Kenya: State agencies ignored Githu Muigai’s counsel on railway contract, MPs told


NAIROBI, KENYA: The only body with oversight over Government contracts brushed aside warnings by the State’s chief legal advisor over the Sh327 billion contract for the Standard Gauge Railway (SGR).

Public Investments Committee chairman Adan Keynan

Attorney General Githu Muigai had advised that the process used to award the China Roads and Bridges Corporation (CRBC) the contract to build the railway is not backed by Kenyan law, documents tabled before the National Assembly’s Public Investment Committee (PIC) show.

But despite Muigai’s misgivings, the Public Procurement Oversight Authority (PPOA) approved the project even after seeking the AG’s legal opinion. The PIC heard that PPOA did not receive any documentary evidence showing that the deal was a “government-to-government” contract before ‘looking away’ and accepting that it was not in its purview.

In a letter to the procurement watchdog, Prof Muigai noted that there is no method for selecting suppliers known as “government-to-government” contract.

This emerged Monday as the PIC, chaired by Eldas MP Adan Keynan, received details on how the cost of the SGR was inflated, and how the Government chose a procurement method not recognised by law.

PPOA Director General Maurice Juma, who was the first before the PIC panel, was hard pressed to explain why the authority sought the opinion of the AG only to disregard it later. The committee also heard that the Chinese firm initiated the tender by writing to Kenya Railways and offering to do the feasibility study for ‘free’. PPOA also ignored advice from Muigai on whether the tender satisfied the Public Procurement and Disposal Act 2005, the law that guides State procurement.

According to correspondence tabled before the PIC, Mr Juma had requested a legal opinion on the controversial tender from Muigai on April 5 last year.

The AG responded three weeks later in a strongly worded letter in which he noted “it is worrying that a procuring entity can pick and choose alternate procurement methodologies as alleged over the same subject matter”.

AWARD OF CONTRACT

He went on to note in the letter addressed to Juma: “In adopting initially a procedure… and awarding a contract on that basis, only to subsequently cancel it, and purport to re-award it under alternative arrangements, raises doubt about the integrity of the statute’s authority.”

Prof Muigai further noted that the procurement law was enacted to promote fair competition, transparency and accountability as well as local participation.

In his opinion, Prof Muigai noted that Kenya’s procurement law remains in force in cases where the Government is contributing some resources.

“In cases where the Government contributes from her own resources, and in any form, to any procurement process under such agreement or treaty, the Act applies,” the AG’s letter dated April 30, 2013, reads in part.

“It is not good practice to read one portion of the law in isolation and with disregard to other parts of the same law,” the letter adds.

“More worrying, however, is the increasing phenomenon of government ministries, departments and agencies employing the G-to-G tool to circumvent the requirements of the Public Procurement and Disposal Act 2005,” the AG notes in the letter.

In Muigai’s opinion, the so-called “government-to-government” agreement is not a method for selecting suppliers so as to support the awarding of a contract.

“That is to say, public agencies are expected to implement procurement methods that are fair, equitable, transparent, competitive and cost effective,” Muigai added.

And as if to clear the air on other existing legal opinions, the AG noted that his opinion was the only one recognised by the Constitution of Kenya 2010.

FEASIBILITY STUDY


“I have provided this opinion in my capacity as the Attorney General, a constitutional mandate my office does not share with any other entity in the Republic of Kenya,” he says.

Meanwhile, Kimilili MP Chris Wamalwa revealed that the National Assembly would also summon the team that went for a feasibility study on the project, which he termed a hole to siphon public funds.

In the afternoon, Transport Cabinet Secretary Michael Kamau admitted to the PIC that the Government disregarded local procurement laws in its negotiations with the Chinese authorities for the project.

Kamau said the Government had to work under conditions set by the Chinese government, and thus the procurement of the tender could not be subject to the Public Procurement and Disposal Act.

The Government also had to accept a stringent requirement to pay 6.93 per cent of the commercial loan, as an insurance sum for the project.

He said ignoring procurement law is standard procedure the Government follows whenever it is undertaking a project funded by development partners. “Without exception, we go by the conditions set for us by the financiers. We set aside what our local laws stipulate whenever we are using funding from development partners,” said Kamau.

He said that bypassing the procurement law was not unique to the SGR tender, as similar conditions also apply in projects funded by the European Union, African Development Bank and even the International Monetary Fund (IMF).

“Unless you tell us that we have always been wrong, that is how we have been doing it on the many projects that we have dealt with,” said Kamau.

The committee had questioned Kamau on why the tendering process was not competitive, yet Chapter 6(3) of the Act stipulated that if the Government would partially fund the project, then it should be subjected to the procedures of a competitive procurement.

Instead, the project was undertaken under Chapter 6(1), which exempts the process of competitive procurement, but which only refers to a tender wholly funded by a donor or a development partner. The SGR project is 85 per cent funded by the Chinese government through Exim Bank, while Kenya will pay the balance of 15 per cent.

Kamau further added that unlike Japan, China does not subject its companies to competitive bidding and thus the China Roads and Bridge Corporation (CRBC), was handpicked for the SGR project.

But he said the Government ascertained the Chinese company’s capabilities to handle the project and assured the committee they were convinced Kenyan taxpayers would get value for their money in the investment.

COMMERCIAL LOANS

On claims that the AG had faulted the procurement process and even written to the Public Procurement Oversight Authority on the same, Kamau said the same officer had cleared all documents relating to “government-to-government” dealings and given the process a clean bill.  “He (the AG) has never advised us to stop the contract. Actually, I have his word telling us that we are (moving) in the right direction,” said Kamau.

Kamau and Principal Secretary Nduva Muli further said the Government could not alter the Sh14 billion of the project to go towards insuring the loan, as those were the conditions of the commercial loans.

“These are the conditions set. It is now for us to attract financial funding we have to follow the requirements set,” said Kamau.

The probe continues Tuesday when Finance Cabinet Secretary Henry Rotich, officials from the China Roads and Bridges Corporation and the AG appear before the committee.

By PAUL WAFULA and MOSES NJAGIH, The Standard

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