Treasury Cabinet Secretary John Mbadi (left) and Indian billionaire Gautam Adani.
When the Public Procurement and Disposal Act first came into effect on January 1, 2007, it was praised as a game changer in the war on tender corruption.
But the legislation, which received local and international acclaim for its attempts to curb graft in lucrative public tenders, also introduced a back-door through which government agencies could secretly enter into negotiations without going through a competitive process, while dodging oversight by the public procurement regulator.
After being sparingly used in the Mwai Kibaki and Uhuru Kenyatta eras, the little-known clause has now become the foundation on which at least four multibillion-shilling contracts under President William Ruto’s administration are built, all of which have attracted controversy.
Three of those deals are with companies that have ties to the United Arab Emirates (UAE) royal family and India’s Adani Group.
Last week, Treasury Cabinet Secretary John Mbadi, in an interview with a local radio station, said the government will enter into several other contracts with private firms using the Specially Permitted Procurement Procedure (SPPP) model.
Currently, under Section 114A of the Public Procurement and Disposal Act, the SPPP allows government institutions to engage private sector players for contracts, without having to make public the decision or its details.
The Public Procurement Regulatory Authority has no power to oversee contracts entered into under the SPPP, unlike other tenders. Under the SPPP, procuring entities only need to seek the Treasury’s permission. While that law allows procuring entities and contractors to set the rules of engagement, its section three states that the Treasury CS may prescribe the procedure for carrying out the SPPP.
Entered into contracts
Using the SPPP, Kenya has entered into contracts with private firms in leasing the Jomo Kenyatta International Airport (JKIA), construction of electricity transmission lines and substations, integration of the healthcare industry, and modernisation of the taxman’s technology platforms.
On Friday, Mr Mbadi did not pick up calls or respond to text messages to his mobile phone number asking why the government has opted for the SPPPs over other procurement types that are more competitive and open to the public for tracking. On Monday, his phone was off.
Kwame Owino, CEO of the Institute of Economic Affairs, said that Section 114A of the Public Procurement and Disposal Act has opened the door for opaque processes that undermine the rest of the legislation, while leaving taxpayers exposed.
“It (SPPP) has no justification. The Public Procurement and Disposal Act is supposed to provide oversight and transparency. What Section 114A does is to provide a cover out. This has two effects. First, there is no transparency. Second, by the time it (contracts entered into under SPPP) goes through, it is difficult to reverse,” Mr Owino said in an interview with the Daily Nation.
The economist faults Parliament, arguing that lawmakers have failed to ensure all public procurement processes are transparent and overseen.
“What PPPs (Public Private Partnerships) and cover-outs (like the SPPP) do is undermine public procurement. It allows ministers and procuring bodies to enter into agreements with no oversight. It has gaping holes that can be used to… it’s bad. They (procuring bodies) ring-fence a process and all you will ever know is after the fact, for example, through the auditor-general who will likely only bring it to light maybe because there are missing documents,” Mr Owino said.
He dismissed the argument that there is little harm to the public because there is no direct taxpayer contribution, as he held that such procurement models still contribute to public debt. The Kenya Airports Authority has entered into a contract with Adani Group for the lease of the JKIA.
Under the deal, Adani will control and operate JKIA for 30 years, and is required to upgrade infrastructure at Kenya’s premier aerodrome. The contract is worth $1.85 billion (Sh238 billion).
For the JKIA deal, the KAA went against recommendations of a consultant it hired, to the effect that a PPP or open tendering would be the best way to enter into a strategic partnership.
Adani has also signed a contract worth $736 million (Sh95 billion) with the Kenya Electricity Transmission Company using the SPPP.
In this deal, Adani Energy will build three electricity transmission lines and a substation. The Indian firm will then operate and maintain the infrastructure for 30 years as it recoups its investment in the same period.
Hired a consortium
For healthcare, the Energy ministry hired a consortium comprising Safaricom PLC, Abu Dhabi-based Apeiro Ltd and Konvergenz Network Solutions for the development and implementation of a technological ecosystem to provide solutions for all stakeholders in the industry. The ecosystem will link the Social Health Authority, Digital Health Agency, healthcare facilities and suppliers, and service seekers. The cost of the platform is Sh104.8 billion, which the consortium will recoup over 10 years.
Ministry of Health documents indicate that an initial proposal sent to the ministry quoted Sh48.3 billion, but along the way the cost was revised upwards.
Medical Services Principal Secretary Harry Kimtai said in a past interview that the project’s scope was expanded, hence the cost rise.
The UAE royal family is a significant shareholder in Apeiro Ltd, one of the consortium partners, and also has a stake in the Adani Group that has bagged the JKIA and KETRACO deals.
The Kenya Revenue Authority (KRA) is the latest entrant in the line of government bodies using the SPPP procurement model.
Modernise technology
The KRA is negotiating with Safaricom for a deal that would potentially see the telecommunications giant modernise the taxman’s technology platforms with the aim of enhancing revenue collection. It is the second phase of an overhaul of the taxman’s systems.
“This phase will focus on modernising KRA technology, including the design and implementation of a comprehensive technology platform, aimed at enhancing revenue mobilisation and integrating tax solutions with taxpayer ecosystems. This phase shall broadly include the modernisation of legacy systems, embedding of data analytics capability, provision of infrastructure support and modernisation of customer interphases,” KRA said in a response to queries by Nation.Africa on the deal.
The KRA says it has followed the procurement law and will publish to the public the outcome of the process.
