government not to accept what he described as manipulation and called for a thorough investigation to establish accountability and prevent further burdens on public finances.
Operational delays add to costs
The contract controversy comes as Bangladesh’s first SPM facility has remained non-operational for more than two years, largely because of delays in appointing an O&M contractor.
The delay has forced BPC to continue transferring petroleum products from large tankers anchored offshore to onshore storage facilities using smaller lighter vessels, resulting in substantial additional expenditure.
Built by China Petroleum Pipeline Engineering Co Ltd (CPPEC), the SPM project was formally handed over to BPC in August 2024. Sources said the defect liability and guarantee period for correcting operational faults expired in February this year, before commercial operations could begin.
The project was initially estimated to cost Tk 49.36 billion, but expenditure rose to around Tk 82.98 billion following repeated revisions, according to BPC officials.
Despite the increased investment, the facility has yet to complete successful testing and commissioning. Trial operations have failed more than once, preventing the start of full-scale commercial operations, sources said.
The SPM system is designed to transfer imported fuel directly from large offshore tankers to onshore storage tanks through a pipeline network, reducing reliance on lighter vessels.
The project comprises a 220-kilometre pipeline network, much of it beneath the Bay of Bengal, and six storage tanks with a combined capacity of 240,000 tonnes.
Of the total capacity, 150,000 tonnes are allocated for crude oil and 90,000 tonnes for gas oil.
Once operational, the facility is expected to allow BPC to unload a 100,000-deadweight-tonne tanker within 48 hours, compared with around 11 days under the existing system.
It is also expected to eliminate lighterage operations, for which BPC currently pays around US$5.50 per tonne. Most of the lighter vessels used for the operation are run by the Bangladesh Shipping Corporation (BSC).
Market insiders estimate that putting the SPM facility into operation could save the government around Tk 8 billion annually in fuel transportation and handling costs alone.
The latest dispute has therefore intensified concerns over procurement oversight, escalating project expenditure and the continued loss of potential savings from an energy infrastructure facility that has yet to deliver its intended benefits.