Monday, July 27, 2009

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Mahindra Satyam loses Railways’ tech contract

Indian Railways has cancelled a locomotive management system (LMS) contract awarded to Satyam Computer Services (now Mahindra Satyam) in January this year, after the company failed to meet the deadline for submitting required financial details and start working on the pilot project.

“After non-delivery of the pilot, we served a notice around one-and-a-half months ago,” a senior railways official told ET. He requested anonymity because he is not authorised to speak with media about vendors and contracts. While the value of the LMS contract is less than Rs 100 crore, it could help vendors chase similar contracts worth up to Rs 3,000 crore more effectively. Apart from Mahindra Satyam, rivals, TCS, Infosys, Wipro and HCL are all aggressively bidding for these contracts.

“We have already received three applications, including from Wipro, after we issued a new tender for the same project,” he added. Railways has now invited other vendors including Wipro to bid for the project.

Mahindra Satyam had emerged as the lowest bidder for the first in a series of outsourcing contracts worth almost Rs 2,000 crore to be awarded by Indian Railways in January earlier this year.

When contacted, a Mahindra Satyam spokesman said his company could not produce the audited financial statements for past three years, which led to the cancellation of the contract.

“It is true that Satyam had bid for an Indian Railways project for asset management solutions (called Loco-shed Management System LMS) in June 2008. This was decided in January 2009 and the ‘letter of acceptance’ was placed on us,” said Sridhar Maturi, a Mahindra Satyam spokesman.

“However, since we were not able to meet the statutory requirements of submitting the audited financial statements for the past three years as required by the Indian Railways, the contract awarded to us was cancelled,” he said, adding, “So, there is no question of losing the contract.”

Railways is planning to outsource three more contracts over the next few months, with each estimated to be in the range of Rs 450-500 crore. Apart from the asset management contract, railways also plan to invite bids for a contract to develop and deploy a solution for automating and integrating the functions of finance and payroll and the other one for material management solution.

“While Satyam is free to bid for all future contracts, we will be closely looking at the past track record,” the railways official added. Indian Railways, which is the second-largest rail network in the world, also plans to outsource another contract called ‘implementation of software-aided train scheduling’, valued at around Rs 450 crore. The project will help railways do real-time train scheduling and management with the help of a software solution.

However, Mahindra Satyam still sees opportunities for gaining new business from railways. “Mahindra Satyam is free to participate in bidding for future projects for Indian Railways and it has not been blacklisted by them. Our senior management is in touch with the railway authorities and is exploring future business opportunities,” Mr Maturi added.

Mahindra Satyam had emerged as the lowest bidder for the first in a series of outsourcing contracts worth almost Rs 2,000 crore.

Railways is planning to outsource three more contracts over the next few months, with each estimated to be in the range of Rs 450-500 cr.

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