McKinsey on the spot in Sh348m Industrialisation ministry contract

US consultancy McKinsey and Company raised a Sh69 million invoice payable by the Kenyan Ministry of Industrialisation before a contract for the job was signed, an audit report has revealed.

Auditor-General Edward Ouko says the ministry procured consultancy services from McKinsey for support of Kenya’s industrial programme, but raised an invoice of Sh69,827,963 seven days before the signing of a Sh348 million contract with the ministry.

The contract was signed on November 18, 2014 but McKinsey raised the invoice on November 11, 2014.

Mr Ouko said the contract agreement under subsection 2.1 and 2.2 indicates that the contract was to come into effect on the date the contract is signed by both parties and that the consultant would begin offering the services upon signing of the deal or such other date as may be specified in the contract.

“A review of the process indicates that the consultant raised an invoice of Sh69.8 million on November 11, 2014 for Milestone 1 (inception) even before the contract was signed between the two parties implying that the consultant may have started working before contract was awarded and the signing of the contract was mere ratification of the said contract,” says Mr Ouko in the annual report and financial statements of the ministry for the year to June 2015.

Mr Ouko said the propriety of the expenditure could not be confirmed.

In other consultancy contracts, Mr Ouko said he could not confirm whether the ministry got value for money on a transaction worth Sh11 million.

Mr Ouko said the Ministerial Tender Committee awarded a consultancy for the provision of technical support to the Business Environment Delivery Unit of Strathmore Business School.

He said the ministry invited bidders but only one application was received. “The tender committee went ahead and awarded the tender to the only responsive bidder which in effect resulted in use of direct procurement,” he said.

Mr Ouko questioned how the consultant commenced work before the contract was awarded and signed.

“From the subsequent payment documents, it was noted that the proforma invoice and invoice were issued on November 6, 2014 and November 17, 2014 respectively and received by the ministry before local purchase order of November 27 was raised,” said Mr Ouko.

He said the whole deal was done in a record less than one week despite the contract agreement indicating that the whole exercise was to be carried out in three months so that all stakeholders in the department were involved.

“The consultant was paid Sh5,940,000 on December 2, 2014 contrary to terms of the contract,” said Mr Ouko.

He also questioned another contract that the ministry entered into with Strathmore Business School for provision of consultancy services for ease of doing business improvement programme Phase II at a cost of Sh5,127,200.

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Mr Ouko said the tender was opened on May 26, 2015 and purchase order issued on June 9 while the invoice by the consultant was raised on June 25.

“The contract stated the special conditions that the duration of the contract should take four months from the date of this contract as is guided by the work plan submitted by consultant which was eventually completed in less than three weeks.

“This also casts doubt as to whether the service had already been mooted earlier and the tender committee was being used to rubberstamp or ratify an already consummated transaction,” Mr Ouko said in the report tabled in Parliament.

He further doubted whether the relevant stakeholders were consulted on the transaction.

“The procurement procedure may not have been followed in procuring the…services contrary to section 68(3) of the Public Procurement and Disposal Act, 2005.

“Consequently, the propriety and value for money from the transaction’s worth Sh11,067,200 could not be confirmed as at June 30, 2015,” the auditor said.