Valec cancels rail bidding and will split process

Valec decided to take a drastic measure in order to try to get rid of the paralysis that is taking over its operations. The rails that the state-owned company had in its inventory are over. To complicate the situation even more, the bids that could replenish its inventory of steel bars were suspended by order of the Brazilian Court of Audit (TCU). The only alternative left is the definitive cancellation of the two bids that it held last month. According to Valor, Valec communicated the decision to the Brazilian Court of Audit and to the only company that had submitted a proposal in both auctions, the consortium formed by Brazil’s PNG and China’s manufacturer Pangang.

The new plan of Valec is to divide its purchase of 243,000 tons of rails into approximately eight lots. Thus, each bid will result in approximately 30,000 tons of steel ingots. The decision was taken after the state-owned company had consulted, in recent weeks, thirteen multinational specialized in the manufacture of rails. Consultation with these companies had a very clear purpose: to understand the reasons why none of them have participated in the two international competitions that, in a bad moment for the world economy, offered a check of at least $397.96 million.

In an interview to Valor, the CEO of Valec, Josias Sampaio Cavalcante, said that the responses were almost unanimous. All companies, he said, complained about the short term – up to ten months – to deliver a high volume of rails. Most global manufacturers, according Cavalcante, work with a lean structure and have much of their production capacity already committed. On average, the productive potential of the factories is 100,000 tons, reaching a maximum of 500,000 tons. When they received our request, they saw no possibility of service, he said.

A technical criterion related to the strength of the rails also helped undermine part of the interest of manufacturers, to a lesser degree though. Valec required a hardness level for the ingots that, according Cavalcante, is a feature of premium rails, a better – and therefore more expensive – product than the standard rail. The companies claimed, he said, that this condition would require a significant adjustment in the production line of many manufacturers. With the division of lots, we can submit proposals that many companies are able to respond, the CEO of Valec said.

The goal of the two auctions conducted by Valec was to purchase a total of 243,000 tons of rails that were bound for the construction sites of the North-South Railroad and the East-West Integration Railroad (Fiol), federal projects that already face serious problems in their schedules. The two bids, however, were suspended by the TCU, which alleged constraint to competitiveness.

Valec, which had not approved the results of the auctions, sent a letter to the PNG Pangang consortium last week, informing the company of its decision. PNG, however, is not willing to accept the cancellation of the auctions, and according to Valor, will go to the bitter end in order to sign the contract with the state-owned company. This means that the acquisition of rails by the state-owned company is about to turn into an endless legal battle.

The purchase of rails by Valec, which should be just another public bidding process, has become a true martyrdom. Two years ago, the state-owned company tried to buy, at once, 1,711 kilometers of steel bars. The auction, won by the company Distribuidora de Manufaturados Ltda (Dismaf), ended up in court after a sequence of irregularities pointed out by the Court of Audit. The imbroglio only ended at the end of that year, after the decision of the Superior Court of Justice (STJ), which annulled the event and allowed Valec to resume the process. Dismaf and its owners – Alexandre Pantazis and Basile Pantazis –, because of the alleged involvement in corruption schemes in Correios, eventually were prevented from participating in new contracts with ECT.

It was from this episode on that Valec decided, with support from TCU, to make the purchase of rails through two notices to bid. So, it did the auction of 95,400 tons of ingots for the North-South Railroad and another 147,000 tons to be installed in the Fiol. These are the two notices to bid that now the state-owned company tries to cancel for the second time. PNG, which was the only company to submit a commercial proposal in these two auctions – which amounted an offer of $396.56 million – belong to the children of the owners of Dismaf, Karine Pantazis and George Pantazis. It was the solution found by the company to return to compete in the business, given the worn history between Dismaf and Valec.

Fonte: Valor Econômico – The new plan of Valec is to divi