Logistics

Airports privatisation: Eligibility norms for bidders stokes fears of foul play

P Manoj Mumbai | Updated on February 06, 2019

The airport privatisation bid norms raises concerns for bidders.

Tight bidding timeline adds to the concerns

The Centre’s move to privatise six non-metro airports run by the Airports Authority of India (AAI) will potentially “eliminate competition” and favour a “chosen few”, said consultants and industry sources involved in the exercise. They also cited “anomalies” in the eligibility terms for bidders and the tight timeline for award of projects.

Besides, the “unseemly haste” shown by the Centre in privatising the airports runs the risk of project failures, they added.

AAI has sought bids for the operation and management of existing airport assets as well as their upgradation and development of additional air-side terminals, city-side and land-side infrastructure for Ahmedabad, Guwahati, Jaipur, Lucknow, Mangalore and Thiruvananthapuram airports under a single stage bidding process.

The request for proposal (RFP) was issued on December 14, 2018 and the bid submission date was set as February 16, 2019.

“The timeline for the entire bidding process is extremely short given the importance of the projects requiring detailed due diligence and analysis of techno- commercial, legal, contractual and regulatory complexities,” a top official at an Indian firm looking to participate in the auction said, asking not to be named.

The AAI aims to award the projects by February 28, 2019 to help the National Democratic Alliance (NDA) government reach the budgeted disinvestment target of ₹80,000 crore for FY19.

“This may lead to bidding and award happening in a manner without the opportunity of adequate analysis both on the part of bidders and AAI, perhaps even leading to project failures post award,” he said.

“Anomalies” in terms and conditions

Industry sources also pointed out the “anomalies” in the eligibility terms and conditions set by AAI for bidders.

For instance, the minimum technical and financial capacity for qualifying bidders is “surprisingly identical” in the RFPs, requiring the bidders to have experience in eligible projects of ₹3,500 crore and minimum net worth of ₹1,000 crore.

“As per the established norms, technical capacity is experience in projects worth double the estimated project cost. The eligibility criteria should, therefore, have been linked to the project cost and should have been different for each airport project. However, the RFP documents require the same experience for all the six airport projects irrespective of the size of the airport project/cost,” said a consultant advising a potential bidder .

The RFP documents also mandates the successful bidder to pay a certain upfront amount towards cost of works currently incurred by AAI.

“It is, however, not clear whether the cost of works currently incurred by AAI is against the capital expenditure projected and that the successful private operator is expected to incur only the balance of projected capital expenditure,” said the consultant, who declined to be named citing conflict of interest.

“The errors in the RFP documents and the tearing hurry to complete the bidding process and award of projects appea rs to be aimed at allowing only a chosen few to make to the shortlisting and prevent wider competitive participation by other serious potential bidders,” an industry source said.

AAI could not be reached for comment.

Published on February 06, 2019

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