CHENNAI, July 10: Other things being equal, the lowest bidder in a tender bags the contract. The highest bidder does not get a chance to quote again after being told all the prices quoted by his competitors. Right?

No, you would be wrong if you were dealing with the Poompuhar Shipping Corporation, a Tamil Nadu government undertaking. At least, this is what has happened in an open tender floated by the corporation for charter of ships to transport coal from Haldia, Paradip and Vizag to Madras and Tuticorin. The coal will feed the power stations of Tamil Nadu Electricity Board.Poompuhar has thrown aside internationally accepted tendering norms by revealing the prices quoted and then asking all the bidders to bid again in the same tender.

After knowing the prices of their competitors, many companies have sharply reduced their quotes in the second round. Instead of being out of the race, they have moved to the first positions, while those originally in the lead are trailing.By adopting the strange procedure, Poompuhar has laid itself open to charges that it is favouring certain shipping companies, while nobbling others which quoted prices 20 per cent lower.

The tender was for chartering of seven ships for seven periods, starting the second week of July. The bids were opened on May 9 in the presence of the bidders and prices read out openly. The companies knew the prices quoted by their rivals. The normal procedure at this stage would be to call the lowest three or four bidders for negotiations on further price reductions. The rest would be politely told that their bids had been rejected because their quotations were too high. This is fair and legal.

Instead, Poompuhar called all the nine companies which had bid and told them to submit price quotes again! This was done despite the fact that the tender conditions did not provide for a second round of bidding by all the competitors.

The injustice of the procedure is obvious. You know what the lowest bidder has quoted and therefore you can cut your price below his. You are back in business and the lowest bidders are left fuming. If Pompuhar was dissatisfied with the prices quoted and wanted the shipping companies to reduce their rates, it should have scrapped the first tender and floated a new one.

Here are some figures to substantiate the point made here.

For the period July 10 to 20, some of the first round quotes (in rupees per ship per day of charter) were as follows: Shipping Corporation of India Rs 3,80,000; Varun Shipping Rs 4,55,000; Tolani Shipping Rs 4,25,125. SCI was the lowest tenderer. But see what happened when Poompuar revealed the prices and then asked all companies to bid again. This time, Varun Shipping quoted Rs 3,40,000, Tolani Shipping Rs. 3,70,000 and SCI Rs 3,74,500. The highest bidder had become the lowest and SCI is out in the cold.

Take another example for the period July 20 to July 31. Among the first quotes were: South India Shipping Rs 3,78,000, Great Eastern Shipping Rs 4,40,000 and Varun Shipping Rs 4,55,000. The second round of bidding turned the picture upside down. Great Eastern quoted Rs 3,24,000, Varun Rs 3,40,000 and South India Shipping Rs 3,60,000.It is learnt that Poompuhar has called for another round of price negotiations. The question now is: how long will this go on? Till somebody decides to go to court?

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.