Price, capacity led to US$ 7.5M Suriname stone buy
– CJIA expansion contractor
China Harbour Engineering Corporation (CHEC) says price and capacity were the sole determinants in the purchase of US$7.5M worth of stone from Surinamese company Grassalco for the completion of the Cheddi Jagan International Airport (CJIA) expansion project.
“Please be advised that China Harbour Engineering, the contractors for the CJIA airport in Guyana, selected its aggregate supplier based solely on price and capacity,” Public Relations Officer for the CHEC’s Caribbean office Wanda Babb told Stabroek News in response to queries on the project.
“The sourcing of aggregate out of Suriname was based on a price advantage, which was significantly cheaper, inclusive of the cost of transportation. Additionally, CHEC’s contractual agreement also affords us the flexibility to choose our own suppliers,” Babb added.
She pointed out that the company, whose Caribbean headquarters is in Jamaica, wanted to make clear that “pricing” was the main reason for the choice.
Recently, CHEC announced that it had signed a US$7.5M contract with Grassalco to supply some 300,000 tonnes of crushed stone over a 12month period for the CJIA expansion project.
The announcement was met with criticism by one local quarry operator, who argued that not only was the move on a state project causing the loss of local sales but that there is no stone shortage here to justify outsourcing.
The Ministry of Public Infrastructure (MPI), meanwhile, noted that the quotes given by local suppliers were higher than CHEC’s Suriname supplier and, therefore, CHEC chose the more economical source.
“The Suriname company submitted quotations for the supply and delivery of the stone landed at the Timehri docks of US$28 per ton. Quotes were received from the local suppliers ranging from US$36 - US$40 per ton. These costs were ex factory or ex depot costs (i.e. Kingston and East Bank), hence an increase would be added to transport the stone to the site,” MPI explained, in response to questions sent by this newspaper to Minister David Patterson.
While CHEC did not explain what modifications were made to the CJIA project, the company said that an amendment to the contract did not see an increase in the purchase of aggregate.
“The modification to the original contract did not increase the amount of aggregate that we would need. It actually decreased the amount of aggregate required,” the company asserted, although it did not state the original or decreased amounts.
MPI explained the purpose of the stone to be procured. “The stone will be used for the crushed aggregate base course of the runway. For the runway, the base course will be 700mm thick, the South-West shoulder base course will be 250mm thick, and the North-Eastern base course will be 470mm and 250mm thick,” it said in its response to questions from this newspaper.
“The only change in quantity was to the SouthWestern shoulder where the aggregate base was substituted for a cement treated base course. This increased the required stone for that section by 35,000 tons. However, there was a cost reduction due to substitution,” it added.
The response also said that MPI, along with the Ministry of Business, intends to meet with the local stone suppliers to ascertain the reasons for the higher stone quotes. It also pointed out that electricity costs do not factor into stone production at the local quarries.
The promised meeting with government is being welcomed by local quarry owners, who also say that given the large quantity of aggregate needed, companies would have tried to match what CHEC was willing to pay.
One local quarry owner explained that locally-produced aggregate will have a price disparity because it is harder to mine but the
quality surpasses its regional competitors. “It is a harder rock to quarry and has a higher engineering quality and specifications, in comparison to Suriname and the Caribbean. Since it is, it will sell a little higher than others, so that is probably why they said it is more expensive. It has a higher advantage because it gives a better quality product,” Rajesh Persaud, of Toolsie Persaud Limited, told Stabroek News.
However, he pointed out that costs are also subject to amounts being purchased and that when a price quote was sought by CHEC, the company never specified what quantity they needed.
Persaud said that if this was done, notwithstanding that the cost to quarry the local stone was higher, he is sure that negotiations would have led to a matching of the price quoted by the Suriname competitor. “With respect to the price disparity, one it is more expensive to quarry but you can get discounts. No one knew the amount they needed for the project. They never disclosed how much they needed for the project anytime.
They only used a quote as a means to come up with their justification. Speaking as producer, I can tell you there is always room for negotiation. The price reduction can be negotiated,” he said.
He noted that Toolsie Persaud Quarries had been supplying stone to CHEC but he is not sure for which projects the aggregate was used since CHEC has multiple projects in Guyana.
And while government has said that it wants to meet soon with quarry owners, Persaud said that no meeting has been set up as yet but owners countrywide would welcome such a forum.