McDermott tender audited

JAKARTA (JP): The tender of a contract for the construction of a natural gas pipeline between West Natuna and Singapore, which was awarded to PT McDermott Indonesia, is currently under a special audit to investigate possible irregularities in the assessment of bids.

President of state-owned Pertamina, Martiono Hadianto, said on Wednesday that the special audit was being made by the Development Finance Comptroller (BPKP) at the instruction of Coordinating Minister for Development Supervision/State Administrative Reforms Hartarto Sastrosoenarto.

There was confusion over the status of the McDermott contract following a letter regarding a review of the tender process from President B.J. Habibie's aide Sintong Pandjaitan, the secretary for development operation control (Sesdalopbang).

House of Representative members have interpreted the content of the letter as support toward a retendering of the project and the cancellation of McDermott as its selection.

"The letter from Sesdalopbang states that the contract should be continued if the procedures for tender are proven correct," Martiono said.

He said the results of the audit, which were expected to be completed later this year, would determine the final status of the McDermott contract.

"We will just wait and see until the audit process is completed," he said.

Martiono said a consortium, consisting of Premier Oil of Britain, Gulf Resources of Canada and Conoco Inc. of the United States, also asked PriceWaterhouseCoopers to make an independent audit of the tender process.

"These two auditing processes are separate from each other," he said.

However, preparations for the 560-kilometer submarine pipeline project are continuing due to a tight schedule, he said.

"We have to take the schedule into consideration. If the project is awarded to another firm, the consequences have to be anticipated," he said.

He hoped the tender reassessment would not affect the completion of the pipeline project so that Pertamina would be able to make gas delivery to Singapore by 2001 under a 22-year contract with Sembawang Gas.

McDermott, a subsidiary of American firm J Ray McDermott SA, was alleged to have colluded with Pertamina officials by using inside information to beat out other bidders in March.

The company won the tender with the lowest bid of US$335 million against other bidders, including Italian firm Saipem, French firm ETPM and Japanese firm Nippon Steel.

The House of Representatives Commission V for mining has demanded that the government transfer the pipeline contract from McDermott to other bidders which offered the next lowest bid.

McDermott has insisted, however, that it won the contract through a competitive bidding process.

The company's area manager, Howard J. Cleave, said recently his company won the contract through a lengthy, open and transparent bid process.

Cleave said that McDermott's experience over the last 27 years in Indonesia enabled it to cut project costs and offer the lowest bid.(02)