How firms jostled for pie of public pension fund
It took a court fight and a tenders review board assessment to settle the bid war.
When the multibillion-shilling pension scheme for civil servants was rolled out in January 2021, more than 20 bidders trooped in seeking appointments as either administrators or managers of the lucrative fund.
With its Sh31billion cash haul, the Public Service Superannuation Scheme (PSSS) was irresistible, sparking off contract fights that ended up in court and before the Public Procurement Administrative Review Board (PPARB).
In one of the rounds of clashes, Kuramo Capital’s fund management arm Gen Africa, in February successfully fought to manage the mega scheme.
And months, later, pension funds administrator, CPF Financial Services, last week won a separate fight to handle the PSSS fund after the Court of Appeal directed the scheme board of trustees to honour a contract that had been awarded to the company.
In the case of Gen Africa, the company managed to overturn a decision by the PSSS board to end its contract after the company beat 10 bidders last year.
The PSSS board had attempted to cancel the procurement process at the tail end, proposing to hire three fund managers instead of one.
Gen Africa protested the move at the PPARB, saying, the cancellation would help their rivals who were now aware of their bids, and could alter their applications to its disadvantage.
PPARB gave the PSSS 30 days to complete the process, which, it added, “had been terminated on December 20, 2021, over alleged material governance issues.”
The lucrative tender to manage the PSSS fund attracted 10 bidders, including Old Mutual Investment Group, Sanlam Investments East Africa Limited, Co-Optrust Investment Service Limited, ICEA Lion Asset Management, African Alliance Kenya Investment Bank, Britam Asset Manager Limited, Absa Asset Management Limited, CIC Asset Management Limited, UAP Life Assurance Limited, and Gen Africa Asset Managers.
At the end of the initial stage of evaluation, five bids were found non-responsive while five proceeded to the next stage.
In the second stage, one bid was dropped, leaving four companies chasing the three-year contract.
Gen Africa won the bid, having attained a 97 percent score, subject to a physical due diligence exercise being conducted on the company when they were told the process had been cancelled.
The PSSS trustees resolved to instead procure three fund managers and instructed management to re-advertise the services sought.
Gen Africa argued the move would disadvantage the tenderer with the highest combined score and help other competitors who will use that marking scheme to improve their performance if the tender is re-advertised.
PPARB agreed with them and said the resolution to get additional fund managers should have progressed separately. Gen Africa subsequently bagged the deal.
Last week, the final battle in the race for the PSSS administrator was also settled after the Court of Appeal cleared CPF Financial Services to handle the role.
A bench of three judges ruled that while CPF had successfully bid for the civil service pensions contract, the board of trustees employed delaying tactics to deny it the tender. The tender was advertised in June last year and several firms submitted their bids.
CPF was the only bidder who managed to get to the financial proposals opening stage after attaining a technical score of 95.2 percent.
The fund administrator, however, accused the board of trustees of delaying the process to frustrate the conclusion of the matter.
The matter was challenged before the Public Procurement and Administrative Review Board and later the High Court, where the PBARB was directed to complete the process.
The trustees opposed the case arguing that once the tender validity period expired, it could not be resuscitated. The tender period lapsed on January 11, 2022, according to the trustees.
“To bring finality in this matter, we are of the considered view that the interests of justice would be best served if we order, as we hereby do, that the appellant (Board of Trustees) do issue the 1st respondent (CPF) with the appropriate notification letter within 30 days from the date hereof,” Justices Daniel Musinga, Luka Kimaru, and Ngenye Macharia said.
CPF moved to court, arguing that the due diligence conducted by the trustees created a legitimate expectation that it was the successful bidder and that it would receive the notification letter.
This did not happen as anticipated and no reasons for the delay were given, necessitating the court case.
The judges said the review board has the power to give directions to accounting officers of procuring entities concerning anything to be done or redone in procurement or disposal proceedings.
“In our view, its power may even include the power to extend the validity of a tender in situations where an accounting officer, for no good reason, fails to adhere to statutory timelines or disobeys the Board’s directions to frustrate tenderers or bidders, even if the stated tender validity period has expired,” the court said.
In such a situation, the judges said the Board had the power to extend the tender validity period and even direct the appellant to award the tender.
The PSSS has already awarded three banks, namely NCBA, Stanbic, and Co-op as custodians of the funds collected from more than 350,000 civil servants.
These include police officers and teachers, who started contributing to their pension savings scheme.
