Uzbekistan bid in 1993

To bid a tender which you can not win, Uzbekistan bid in 1993

USA companies ask upfront fees for proposal they prepare for expensive projects, in order to be sure that project is real, the client is serious and the buyer also share their cost of proposal expenses.  This figure could be between 10k- 50k$. For a big thermal power plant tender, we were the lıcal partner, the US license holder asked us to pay 50k$ upfront to cover their proposal expenses.

This is again a case for John Nash "game theory", and subsequently we learn by making practice in time.

In long past, your writer was working in machine plant of a public company. We were manufacturing two types of industrial size steam boilers under license of German VKW boiler company. Later in time VKW is sold to another conglomerate. That entity later was sold again. So we were manufacturing fuel oil burning 50 tons per hour at 20-bar slightly superheated steam capacity steam boiler. Moreover we were also manufacturing another boiler with 100 tons per hour same pressure temperature but firing low quality local lignite coal on cast iron louver grades. We were manufacturing in a mass fabrication for our new plants as well as replacement of old plants. We knew every detail of the fabrication, but we had no idea of the cost. We were buying steel sheets, seamless boiler tubes, safety valves, instrumentation from the local market.

Then I changed my job and joined a private contractor company with boiler license of a reputable US manufacturer. We were making in-house design, and manufacture package type industrial size steam boilers in our modest size fabrication plant. We were buying steel sheets, insulation, seamless boiler tubes, burners, safety valves, soot blowers, instrumentation from international suppliers.

There were two local competitors in the market. First one was in Izmir with exclusive German boiler license. The other was in Istanbul Tuzla with Variety of foreign licenses case by case basis. Price levels were well known. Competition was very hard. Due to many ongoing industrial investments, domestic market was in high demand of industrial size boilers. We were trying to cut the expenses.

One day, we received a proposal request from my public company with tender specs same as their 50- tons per hour fuel oil firing steam boiler. It was not logical. They were manufacturing the same size steam boiler in their facilities. I visited their head office for further explanation of this nonsense situation. They explained me  that they have received an order to build 3- plants in Uzbekistan through government to government agreements each to process 3000 tons of sugar beets per day to produce sugar. Earlier Uzbekistan was producing only cotton for Soviet republics, and they had no sugar production. Uzbek authority had discomfort for steam boilers and they decided to initiate international outsourcing. We were asked to compete with their own boilers for Uzbek plants. In the proposal department, we were uneasy to make any effort since in any case the public company would not buy from us. We should not spend our limited human resources for this futile project. However our private company board decided to deliver "a highly competitive quote" for this project.

So within one month, we delivered our most competitive offer for 3-each package type each with 50 tons per hour superheater steam capacity at 20-bar at 1-m US$ each, with FOT Ankara plant delivery within 11-months plus one month site installation under our supervision.

At that time their loose design, completely site erected steam boiler had 2-million US$ each price with minimum 2-years delivery. Our shop man hour cost was 5US$ whereas theirs 25- US$.

We delivered our proposal and waited for 90-days for evaluation and final decision. We have been later informed that our proposal was not considered and they proceeded with their boilers. Delivery was not important, since overall plant delivery was 5-years. Their plant was available to fabrication. Our proposal expenses were futile. Uzbeks were satisfied to go with the existing major supplier and the cost differential was not important any more. Moreover their public finance package could not be shared by private entities.

Now these days, there are many industrial plants in Uzbekistan. They place orders to international private companies since they earn hard currency by selling their natural resources. We consequently were very careful to respond to public tenders.

That public company is then partially sold to private entities in time. Plant is not in operation any more. Private company has not renewed their US boiler license. Their manufacturing plant is also sold. A new shopping mall is built in its place.

Our local market has no intention nor ready to pay for intellectual property, special consultancy, or any original design. That is not the case in North America nor in the Western Europe. If you request an original design, consultancy, even a detailed proposal, then you should be ready to pay their bidding cost.

Our geography will learn in time.

Ankara, 31- January 2019

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Haluk Direskeneli, is a graduate of METU Mechanical Engineering department (1973). He worked in public, private enterprises, USA Turkish JV companies (B&W, CSWI, AEP), in fabrication, basic and detail design, marketing, sales and project management of thermal power plants. He is currently working as freelance consultant/ energy analyst with thermal power plants basic/ detail design software expertise for private engineering companies, investors, universities and research institutions. He is a member of ODTÜ Alumni and Chamber of Turkish Mechanical Engineers Energy Working Group.