Ruling leaves Kenya Power in procurement dilemma

When former Kenya Power chief executive officer Ben Chumo announced on March 30,2015, that the utility firm would give local manufacturers a chance to supply electric materials, Kenyans welcomed the decision. It was a firm commitment to the state policy on ‘Buy Kenya Build Kenya’.

Dr Chumo then revealed that the company had spent about two thirds of its annual procurement budget, amounting to Sh6.2 billion the previous year, on materials sourced from abroad, mainly from India and China.

Equipment

The equipment included transformers, electric cables, metering solutions, insulators, electricity management systems and accessories such as cut-outs, fuses and circuit breakers. He then urged local investors to manufacture electricity for use in the multibillion Last Mile Connectivity project, initiated under the Jubilee administration to connect rural homes to the national grid.

Dr Chumo announced that Kenya Power had started procuring its electricity poles (wooden and concrete) locally, a departure from the past when the poles were procured from South Africa and Tanzania. More than 40 local companies set up treatment of wooden poles.

Besides the pole treatment plants, many Kenyans established firms to assemble and manufacture the equipment. The companies met the required certifications of KP, as well as the Kenya Bureau of Standards Diamond mark of Quality for locally manufactured and assembled goods.

But trouble followed a few years later when the power utility company was hit by a scandal following revelations that some of the procured equipment, such as transformers, turned out faulty.

Investigations later revealed that the defective transformers were the cause of inflated electricity bills. Later, Dr Chumo and his successor, Ken Tarus, and others senior officials were charged in court. The trial is ongoing.

Last year, the government set up a taskforce to review Power Purchases Agreements following complaints by Kenyans.

Although it was not part of its terms of reference, the taskforce later recommended that KP designate specific goods of a high value or critical to sustainable service (e.g. transformers, sub-station equipment, meters, cables) to be procured from Original Equipment Manufacturers (OEMs) only and not assemblers.

Tender

The company recently invited bids for the supply of single phase and three phase postpaid and prepaid meters worth Sh2 billion. And departing from the norm, it restricted the tender to international bidders, locking out local manufacturers who have been supplying the meters.

But in what has awaken past ghosts of inferior-quality products sourced locally by Kenya Power, the Public Procurement Administrative Board has frozen the tender following an appeal by local manufacturers under Energy Meters Assemblers & Manufacturers Association.

In the appeal, the local manufacturers said Kenya Power invited bids for the supply of the meters and placed conditions that automatically lock them out, yet they have been supplying meters since 2015. Their lawyer, Titus Koceyo, said the restrictions placed in the tender and favouring foreign manufacturers over local manufacturers and assemblers violates Article 10 of the Constitution on national values and principles to promote local manufacturing.

“The applicant’s members are apprehensive that the Respondent, in a hurried manner to implement the Taskforce Report out of context and to achieve ulterior motives, inserted conditions in the impugned tender, whose net effect is to disqualify the members of the Applicant from participating in the tender,” he said in his submissions.

If not stopped, the local manufacturers said they will suffer losses and damages as their factories and manufacturing plants will be rendered useless, besides job losses and flooding the local market with imported goods that are readily manufactured and assembled locally.

One of the requirements in the tender is a minimum of 15 years of technical specifications experience in the manufacture of energy meter. The condition, the local manufacturers say, is unreasonable, impractical, and discriminatory and meant to unfairly deny them the opportunity to participate in the tender.

Periodic evaluation

Court documents show that none of the local companies have been in existence for 15 years because they only commenced their production seven years ago.

Further, as per tender conditions, all specifications will be renewed every five years, hence 15-year experience does not form the basis of technical evaluation.

“This requirement might pave the way for other manufacturers to supply to KP while their products have never been tested in Kenya. Possible high failure meter rates might occur and it would damage the interests of both KP and Kenyan people, which violates the prudent use of public funds as required by the Constitution,” Mr Koceyo said.

The association said the move is also illegal because they were not given an opportunity to be heard.

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