Steel company, procurement office face conflict over material delay

Steely R.M.I. plc, one of the major local steel manufacturers, refused to supply steel because a request from the Public Procurement and Property Disposal Service (PPPDS) was delayed.

A Chinese steel factory who was expected to supply a small part of steel was not called. PPPDS claimed the hindrance occurred because the Army Foundation was slow to finalize the proceeds.

During the bid held on September 9, Steely offered the lowest price for the supply of 22,000 metric tons of steel. According to the contract document the company who won the bid would be notified within two months and would sign a contract to supply the product. However, PDDS did not appear for almost three months after the bid was closed.

In its December 1 letter sent to  Steely, PPDS stated that for different reasons the bid evaluation process had taken a long time. However, it did not point out the exact reason why the bid evaluation was not accomplished as scheduled.

PPPDS asked the company if it would proceed with the same amount that it offered 84 days ago and supply the product.

The company said that for reasons it did not understand the bid process has taken a very long time and things have changed since it offered the revised price tag for the products months ago.

In its response the company declined the request for three reasons. Initially the company argued that since the bid was an international bid it was expected to disclose the winning company and the supply procedure as per the schedule, but the public procurement body did not do that, and it said that the request was expected to come within two months, as per the specific bid rule.

Finally in its letter it refused to supply the product with the same price offer that it gave almost three months ago. “At the time (September) the oil price, which is directly related to the steel market, was lower,” Steely’s letter read. “Now both the price of oil and steel has gone up considerably,” the letter explained.

In the past couple of years the international steel price has gone up 50 percent.

Solomon Betre, Procurement process division head at PPDS, told Capital that the problem occurred because of delay from PPPDS. “The company has a right to refuse the request because we have been late,” he said. He claimed that the Army Foundation is responsible for the delay.

“We have sent the bid evaluation to the Army Foundation on time, but they delayed the response,” Solomon said.

He said that he does know why the Foundation delayed the final response. Steely RMI had the lowest price on the bid for 6 different sizes of reinforcement bars, from 10mm to 24mm.

In the same bid East Steel’s price offer was the lowest price, including the other two foreign companies who bid on the 8mm product. Sources at the company told Capital that they were not invited by PPDS to sign a contract to supply the item.

“We have officially asked PPPDS by letter if  they will continue with the purchase or cancel, but have not responded,” sources at East Steel added.

Experts said that these kind of unknown reasons are related to the lack of good governance and misdemeanors. The country’s steel sector has been experiencing different problems including the marketing issue influenced by external manufacturers who want to dominate the local market, according to experts. Local manufacturers also claim that the sector which transacts a lot of money should receive adequate government attention since it is a backbone for the country’s economy and development.

On the September 9 bid for 22,000 metric tons of steel, domestic steel manufacturers offered a significantly lower price compared with competitive rates of international suppliers and importers for items that the Army Foundation wanted to buy via PPPDS, including 6 mm of wire rod and reinforcement bars measuring 8 to24 millimeters.

After a technical evaluation was completed in November 2015, PPPDS asked the selected companies to offer their revised prices.

Importing companies, Acemar International Ltd and Metal Market, offered USD 546.5 and USD 543.5 per metric ton respectively for the supply of eight different sizes of reinforcement bar, according to their financial proposal. This comes to 22.25 birr and 22.15 birr per kilogram respectively.

The three local manufacturers that were accepted by the technical evaluation and invited to offer their revised prices were Steely RMI, C and E Brothers and East Steel.

All of them offered a much smaller amount than the importers for the items listed in the bid document. Steely RMI offered 16.65 birr per kilogram for six types of reinforcement bars (except for 8mm and 6 mm).

The other local manufacturer C and E Brothers, currently the largest steel manufacturer in the country, offered 17.48 birr per kilogram for the same type of products that Steely offered.

East Steel, another local steel producer, owned by a Chinese investor offered 17.78 birr per kilogram for items from 12 to 24mm and 18.28 birr per kilogram for 10mm reinforcement bars. East Steel is also the only local manufacturer that offered a price quotation for 8mm reinforcement bars, which amounted to 18.89 birr per kilogram.

The two importers’ offer was much higher than the local manufacturers’ price tag on the same bid. The two foreign companies are also interested in supplying 8mm reinforcement bars.

The Turkish Metal Market offered the lowest price to supply 6mm wire rods. The other, Acemar offered 22.25 birr per kilogram for the 6mm wire rod, while Metal Market’s offer was 22.15 birr per kilogram. Local manufacturers did not participate in the 6mm bid.

Currently there 71 steel manufacturers in Ethiopia, of which 11 are deformed bar manufacturers, five of these companies have standardization certificates allowing them to compete in mega bids. These five factories have a production capacity of over 1.3 million metric tons but the demand is not more than 700,000 tons. Generally Ethiopia produces two million metric tons of all types of steel.