In Zambia’s Nakonde–Kasama tender, losses are priced into the bid and enforced at the factory test

In ZESCO’s Package 4, a tender for work at two 330 kV substations, each bid’s guaranteed transformer and reactor losses were added to its price before the bids were compared: USD 12,000/kW for transformer no-load and reactor losses, USD 7,000/kW for transformer load losses. The contract terms brought the same rates back after the factory tests: a penalty per kilowatt found above the guarantee was to be deducted from the Contract Price, and a transformer or reactor more than 10% over its guaranteed losses could be rejected.^{1, 2}

One figure thus worked on a bid at two moments: in the evaluation, a lower guaranteed loss meant a lower evaluated cost and a better cost score, and at the factory it became the line the measured losses had to stay under.

The package covered two equipped 330 kV line bays with line reactors at the existing Kasama substation and the new greenfield Nakonde Stepdown substation, about 18 km west of Nakonde Town, with 330 kV lines to Tunduma and Kasama and 330/(132)66/11 kV, 90 MVA transformers. The World Bank’s procurement plan for the project, revised on 1 September 2025, put the package at an estimated US$26,052,525.18, describing it only as a new Nakonde 330/132/66 kV substation; the request for bids itself states no budget or contract value.^{1, 6} As of 22 October 2026, ZESCO’s tender register showed no notice of evaluation or award for Package 4, whose listing gave a closing date of 25 September 2026 at 10:30, and the World Bank’s procurement notices for the project listed no contract award for it.^{7, 8}

The losses were added for comparison only, and where a bidder offered transformers from more than one maker, the highest guaranteed losses were used. Bids came in two envelopes, technical and financial, and only substantially responsive bids with a technical score of at least 60% were to have their financial parts opened. Cost then carried half the score, measured against the lowest evaluated cost, and rated technical and non-price criteria the other half, measured against the highest technical score; the best-scoring qualified bid was the Most Advantageous Bid.¹

Two bids show the trade-off.

With cost and technical merit weighted equally, a cheaper bid with a lower technical score beat the technical leader in a two-bid comparison only if its evaluated cost, as a share of the leader’s, was below its technical score as a share of the leader’s. That evaluated cost already included the capitalised losses, which is where the loss guarantee entered the score.¹

After the factory tests, the functional-guarantee clauses set the evaluation’s figures as penalties, although a footnote to the evaluation criteria calls the penalty higher than the capitalisation value. The contract’s appendix says the penalties “shall be stated once only and shall be identical to the values below”, and deducts them “from the Contract Price”. Asked whether losses were counted twice, ZESCO pointed to the capitalisation for the evaluation and to the appendix for the penalties; no addendum or clarification in the documents read addresses the footnote. As printed, a kilowatt over the guarantee would cost the contractor the rate at which a guaranteed kilowatt had been priced into the comparison, not the higher penalty the footnote describes.^{1, 2}

The trigger is worded differently for the two: the transformer penalties apply where losses exceed the guarantee “by more than the margins specified hereunder”, the reactor penalty where they exceed it “by not more than the margins”, each charged per full kilowatt above the guaranteed value, with 0.5 kW and above rounded up. The only loss margins the clauses list are those beyond which ZESCO could reject a unit, 10%, and the transformer specification calls the guaranteed losses maximum values that “shall not be exceeded”. Read literally, a transformer penalty would start only beyond the 10% at which ZESCO could also reject the unit, and would then count every kilowatt above the guarantee, while the specification says the guarantee is not to be exceeded at all; the reactor clause reads the other way round, and no addendum or clarification addresses the point.¹

The reactor rate itself is printed two ways: the reactor data table in the technical specification gives 7000 USD/kW for the capitalisation of losses, against USD 12,000/kW for reactor losses in the evaluation criteria and in the specification’s own reactor formula, and 12,000 USD/kW for the reactor penalty. No addendum or clarification addresses the difference.¹

The appendix limits the functional guarantees to the transformer and reactor loss and noise values the contractor guaranteed, caps its liquidated damages for missing them at 10% of the Contract price in total, and levies them separately from, and concurrently with, damages for delay. Delay damages ran at 0.5% a week, applied to the price, as quoted in the Price Schedule, of the part not completed on time, up to 10% of the Contract Value. Damages for missed loss and noise guarantees had, in other words, a ceiling of their own, beside the delay ceiling rather than inside it, and a unit more than 10% over its guaranteed losses could also be rejected.¹

Access did not depend on a prior list: the request for bids was international, under the World Bank’s Procurement Regulations for IPF Borrowers, Seventh Edition, issued in September 2025, open to all eligible bidders, without prequalification and with no electronic bidding. Qualification was tested inside the evaluation instead: only substantially responsive bids from eligible and qualified bidders were to go on to the detailed technical evaluation. ZESCO was to judge qualification on the bidder’s own documents, without counting the qualifications of its subsidiaries, parent entities, affiliates or subcontractors, other than specialised subcontractors where permitted.¹

The financial bar was an average annual energy-sector turnover of at least USD 42 million over the last three years and access to at least USD 7 million in financial resources other than advance payments, plus the cash flow for this contract and its current commitments. The experience bar was narrower: at least two contracts of at least USD 20 m each, or one of at least USD 40 m, in the last ten years, completed or at least 80% complete. Each had to be for an air-insulated substation with a new greenfield substation of at least 330 kV, two or more transformers of 330 kV or above and two or more line bays of 330 kV or above with line reactors, all “under one contract”, as ZESCO answered a bidder. Experience as contractor, joint-venture member, management contractor or subcontractor counted, and in a joint venture the members combined had to meet the requirement. A group whose substation and reactor-bay references sat in separate contracts, or in a parent company that was not itself the bidder or a joint-venture member, could not qualify on them.^{1, 2}

The grid and transmission guide sets substation tenders like this one beside the frameworks and qualification systems through which transmission owners buy.

The performance security was 10% of the total contract sum, as a bank guarantee within 28 days of the Letter of Acceptance. The particular conditions print its reduction clause twice, once saying the security “shall not be reduced” at Operational Acceptance and once that it “shall be reduced” to 10% of the value of the components under the extended defects liability. The bank-guarantee form in the contract forms says something else again, halving the guarantee at Operational Acceptance, though a footnote to the form says its text is to be revised where needed, among other things for an extended warranty obligation. The components under extended liability include the transformers and reactors: defects liability ran for 24 months from Operational Acceptance, and for 36 months for transformers, reactors, circuit breakers, disconnectors, instrument transformers, SAS and WAMPACs. Liability was capped at 1.1 times the contract price; asked to lower the multiplier to 1, ZESCO answered that the clause “shall not be revised”.^{1, 2}

If the network in Tanzania, at Tunduma, or other connecting lines could not be energised when Nakonde was complete, successful loop-back tests by the contractor would let ZESCO issue the Operational Acceptance Certificate and make the completion payments, with no delay to payment and no liquidated damages for those lines, while the live tests across the link became a call-out service paid from a provisional sum. Taking over after that call-out still required the site acceptance and commissioning tests, including the protection tests across the link, SCADA and telecom availability, metering accuracy and earthing checks. The contractor still answered for telecom interoperability between Nakonde and Tunduma, with TANESCO’s contractors there coordinated by the utility project managers, and ZESCO told a bidder there would be some works at Tunduma substation.^{1, 2}

Package 4 was issued on 11 May 2026 with a bid deadline of 26 June 2026; after five addenda, bids were due on 25 September 2026 at 10:30 CAT, when their technical parts were to be opened in public at ZESCO’s headquarters in Lusaka.^{1, 2, 3, 4, 5}

Addendum No. 3 cut the window for the Guarantee Test of the completed facilities from 730 days after Completion to 30 days, and added that passing it does not relieve the contractor of its obligations during the defects liability period. The same addendum raised the extended defects liability from 12 to 36 months, after a bidder had asked ZESCO to confirm 12. Addendum No. 5, after a bidder asked, fixed the date of the OANDA selling rate used to convert bid prices to US dollars at 28 days before the bid deadline; before, it could be any date from then to the expiry of bid validity. A bid priced on the documents as first issued would have assumed 12 months of extended defects liability on the transformers and reactors, not 36, and a Guarantee Test window of 730 days, not 30.^{1, 2, 3, 4}

Before any award, every bidder was to receive a Notification of Intention to Award giving each bidder’s price as read out and as evaluated, its technical score, and the winner’s contract price and combined score. A standstill period of 10 business days then had to run, unless only one bid was submitted or the Bank recognised an emergency, and longer if a requested debriefing was delayed. Within 10 business days of the Letter of Acceptance, ZESCO was to publish a Contract Award Notice listing every bidder’s price as read out and as evaluated, the bids rejected and why, and the final contract price, on its website with free access if available, otherwise in a national newspaper or the official gazette. How the World Bank’s standstill and complaint rules compare with those of other development banks is set out in our field note on development-bank procurement rules.¹

Every evaluated price in that notice includes the bidder’s capitalised losses, so, once the notice is published, the gap between a bid’s read-out and evaluated price will include what its loss guarantees added in the comparison.

ListingMinds, “In Zambia’s Nakonde–Kasama tender, losses are priced into the bid and enforced at the factory test”, 15 October 2026, updated 22 October 2026. https://www.listingminds.com/energy/field-notes/zambia-nakonde-kasama-substation-tender