Inside tender scandal that nearly stalled dream Kiambu dairy project
A dairy worker receives milk from farmers. A scandal almost ruined project to upgrade milk processor at the Limuru Dairy Farmers Co-operative Society.
On March 1, 2021, Kiambu County, in partnership with the World Bank, the national government, and the Limuru Dairy Farmers Co-operative Society, advertised a tender for the installation of a Sh145 million ultra-treated (UHT) milk plant to increase returns to the primary producers through value-addition.
The project under the National Agricultural and Rural Inclusive Project involved the supply and installation of the whole processing line of the UHT-ESL Unit, which comprises a steriliser, milk homogeniser, and an aseptic pouch packing machine.
The World Bank, through the National Agricultural and Rural Inclusive Project, was to grant about Sh100 million to fund the project partially. The county government, then under governor James Nyoro, was the contracting party on behalf of the beneficiaries and offered to give Sh30 million for the project. Limuru Dairies was to provide Sh15 million under a cost-sharing arrangement.
But the project meant to uplift the economic status of the dairy farmers who deliver milk at the Limuru town-based plant ran into a scandal that threatened to wreck it.
The bone of contention, which has muddied the project, arose from the awarding of the contract to a supplier against an adverse professional opinion by the then county director of supply chain management Peter Mwangi, who, on May 24, 2021, declared that the process of awarding lacked integrity, and proposed a reevaluation or re-constitution of the evaluation committee.
“The evaluation committee in its application of the evaluation criteria have failed to demonstrate objectivity in their report and award of marks….it was not also clear what the evaluators used to arrive at the marks for the requirement on technical specifications. I am of the opinion that the application of the criteria has not been supported by notes or reasons for the award of marks and therefore the accounting officer may, before the award of the tender cause a repeat of the evaluation or appoint another evaluation committee to apply the evaluation criteria afresh,” he concluded in his eight-page professional opinion.
Meaf Consult
His opinion was ignored and the tender was awarded to M/S Alpes Industries Services International Limited and Perazim General Suppliers Limited as a joint venture at a sum of Sh89,964,901 for the supply, delivery, installation, testing, and commissioning of the plant.
Other companies shortlisted were Dairy Consulting, which quoted Sh78 million, Meaf Consult (Sh93.2 million), Ramsis Enterprise (490, 849 euros), Desley Holding (744, 000 currency not indicated), ASL Holding (Sh96 million), Spenomatic (Sh96 million) and Elecster (897,058 euros).
To manage the implementation of the project, the then chief officer appointed a contract implementation team (CIT) on June 22, 2022, which held meetings in June and July 2022.
The team members, after reviewing the tender document and observing that the requirements for goods inspection upon delivery would entail the inspection of the whole processing line of UHT-ESL Unit, which includes the steriliser, milk homogeniser, and the aseptic pouch packaging machine, declined to inspect the delivered machine.
The members argued the shipment documents indicated the delivered box was made of 20 different detached items, and, even if the parts were assembled, it would be impossible to ascertain whether the machine would eventually be compatible and functional with the steriliser and homogeniser that were to be sourced from other countries. They also declined to endorse the partial payment for the partial delivery as demanded by the contractor.
On July 5, 2022, the Office of the County Attorney wrote to the CIT advising it not to honour the partial payment demanded by the contractor, cautioning that the procurement process “was greatly flawed and irregular”. On July 25, 2022, the County Attorney wrote another letter to the CIT recommending the termination of the tender and launching a fresh procurement process.
The justification was the contract had expired and the supplier did not seek an extension, the performance bond had expired, the supplier had not brought the UHT-ESL Unit within the agreed timelines, and consequently, the tender was terminated on July 27, 2022, causing him to seek legal redress through arbitration.
Erastus Gatu, project manager, observed that as per the tender document, he was to inspect a complete UHT-ESL Unit “and it would be very risky to inspect one machine as it would be impossible to ascertain whether it would be functional and compatible with the rest”.
He noted the inspection he was supposed to undertake was not a matter of opening a carton, but dry running it with water before injecting milk to ascertain its functionality” and advised that it would be prudent to instal the entire system properly.
Despite these warnings, the tender was pushed through, with the controversially picked firms — Alpes Industries Services International and Perazim General Suppliers only delivering an aseptic pouch packaging machine on December 23, 2021, which they claimed was sourced from China.
Demanding Sh28 million
However, the supplier, through his lawyer Manases Mwangi & Associates, has instead been demanding Sh28 million to make a second supply of the equipment, which he said is stuck in France and Italy, saying the contracting had a provision for partial payment, which the county had rejected.
“It was a term of the contract that upon delivery of the said equipment and the provision of the same documents, you were contractually obligated to settle the invoiced amount. Our client is highly prejudiced by these unwarranted delays and is convinced that your failure to pay/and or settle its pending invoice does not reflect good faith/and or reasonableness on your part. We believe that in the interest of all the concerned parties to bring this project to fruition,” says the supplier in one of the demand letters.
The Ethics and Anti-Corruption Commission (EACC) is handling the case. The EACC detectives are investigating a possible conflict of interests by unscrupulous officials who facilitated an alleged incompetent supplier to win the tender.
Officials who have recorded statements with the EACC are Boniface Njenga who is the Capacity Building Office at NARIGP, Susan Gathoni (accountant), Erastus Gatu, the project manager, Michael Mwangi procurement officer, and Joan Nabea of the National Agricultural and Rural Inclusive Project. The watchdog also demanded from the county an approved procurement plan and budget for the 2020/21 financial year, approved requisition for the Limuru project, tender advertisement documents, blank tender documents, and bid documents sent by tenderers.
Others are appointment letters for the tender and evaluation committee, minutes of the committee, professional opinion, tender award notification of the successful bidder, regret letters to unsuccessful bidders, acceptance letter from the fruitful bidder, signed contract, inspection and acceptance certificate, and payment vouchers.
“The commission has prioritised the investigation due to the public interest in the said project.
“However, we have no objection to the re-tendering process provided the procurement process is guided by procurement laws and regulations, the Public Finance Management Act, and any other law applicable to ensure that the process is transparent and accountable,” wrote the EACC to the county secretary last October.
Delayed installation
The Limuru Dairy leadership has also confirmed the investigations and in a letter to the National Assembly dated May 25, 2023, sought intervention over the delayed installation.
The firm’s chairman George Njuguna said the current regime couldn’t renew the contract of the supplier as one of the possible remedies for installation of remaining machines “due to time limit and ongoing EACC investigations”
Limuru Dairies last Friday floated a fresh tender for the milk plant project, raising fresh hope of completing the project. In the new tender call, Limiru Dairy has sought supplies of one sterilizer, a milk homogeniser, two aseptic pouch packing machines and an inverter.
Governor Kimani Wamatangi said his administration would shield the project from headwinds and was in talks with the World Bank and NARIGP to ensure its success.
“We have had several meetings, consulting on the way forward. This is one of the unimaginable stories of devolution, captured by brokers where personal interests override those of the public. We had to send people to check on the UHT machine and recheck the whole process to ensure it was a clean deal and I am optimistic that Limuru farmers will get the plant,” Mr Wamatangi told Smart Business.
The project has been given a nine-month no-cost extension to allow the project to have a life until March 31, 2024, and Limuru Dairies, granted procurement rights for the UHT-ESL machinery.
