Five companies are vying to supply four million quintals of wheat that was retendered after the contract awarded to two companies two months ago was terminated due to price variations.
Four international and a local company reached the technical evaluation stage for the supply of the wheat that will be procured in a single lot. The wheat will be procured on behalf of the Ethiopian Trading Business Corporation to be used for market stabilisation.
The Public Procurement & Property Disposal Service refloated the tender on June 16, 2020, after the contract awarded to Martina Mertens Sample and Olam International Limited was terminated a month ago due to variation in price.
Martina Mertens Sample was awarded a contract to supply three million quintals of wheat for 65.9 million dollars, while Olam International was also contracted to supply one million quintals for 21.3 million dollars. There was a 6.91 dollar a tonne price variation between the two companies for the same quantity of wheat. This triggered the Service to terminate the award to the two companies.
After getting approval of a special procurement permit from the Public Procurement & Administration Agency, the regulatory agency, the Service decided to procure the wheat under a single lot that was previously divided into four batches. So far, the government has been floating tenders by dividing the grain into batches, each containing one million quintals.
Dividing the supply into batches was aimed at attracting more companies and getting lower prices, according to Abeba Alemayehu, deputy director of the Service in charge of procurement and contract administration.
“But after we noticed the price difference for the same quantity,” said Abeba, “we decided to award the wheat to a single supplier.”
For the retendered bid, a total of 53 companies bought the bidding document, but only five of them returned it during the opening that was held on July 24, 2020. The Service has postponed the opening date three times due to the internet shutoff in the country.
Huyton Inc Group, Mush Candle Factory Limited, Tudo General Trading LLC, Aston FFI (Suisse) SA, and Aplaus Importer, a local agent of WifagMabrouk General Trading, are the five companies that made it to the technical evaluation stage.
The financial opening will be made after 10 days, according to Worku Gezahegne, acting director of procurements at the Service.
The technical evaluation is expected to be completed within a week, and the financial evaluation will follow if other bidders do not file a grievance within the mandatory seven-day standstill period, according to Worku.
The current trend of hiring one company for the supply will continue as long as it safeguards the government’s interest, accessibility and quality of wheat, according to Abeba.
While cancelling the award for the two companies last month, the Service awarded GemCorp Commodities to supply two million quintals of wheat for the National Disaster Risk Management Commission to be used for humanitarian assistance. GemCorp is supplying the grain for 40.7 million dollars.
In the last fiscal year, on behalf of the National Disaster Risk Management Commission, the Ethiopian Business Trading Corporation and the Ministry of Agriculture, the Service procured 1.7 million tonnes of wheat from four international companies. The procurement is worth 11.1 billion Br.
Tesfaye Melaku, a lecturer at Bahir Dar University’s Department of Economics, says that the cancellation of the contact could have consequences.
“It could lead to bread shortages and inflation,” he said, “but this will only happen if the government does not have enough wheat backup.”
Tesfaye also backs the current procurement procedure, saying that the larger the purchase, the lower the price will be, making it easier to identify an efficient and experienced supplier.
Ethiopia is among the top three wheat producers in Africa. Wheat accounts for about 20pc of the nation’s total cereal production. More than 90pc of Ethiopia’s wheat production is grown on small farms without irrigation, most of which are in the highlands.
There are approximately 4.7 million small-scale wheat farmers in Ethiopia, which accounts for about 95pc of wheat production and large-scale commercial farms account for only 5pc of the total production, according to Global Agricultural Information Network’s 2019 report.