• MDAs asked to refer to the Public Procurement and Asset Disposal Act, 2015, during the tendering process.
•State agencies are accused of failing to conduct inspections prior to tendering.
Image: FILE
The National Treasury will not take part in investigating companies and contractors tipped for tender awards by various state agencies.
Cabinet Secretary Njuguna Ndung’u has told ministries, state departments and agencies that it is not the exchequer’s job to verify the capacity of suppliers and contractors.
Treasury says various MDAs have been requesting its participation in the due diligence exercises aimed at determining the technical, financial and legal capacity of bidders.
The reviews are usually taken with a view to ascertaining whether a contractor or supplier is able to implement a project.
In a circular to all accounting officers, Prof Ndung’u said due diligence forms part of the procurement process, hence, should be handled by the accounting officers of the procuring entities.
“The National Treasury has no role in the procurement process and should not be involved in the due diligence exercises,” the CS said.
Prof Ndung’u restated in the circular copied to Attorney General Justin Muturi that the National Treasury’s mandate is to source and mobilise financial resources for approved projects.
The Treasury boss asked MDAs to refer to the Public Procurement and Asset Disposal Act, of 2015, during the tendering process.
He cited Section 83, which says that an evaluation committee, prior to the award of a tender, should conduct due diligence and present the report in writing.
The law says procuring entities — through the evaluation committee —should confirm and verify the qualifications of the tenderer who has submitted the lowest evaluated tender to be awarded the contract.
The Public Investments Committee, in its 24th report after a review of state corporations audits, flagged many instances in which due diligence would have saved Kenyans millions of shillings.
A case was pointed out in Kenyatta National Hospital where the auditor flagged problems with a solar system which worked only for five months before running down following a surge.
MPs said the hospital should have conducted due diligence to prevent the unforeseen effects of the power surge.
A hydropower project whose cost increased by Sh112 million owing to a lack of proper due diligence was also reviewed by PIC.
Kerra was also forced to assign a road project to a new contractor at Sh504 million due to the slow performance of the previous contractor.
MPs concluded that the events “brought into sharp focus the due diligence that was done on the contractor”, adding that the reassignment was also done late.
“It was a common trend in KERRA to award contractors only to go under after a short time. This may indicate poor due diligence done on contractors by KERRA before award,” PIC said.
A contractor who was assigned the installation of diesel generators at Kiunga in Lamu and another in Ijara also failed and the project was reassigned.
PIC, under the chairmanship of current Mombasa governor Abdulswamad Nassir, concluded that no due diligence was conducted on the contractor.
“There was no due diligence report provided on the terminated contractor to show whether it was capable to undertake the works despite the committee requesting it on several occasions,” the committee said.
The Rural Electrification Corporation (Rerec) was also called out for not conducting due diligence in the procurement of 200 computers from Tanelec Limited, a Tanzanian firm, in 2016.
“It was not clear how the ad hoc committee procured the Tanzanian company without ever doing due diligence,” MPs said.
The Water Sector Trust Fund also lost Sh9 million to a deregistered NGO trading as NETWAS that it awarded a tender to construct a dam, only to learn later the organisation had no capacity.
MPs said it appeared the fund did not do due diligence before funding the organisation, further citing a case at the National Housing Corporation where an expenditure of Sh920,000 was made in the valuation of a parcel of land.
The corporation spent an additional Sh5.6 million on its Nyeri Housing Scheme project, with MPs blaming the corporation for failing to assess the contractors before awarding the contracts.
(Edited by V. Graham)