Economy

Swiss firm wins ERC contract to label oil products

tankers

Oil tankers at the Uganda-Kenya border in Busia. The ERC will award a tender to Swiss firm SGS to label petroleum products to curb dumping. PHOTO | FILE

A Swiss firm, SGS has won a contract to supply test kits and special labelling for petroleum products in Kenya as the government steps up its purge on the dumping and adulteration of fuels.

The public procurement watchdog cleared the Energy Regulatory Commission (ERC) to hand the deal to the inspection, verification, testing and certification company — ending a tender feud that had threatened to stall the fight against product adulteration and dumping.

“The procuring entity is directed to proceed with procurement process to its logical end,” the Public Procurement Administrative Review Board (PPARB) said in a ruling.

South Africa’s Global Fluids International (GFI) had challenged a decision by ERC to award the tender estimated at Sh203 million a year to SGS Kenya Limited amid claims of bias.

Four firms including SGS, GFI, Kosta Oil Fields Technologies and Intertek Testing Services responded to an expression of interest (EOI) call by the regulator on August 5, last year with the bids being opened exactly 14 days later.

ERC’s tender committee sat on September 18, 2014 and approved EOI list before writing to the four shortlisted firms informing them that they would be invited to pick the Request for Proposal (RFP) document.

All bidders were invited for pre-proposal conference on October 27, last year to clarify all grey areas but only two firms; Intertek Testing Services and SGS attended.

All queries raised were answered in writing and sent to all the bidders. The RFPs opened on November 6, 2014 and only one bidder — SGS Kenya Ltd submitted its proposal for evaluation.

A technical evaluation report on November 12 recommended that SGS having obtained 98.5 per cent marks on technical criteria and being the only bidder be invited to financial proposal.

A combined technical and financial evaluation report was prepared on November 18 and the evaluation committee ruled that having obtained a combined score of 96.4 marks, SGC be declared the successful bidder with a fee of $2.25 million (Sh203 million) subject to negotiation.

GFI, however, disputed the decision to award the contract to SGS saying regulator failed to specify in its EOI and RFP documents that the tender would involve both testing and monitoring of products.

It, therefore, declined to participate in the RFP and instead wrote a protest letter to PPARB demanding for a review.

The nod by public procurement watchdog gives a boost to ERC as it plans to tackle fuel dumping and adulteration in line with the Products Quality Management Regulations 2014 that the Energy ministry is expected to approve.

READ: ERC scales up tests to curb mixing of petrol with kerosene

Under the proposed regulations, petroleum products for export and kerosene for domestic consumption will have a special mark to reduce dumping and adulteration.

ERC will also provide test kits at pump stations and depots at subsidised prices to help deal with the menace.

Offenders will face a fine of Sh5,000 for each day their products remained non-compliant and Sh1 million for staying without the label. Selling sub-standard products will attract a fine of Sh1 million same as those offering marked motor fuels locally.

The present Petroleum (Amendment) Rules 2000 have been criticised for being lenient on offenders as they only provide for a Sh500 fine for each day an offence is committed.

Under the new regulations, second-time and subsequent offenders will be charged Sh500,000 and their licences suspended for a minimum three months while those found guilty of re-opening non-compliant sites will face a Sh2 million penalty.

“The regulations provide for suspension from operations by way of sealing of tanks for all non-compliant sites and road tankers until the commission is satisfied that the subject operators have paid fines and penalties to Kenya Revenue Authority and that reasonable mitigating measures have been put in place,” ERC said.

Kenya has registered a rise in the number of cases of fuel adulteration by people seeking to draw huge profits.