23 March 2014

Ethiopia: Consortium Switches Decision in National Banking System Tender

Hidden costs within the financial bid of one of the two finalists led Eth-Switch to reconsider their choice

Eth-Switch S.C - a consortium of Ethiopia's banks, established to provide a national switch system - is to award a contract to BPC Banking Technologies BV for the supply and implementation of a National Electronic Funds Transfer (EFT) Switch Clearing, Settlement and Reconciliation System.

The system will allow the domestic financial industry to have a single transaction between banks, and a clearing house at the Central Bank.

The National Switch Company is going to award the contract to BPC at a signing ceremony to be held at the Sheraton Addis on Tuesday, March 25, 2014.

Members of the Eth-Switch committee held a meeting on Friday afternoon, March 21, 2014, to discuss the deal with BPC, according to a source close to the process.

Eth-Switch decided to award the contract to BPC, despite being close to awarding the contract to BPC's main competitor and the other finalist in the tender floated back in February, 2012, Compass Plus. Around 14 IT vendors participated in the tender.

The Bidding Committee of the national switch Company conducted a technical evaluation and disclosed the first stage results of four shortlisted companies: S2M, M2M, BPC and Compass Plus.

When the second stage of the tender was disclosed months later, however, the bid was narrowed down to just BPC and Compass Plus.

Following this, BPC offered 17 million dollars, while Compass Plus offered 11 million dollars, for the switch system, expected to enable all banks in Ethiopia to electronically transfer funds and clear cheques between themselves. The switch system also allows all banks to share each other's Automated Teller Machines (ATMs).

However, the opening of the financial proposals of BPC and Compass Plus on May 7, 2013, revealed that the offers of both companies were beyond the financial capacity of Eth-Switch, whose capital is only 80 million Br. The national switch company then revised the ToR (Terms of Reference) in order to cancel the turnkey aspects of the project, such as the switch system, data centre, transfer of knowledge and hands-on training. The revised ToR, which only requires the switch system, reduced the cost of the project by 80pc.

In a letter dated November 27, 2013, Eth-Switch rejected BPC's request that it be given the opportunity to resubmit an updated financial bid, saying that doing so would violate the terms and conditions of the bid document.

When the Company was dealing with Compass Plus after the opening of the financial proposal, there was criticism from some members of the Bidding Committee and other competitors on the price offered by the number one listed company, Compass Plus. The latter had hidden costs that would push the price of the project beyond that of the second bidder, BPC, they claimed.

Eth-Switch stopped dealing with Compass Plus seven weeks ago, according to sources. An official from the local partner of Compass Plus, Neuro-Net, confirmed the termination of the deal, declining, however, to disclose when the termination came.

Bizuneh Bekele, CEO of the national switch Company, declined to comment on any aspect of the deal.

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