Should the Government Go Ahead with the “Metro Léger” Project?

According to information provided by the Honourable Anil Baichoo in Parliament, only one credible bidder, Afcons Infrastructure/SPCL, has submitted proposals for the Mauritius Light Rapid Transit (MLRT), commonly known as the Metro Leger, which, at a cost of over twenty two billion rupees, will be the most expensive project ever undertaken in Mauritius. For such a project, the tendering process will yield a satisfactory result only if there is competition among at least three bidding companies. Consequently, the Government should investigate why capable companies are not interested in bidding for the project, and then decide the way forward.
Background
On 4 February 2013, the Government published a notice calling for an Expression of Interest (EOI) from interested parties for the design, construction, financing, operation and maintenance of the MLRT project. With the assistance of the Singapore Corporation Enterprise, the Consultant of the project, the Government assessed the capabilities of the eleven companies that responded to the EOI, and prequalified six of them namely MRTP Consortium from France, Rapid Link Consortium from the United Kingdom, Afcons Infrastructure Ltd/SPCL from India, MCJ Consortium from China, China State Construction Engineering Company Ltd (CSCEC) from China, and BCEG/BUEDRI/BMTRO Consortium from China. However, only Afcons Infrastructure/SPCL and CSCEC responded to the request for proposals sent to the six prequalified companies. In a further blow to the competiveness of the bidding process, CSCEC had to be disqualified because the firm was sanctioned by the World Bank in January 2009 for fraud and corruption.
CSCEC Should Never Have Been Prequalified
The Government should not have prequalified CSCEC. The document that the Central Procurement Board circulates to prospective bidders prior to prequalification contains a clause stating the following: “An Applicant appearing on the ineligibility lists of African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank Group and World Bank Group shall be rejected”. CSCEC appears on the ineligibility list of the World Bank Group because, as stated above, the firm has been found guilty of fraud and corruption. Did the Government and Singapore Corporation Enterprise include the above clause on ineligibility in the document sent before prequalification to companies interested in the MLRT project? If no, this is a serious omission, and, if yes, this means that, prior to prequalification, the Government and the Singapore Corporation Enterprise did not carry out a thorough assessment of the eleven companies that responded to the Expression of Interest. Whatever be the case, the prequalification of CSCEC has flawed the tendering process.
Four Prequalified Companies chose not to Submit Proposals. Why?
Two reasons may explain why four out of the six prequalified companies chose not to submit proposals. First, it is very likely that the presence of CSCEC on the list of six prequalified companies may have prompted four of them not to submit a proposal. These companies must have been aware that the Government of Mauritius awarded the contract for the construction of the new airport terminal to CSCEC in December 2009 even though CSCEC had been blamed in January 2009 by the World Bank for indulgence in fraud and corruption. Such circumstances must have raised serious doubts among the prequalified companies on the fairness of the evaluation to be carried out for the award of the contract to implement the MLRT project.
The second reason is that they may have found out that the MLRT project is not financially viable if passenger tariffs are kept at levels close to those of Mauritian buses. As stated in the notice calling for Expression of Interest, the selected company will; in addition to designing and building; finance, maintain, and operate the MLRT installations. The selected company will not be able to attract financing at reasonable interest rates if the financial viability of the project is in doubt. In addition, revenues from passenger tariffs comparable to those of buses will not generate revenues that would allow the selected company to meet its financing, operation and maintenance costs. As a result, the selected company would have to rely on Government subsidies to stay in business thereby drawing criticism from the public, and/or cut corners on the quality of its services. These outcomes will adversely affect the selected company’s reputation.
The Only Remaining Bidder Will be in a Too Strong Position if the Bidding Process is Continued
The remaining steps in the bidding process are the evaluation of the proposals from the only remaining bidder, Afcons Infrastructure/SPCL, and negotiations between the company and the Government. The company will be able to dictate its terms to the Government since it knows that it does not have a competitor for the award of the contract. As a result, the physical installations of the MLRT are not likely to be of optimum quality, the services that would be offered would not be the best available, and Government would have to provide heavy subsidies to the company to maintain reasonable passenger tariffs.
The Way Forward
There is a lack of effective competition for the contract to implement the MLRT project because only one company is remaining in the bidding process for the contract. In such a case, the process should be stopped according to World Bank Procurement Guidelines. If well drafted, the request for proposal should have included a clause stating that the Government reserves the right to accept or reject any bid, and to annul the bidding process and reject all bids at any time prior to contract award, without thereby incurring any liability to Bidders.
The Government should then find out why four prequalified companies did not submit a proposal. The project should be cancelled if the companies confirm that it is financially not viable. Else, the Government should address the concerns of the four companies and invite them to submit their proposals. These would then be evaluated together with the proposals of Afcons Infrastructure/SPCL. This approach would ensure that the project would bring maximum benefits to the country.