McDermott contract hangs in the balance<\/p>\n
JAKARTA (JP): Construction company PT McDermott Indonesia
\ncould lose a contract for the installation of a giant natural gas
\npipeline linking west of the Natuna islands to Singapore after
\nthe House of Representatives found irregularities in the
\ntendering process for the project.<\/p>\n
Legislator HA Walid of the United Development Party (PPP) said
\nthe special team formed by the House to probe the tendering
\nprocess had found irregularities in the bidding and that state
\noil and gas Pertamina and the government should cancel the
\nselection of McDermott.<\/p>\n
\"The team has recommended that the government and Pertamina
\ndisqualify McDermott,\" Walid told The Jakarta Post.<\/p>\n
The 12-strong team comprising the members of the House
\nCommission V for industry, mines and energy decided on the case
\nin a meeting presided over by Walid on Thursday.<\/p>\n
The House formed the team to end the controversy over the
\nappointment of McDermott -- a subsidiary of J Ray McDermott SA of
\nthe United States -- to construct a 650-kilometer underwater
\npipeline for the transportation of natural gas from the gas
\nfields in the Southeast China Sea to Singapore for 22 years
\nstarting from 2001.<\/p>\n
The gas fields are being developed by a consortium comprising
\nthree of Pertamina's production-sharing contractors -- Conoco
\nCorp. of the United States, Premier Oil of Britain and Gulf
\nResources of Canada.<\/p>\n
Several legislators criticized the consortium and Pertamina
\nfor selecting McDermott, citing its partnership with former
\npresident Soeharto's close friend, Mohammad \"Bob\" Hasan, who has
\nan 18 percent share in McDermott Indonesia.<\/p>\n
Pertamina and the consortium maintained that McDermott had won
\nthe project in an open, competitive bidding.<\/p>\n
After studying the bidding for several weeks, however, the
\nteam found that the bidding was \"not transparent and in violation
\nof the existing regulation,\" said Walid.<\/p>\n
He said the team found evidence that Pertamina was under
\npolitical pressure to directly appoint McDermott for the project
\n\"before and during the bidding process\" prior to the downfall of
\nSoeharto in May last year.<\/p>\n
\"Head of Pertamina's foreign contractors supervision body
\n(BPPKA) Gatot K Wiroyudo informed the team about the pressure in
\na recent hearing,\" Walid said.<\/p>\n
McDermott had won the project with the lowest bid of US$335.8
\nmillion, beating out other bidders, ETPM of France, Saipem of
\nItaly and Nippon Steel of Japan.<\/p>\n
But the team dismissed the contract signed by McDermott and
\nthe consortium as imperfect over the fact that it did not
\nexplicitly state whether the cost proposed by McDermott was the
\nmaximum payable by the consortium and Pertamina to McDermott.<\/p>\n
\"As such, McDermott is not forbidden under the contract to ask
\nfor the reimbursement of additional costs in the future,\" Walid
\nsaid.<\/p>\n
The team also faulted the contract because Pertamina and the
\nconsortium did not require McDermott to provide a bank guarantee
\nin case the contractor failed to complete the job properly.<\/p>\n
The team found evidence indicating McDermott had benefited
\nfrom \"insider information\" to cut field survey costs, allowing it
\nto propose a much lower bid than its competitors.<\/p>\n
Walid said the team was also concerned with the fact that
\nHasan had shares in the company but it asserted that the
\npartnership was not the main reason behind the team's demand for
\nthe cancellation of McDermott's contract.<\/p>\n
\"The team will still demand the cancellation of the contract
\neven if Hasan has no longer any shares in the company,\" he said.<\/p>\n
Walid said the team's recommendation should be approved by the
\ncommission before being submitted to Pertamina and the
\ngovernment.<\/p>\n
\"The commission can't discuss the recommendation right now due
\nto a recess period. But the commission's head had approved it
\npersonally,\" Walid said.<\/p>\n
Walid denied allegations that the cancellation of the contract
\nwould affect the country's investment climate.<\/p>\n
\"On the contrary, foreign investors will praise us for our
\ndetermination to create a clean business environment,\" Walid
\nsaid. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/mcdermott-contract-hangs-in-the-balance-1447893297",
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