FLEECE POINTS

How procurement officers swindle billions through tenders

Tender prices are varied and excess costs passed to officers in kickbacks.

In Summary

• An expenditure of Sh26 million for branded caps, tops, polo shirts, and corporate uniforms for Thwake Dam launch was among the exposed transaction.

• Ouko flagged transactions by the Interior Ministry in regard to the purchase of three helicopters and assorted weapons whose cost was varied upwards by nearly Sh1 billion.

Former Auditor General Edward Ouko.
Former Auditor General Edward Ouko.
Image: FILE

State officers have continued to occasion the loss of billions of shillings in public funds through blatant abuse of public procurement laws, a new report has revealed.

In some cases, tenders — cited on many occasions as conduits of corruption in government — have been awarded without a cause or priority.

Former Auditor General Edward Ouko, in his report on the government spending for the financial year 2017-18, flagged the anomalies.

 
 

Accounts reviewed by the Star showed a possible loss of over Sh5.6 billion, part of it being advance payments for no work done, variations in costs of tender, and goods not put to use after purchase.

The incidents are ubiquitous, the most hilarious being an expenditure of Sh26 million for branded caps, tops, polo shirts, and corporate uniforms for Thwake Dam launch.

Works at the dam have just picked up after lengthy negotiations over the acquisition of 9,158 acres, defeating the logic of the wasteful expenditure by the Irrigation department.

The revelations came at a time when some state officers are facing various charges, among them engaging in procurement without prior planning.

Even as Director of Public Prosecutions Noordin Haji seeks to prove a point in his renewed fight against graft, the report shows tender flaws are on a massive scale.

The dossier reveals a chaotic system where tenders are restricted on grounds of technicality, while they could ostensibly be a plot to award cronies.

Another major challenge, as flagged by Ouko, is the use of direct procurement for works that require competitive awards, and bidders with the highest prices getting awards against the law. Among the basic tenets of the Public Procurement and Asset Disposal Act, 2015, is that tenders are awarded to the competent lowest bidder.

 
 

But this is not the case in many ministries, departments, and agencies, amid revelations of flagrant abuse of procurement laws.

SH1 BILLION INFLATED COST

Ouko flagged transactions by the Interior ministry in regard to the purchase of three helicopters and assorted weapons whose cost was varied upwards by nearly Sh1 billion.

For the helicopters, the ministry reported that only one bidder was invited and issued with the bid documents without evidence of the entity’s capacity.

Additional essential standard avionics helicopter parts were to be issued as the basis of tender preparation, hence were not included in the original tender documents.

Furthermore, the aircraft's cost was adjusted upwards by Sh900 million in 2017, when the deal was negotiated, contrary to the tender committee’s advice for lower prices. Another Sh76 million was expended in payment for the difference in forex rates.

Audit verification on May 15 revealed that two of the trainer helicopters delivered at NPS air wing at Wilson Airport had not been fully assembled.

In the same ministry, a tender for supply of machine guns was awarded to a bidder that did not provide a certificate of incorporation and a weaponry manufacture registration.

“The bidder was not responsive on the rate of fire, maximum effective range and provision of accessories. Failure to meet all the requirements by the bidder should have led to an automatic disqualification,” Ouko said.

Correctional Services, a department within the Interior ministry, also has 15 firefighting trucks that had not been used as at the time of the audit.

The trucks were acquired at Sh11.9 million in June 2014 and were distributed to prisons across the country.

Another instance was cited in the advance payment of Sh4.2 billion to CMC di Ravenna for the Arror dam project, which is a subject of an ongoing court case.

Former Treasury CS Henry Rotich, among other senior officials of Kerio Valley Development Authority, are in court over the project, which started seven months outside the validity period.

Ouko, in his report, said no evidence was provided to show persons whom were paid the Sh4.2 billion in advance when the same was paid, and by whose authority.

Vehicle purchases are also another area Ouko noted has been abused.

The NG-CDF board was flagged for paying Sh37.5 million to Toyota Kenya before the latter delivered four cars contrary to regulations governing the purchase of vehicles.

At the same time, Ouko queried a Sh13.5 million variance further seeking explanation on why only four cars were bought for the nine regional offices.

THREE TV SETS FOR SH1.9 MILLION

The CDF board was also queried for purchasing three TV sets at Sh1.9 million for the boardroom without providing details on why one was not enough.

“Further, the price at which each TV was acquired does not reflect the fair market price in accordance with fair competition and value for money.”

There are also fears taxpayers may lose Sh2.4 billion in respect of payment to a Chinese firm – Avic International, for the supply of equipment to TVETs.

This followed a delay on the part of the government to put up the infrastructure for the equipment, some of which have been delivered to the 130 TTIs.

Also of concern to the auditor is the engagement of consultants at exorbitant costs yet the government boasts of having experts on-boarded in various MDAs.

The Education ministry was reprimanded on this following an irregular procurement of 10 consultants at Sh251 million to train 4,000 schools on improvement plans.

Public Service and Gender ministry was also queried for paying Sh23 million as ICT, legal, and audit consultancy fees, yet they have full-fledged departments handling the same.

“The contracts were clearly duplication of existing roles that had existing employees undertaking the same duties,” Ouko said.

The issue is pervasive in most departments.

Questions have also been raised on whether the Ministry of Health conducted due diligence on the payment of Sh1.7 billion paid for CT Scanners.

The issue is that the money, being 20 per cent of the contract value, was paid as a condition for the government to obtain a Sh7 billion loan from China.

“Information available indicates that the company was proposed by the Government of the People's Republic of China as a leading manufacturer of CT scans,” Ouko’s report reads.

Queries on the Sh800 million paid out for portable clinics, which have been lying idle at a yard in Mombasa, also remain unsettled.

In the Environment ministry, there are questions over an upward variation of Sh14 million for works on a Met office in Embu, which has since stalled.

Another suspect Sh6 million variation was flagged at the Infrastructure department in respect of replacement of three lifts at the Public Works building.

Delayed works at Mathare Nyayo Hospital also occasioned an extra Sh56 million cost, being interest charged for delayed payment for works done (about 48 per cent).


Former Auditor General Edward Ouko.
Former Auditor General Edward Ouko.
Image: FILE