Consortium protests selection of Enron

The consortium of Tomen, Alsons, Singapore Power and Tan Holdings on Friday filed its formal protest against awarding Saipan’s 80-megawatt power project to Enron, citing a flawed report by power consultants and unconstitutionality of a recently enacted law that set bidding requirements.

It urged the Commonwealth Utilities Corporation to reconsider its decision which it said would shortchange the residents of Saipan who would end up paying higher rates due to failure to follow procurement regulations.

The protest, contained in a seven-page letter addressed to CUC Board chair Jesus T. Guerrero and other CNMI officials, was the first to be lodged after the government-owned utility firm handed out the estimated $120 million contract to Enron.

The Tomen consortium was vying with the Texas-based conglomerate to bag the project touted to be the largest deal ever in the Commonwealth’s history. Both bidders scored almost identical, with Enron nudging a few percentage points ahead, in the independent evaluation conducted by experts from Burns & McDonnell.

While the CUC board has yet to formally notify other bidders of the decision, the protest raised two major reasons in opposing the selection of Enron — one the alleged flawed report by the Kansas City-based power engineers and the unconstitutionality of Public Law 12-1 otherwise known as the Energy Sufficiency Act of 2000.

“The Burns & McDonnell evaluation and PL 12-1, on which you based your decision to award the project to Enron, are both flawed and will therefore impose upon the people of Saipan a disadvantageous contract,” said Tirso G. Santillan, executive vice president of Alsons Consolidated Resources based in Manila.

“You failed to procure the best and most economically advantageous contract. Your decision invites a host of questions that must be answered in order to safeguard the interests of the people of Saipan,” he added.

There was no immediate reaction from Mr. Guerrero who earlier has said that CUC expects to court a new round of protests for its latest action which came nearly two years after handing out the same contract to Marubeni Corp. of Japan and its U.S. partner, Sithe Energies, Inc.

Questions

Tomen complained alleged non-compliance by its competitors to the requirements set out by the request of proposal issued by the utility corporation in 1997 for the new power plant as well as arbitrariness of the evaluation process.

It also questioned the scoring points that it said appeared inconsistent, depriving the consortium the lead in terms of the numerical scores given by Burns & McDonnell.

In fact, the Tomen claimed their bid would have cost about $23.8 million cheaper than what Enron had offered. “The people of Saipan will have to pay $24 million over 25 years because CUC and Burns & McDonnell thought Enron was more experienced and that the price difference was marginal,” said Mr. Santillan.

On the enactment of PL 12-1 which forced the utility corporation to reinstate the mothballed 80-MW plant, the consortium believed that law was crafted to benefit Enron due to one provision requiring installation of low-speed generators.

This was not a requirement of the RFP and neither other bidders had proposed generators with such specifications, according to the letter.

“PL 12-1 violates the tenets of equal protection of the laws, free competition, all principles of fair play and… the procurement regulations as it amends the terms of the RFP after the bids have been submitted and evaluated,” it said.

The CUC board voted 3-2 on May 26 to “conditionally” award the contract to Enron, citing the provisions of PL 12-1 and the deadline of May 30 it imposed for such action.
Negotiations on the terms of the final agreement between the two parties are expected to commence as soon as the board has hired a private legal counsel.

To be installed through build-operate-transfer scheme under a 25-year deal aimed at meeting power demand on the island, the project has come under a storm of protests for the past two years due to highly-questionable selection process and missteps by utility officials.