MPs order forensic audit on purchase of armoured vehicles

The Ministry of Defence’s purchase of 108 Armoured Personnel Carriers (APCs) worth billions of shillings is set to come under heavy scrutiny after Parliament ordered a forensic audit into the procurement.

The National Assembly’s Public Accounts Committee (PAC) has asked Auditor- General Edward Ouko to investigate the entire procurement process that saw Kenya acquire 32 APCs in 2005/06 at a cost of $1.16 million (Sh1.2 billion) and 76 APCs in 2012/13 at a cost of $ 51,584,235 (Sh5.2 billion).

“The committee recommends that a forensic audit by the Auditor- General on the entire procurement process of all the Armoured Personnel Carriers (APCs) and a report be presented to the Public Accounts Committee by December 31, 2016.

PAC also wants Mr Ouko to investigate the award and subsequent cancellation of a tender for procurement of 75 APCs at a price of Euros 22,406,926 (Sh2.5 billion) in June 2008.

The suppliers used an exit clause to terminate the contract after the Ministry of Defence failed to execute it.

Parliament is also seeking to know how the ministry procured 66 APCs from M/s OTT Technologies of South Africa at a cost of $18,810,000 (Sh1.9 billion) in 2010.

The committee said that although the APCs were considerably cheaper compared to the 32 supplied by China North Industries Corporation (NORINCO) the performance of the South African vehicles was found to be unsatisfactory during their use in Somalia where they were exposing Kenyan troops to a lot of risk.

“Stern action, including prosecution, should be taken against the officers found culpable of the irregular purchases,” the committee chaired by Rarieda MP Nicholas Gumbo says in its report.

The MPs also want the Ethics and Anti-Corruption Commission (EACC) to probe the procurement of the contract for the purchase of 32 APCs.

The committee asked for the forensic audit in the wake of Mr Ouko’s insistence that Ministry of Defence accounting officers flouted Section 23 of the Public Procurement and Asset Disposal Act 2005 in procuring the APCs either through direct or restricted tendering processes.

The Ministry of Defence procured the 76 APCs through direct procurement from NORINCO, which had earlier supplied the 32 APCs that were later found to be defective.

Mr Ouko said the 32 APCs were supplied in 2008 and were deployed in South Sudan as part of the Kenyan contingent in UNMISS and are still there despite the United Nations having identified some flaws with them.

The flaws include the design of the vehicles on the top part that allows water to leak into the vehicle and has to be manually drained out.

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PAC’s report on the procurement says that the accounting officer acknowledged that most of the flaws were design preferences that were not specified in the contract when acquiring the APCs, but the supplier had since fixed them.

Mr Ouko told the MPs that the Ministry of Defence failed to undertake a market survey for the vehicles as required by Section 8 (3) Z of the Public Procurement and Disposal Regulations 2006, when it awarded NORINCO a second tender to supply 76 APCs in 2012/13.

The law requires a procuring entity to conduct periodic market surveys to inform the placing of orders or adjudication by the relevant award committee.

“Instead, the contracted firm, also interested in winning the contract, purports to have established market prices for APCs and confirmed that its bid prices were cheaper,” the report says, adding that the foregoing disclosure was a clear indication that the firm dictated the prices of the APCs and usurped the role and responsibilities of the Ministry’s staff.

The ministry awarded NORINCO of China a tender to supply 76 APCs, spare parts, training and night vision devices at a price of $51,584,235 through a direct procurement contract that was signed on October 15, 2012.

The ministry defended the direct procurement method, saying APCs are security items that are not ‘off the shelf’ and therefore, have to be tailored and manufactured as per the required specifications.

The accounting officer told PAC that the contracted firm (NORINCO) was the only entity that could supply APCs to be procured in accordance with Section 74 (2) (a) of the Public Procurement and Disposal Act, 2005.

But Mr Ouko says the ministry failed to justify the relevance of the initial purchases, which were done through restricted tendering as required by Section 133 of the Public Procurement and Disposal Act, 2005 for procurement of security items, while the subsequent purchases of the same materials were procured through direct procurement method.

He said that despite the ministry explaining that the firm was the only one that could supply APCs given that it had been “tried and tested by KDF (Kenya Defence Forces) for supply of the same in a UN Mission to South Sudan, the firm had earlier supplied 32 APCs that were found to have had numerous flaws and deficiencies, a confirmation that it was more logical to subject the contract to a competitive bidding process in accordance with the law.

The ministry said the circumstances surrounding the procurement of the 76 APCS were such that direct procurement was the most practical method because of the tactical situation in Somalia where Al-Shabaab terrorists use Improvised Explosive Devices (IEDs). “…the situation demanded that urgent procurement was required to protect and enhance operational mobility of the troops.

“To respond to the security challenges experienced in Somalia, the ministry needed protective mobility, which are manoeuvrable and therefore came up with specifications to address this need.

NORINCO happened to be the only manufacturer of APCs type WMZ 551 series, which the ministry had identified as meeting its specifications,” the accounting officer told PAC.

The ministry said it had undertaken critical investment in staff training and maintenance programme for the APCs, logistical infrastructure, including workshops, repair and maintenance equipment’s for the APCs following the initial acquisition of 32 APCs from NORINCO.

“The committee reprimands the accounting officer (principal secretary) for breach of procurement law and recommends that he must going forward adhere to the law,” the report says.

The MPs now want President Uhuru Kenyatta (the appointing authority) to hold the accounting officer to account.