How taxpayers may have lost Sh1.6bn in fuel-testing tender

Director General of Epra, Daniel Kiptoo speaks during a Media Roundtable meeting held by the regulator on May 23, 2024, at Sarova PanAfric Hotel in Nairobi. 

Photo credit: File | Billy Ogada | Nation Media Group

Kenyan taxpayers could have lost Sh1.6 billion after a fuel-testing and monitoring tender to two qualified local firms was withdrawn and issued to another company, at a price more than four times higher.

Auditor-General Nancy Gathungu revealed that the Energy and Petroleum Regulatory Authority (Epra) withdrew a contract it had awarded the two local firms at Sh546 million, only to later hand the deal to a sole bidder at Sh2.3 billion.

Epra during the year to June 2023 invited bids for petroleum fuel marking, testing, and monitoring services, attracting four bidders.

“Review of the tender evaluation report revealed that two firms met the set criteria and were recommended for award being the lowest bidders in both technical and financial at a total price of Sh546,354,432 ($4,944,384). Further, a professional opinion issued on 20 December 2021 by the head of procurement recommended the award of the tender to the two firms, which was approved by the director general three days later,” the Auditor-General notes.

However, the report notes that the tender was terminated a week later, with the Public Procurement and Regulatory Authority (PPRA) reported to have directed Epra to rescind the procurement and seek authorization “to use specifically permitted procurement method for the service provider.”

“Subsequently, management sought and obtained approval from The National Treasury on May 9, 2022, and a tender was issued to the service provider on June 15, 2022. However, no justification was provided to indicate that the request fulfilled the conditions listed in Regulation 107(1) of the Public Procurement and Asset Disposal Regulations 2020, which require the method to be applied in instances of public interest or interest of National Security,” the audit notes.

While Epra said the company that was later awarded the tender was the only one that had technological capacity, the audit faulted the authority for having not placed the requirement in the original tender and noted that by March this year, the system had not been implemented.

“Management indicated that the bidder was the only company with the capacity to implement the intended information technology system, a fact dispelled by an earlier successful procurement process. Further, no evidence was provided to indicate that the system had been implemented as at the time of conclusion of the audit in March 2024, which was over nine months later,” Ms Gathungu stated.

“The IT system component was not part of the initial tender requirements, thus constituted a change in scope that would call for an addendum to the tender documents prior to the tender closing date. However, the component was introduced after the evaluation had been concluded, the award recommendation made by the Evaluation Committee, and the professional opinion submitted to the Accounting Officer,” she added.

The audit reveals that while the initial tender would have cost taxpayers Sh546 million, the one awarded to the sole bidder in July 2022 came to Sh2.356 billion ($16.77 million).

The audit also flags the fact that the contract was signed on July 1, 2022, just two days after the acceptance letter and before the lapse of 14 days provided for in law.

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