BECHTEL POISED TO PREVAIL IN BID PROCESS FOR

UNCLAS ALGIERS 000570 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EINV BEXP ELTN ETRD AG SUBJECT: BECHTEL POISED TO PREVAIL IN BID PROCESS FOR CONSTRUCTING AT LEAST ONE SEGMENT OF THE EAST-WEST HIGHWAY REF: ALGIERS 168 ¶1. (U) This cable contains proprietary information. Please protect accordingly. BIDS UNSEALED IN FULLY TRANSPARENT PROCESS -------------- ¶2. (U) In full view of the Algerian media, public and diplomats representing the home countries of firms bidding to build segments of the 7-billion dollar East-West Highway, the committee evaluating the bids of the competing foreign firms reviewed the submitted bid materials March 28. In a clear show of transparency, the committee methodically opened the boxes of materials submitted by each bidding firm and verified that all required elements of the bid were present. A member of the committee's staff then noted the presence or absence of the necessary documentation on a board at the front of the room. For each of the three segments of the highway let for bids -- east, west, and center -- the members of the committee listed separately on the board the amount of bond guarantee and the price bid by each firm, according to the submitted documentation. BECHTEL WELL POSITIONED TO WIN AT LEAST ONE SEGMENT -------------- -------------- ¶3. (U) At the end of the meeting, which lasted far longer than scheduled, the U.S. firm Bechtel, the only bidder representing a single firm rather than a consortium, came in as the second-lowest bidder on both the eastern and western segments (behind a Chinese firm). The Chinese were also the lowest bidders on the center segment, on which Bechtel did not bid. The committee announced at the end of the public session that it would review over the next two weeks the details of all qualified bids, which were not structured uniformly and thus not suited to on-the-spot comparisons. The Algerian press reported March 29 that a winner for each segment was expected to be announced April 15. ¶4. (SBU) It was widely expected that a Chinese firm would prevail as the lowest price bidder on all three segments. Once quality and performance factors are taken into account by the evaluation committee -- worth 60% of the weighted final point total -- Bechtel, which is widely regarded by foreign embassies and competing firms as the leading entity on quality factors, would be well positioned to win the contract to construct either the western or eastern segment. (Note: Bechtel, its competitors, and diplomats expect the Algerians to award each of the three segments to a different firm.) ¶5. (SBU) Before the March 28 event, Bechtel believed it had its best chance of prevailing on the western segment. Based on its better than expected finish on the pricing side of the eastern segment, however, Bechtel's chances of winning that segment -- whose construction costs are more expensive than the western segment -- are now considerably improved. At a point during the March 28 event, when it appeared that the Japanese firm came in as the second-lowest bidder on the eastern segment, the Japanese DCM, who is well-versed on the bidding process, acknowledged to PolEc Chief that Bechtel was well-positioned to win the eastern segment based on the known price aspects of the accepted bids and Bechtel's presumed advantage on quality and performance factors. EMBASSY'S ADVOCACY HELPFUL -------------- ¶6. (SBU) While it is too early to open a bottle of champagne, Bechtel representatives were pleased and optimistic at this stage of the bidding process and thanked the Embassy for its strong advocacy. Bechtel acknowledged that Ambassador, at very senior levels, and economic/commercial staff worked successfully to educate the GOA on the importance of avoiding a bid evaluation process entailing lowest price automaticity. As a result, factors of quality and proven performance were given more weight, thus creating a more favorable playing field for Bechtel. In addition, at a very early stage in the process, Ambassador, working closely with Bechtel, convinced the government of the advantages of a sovereign-financing rather than a build-operate-transfer approach, a decision that facilitated dividing the project into three sections and increased Bechtel's chance of being awarded one of them. ERDMAN