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ISLAMABAD, July 31: The Frontier Works Organisation (FWO) and National Engineering Services of Pakistan (Nespak) are in a serious dispute over the technical evaluation of bids for the proposed $1.6 billion Neelum-Jhelum hydropower project in Azad Kashmir and the row likely to be resolved by the president.

Informed sources told Dawn that a technical evaluation panel led by Nespak had informally told the FWO-led consortium that its technical bid for the project might not meet the tender criteria for the simple reason that its coaching and management contract did not fall under the definition of ‘joint venture’ required for the project.

The results of technical evaluation of bids are expected to be made public in the next few days that would lead to opening of financial bids. The technical panel comprises Norconsult of Norway and Nespak — a subsidiary of the Ministry of Water and Power. The FWO, a commercial arm of Pakistan Army, is bidding as main contractor for the 969-megawatt Neelum-Jhelum project under a management contract with the Vinci Construction of France.

The three bidders who posted a bid bond are the FWO-Vinci consortium, China Gazhhouba and China International Water and Electric Corporation (CWE). Another bid from SinoHydro of China was rejected because it did not contain a bid bond, the sources said. The company had earlier given up the Gomal Zam dam project without completion, they added.

The sources said that the FWO argued that its foreign partner was a world leader in construction and tunnelling that would enable the FWO to acquire latest management expertise, construction techniques and technical knowledge so direly needed for the upcoming mega projects like dams.

On the other hand, the sources said, Nespak had taken the position that it would go by the terms of tender published in the media in finalising its technical evaluation on a professional basis and it would obviously have no objection if its decision was changed at a higher forum under “some other considerations”.

The FWO is also arguing that technical and financial evaluation of a Chinese firm by Wapda and Nespak had led to suspension of work on Gomal Zam dam because of security problems and was later awarded to the FWO, which meant that its lead role in the $1.6 billion project in Azad Kashmir would minimise force majeure risks, which could be higher in case of any foreign company given the location of the project in a disputed area and within firing range of the Line of Control.

The FWO also told Nespak that its consortium was also providing financing package under a buyer’s credit scheme to cover entire $600 million foreign currency component of the project with a grace period of eight years and a repayment period of 15 years. Of this, a part of financing would also be provided under a soft-term facility.

The construction of $1.6 billion Neelum-Jhelum Hydropower Project in Azad Kashmir is very crucial to secure Pakistan s rights over river Jhelum, threatened by Indian move to use its waters for power generation and diversion.

The government had earlier refused to award the contract of 969MW Neelum-Jhelum project to a Chinese firm in the aftermath of the last year’s earthquake because other bidders had refrained from competing, citing presence of geological fault lines in the area.

The Wapda was originally planning to develop the project on build-operate-transfer (BOT) basis but had later decided to hire engineering, procurement and construction (EPC) contractor and also replaced the condition of suppliers’ credit with buyers’ credit so that bidders could arrange finances from anywhere in the world.

Pakistan had re-advertised the project last year following a poor response to initial bidding, but results remained unchanged.

The only difference it made was that Pakistan lost over two years in the process while India kept on working on its controversial Kishanganga project.

The project is of strategic importance as it could protect Pakistan’s priority rights over Neelum waters besides producing cheap electricity. The project has one of the most difficult designs. It involves construction of a 32-kilometre-long tunnel, passing beneath the bed of Jhelum River, to divert the Neelum River.

India is constructing the Kishanganga hydropower and water storage project on the same river upstream and Pakistan considers it a violation of the bilateral Indus Waters Treaty.

India has already built a major part of a 22km tunnel of the project. It had recently offered to change the project design to satisfy Pakistan’s objections but the revised design was not accepted by Islamabad.