Tax and VAT additions raise contract value despite tender provisions; facility remains non-operational
DHAKA, October 19, 2026: The government faces the prospect of paying an additional US$31 million for the operation and maintenance (O&M) of Bangladesh’s first Single Point Mooring (SPM) facility after taxes and value-added tax (VAT) were added to the winning bidder’s original offer, despite tender provisions requiring such charges to be included in the quoted price. Report UNB
The contract value increased from US$128 million to US$159 million, representing a rise of approximately 24.2 percent, according to a report by UNB citing sources familiar with the procurement process.
Indonesia’s PT Pertamina Trans Kontinental (PTK) emerged as the lowest evaluated bidder with an offer of US$128 million, which included applicable taxes and VAT. The company was subsequently awarded the contract. However, the evaluation committee reportedly treated the quoted amount as exclusive of these charges and added around US$31 million when finalizing the contract value.
The move has raised questions about compliance with the tender conditions and the government’s management of public funds.
Questions over tender compliance
According to the UNB report, Clause 27.9 of the Invitation to Tender (ITT) required bidders to incorporate all applicable taxes, VAT, duties and other charges into their quoted prices. PTK also declared in its bid documents that its offer complied with the tender requirements.
The General Conditions of Contract (GCC) further stipulated under Clause 18.1 that the contractor would be responsible for taxes and duties. Clause 62.2 stated that the contract price would not be adjusted for such costs unless explicitly provided for in the contract.
Industry sources questioned the decision to add taxes and VAT after the bid had been evaluated, arguing that the adjustment appeared inconsistent with the tender provisions and increased the contract value beyond the original offer.
A senior Bangladesh Petroleum Corporation (BPC) official acknowledged that additional amounts had been added to PTK’s bid value. The official reportedly said the taxes and VAT were included following recommendations from a consultant on the Public Procurement Rules (PPR), but declined to provide further details.
Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman described the reported adjustment as a clear violation of public procurement rules and the specific provisions of the tender document.
He said retroactively increasing the value of an operation and maintenance service contract in this manner was unprecedented and raised serious concerns about procurement integrity.
Iftekharuzzaman noted that VAT exemptions might sometimes be considered for high-value machinery and equipment in infrastructure projects, but argued that such considerations did not apply to this service contract, particularly because taxes and VAT were required to be included in the bid.
He also expressed concern over the possibility of collusion between individuals within the contracting authority and the international contractor, potentially allowing improper benefits to be secured while the facility remained unused.
He called on the government to reject any improper adjustment and conduct a thorough investigation to establish accountability.
SPM facility yet to begin commercial operations
The contract dispute comes as Bangladesh’s first SPM facility has remained non-operational for more than two years, largely due to delays in appointing an O&M contractor.
The prolonged delay has forced BPC to continue relying on lighter vessels to transfer petroleum products from large tankers anchored offshore to onshore storage facilities, adding substantially to fuel-handling costs.
Built by China Petroleum Pipeline Engineering Co Ltd (CPPEC), the SPM project was formally handed over to BPC in August 2024. According to sources cited by UNB, the defect liability and guarantee period for rectifying operational faults expired in February 2026, before commercial operations could begin.
Initially estimated to cost Tk 49.36 billion, the project’s expenditure increased to approximately Tk 82.98 billion following repeated revisions, according to BPC officials.
Despite the higher expenditure, the facility has yet to complete successful testing and commissioning. Previous trial operations reportedly failed, preventing the start of full-scale commercial operations.
Potential savings of Tk 8 billion annually
The SPM system is designed to transfer imported petroleum directly from large offshore tankers to onshore storage tanks through a dedicated pipeline network, reducing dependence on lighter vessels.
The project includes approximately 220 kilometers of pipelines, much of it beneath the Bay of Bengal, and six storage tanks with a combined capacity of 240,000 tonnes. Of the total storage capacity, 150,000 tonnes are allocated for crude oil and 90,000 tonnes for gas oil.
Once operational, the facility is expected to unload a tanker with a capacity of 100,000 deadweight tonnes within 48 hours, compared with approximately 11 days under the existing system.
It is also expected to eliminate lighterage operations, for which BPC currently pays around US$5.50 per tonne. Most of the vessels used for these operations are operated by the Bangladesh Shipping Corporation (BSC).
Market insiders estimate that putting the SPM facility into operation could save the government around Tk 8 billion annually in fuel transportation and handling costs alone.
The reported increase in the O&M contract value has therefore intensified concerns over procurement compliance, cost control and accountability in a major energy infrastructure project that has yet to deliver its intended benefits.
The controversy also highlights the financial consequences of delays in commissioning strategic petroleum infrastructure, as the government continues to bear the costs of the existing fuel-transfer system despite investing billions of taka in the new facility.
