Former Kebs executive on the spot over Sh1.3bn tender

Former Kenya Bureau of Standards (Kebs) managing director Eva Oduor is on the spot over the award and subsequent cancellation of a Sh1.3 billion tender for the construction of Mombasa regional offices and laboratories during her tenure.

A new report by Auditor-General Edward Ouko says Ms Oduor irregularly awarded the tender and illegally terminated the contract that was awarded to EPCO Builders.

Ms Oduor, the report says, signed the highly-priced contract despite a clear directive from the National Standards Council that the cost should not exceed Sh1 billion.

Mr Ouko says in the report that Ms Oduor also failed to take into consideration the arithmetic corrections made by the tender evaluation committee, resulting in an Sh8.5 million loss, had the project gone ahead.

“While the corrected evaluated price for EPCO Builders was Sh1,315,883,594, the contract signed was for Sh1,324,399,610,” the report tabled in the National Assembly last Thursday says.

Mr Ouko reckons that Kebs violated Section 68 of the Public Procurement and Disposal Act, which provides that a person submitting a
successful tender and the procuring entity shall enter into a written contract based on the tender documents and any corrections made.

The audit report accuses Ms Oduor of disregarding the Public Procurement Regulations 2006 which require the procurement unit to obtain the approval of the tender committee that authorised the original contract, prior to its termination.

The Kebs project was intended to satisfy increasing demand for laboratory and calibration services in Mombasa which rose by 127 per cent between 2008 and 2010 and its cancellation means the problem persists.

Ms Oduor wrote to the principal secretary for Industrialisation on August 7, 2013 indicating that the special National Standards Council meeting had resolved the previous day to terminate the contract.

“Minutes of the board meeting held on August 6, availed (sic) to us did not indicate any evidence of board’s approval to terminate the contract,” the audit report says.

Ms Oduor went ahead to inform EPCO Builders on August 12 that the National Standards Council had terminated or cancelled the tender.

The audit report further found that due process was not followed in cancelling the tender because the tender committee was not involved. The contractor consequently filed a claim of Sh379.7 million as compensation and damages for wrongful termination of contract.

“This figure is, however, doubtful as no evidence was availed (sic) to prove its legitimacy. We, however, observed that the site had not been officially handed over to the contractor by the time of terminating the contract and, therefore, the claim of Sh379.8 million is not merited,” Mr Ouko says in the report.

The parliamentary Public Investments Committee (PIC) ordered a special audit on the procurement of the tender for the regional offices and laboratories to ascertain how the process was carried out.

The committee chaired by Eldas MP Adan Keynan wanted to know how procurement of the firms, evaluation of tenders and awards, contract agreement, feasibility study for the project was done and whether due diligence was above board.

The auditor was also asked to ascertain whether Kebs contravened a moratorium on large projects issued prior to 2013 General Elections, the role of Industrialisation ministry and the standards body in termination of the contract and related implications, if any.

READ: Minister suspends Kebs boss over claims of gross misconduct

Out of nine bidders who returned tender documents, only three — China Overseas Engineering Ltd, Mulji Devraj and Brothers and EPCO Builders — qualified for the detailed technical evaluation.

Mr Ouko says in his findings that Kebs did not carry out a feasibility study of the project but relied on a concept paper that the chief manager, Testing Services, J. N. Gikubu, developed and which was forwarded to the National Standards Council for approval.

Kebs then engaged the services of a private quantity surveyor M/S Ngahu and Associates, who presented to the council the designs and cost implications of the project as Sh1,270,883,667.

However, the council members agreed and resolved that the project be implemented and directed the management to ensure that the cost did not exceed Sh1 billion.

Mr Ouko says the council relied on cost estimates prepared by the project quantity surveyor M/S Ngahu and Associates to arrive at the figure after minor adjustments on the structure.

The report shows that the project was to be financed from Kebs internal reserves invested in various fixed deposit accounts at the National Bank of Kenya that amounted to Sh1.24 billion as at end of June 2013.

The auditor said Ms Oduor sought approval from the then Head of Public Service Francis Kimemia to undertake the project at a cost of Sh1.2 billion and was cleared on May 24, 2014.

The government at the time had frozen award of tenders exceeding Sh500,000 without the approval of the Head of Public Service.

Mr Ouko, however, says no report was presented to auditors to prove that due diligence was carried out before and after the award of the contract.

Mr Ouko has recommended that Kebs consider alternative ways of financing the project other than using its accumulated reserves.

“Utilisation of all reserves on a single capital project would expose the Kebs to sustainability risks,” he said even as he invites relevant government agencies, (including the Ethics and Anti-Corruption Corruption Commission and the Directorate of Criminal Investigations) to further probe irregularities flagged in the special audit.

“The management of Kebs should re-evaluate its internal procurement systems in line with the Public Procurement and Disposal Act, 2005 and Regulations 2006 with a view of strengthening the system to avoid recurrence of such irregularities in future,” Mr Ouko said.