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Wheat Supplier Leverages Court Battle on Supply Ban


October 31 , 2020
By HAGOS GEBREAMLAK ( FORTUNE STAFF WRITER )


A Dubai-based wheat supplier, which has been wrangling in court with the federal procurement agency over a contract, has won its bitter two-year-long battle. The latter had suspended the company from supplying wheat, accusing it of failing to fulfill commitments.

The Public Procurement & Property Administration Agency had barred Promising International Trading from public procurement bids for a year due to its failure to deliver on a contract it signed for the supply of wheat. In 2018, the company won a bid to supply 200,000tn of wheat for 1.4 billion Br in June of that year, however, it did not deliver the shipments due to an increase in shipping costs.

Promising secured the deal for 1.39 billion Br, winning the bid tendered by the Public Procurement & Property Disposal Service on behalf of the Ministry of Trade & Industry. The auctioneer specified that all the milling wheat must be shipped via the Ethiopian Shipping & Logistics Service Enterprise (ESLSE) with the Enterprise reserving the right to waive its duty.

The bid demanded cost & freight (CFR) offers in which the seller is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier. The bidders were also required to factor in shipping costs from the ESLSE on top of the wheat price. After the firm won the bid, it faced an increase in the initial shipping price submitted by the Enterprise from 26 dollars a tonne to 34 dollars.


“They told us the initial price was an indicative price,” said Habtamu Million, a local representative at Promising. "We then appealed to the Service about the increase in shipping costs and asked for a waiver but received no solution."

The company then submitted a letter of contract cancellation to the Service. The Service, in turn, wrote a letter to Commercial Bank of Ethiopia (CBE) to forfeit the bid security amounting to 18,000 dollars. It also filed an appeal to the regulatory agency accusing Promising of failing to uphold its end of the contract. Upon receipt of the appeal, the Agency suspended Promising from participating in any public procurement for a year.


"Instead of receiving an apology," said Binyam Kebere, an attorney who has been with Promising for 12 years, "we've been banned."

This triggered Promising to take the case to the Federal High Court, disputing the Agency's decision. However, in November 2019, the High Court ruled in favour of the Agency. Promising then filed an appeal to the Federal Supreme Court's Cassasion Bench, stating that because the buyer mandated that the wheat be transported by the Enterprise and the shipper then revised the price, the company was not liable for failing to deliver.


In its appeal, the company stated that the Service is obligated to either consider the shipping price increase and adjust the tender accordingly or grant the supplier a waiver to transport the wheat using other means. Promising also claimed that even if it had asked for the issuance of the waiver, the Service would not have granted it.

As a response to the appeal, the Agency disclosed that it had written a letter to the then Ministry of Finance to issue a waiver letter. In return, the Ministry did send a letter to the Enterprise, which then wrote a waiver and forwarded it to Commercial Bank of Ethiopia. However, unlike preceding cases, the Enterprise did not notify Promising about the waiver nor did it mail over a copy of the letter.

After reviewing the case, the justices at the Federal Supreme Court's Cassation Division ruled a few weeks ago to nullify the verdict by the Agency and High Court. The justices stated that the supplier should have been notified of the waiver and provided with a copy of the waiver letter.

The Agency accepts the ruling, according to Setegn Gelan, communications head at the Agency, which already delisted Promising from the blacklist a few weeks before the ruling along with 44 other suppliers, citing the economic slowdown due to the Novel Coronavirus (COVID-19) pandemic.


However, Promising International Trading, which has so far delivered on 19 contracts, continued its court case, because the decision of the Agency and Federal High Court tarnishes the reputation of the company, according to Habtamu.

Even though the procurement proclamation gives the Agency the power to suspend suppliers from participating in public bids, it is not clear that the grounds for this include the act of non-performance, according to a legal expert who commented under the condition of anonymity.

"The supplier should have followed up on the status of the waiver," said the legal expert. "It isn't the duty of the other party to announce the issuance of a waiver."

The Court said that the Enterprise should have notified the supplier about the waiver as the law demands communications to be in written form. But the expert quarreled with this, claiming that the article was misinterpreted. The expert says that written communication is needed during the early stages but not when bidders have already won and signed contracts.

"The Court should have heard from an independent expert witness," the expert said, "and either wholly accept the expert witness of the general manager of the Enterprise or reject the expert witness entirely."



PUBLISHED ON Oct 31,2020 [ VOL 21 , NO 1070]


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