Road works on Thika Road. Photo courtesy of Kevin A. Urban.
Over the next few weeks, I will run a number of articles on how our country continues to lose money because of poorly thought out policies and laws on public procurement.
Coming from my years of active participation and interaction with public procurement matters, I keep insisting that as a nation, our decisions on public procurement must make sense. There are no options. This is a debate we must have as a nation and the earlier we face it the better.
What we buy and how we buy must make sense
Public procurement is a marketplace. When a procuring entity ventures out to make a purchase of works, goods or services, it does so on behalf of the public.
It is in our interest that the procuring entity gets the best deal in the market using our money. That deal should incorporate and attain a balance of both good price and best quality. Is that always the case?
Poor Decisions – Who really benefits?
Poor decisions lead to unwanted outcomes. They say you must never make the same mistake twice. The second time you repeat that bad decision is no longer a mistake but a choice. You intend that particular second outcome.
When procuring officials, out of ignorance or sheer cheekiness, make poor decisions, we reap the raw fruits as a nation. In the same equation however, there are others who celebrate and seem to be quite happy with our poor decisions. I will explain how by this illustration.
In February 2020, one of our biggest state corporations awarded a tender of around Kshs. 5 billion to a company of Chinese origin. One of the bidders filed for review before the procurement Review Board to contest the award.
This application was on the basis that the applicant had been eliminated because of a preliminary issue that was unfairly evaluated. The Applicant felt that its tender was adequate and it was therefore likely to win as its bid was about Kshs. 0.5 billion cheaper. The aggrieved party was also of Chinese origin.
The Application was subsequently withdrawn without further instructions before any further filings before the Review Board.
This is an emerging trend in the event that a Chinese company is awarded a tender at a higher amount, and another Chinese company contends the same, there is a withdrawal and the company with the higher price is allowed to proceed.
How can one design a tender document in such a way that you are able to say that a person who has worked for you satisfactorily in the near past, is working for you satisfactorily presently, is not eligible or qualified to work for you in future and as a result the public is left to pay Kshs. 300 million more?
My thinking (I could be wrong) is that either the companies agree to work together or there is intervention from certain quarters keen to ensure that the company with higher price undertakes the work. My feeling is that the latter is most likely at play.
And why not? It is in China’s interest that the company that will repatriate more money back home undertakes a project in a foreign country. And that is sheer logic for any country with a well thought out national interest strategy.
In my view, this is top shelf decision making clearly putting one’s nation first.
Kenyan Scenario
Coming back home, things tend to play in a slightly different and awkward fashion. At this point, I would like to deal with facts based on reported cases. These cases should be available from the Public Procurement Regulatory Authority either online or by request.
The Saxon, Roben and KeNHA Cases
[Reported/available at PPOA-See PPARB Applications 38 of 2020, 58 of 2020 and 60 of 2020 (Consolidated) between Roben Aberdare (K) Limited, Saxon Investment Limited vs The Accounting Officer, Kenya National Highways Authority and Halane Construction Company Limited]
In November 2019, the Kenya National Highways Authority (KeNHA) advertised a tender for Periodic Maintenance of Thika – Garissa [Makongeni-Embu Junction]. This is part of a busy highway that cuts through parts of Kiambu, Machakos, Kitui and Garissa counties.
The scope of tender included earthworks, fixing of shoulders, patching of potholes and regulating of the surface. This is quite usual/ordinary scope for these kinds of works. KeNHA routinely undertakes such works in their tens at any one point in time.
For this size of works, KeNHA required that the contractor should have NCA 1 for roads and bridges.
What is NCA 1?
For one to be registered as NCA 1, there is a thorough registration process administered by National Construction Authority (NCA) – the body entrusted by Kenyan people to register, verify and rank contractors. NCA is established under the National Construction Authority Act.
This process involves submission of education levels of directors, experience, equipment, offices, assets (both fixed and current). In short, any company vetted and registered as NCA 1 is expected to have capacity to undertake any work of NCA 1 category in this country subject to tender requirements.
The fact that NCA exists should make us grant a certain level of leeway to firms with certain ranking that they can undertake certain works in their categories. Do we trust these NCA rankings? Is it of any significance during procurement? In my view the jury on this is still out.
Unusual Requirements in the Tender Document
To undertake the works, a contractor was required to have these pieces of equipment among others:
- Towed or motorized grader
- Steel wheeled roller
- Excavators
- Water bowsers
- Concrete mixer
- Scrapper
- Chip spreader
- Sheep foot roller
- Bitumen distributor
- Paver
In the tender however, KeNHA somehow found it important to pick five pieces of equipment and make them mandatory. These were:
- Paver
- Bitumen distributor
- Tippers
- Pneumatic roller
- Drum roller.
Weirdly, the said pieces of equipment were accorded a whole 40 marks.
The assignment of 40 marks for the equipment in this particular tender was confusing since even if a bidder scored 38 marks and lacked one piece, it would still be eliminated since the five equipment had been designated as mandatory. https://gerivia.co.ke/1038/preliminary-mandatory-evaluation-in-public-procurement-in-kenya-necessary-formalities-or-undue-technicalities/
Why was this unusual?
The more sensible approach to technical evaluation would be, a bidder would be expected to earn or lose marks depending on documents of ownership or lease provided for any of the equipment and not to be disqualified. A bidder who owns equipment would earn more marks than one who leases the equipment.
This is because the Public Procurement and Asset Disposal Act at Section 80 requires that technical aspects of a tender should consider both quality and quantity of the bid. Naturally, the tender with the highest quality will get the highest mark.
However, this particular tender instead locked the bidders to yes or no choices at technical evaluation and assigned marks at the same time. As stated above, no specific reason was given as to why these particular pieces of equipment were mandatory.
I wish to bring out two aspects about these pieces of equipment. Firstly, there is nothing unique about any of them for this kind of work and secondly, any NCA 1 company in the Roads category would be expected to have them either through ownership or on lease.
What is the implication of this unusual approach?
This is how serious the implications are. If a bidder did not have two tippers as demanded, and had only provided evidence of one, then such bidder would be eliminated. That is regardless of how low their bid amount was or how experienced the bidder is.
This will then result in the unimaginable absurdity of eliminating a well-established construction company which is already doing other road works in Kenya (including for KeNHa) over lack of a tipper as required under the tender document.
In Kenya today, there is no magic in hiring a tipper. You can walk into any yard and get a tipper to undertake the works under contract. In the minimum, a tipper should just be awarded a mark but should not form basis for elimination. In this tender? It led to elimination!
Contested Tender Award Decision
KeNHA evaluated the tender and initially awarded it to a company called Saxon Investment Limited. This award decision was immediately contested before the Review Board by Roben Aberdare (K) Limited, the second lowest evaluated bidder.
Roben contended that Saxon did not have all the equipment. In response, KeNHA defended its action and attached documents of ownership or lease for equipment as submitted by Saxon.
Among the documents was a sale agreement indicating that Saxon had purchased a bitumen distributor from a third party. Roben argued that though there was a sale agreement, there was no receipt to prove that payment was made.
In its Ruling, the Review Board agreed with Roben adding that there should have been a logbook for the bitumen distributor. It nullified the award to Saxon and sent the tender back for re-evaluation. In doing so, the Review Board noted that the requirement for bitumen distributor was mandatory and therefore Saxon should not have passed the technical stage.
Re-Evaluation Outcome
During the re-evaluation, it was found that even the bitumen distributor supplied by Roben did not have a logbook. KeNHA therefore made a decision that resulted in Roben joining Saxon in the rejected lot. This left only one bidder eligible for award, that is the highest bidder known as Halane Construction Limited.
The Kshs. 300 million Decision
At this point, let us look at the financial implication of this outcome. The three companies in contention had quoted as follows:
Saxon: Kshs. 1, 248, 984, 093
Roben: Kshs. 1, 325, 687,643
Halane: Kshs. 1, 583, 648, 472
The difference between Saxon and Roben was Kshs. 77 million. The difference between Saxon and Halane Construction (the awarded bidder) was over Kshs. 300 million!
Suffice to say Roben filed a second application to which KeNHA mounted a defence of its decision to award to the highest bidder. The Review Board in applying the law agreed with KeNHA and so the tender was awarded to Halane at Kshs. 1,583,648,472.
It is important to note that none of the companies applied to High Court for review and no one appealed the Review Board’s decision meaning all felt that the decision was within the law.
Lessons from This Tender
Article 201 of the Constitution calls for responsibility in making decisions with regard to public money. The decision by KeNHA to make it mandatory to have five pieces of equipment is not only unusual but irresponsible considering the financial implications of such decisions.
If the government is sourcing water desalination services, then making ownership of a desalination plant mandatory would be logically sound… however, it would be of no logical value for the government to make evidence of ownership of lifting jacks compulsory while sourcing for staff transport buses… it is expected that persons who offer staff transport using buses will have jacks to lift their buses and change tyres in case of a puncture!
Further, such unusual decisions should have obvious benefits to the public especially if they are likely to cost the public so much money. For instance, if the government is sourcing water desalination services, then making ownership of a desalination plant mandatory would be logically sound.
On the other hand, it would be of no logical value for the government to make evidence of ownership of lifting jacks compulsory while sourcing for staff transport buses. It is logically expected that persons who offer staff transport using buses will have jacks to lift their buses and change tyres in case of a puncture!
The Big Irony
Reading through the Ruling, you will find that at the time of the cases before the Review Board, both Saxon and Roben were already providing the same services as those under procurement to KeNHA. In fact, both claimed that they had, in the recent past, completed and gotten paid by KeNHA for exactly the same scope of works in other parts of the country.
This further goes to show how weak decision making can be costly. To an objective person, one is left to wonder how one can design a tender document in such a way that you are able to say that a person who has worked for you satisfactorily in the near past, is working for you satisfactorily presently, is not eligible or qualified to work for you in future and as a result the public is left to pay Kshs. 300 million more.
In making our procurement decisions, we must not be static and without financial sense. The decisions should be made in such a way that they will result in the best deal for the public in the market and for the best quality of work.
In the absence of this, as stated above, we might as well be playing into the hands of the other person at a hefty price to Kenyans. The beneficiaries might not even be Kenyans. Sadly.
