How Chinese bidder inflated police radio tender to Sh18bn

Ethics and Anti-Corruption Commission headquarters in Nairobi. A judge had ordered the commission to submit a status report on the tender process by today. Photo/FILE  NATION MEDIA GROUP

By GALGALLO FAYO

In Summary

• ZTE has lost its bid to have the controversial Sh9 billion police communication tender reinstated, after an appeals tribunal found the prices quoted were two times above market rates
• Public Procurement Administrative Review Board upheld the cancellation of the tender after it found the ZTE contract would have cost taxpayers Sh1 billion annually in maintenance costs
• Huawei Technologies Africa Limited and AVIC International Holding were eliminated at the technical stage, leaving ZTE as the only successful firm, at which point the tender should have been declared unresponsive and floated afresh
• ZTE quoted $206 million (Sh17.7 billion), more than double the contract sum. The tender committee interrogated the quotation and found that the prices of items were highly exaggerated

A Chinese company has lost its bid to have the controversial Sh9 billion police communication tender reinstated, after an appeals tribunal found the prices quoted were two times above market rates.

The Public Procurement Administrative Review Board upheld the cancellation of the tender after it also found the ZTE contract would have cost taxpayers Sh1 billion annually in maintenance costs.

“The board has already stated why the applicant’s bid was not successful and adds that it was against the promotion of the principles of integrity, fairness, transparency and accountability to award a tender where the tender price was increased by 106 per cent due to the overpricing of items,” said the PPRB in its ruling last week.

PPRB also described as “extremely dangerous” a provision in the contract that 90 per cent of the contract sum be paid on the equipment’s arrival in Kenya even before the devices were installed, tested and commissioned.

“The bidder had also proposed 90 per cent payment of the price when shipment lands in Mombasa, contrary to the phased schedule of project implementation,” said the tender committee said in its submission.

ZTE had appealed to the board on October 29 three weeks after the Interior ministry’s tender committee cancelled the award. This was prompted by the National Police Service, which said the technology could not be run together with the existing police communication system.

The tender was to be funded with a $100 million (Sh8.6 billion) concessionary loan the government had negotiated with China and which tied the project to Chinese suppliers only.

Huawei Technologies Africa Limited and AVIC International Holding were eliminated at the technical stage, leaving ZTE as the only successful firm, at which point the tender should have been declared unresponsive and floated afresh.

ZTE quoted $206 million (Sh17.7 billion), more than double the contract sum. The tender committee interrogated the quotation and found that the prices of items were highly exaggerated.

The tender committee, in its submission before the PPRB, said ZTE indicated the price of a HP desktop computer at Sh324,000 against the market price of Sh103,000; HP printers at Sh832,000 against a market price of Sh43,000 and routers at Sh168,000 against market price of Sh51,000.

“It does not require rocket science in view of the evidence before the Board to establish that the Interested Party’s financial proposal was highly exaggerated,” reads the ruling in part.

The decision by PPRB vindicates the order in February by then head of the Civil Service Francis Kimemia to cancel the contract.

In a letter dated February 11, Mr Kimemia had accused Internal Security ministry officials of handling the tender unprofessionally. The contract was part of the Sh60 billion Anglo Leasing contracts that have dogged successive governments since 2002.

The letter by Mr Kimemia ended a court battle between Huawei and ZTE. Huawei Technologies Africa Limited had moved to court in January after PPRB upheld the tender committee’s decision to reject its bid at the technical stage.

Huawei withdrew the suit after Mr Kimemia’s order in the hope that the tender would be floated afresh.