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Nigerian Content: House Orders Total to Re-award Contract

03 Aug 2010

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The House of Representatives last week adopted the report of its Committee on Public Procurement, directing Total Upstream Nigeria Limited (TUPNI) to award the full complement of four Remotely Operated Vehicles (ROVs) services to Tilone Nigeria Ltd at the current commercial rates; in line with the agreement of the tripartite meeting of April 24, 2008.

The law makers also directed that the position of the National Petroleum Investment and Management Services (NAPIMS), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) in supervising the activities of the multinationals in the oil and gas sector be properly reinforced to enable them ensure strict compliance to due process, rule of law and the local content initiative of the Federal Government.

According to the report of the committee signed by its Chairman, Hon. Yusuf Maitama Tuggar and the Clerk, Mrs. Margaret N. Okoro, and obtained by THISDAY, the law makers however rejected the demand by Tilone to be paid compensation for undue financial exposure for not servicing the contract, which Total awarded to Oceaneering International AG.
Tilone Nigeria Limited, an indigenous company wholly owned by Nigerians, was established to carry on the business of marine contracting and subsea Install Maintain and Repair (IMR) services. Messrs Oceaneering International AG is a Swiss company that is not registered in Nigeria.

Total organised the call for tender APO/C04/05 for the provision of four Remotely Operated Vehicles (ROVs) for the Akpo Field Development Project, out of which Messrs Tilone Nigeria Limited; Oceaneering International AG and SUB-SEA 7 indicated interest and were subsequently pre-qualified.
However, SUB-SEA 7 later opted out of the commercial bidding, while a competitive bid exercise was conducted between Oceaneering International and Tilone Nigeria Limited on June 13, 2006, with the latter emerging the winner.

But on the July 7, 2006, TUPNI recommended to the NNPC board to award the contract to Oceaneering International and without waiting for a response from the NNPC, the company went ahead and awarded the contract to Oceaneering on July 12, 2006, thereby pre-empting the NNPC board decision of April 25, 2007, instructing them to award the contract to Tilone for $43 million.

According to the House Committee report, “when it became obvious that TUPNI had awarded the contract to Oceaneering International, Tilone protested through letters to NNPC, which is the regulatory agency established to monitor the activities of oil companies to ensure compliance with the Federal Government’s directives and regulations. Despite the protest and interventions by the approved regulatory agencies, TUPNI refused to adhere strictly to the resolution of NNPC board approving the award of four ROVs to Tilone.”

Following the failure of TUPNI to abide by the decision of the NNPC, Tilone on February 3, 2009, wrote a petition to the House Committee on Public Procurement, urging the committee to prevail on TUPNI to abide by the decision of the NNPC and award it the full contract for four ROVs.
Tilone had alleged in its petition that before the completion of the tendering process, TUPNI during its own independent evaluation “fraudulently added” or “normalised” Tilone bid price by adding $10.975million in order to make its submission higher than that of Oceaneering International AG.
Tilone also alleged that based on their protest letter to the NNPC, TUPNI issued a Letter of Award (LOA) dated August  3, 2007 to Tilone, requesting them to mobilise one ROV, instead of the four ROVs approved by the NNPC board.

Also based on another protest Tilone forwarded to the Group Managing Director of NNPC on September 19, 2007, TUPNI offered them to mobilise two ROVs by a Letter of Award (LOA) dated February 18, 2008, instead of the approved four ROVs, but Tilone rejected the offer.
However, TUPNI submitted that series of meetings was held with Tilone and the NNPC and this resulted in a new unsolicited commercial proposal by Tilone with an overall cost evaluated well in excess of the original $43million bid. It noted that the evaluation was transmitted to the NNPC on the May 22, 2008, with a request for guidance about the significant cost increase under the Production Sharing Contract (PSC).

According to the committee’s report, a contentious issue that was sought to be resolved at the investigative hearing was the process of “normalising” contracts. Tilone had alleged that it was adjudged the least bidder in respect of the contract, but that TUPNI, after its own independent evaluation “normalised” or “fraudulently added” to their bid various sums totalling $10.975million in order to make their offer appear higher than that of Oceaneering International during the bid process.

But TUPNI insisted that Oceaneering rather than Tilone was the least bidder after joint evaluation of the bid process. The spokesman of TUPNI, during his presentations to committee, however agreed that the “joint evaluation document” was prepared by TUPNI, though they wrote to NAPIMS to participate in the process.
However, during their presentations, the NNPC/NAPIMS stated that Tilone was indeed the lowest bidder, but that TUPNI normalised the contract bid of Tilone by adding figures to it.

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