Height of incompetence

Last month, the Power Sector Assets and Liabilities Management Corp. (PSALM) announced two companies submitted bids for the operations and maintenance service contract of the 650 megawatt (MW) Malaya thermal power plant (MTPP) in Pililla, Rizal.

PSALM president and chief executive officer Lourdes Alzona said local firm SPC Malaya Power Corp. and STX Marine Services Co. Ltd. of Korea have already submitted bids for the contract, but these are still subject to post-qualification of the bidders.

The 40-year-old Malaya thermal power plant, composed of two units with a dependable capacity of 290 MW and 340 MW each, is now being operated by STX whose current contract ends on Sept. 25.

The operations and maintenance contract of the Malaya thermal power plant has an approved budget of P457.27 million.

But employees of MTPP want the current operator STX to be disqualified from participating in the bid for a new O&M contract for the period Oct. 26, 2015 to Oct. 25, 2016.

They claim STX Marine has no experience and is not competent to operate and maintain a power plant as big as the 650-MW MTPP as the company’s core business consists of ship building and maintenance.

It is also alleged STX Marine is already bankrupt, that the mother company has already applied for bankruptcy in South Korea, and that this fact was on the Internet and known to PSALM when STX won the bid in September 2014.

Reports also revealed that while STX Marine has committed to purchase from SPC Malaya Power Corporation (SMPC), the operator of MTPP from October 2011 up to October 2014, its Operator’s Stock which is part of the operator’s obligations under the operations and maintenance service contract or OSMC, STX has not paid SMPC up to now despite several follow-ups and a final demand letter.

Sources likewise claim STX won the bid for the overhaul of the turbine of MTPP Unit 1 and as per contract, overhauling will be completed within 90 days from December 2014. But while said overhauling was allegedly completed in July, up to now the unit has not been officially turned over due to pending technical and/or mechanical problems during testing and commissioning.

The MTPP employees, in their petition to have STX disqualified, said the company has committed several violations of the OMSC but PSALM has equally failed to conduct a performance audit of STX.

In the bid conducted last Aug. 2 for a new OMSC, STX Marine submitted the lowest bid but, following the process under the Government Reformed Procurement Law, the bids are subject to post-qualification evaluation.

The employees have noted that bids and awards committee head Eric Quevedo, the technical working group chair Jun Empleo, and some members of the bid secretariat are the same persons who handed over the contract to STX Marine last year.

Last year, STX was blamed for the delay in the Malaya plant’s repair and for not being aligned then as a dependable security capacity that could have helped the Luzon grid capacity during the critical summer months. In their petition, the employees said the completion was delayed from the three month contract schedule to almost eight months as of July due to inexperience decisions of STX. They noted the site Korean personnel managing the power plant is only a new recruit and is not well-versed in the operation and maintenance of equipment and system of such power plant type.

They added there have been instances of overriding some standard operating procedures of manufacturers and by pretending to know, thus inflicting more serious damage to the equipment and the system.

The employees likewise revealed STX Marine violated its OMSC with PSALM primarily on the requirement to procure spare parts and consumables necessary for the plant’s upkeep.

All these information should have alarmed PSALM and MTPP management. But as early as last January, when asked about reports that STX has no competence when it comes to power plant operations and repair works, then Energy Secretary and PSALM board vice-chairman Carlos Jericho Petilla seemed to be on the side of STX, saying what is important is the overhaul contract for MTPP underwent bidding and that since this is a government procurement, even if the bidder is the most qualified but if its bid is the most expensive, then the contract cannot be awarded to it.

This was in January. Energy officials by now should have done their homework and should have looked into all these complaints and reports involving STX Marine.

The reason why we have post-qualification evaluation in government procurement is obvious. A low bid is not always the better or the best bid. For a work of such highly technical nature as the upkeep of a power plant, a good track record should have the same weight as the amount of the bid in determining the winning bidder. Unless of course, other considerations that we do know of are more important.

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