THE AWARDING OF THE NDOLA-LUSAKA DUAL CARRIAGEWAY PROJECT TO AVIC IS BAD FOR ZAMBIA AND THE FUTURE AND SHOULD BE STOPPED OR REDONE
By Shalala Oliver Sepiso
AVIC ALREADY AWARDED
The Road Development Agency and the PPP Council won’t tell you this but they have already awarded the Ndola-Lusaka Dual Carriageway Project to AVIC Consortium, which is officially called Macro-Ocean Investment Consortium (Messrs AVIC International Project Engineering Company, Zhejiang Communications Construction Group Co Limited and China Railway Seventh Group Co Limited) or the MOIC Consortium.
They haven’t announced because there are many wrong things being done around the whole tender awarding process.
COMPARISONS OF VELOS AND AVIC BIDS
At bid evaluation, the MOIC Consortium was declared a preferred bidder with the Velos Consortium being declared the next best evaluated bidder.
1. VELOS CHEAPER: The Velos Consortium Bid was initially slightly more expensive. Macro-Ocean Investment Consortium (Messrs AVIC International Project Engineering Company, Zhejiang Communications Construction Group Co Limited and China Railway Seventh Group Co Limited) had a bid of 649,950,804.00 while Velos Consortium (Velos Enterprises Limited, Graduare Property Development Limited, Yamene Financial Services Limited and Hillary Construction Pty Limited) had a bid of 700,000,000.00. The impressive thing about the bids is that both bids were around USD 700m, which is more than half the price the PF wanted to construct the same road i.e. USD 1.5 billion. However, since the Velos Consortium is a Zambian entity, it qualifies for a citizen discount under the CEEC provisions. This brings the bid amount for Velos below that of AVIC.
2. AVIC CHANGES BID PRICE: The only reason the MOIC Consortium bid was lower than the Velos Consortium bid is that MOIC submitted a variant bid (which has a reduced scope of works). The Velos Consortium had stated in their bid that they would abide by the RFP terms and Conditions and have included the entire scope of works according to the RFP at their bid price of US$700,000,000.00. During negotiations, it was observed that the MOIC Consortium actually do not want to add the omitted structures within their price but would like to increase the price if the Government insists that these structures should be included. During negotiations, the MOIC consortium in August, 2022 indicated that they would like to increase the cost by US$134,329,598.09 to US$784,280,402.09 (more than US$84million over Velos Consortium’s Price). Thereafter in October, 2022 during the ongoing negotiations, MOIC Consortium yet again increased their cost by US$160,515,975.26 to US$810,466,779.26 an increase of US$110,466,779.26 over their bid price. But corrupt elements within RDA and the PPP Council see nothing wrong with this increase or that it is getting closer to the PF price and UPND will be seen in a bad light. This increase, if allowed, would bring their bid price to be higher than the Velos bid price and this would dismantle the claim that AVIC was cheaper. The corrupt entities within the system want the bid to pass at this lower price and then allow the variation later on as an addendum.
3. AVIC’S BID NOT COMPLIANT: A source close to the Evaluation Committee of the Ndola-Lusaka Dual-Carriageway Project revealed that the Velos Consortium bid was superior to MOIC Consortium bid in terms OF concept. The Velos bid is a better fit in terms of PPP as they have demonstrated ability to raise the funds needed and coming up with a model that will run the project over the tenure of the concession. The MOIC Consortium submitted a variant bid (which has a reduced scope of works) which was not in line with the Request for Proposal or the Terms of Reference. AVIC doesn’t want to construct by-passes of Kabwe and Kapiri, dual carriageway roads through Kabwe and Kapiri, grade separator of urban roads in Kabwe and Kapiri etc. Now, it is either AVIC didn’t really understand the bidding process to be that of a PPP or they just wanted to bulldoze the situation and get the usual contracts where the Zambian government pays for the works. They also seemed to want a kind of project where the Chinese contractor is backed by government guarantees. This makes sense when you remember that the Chinese do not do concessions and always prefer being hired and paid. Strictly speaking, MOIC Consortium aka AVIC Consortium did not comply with the tender terms and guidelines. They should have been disqualified. But the reason given by those handling the tenders for allowing them to go through is that there were only two bidders and the PPP Act allows this. (See attached hereto the details of the scaled down scope and costings thereof.)
4. AVIC DOESNT WANT GRZ TO GET PART OF TOLL-FEES: The bid, which these RDA and PPP Council guys want to pass, will not allow GRZ to get any revenue of the road unless the actual revenue collected exceeds 150% of the target revenue on annual basis. The bid also doesnt want the grade separators to be built unless the income exceeds 165% of the budgeted revenue. However, the 150% and 165% revenue increases are not attainable in the near future with the projected traffic volumes and as such the above-mentioned omitted infrastructure may not even be built during the concession period of 25 years or more. Does it make sense to have the current Kabwe and Kapiri roads legally locked away from being developed better than they are for the next 25 years?
5. AVIC WONT BRING MONEY FROM OUTSIDE ZAMBIA BUT WILL EXTERNALISE PROFITS: MOIC intends to source the majority of their working capital from within Zambia. This money will come from NAPSA, Stanbic Ban Zambia and Workmen’s Compensation Fund. They will then externalize their profits in US$. This means that they will put pressure against the Kwacha. In turn this will trigger an increase in the Toll Fees as per their demand to review the Toll Fee bi-annually. This project will have little or no Foreign Direct Investment as they intend to utilize the Toll Fees collected to construct part of the facilities during the Operations and Maintenance Period of the project. However, they will be provided with Duty Free and zero rated concessions to import their Capital Equipment as well as materials during the construction period.
Based on the above comparisons (I have left out many other comparisons), if MOIC Consortium is given the Contract, they will provide less infrastructure at their original bid price.
Further, they have also changed the Concession Agreement considerably and would want the Government to assume some major risks such as Specifications and Design Audits/Reviews (at Design Stage), Performance Standards, and Operational Requirements and Maintenance Standards connected with the Operation and Maintenance phase of the project. Does it make sense to have government take all these risks but be locked out of the income from the same profitable road? The cash-cow of roads?
There is also a bigger concern of the AVIC bid, which is the underestimated Traffic projection, which has a huge detrimental effect on the Pavement Design of the road. The acceptable Engineering standards in estimating traffic projections is to use the GDP (estimated to be 3.6% for 2022) combined with population growth trends. However, using GDP is considered in most cases as there is a direct correlation with the growth rate of vehicular traffic. Despite exponential population growth and expect ability to drive by more Zambians, AVIC has made a growth rate assumption of 2% for the first 2 years, 1.5% for the period 2025 to 2034 and 1.0% for the period 2034 to 2045. This works out to an average of 1.3% over the 25 years of the Concession. This is understated to reduce on the design needs and hence do bare minimum is construction works. An underestimated traffic projection means an inferior design of the Road Foundations layers which will cause the road to deteriorate to serious levels much, much earlier than the 25 year proposed concession period. The estimated total traffic loading carried out by various studies indicate an Equivalent Standards Axle Loading of 60million over the 25 year concession period while the MOIC predictions are at 20million (MESA). The MOIC Consortium is influencing some members of the PPP Council, RDA and the NRFA to accept their sub-standard proposal, which if Government accepts has the potential to backfire drastically as the inferior pavement design suggested by them, coupled with the omitted structures will not help to bring down the cost of construction but simply ensure a poor road which wont last for years.
TO BE CONTINUED LATER TODAY