Jun 14 , 2020

The government has started the process of re-floating a tender for the procurement of 400,000tn of wheat after an initial contract was cancelled due to variations in prices.

Last week the Public Procurement & Property Disposal Service cancelled the contract it awarded to two companies to supply the wheat. Martina Mertens Sample and Olam International Limited were awarded the deal for the supply on May 16, 2020, after both of them were deemed technically and financially qualified.

To procure the wheat, the Service has asked for a special procurement permit from the Public Procurement &  Property Administration Agency, the regulatory agency, to re-announce the bid.

Last month, the Service awarded three companies contracts to supply 600,000tn of wheat for market stabilisation and emergency food assistance on behalf of the Ethiopian Trading Business Corporation and the National Disaster Risk Management Commission.

Martina Mertens Sample was awarded a contract to supply 300,000tn of wheat for 65.9 million dollars for three lots. It offered an average of 219.6 dollars a tonne. Olam International, a Singaporean company, was also contracted to supply 100,000tn of wheat for 21.3 million dollars, offering 212.7 dollars a tonne.

The third company GemCorp Commodities, a London-based trading company, was awarded a contract to supply 200,000tn of wheat for 40.7 million dollars. The company offered an average of 203.65 dollars a tonne, which was lower than the other two companies.

While cancelling the contract for the two companies, the Service inked the agreement with GemCorp Commodities on June 9, 2020, to supply 200,000tn of wheat. GemCorp Commodities plans to source the grain from Ukraine and Russia.

Before cancelling the contract, the Service made an analysis comparing the prices the companies offered with the National Bank of Ethiopia’s international wheat market price, according to Abeba Alemayehu, deputy director of the Service in charge of procurement and contract administration.

“We realise that there is a 6.91 dollar a tonne variation between the two prices for the same 100,000tn," Tsewaye Muluneh said, the director-general of the Service. It procured 1.7 million tonnes of wheat in the last fiscal year from four international companies on behalf of the Ethiopian Business Corporation, the Ministry of Agriculture, and the National Disaster Risk Management Commission.

Between Martina Mertens Sample and Olam International Limited, there is a 2.8-million-dollar price variation, which is not in the interest of the country, according to Tsewaye.

After the initial contracts were cancelled, neither of the companies filed grievances, according to Tsewaye.

"As soon as we get a green light from the Agency," Tsewaye said, "we'll float another tender."

Atlaw Alemu (PhD), a lecturer at Addis Abeba University’s Faculty of Business & Economics, says that it could have been good if the Service had conducted an assessment about the international market price of wheat before awarding the companies.

“In addition to the price set for wheat, it should be noted that the quality of the grain, credit financing, reliability of companies and transportation cost should be considered,” said Atlaw.

Atlaw says that there is not much harm in rebidding the procurement unless the wheat is needed for an urgent purpose.

Before awarding contracts to companies, the Service should adequately review the prices, transportation, credit financing and other criteria of the bidding companies to pick the right one, recommended Atlaw.

Representatives of Martina Mertens Sample and Olam International Limited did not respond to inquiries from Fortune.

PUBLISHED ON Jun 14,2020 [ VOL 21 , NO 1051]

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