Spotlight on Sh28bn port tender

Cargo being offloaded at the Port of Mombasa. FILE PHOTO | KEVIN ODIT |  NATION MEDIA GROUP

In Summary

• Government wants winning bidder to give it up to 15 per cent free to carry shares in the company

By ANDREW TEYIE
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The eagerly awaited Sh28 billion tender to select an operator for the second container terminal in Mombasa could be headed for trouble with a reported move by the National Treasury to change the rules of engagement midway.

The move, which is causing anxiety among shortlisted local and international bidders, has been questioned by the Kenya Ports Authority (KPA) which argues that it could lead to an uneven playing field, introduce disputes and delay the process of choosing the operator.

“It is the opinion of the Authority that the introduction of the new criteria may water down the core objective of PPP arrangements and may punctuate progression of the entire process and may also require revisiting the concession plan.

“It is, therefore, the Authority’s opinion that further consultation is necessary in order to avoid the likely disputes and potential delay of the entire process,” says KPA managing director Gichiri Ndua.

In a letter dated May 11, 2015 and addressed to the Public Private Partnership director in the National Treasury, Mr Stanley Kamau, the KPA boss says the move would put the authority in an awkward position.

According to correspondence, the PPP unit wants KPA to introduce a new rule in the tender documents that would give the government “15 per cent free to carry shares” in the winning company.

On May 6, Mr Kamau wrote to Mr Ndua pointing out that they needed to amend the tender documents to accommodate government interests.

“We have identified issues in the tender documents that need to be amended through an addendum to be issued to the bidders with the view of improving the competitive framework for the tender on the second container terminal at Mombasa,” says Mr Kamau.

However, this is despite the fact that the government’s interests are catered for by KPA, which during the expression of interest stage asked international bidders to form joint ventures with Kenyan companies to bid for the business.

COULD FAVOUR BIDDER

On Friday, Sunday Nation called Mr Kamau’s office for a comment, but we were referred to one Khadija who asked us to speak to KPA instead.

“Please speak to KPA. They are the project implementers. We are only involved at the initial stages of PPP unit project,” says Khadija. On Saturday, we failed to reach Mr Ndua, whose cell phone was switched off.

There are now fears that the contentious alterations contained in the yet-to-be published addendum to the tender documents could favour one of the international bidders who is wired in government.

Before the expression of interest stage, 19 international bidders formed joint ventures with locals before the tendering process. The companies were whittled down to 12 on February 2.

The second two-berth container terminal will be the first to be managed in Kenya by a private company. The winning bidder will operate the terminal for 25 years from next year when the construction will be completed.

The winners will pay KPA an annual fee of $18.4 million every year apart from a percentage of the profit handed to the parastatal annually.

According to documents, the decision to change the rules followed a meeting between Mr Kamau and KPA Corporate Affairs head, Mr J O Nyarandi, in Nairobi on May 5.

The proposed addendum states that “a prequalified bidder may offer government up to 15 per cent free to carry interest in the project company, which shall count as local participation, consistent with section 59 of the PPP Act 2013”.

The new rule is added on to the clause that says among others that “a prequalified bidder that submits a bid as a consortium/joint venture with a local Kenyan entity or otherwise shall provide details of the joint venture agreement. The Kenyan entity shall have a share of not less than 15 per cent of the total share of the project company for the entire contract period”.

The addendum is signed by the KPA head of procurement and supplies, Mr Yobesh Oyaro.

While responding to Mr Kamau, Mr Ndua reminds him of a consultative meeting, attended by PPP transaction adviser on May 6, 2014, where the same proposal was tabled by KPA but was shot down by a team of officers.

“However, the PPP unit position was that, if taken on board, this criteria would defeat the whole purpose of the PPP process as the authority would be a participant, a landlord and a beneficiary in the revenues share. Based on this premise, the authority proceeded to prepare a concession plan that was approved by the PPP committee on December 19, 2014,” says Mr Ndua.

Mr Ndua argues that the introduction of the fresh clauses should not be done at this stage of the process. He says both international and local bidders had been informed of the local participation. Mr Ndua informs Mr Kamau that the move might plunge the project into a crisis resulting in some bidders contesting the decision.

“In the qualification stage, bidders had been informed of the requirement for local participation and this has been clearly defined. Arising from the bidders’ conference held on April 30, it is already in public domain that bidders have formed consortia/ joint ventures.”