Opaquely procured power deals are prone to bribery and kickbacks
This is what we read in textbooks about the procurement method known as privately initiated public-private-public (PPP) projects. A contractor submits an unsolicited proposal to a government agency and is awarded the project, without having to face competition from other bidders.
How is this method of procurement justified? The assumption is that by inviting the private sector, major infrastructure projects can be completed faster or become more financially viable through better access to technical skills as well as capital markets.
We also read in contemporary literature that unsolicited PPP projects tend to become popular with governments—like Kenya’s—that are heavily indebted and do not have the fiscal space to fund large infrastructure projects.
But there is a flip side. Textbook theory teaches that unsolicited and privately initiated proposals carry huge corruption risks because the lack of transparency in procuring such deals. Opaquely procured projects are prone to bribery and kickbacks. Handled opaquely, they can undermine the legitimacy and popular support for a country’s PPP programme.
Enough of theory. What are the latest trends and goings-on in the PPP landscape here in Kenya?
After the recent public furore over opaquely procured privately initiated projects that forced the government to stop the infamous Adani airport PPP project, you would assume that this method is no longer popular with the government. The reality though is that unsolicited proposals on major infrastructure projects are still being negotiated and awarded.
This procurement method is popular with governments in Africa because it opens wide loopholes that greedy elites exploit to circumvent probity issues around procurement of large PPP projects.
I must admit that the evidence I have is still scanty. A full-fledged story will come when all correspondence on the negotiations is in. Still, I am confident enough to say what I say here today because a whistleblower recently briefed me fully about two large infrastructure projects that have been gifted to two foreign contractors without competitive bidding.
Geothermal power station
In the first case, a Chinese company has been gifted a deal to build a massive geothermal power station without competitive bidding. I was informed authoritatively that the State agency involved in this transaction sought and received approval from the National Treasury to engage the Chinese developer through the specially permitted procurement method. When this project was put to international tender in 2020, it attracted all the big names, including Toyo Tshusho, Sumitomo, Mitsubishi Heavy Industries, Toshiba, Ormat and Enel SPA of Italy. The Chinese firm that has been gifted the contract did not participate in that process.
In the second case, an Emirati entity has signed an unsolicited geothermal power development deal couched as “a collaborative framework agreement”, but which, in reality, is an arrangement that sets the Emiratis at an advantage over any other competitor who may be interested in developing the project. According to the whistleblower, this project is at a geothermal field touted by industry insiders as the biggest geothermal prospect in Kenya.
This is how the game is played—you propose to implement a project that is expensive and complex. From what I gather, the Chinese have grossly expanded the scope of the project they have been awarded by proposing to build a huge power plant embedded with a massive fertiliser manufacturing plant.
It seems to me that in order to clinch a deal like this, you propose to build systems that are difficult to replicate and craft everything in a way that will not only create a constant need for your expertise, but also make it difficult for the project to transition to another contractor. The more complex and the wider the scope, the more difficult it is to detect corruption.
Intriguingly, one of the State agencies has also been made to sign a thick and complicatedly-drafted non-disclosure agreement (NDA) obligating it to keep secrets about the project for five years. Granted, NDA’s are commonplace in commercial transactions. But I ask: What confidential or proprietary information does a public agency have to protect for a whole five years?
The way I see it, this is a case where a public agency is using an NDA that has been deliberately drafted to keep information about the deal with the Emiratis confidential not only to avoid public scrutiny, but to circumvent the constitutional requirement of public participation on projects of this nature and scope.
Competitive bidding
Privately initiated projects and deals negotiated under National-Treasury-approved specially permitted procurement are perfectly legal under our laws. But the case for more transparency and competitive bidding cannot be gainsaid. I read somewhere that in India, it has been suggested that all the private partners in PPPs be designated as public officials to make then accountable under that country’s Access to Public Information Act and to protect whistleblowers.
jaindikisero@gmail.com
