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PPA’s violation: Court hears N11bn suit against NNPC, 2 others

Justice S. S. Ogunsanya of a Lagos High Court in Igbosere will today commence the hearing of an N11 billion suit slammed on the Nigerian National Petroleum Corporation (NNPC) and three others by an oil and gas consultancy firm, Contraco Limited, over alleged breach of the Public Procurement Act (PPA).


Total Upstream Nigeria Limited, Samsung Heavy Industries Company Nigeria Limited and Hyundai Heavy Industries were joined as co-respondents in the suit.


The suit is in connection with a contract for the supply of an Oil Offloading Terminal for OML 130 otherwise known as Egina Field Development. The contract, which is worth $3.9 billion and was awarded to Samsung with a capacity of 200,000bpd, is the largest Floating Production Storage Offloading unit ever installed in Nigeria and the largest FPSO built by the Total Group worldwide.


In its statement of claims, Contraco said Total had in 2009 published an invitation for tender pre-qualification for the supply of an Oil Offloading Terminal for OML 130 – Egina Field Development. Hyundai was said to have indicated interest in the tender and commenced talks with Contraco to act as its consultants to the bid which was done in 2011.


It was further agreed that in the event of a successful bid by Hyundai, the claimant (Contraco) in consideration of performing the services stated above, shall be entitled to one per cent of the entire contract sum offered by Total.


Hyundai and Samsung later submitted bids which were evaluated by Total and National Petroleum Investment Management Services (NAPIMS). Hyundai was said to have been adjudged the lowest responsive evaluated bid and by Section 24 (3) of the Public Procurement Act, it was the winner of the bid.


To this end, Total was said to have written a letter dated March 30, 2012, to the NNPC’s Group General Manager where it was recommended that the contract should be given to Hyundai.


The Group Executive Committee of the NNPC was later directed by the corporation’s Group Executive Director to approve the award of the contract to Hyundai at a Total contract ceiling of $ 3, 965,972,265.00 having met the requisite Nigerian content plan, offered the lowest commercial bid and having presented the best execution plan.


Contraco said when the NNPC continued to delay the contract, its client, Hyundai, wrote a letter to the then President, Goodluck Jonathan, on July 29, 2012, to ensure that it was awarded the contract on time having painstakingly gone through the bid process and adjudged the winner in line with due process and extant laws.


The firm claimed that this letter written to Jonathan enraged the NNPC which rather than award the contract to Hyundai, raised issues of lack of due process in the bid procedure but this position was countered by Total which insisted that Hyundai followed due process.


The claimant alleged that rather than awarding the contract to Hyundai, the NNPC gave Samsung the opportunity of amending its bid without giving Hyundai that same opportunity, a move which contravenes the Public Procurement Act.


“Contrary to overwhelming recommendations by the officials of the 1st defendant (NNPC) that the 3rd Defendant (Hyundai) be awarded the contract, the 1st and 2nd defendants (NNPC and Total) conspired with the 4th defendant (Samsung) and awarded the contract to the 4th defendant (Samsung) having negotiated a 5 per cent discount off the contract price from the bid initially presented by the 4th defendant (Samsung). The negotiated 5 per cent discount was not offered to other bidders.


“It turned out that NNPC and Total in a bid to scuttle the award of the contract to Hyundai colluded and negotiated a 5 per cent discount with Samsung from its original bid. This opportunity was not given to Hyundai. The change in price quoted by Samsung is contrary to Section 31 (3) (a) of the Public Procurement Act. Thus, Samsung in effect was permitted by the NNPC and Total to revise its bid well after close of bid submission in clear contravention of the law”, the firm disclosed.


Contraco added that since NNPC and Total had illegally seized the contract from its Hyundai, it has been denied of its own one per cent commission which would have been $31 million.


It is consequently seeking for an order against the defendants for the payment of $31 million being one per cent commission it would have realized having fulfilled its obligation under the Consultant Agreement dated April 11, 2012. The firm is also asking for the payment of N30 million as cost of filing the suit.


Total and Hyundai have entered conditional appearances and have filed preliminary objections challenging the competence of the action on jurisdictional grounds. They are also challenging the ‘locus standi’ of Contraco to file the suit.



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