US Embassy Comments on the proposed Terms of Reference for the national fuel bid

Tegucigalpa, Honduras

August 4, 2006

The Embassy of the United States congratulates the Government of Honduras on its continuing efforts to ensure that the refined oil product solicitation take place in the most efficient and transparent manner possible.  The Government of Honduras' decision to adopt the international best practice of soliciting and receiving comments and suggestions from interested parties further strengthens this process.  It is our understanding that the submitted comments will be made public at the close of the 10-day comment period.  We further understand that written replies to these suggestions, either affirming their acceptance and adoption or explaining why they were not adopted, will also be published in time to be used by potential bidders in formulating their bid submissions. 

The Embassy of the United States is pleased to offer these comments regarding the draft refined oil product solicitation.

Consistent with generally accepted business practices and Honduran law, transparency at every stage of this process is of the utmost importance.  As noted above, we are confident, given the announced safeguards, that the process of soliciting bids will be conducted in this manner.  Similarly rigorous steps should be taken to ensure that the evaluation of those bids is transparent and easily understood.  While the current Terms of Reference contain normative evaluation criteria, the formula and weights for those criteria are not specified.  Establishing and publishing these formulae and weights will greatly assist firms in preparing more competitive bids, in better understanding the priorities of the Government of Honduras, and in interpreting and reviewing the results of the solicitation process once the bids have been evaluated.  Based on Government of Honduras statements throughout this process, it would appear that the most significant criterion should be the lowest price at the pump for consumers.  Consistent with President Jose Manuel Zelaya Rosales' publicly stated support for a market-based solution that leads over time to a liberalized market, only proposals offering market-based terms and conditions should be accepted as valid bids.

Another modification that would assist potential bidders is defining vague terms.  For example, in English (the controlling language of the bid document), the word "may" is often ambiguous, and should be replaced with either "might" or "shall," as appropriate to the case. 

We note that additional detail on the mechanism of payment by the Government of Honduras to the winning bidder would be desirable.  Specification of how payments will be arranged, on what schedule, and under what terms and conditions would assist potential bidders in assessing risk.

Given the minimum one-year timeline required to build new storage facilities, any "ex-ship" bid will require the use of existing, private facilities.  Ownership of these facilities is clearly established and protected under existing laws, and we note recent written and oral assurances from the Government of Honduras that no expropriation or other compelled use of these facilities is contemplated.  However, given the centrality of storage to the proposed importation program, the Terms of Reference should explicitly guarantee that no confiscation or compelled use of these facilities will take place.  Further, procedures for how existing facilities will be used and at what price in the event an "ex-ship" bid wins the solicitation should be clearly laid out in the document for the benefit of both current storage owners and potential bidders.

Finally, pursuant to President Zelaya's public commitment to move the Honduran fuels market towards liberalization over time, the Terms of Reference should include a statement to this effect, together with at least a brief outline of how this is to be accomplished and over what period of time.  Moves to liberalize the market over the remainder of President Zelaya's term of office will certainly affect the market analysis and other financial calculations that must be carried out by potential bidders, and should therefore be included for their reference in the document.

The U.S. Government welcomes future inquiries from the Government of Honduras to clarify any of these points.  Neither the submission of this letter nor the elaboration of the above points is intended to or in any way abridges the rights of any other person, public or private, to submit comments during the remainder of the stipulated comment period.