PIA awards Rs700m contract to dubious company

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In a scandalous deal, the Pakistan International Airlines (PIA) have awarded a contract of Rs700 million for the up-gradation of In Flight Entertainment (IFE) in eight Boeing 777 aircraft to a local company which was registered only two months before the tender was floated.

A retired Pakistan Air Force officer, Group Captain (R) Khawaja Moizuddin, is the owner of that company, M/s Avionic Solutions Private Limited. It was incorporated with a capital share of Rs100,000. He is said to be a close friend of PIA CEO, Air Marshal Arshad Malik. The PIA spokesman termed the allegation “highly unfair and absurd.” Malik is presently under suspension on the order of the Sindh High Court after a petitioner challenged his appointment.

Avionic Solutions, according to PIA spokesman, has extensive commercial and military avionics modifications and technical support experience and are working with local and international players. However, this claim is in contrast with the details mentioned in the documents available with The News. They indicate the company was registered only in March last year, two months before the tender was floated by PIA in which Avionic Solutions participated and won. M/s AAR International Corporations of Singapore, with 70-year experience in the relevant field, was another company that participated in the bid and lost.

Other than Khawaja, his wife and daughter, a student, are Directors of the Avionic Solution. By the time of participation, it had not filed a single tax return, annual report and there was no auditor to look after its accounts. The PIA’s spokesman initially said that Avionic Solutions was not a newly formed company and later said Terms of Reference designed for the purpose didn’t specify how much experience the company should have. When asked that TORs might have been tailor-made to oblige a particular bidder, he said PIA wanted “indigenous solutions” of IFE and there is no local company having relevant experience. He said the service provider will be paid only after its products are certified to be fit for the purpose.

The IFE is a digital entertainment system consisting of audio and visual gaming as well as other material designed to entertain the passengers, especially during flights. It is used as a marketing tool and is considered a need for the modern airline industry. Installation and up-gradation of IFE is a highly technical job and needs certification of the European Union Aviation Safety Agency and Federal Aviation Authority of the US Department of Transportation.

Out of eight aircraft selected for up-gradation, three are 16-year old, two are of 14-year and another two have a life of 11 and 12 years respectively. As per aviation policy, no aircraft can be operated after 20-year life. Major airlines like Emirates have phased out the above series of Boeing 777 aircraft and most airlines have a policy of using aircrafts not older than 12 year as per average as prohibitive maintenance is required on fleet older than 15 years.

In the case under question, tenders were invited in June and two companies participated: AAR International Corporation which was registered in 1951 and Avionic Solutions which was only two-month-old at the time of floating tender. Incidentally, PIA’s Chief Financial Officer Khalilullah who signed this award to Avionic Solution was also hired in the month when a tender was floated. Avionic Solutions, the winner of the Rs700 million project, doesn’t have any experience of carrying out such a project, a fact admitted by PIA spokesman who was initially of the view the winner has “extensive experience.” The company was registered on the same date (March 18, 2019) with the Securities Exchange Commission of Pakistan and the Federal Board of Revenue.

When asked if this is true that it was a family-owned company where a family head has appointed his wife and daughter its directors who don’t have any experience, the spokesman said Avionic Solutions is a private limited company including partners from the family which “is a common practice in Pakistan.” To another question that whether it is true that the company was set up just two months before the floating of tender, the spokesman said “the evaluation criteria required a registered company which it was at the time of bid submission.”

He said TORs required a solutions provider that can provide an indigenous cost-effective solution. The mandatory requirements were of a company that is registered with local companies and taxation regulators and could provide components, services, and support in compliance with FAA Part 21 and PCAA certifications, he said. Asked then why PIA allowed a foreign company to participate in the bid if a local company was required for “indigenous solutions”, he said the foreign company had a local representative.