Chinese firm loses case on security network contract

ZTE in January moved to the High Court seeking a review of the PPRB’s decision that upheld the cancellation of the police communication tender. Photo/FILE 

By GALGALLO FAYO

In Summary

• Justice George Odunga upheld the Public Procurement Review Board’s (PPRB) decision to reject ZTE’s attempt to overturn cancellation of the controversial tender that had been restricted to Chinese firms.
• The judge said that since he was presiding over a judicial review application, it was not possible to interrogate in details the merits of the Ministry of Interior’s decision, noting that the process as provided for in the law was followed.

Telecoms operator Safaricom’s quest to build a multi-billion shilling digital security network got a major boost Wednesday after the High Court dismissed an application by a Chinese firm challenging last year’s cancellation of a tendering process that awarded it the contract.

 

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Justice George Odunga upheld the Public Procurement Review Board’s (PPRB) decision to reject ZTE’s attempt to overturn cancellation of the controversial tender that had been restricted to Chinese firms.

“Having considered the issues raised in this application (by ZTE) the inescapable conclusion I have come to is that the notice of motion dated January 21, 2014 is unmerited,” Justice Odunga said, adding that the arguments ZTE advanced in its application hinged on factual issues that could only be interrogated in an appeal against the decision.

Justice Odunga said that since he was presiding over a judicial review application, it was not possible to interrogate in details the merits of the Ministry of Interior’s decision, noting that the process as provided for in the law was followed.

The judge rejected ZTE’s argument that having filed its appeal with PPRB before the ministry cancelled the tender, cancellation of the tender was null and void.

The procurement law provides that once the procuring entity is notified of an appeal against a tendering process, the same is put on hold pending the tribunal’s decision.

Justice Odunga ruled that no evidence was adduced to support the claim that the Ministry of Interior was informed of the pending appeal before it acted.

The decision puts Safaricom, which has been awarded a contract to build a security network in Nairobi and Mombasa for Sh14.9 billion, on a firm ground to close the deal that has been beset by strong political and commercial headwinds.

Safaricom has agreed to build 60 LTE base stations in Nairobi and 20 in Mombasa. It will also install 1,800 CCTV high-tec cameras in a deal that will see the government initially spend nothing on the works.

ZTE in January moved to the High Court seeking a review of the PPRB’s decision that upheld the cancellation of the police communication tender.
The appeals tribunal found that prices quoted by the bidder were two times above market rates and that ZTE’s contract would have cost taxpayers Sh1 billion annually in maintenance costs.

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.

ZTE had appealed to the board three weeks after the Interior Ministry’s tender committee cancelled the award in October last year. The action was taken after the National Police Service said the technology could not be incorporated into the existing police communication system.

Cancellation of the tender ended an ugly court battle between ZTE and its fellow Chinese firm, Huawei. Huawei Technologies Africa Limited had moved to court after PPRB upheld the tender committee’s decision to reject the company’s bid at the technical stage.

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