Corruption Alert: Behind The Scenes Of Tender Wars Derailing Sh1.5B KEBS Contract

A lucrative tender at the Kenya Bureau of Standards (Kebs) has been dogged by controversy that has forced the contract to be postponed multiple times last year and left the standard’s agency on the spot.

Kenya Insights has established that at least 13 firms have now submitted bids for the multi-billion-shilling motor vehicle inspection contract, including two firms that are fighting from being blacklisted from doing business in Kenya.

The Sh1.5 billion contract was first advertised in January 2021 but was never awarded under unclear circumstances even though contracts for the firms undertaking inspections for Kenya abroad had lapsed.

Postponement

Over the last three months, Kebs has postponed the tender at least thrice.

The agency had announced that documents for the restricted tender were to be published on November 24, 2021. However, this was pushed to November 30 with the tender deadline being set for January 6, 2022. Kebs managing irector Bernard Njiraini has since pushed the tender deadline to January 27 following a request by one of the bidders.

“Due to the new Covid-19 variant(Omicron) and the festive season, the travel restrictions imposed by airlines have made it difficult to beat the tender deadline of 6th January, 2022. Secondly most offices are closed for the holidays. We hereby request for the extension of the tender closing date,” the request reads in part.

Among the firms invited to bid for the contract include East Africa Automobile Inspection company (EAA) that has been debarred by the Public Procurement Administrative Review Board (PPARB) from doing business in Kenya.

The firm was debarred for three years and the decision gazetted by Treasury Cabinet Secretary Ukur Yatani.

However, EAA dashed to court and obtained orders staying the debarment pending the hearing and determination of the suit.

EAA was debarred for alleged falsification of documents in previous contract.

The decision to debar EAA was arrived at after various investigative agencies including the Directorate of Criminal Investigations in conjunction with Interpol, the National Assembly’s Public Investments Committee and the Auditor General separately concluded that the firm was involved in falsification of its bid documents.

EAA was debarred in June last year after PPARB ruled that the company forged documents in different bids placed between 2011 to 2019.

Also invited to bid for the contract is Auto Terminal Japan Ltd (ATJ).

The company is embroiled in vicious court cases with PPARB fighting debarment for alleged falsification of documents.

The Auditor General, the DCI and PICalso alleged forgery of bid documents by ATJ to win previous multi billion shillings Kebss contracts for motor vehicle inspection.

Other companies that have been invited in the restricted tender include Japanese based Aichi Daihatsu. The company was registered in Kenya in 2015 under Jumbo DAA Kenya Limited.

ISO certification

Jumbo DAA is a company importing and exporting vehicles from Japan to Kenya and its neighbouring countries.

Other firms include Quality Inspection Services Japan (QISJ), Japan Inspection Services, Telova, Jurong Inspection Centre (JIC), Wilna, Geochem, Vinstar, TIS, JAAI and Five Blocks.

For the first time, KEBS has insisted that the tender would only be awarded to firms with Type A ISO certification.

Type A certified firms are seen as the most independent inspection companies as they are not affiliated to any manufacturers or suppliers of a similar product. “For purposes of our tender, we are looking for an independent body devoid of any conflict of interest e.g vehicle sales, repairs, maintenance etc and hence type C is not admissible,” Njiraini said in an addendum dated December 20.

ATJ and Aichi Daihatsu have type C certification, which Kebs says lacks sufficient independence for the job.

Corruption masterminded by CEO Njiraini

In 2020, a court case revealed how the Kenya Bureau of Standards (KeBS) had compromised the health and wealth of Kenyans by associating with a rogue Japanese firm known as Quality Inspection Services Inc Japan (QISJ).

QISJ had been banned from engaging in motor vehicle business by the Japan Harbor Transportation Association (JHTA) in a dated August 27, 2015.

The reason for the ban was simple, QISJ had engaged in poor inspection of radioactive substances in used vehicles that were being sold worldwide.

In March 2011, Japan had suffered its worst nuclear disaster at the Fukushima Daichi power plant. The effects were that the waste and radioactive materials affected most things and therefore made radiation inspection critical especially in used cars being sold abroad.

The radiation measurement is taken before vehicles are handled by harbour workers. That way, only vehicles that satisfy the standard radiation values proceeds to the export procedures.

Radiation measurement is required for all used vehicles to be exported from Japan.

But in corrupt-ridden Kenya, KeBS and the QISJ saw an opportunity to cut corners.

Sh2.5 billion scandal

The second issue, that reached the corridors of justice was the additional Sh4000 charged on every vehicle imported into Kenya by QISJ.

KeBS had contracted QISJ as the only entity mandated to conduct inspection and verification of all vehicles imported into the country.

EACC OFFICERS arrest Kebs boss Bernard Njiraini amid investigation on bribery at the agency. pic.twitter.com/yhcDLPRsbY

— Nation Breaking News (@NationBreaking) July 2, 2020

On May 26 2020, a private Kenyan car importer, George Odhiambo filed a case at the High Court, accusing the QISJ of overcharging Kenyans during the inspection process, arguing that the burden of the extra cost was eventually passed to the consumers.

“The first respondent (Quality Inspection Services Inc. Japan Limited) has been overcharging exporters and importers and Kenyans and unfairly withholding more fees than that contracted for.”

“The first respondent charges from its website, and still overcharges consumers when the current exchange rates for each subject country are applied against the contracted currency,” court papers filed by Odhiambo’s lawyer Andrew Ombwayo read in part.

Mr Odhiambo, questioned the legality of QISJ operating as a monopoly in Kenya, giving them the autonomy he claims they have used to siphon billions over the years.

“The fact that the extra charged levies by the first respondent are passed to the consumers violates the consumers’ right to the protection of their economic interest.

Bernard Njiraini. His appointment to KeBs was questioned by Members of Parliament, terming it ‘unprocedural’. MP’s cited several irregularities in his appointment which they argue were driven by partisan interests. They alleged that Njiraini who took over the reins from Bernard Nguyo had emerged a distant sixth in a series of interviews conducted by the KEBS board and a hired consultant.

“The loss is likely to be more considering that a Parliamentary progress report of the special audit report dated July 10, 2019, on procurement of pre-export verification of conformity to standard tender no Kebs/T019/2017-2020 had in page 13 placed the figure of motor vehicles imported into Kenya in the years 20150-19 at 409,070 used vehicles,” Odhiambo says in the court papers.

QISJ had charged an extra Ksh4,000 extra fee charged on each imported car for over six years.

It is KeBS boss Njiraini that reportedly lifted the lid on the loss of over Sh2.5 billion by importers through the overcharging.

“Overcharges curb importation because the prospective importer is cut off or dissuaded by expensive fees thus increasing cost of business in Kenya,” Njiraini’s statement read in part

However, sources say he received a bribe of Sh50 million to stop investigations.

Behind The Scenes

When the Kenya Bureau of Standards (KEBS) floated the tender for Pre-Export Verification of Conformity (PVOC) of used motor vehicles and motor vehicle spare parts on January 19, 2021, among the entities that collected tender documents was Five Blocks Enterprises. Curiously, Five Blocks did not return the documents as a bidder. But, in the ongoing tender process, Five Blocks, through its sole director Dr Charles Nzai, an Environmental and Natural Resource Economist at Kenyatta University, would be at the centre of the tendering.

The tender has turned into a classic case of dirty tricks being employed to undercut rival bidders, interests converging and diverging, a Directorate of Criminal Investigations (DCI) speaking from both sides of its mouth, the Auditor General seeking to get involved in procurement matters and clashing multiple investigations reports.

In there are debarment proceedings against two bidders, East Africa Automobile Services (EAA) and Auto-Terminal Japan (ATJ), and the Debarment Committee of the Public Procurement Regulatory Authority (PPRA) keen on rushing through the consequential proceedings before KEBS concludes tender evaluation. Meanwhile, KEBS, who just a year ago expanded the pool of PVOC inspectors, now appear to be leaning towards going back to monopoly.

Reports suggest that hundreds of millions have been spent by one of the bidders to buy investigators, including members of the Debarment Committee. At least two senior officials at the DCI and KEBS are said to have received bribes to the tune of US$1 million (Sh100 million) each.

After collecting but not returning the tender documents, Five Blocks twice filed reviews with the Public Procurement Administrative Review Board (PPARB). In the both applications for review, Five Blocks managed to have the tender conditions reviewed and the bidding period extended. A tender that was floated on January 19, 2021 and was originally set to close on February 10 ended up closing on May 5. By the time of closing, only four companies submitted bids for the PVOC for motor vehicles and motor vehicle spare parts: Quality Inspection Services Japan (QISJ), Auto-Terminal Japan (ATJ), East Africa Automobile Services (EAA) and Wilnar International Company.

Before the closing of the tender, and after the two successful applications for reviews, the hitherto dirty tricks shifted into high gear: two of the bidders, ATJ and EAA had to be debarred. Dr Nzai – again – on April 1, 2021, went to the debarment committee seeking to have ATJ and EAA blacklisted and therefore blocked from participating in the PVOC tender.

Looking at the companies who submitted their bids, Dr Nzai’s application would have only meant to benefit one of the remaining bidders if the debarment application was upheld – QISJ because of its experience and financial muscle.

Just to demonstrate how the debarment application was targeted, Dr Nzai wanted his application determined before May 5, the day KEBS had set for the closing of the tender.

The application for debarment was based on allegations stemming from a controversial Special Audit Report by the Auditor General that recommended barring of EAA Company and ATJ, accusing them of forging documents and misrepresenting themselves in the tender that was later awarded to QISJ, allegations the two both companies have vehemently refuted.

Arising from the Special Audit Report, the National Assembly’s Public Investment Committee (PIC) also conducted contentious investigations and also recommended that EAA Company Limited and Auto Terminal Japan (ATJ) be barred from engaging in vehicle inspection tenders.

But in October 2020, High Court Judge Pauline Nyamweya stayed the implementation of parts of the PIC report.

Dr Nzai’s application was based on the Special Audit, which the Parliamentary Investments Committee had submitted to the DCI and the Ethics and Anti-Corruption Commission (EACC) for further investigations. To date, neither of the agencies have produced a report on the investigations.

In fact, when EAA wrote to the DCI on March 25, 2021, inquiring on the status of investigations, John Kariuki responded on May 7, 2021, saying investigations had not concluded, meaning there was no report the Debarment Committee could act upon to convict ATJ and EAA.

“We received information and a host of documents for investigations from the Public Procurement Regulatory Authority (PPRA), the Public Investment Committee (PIC) and the Office of the Director of Public Prosecutions (ODPP). The matter is under active investigation and in the process of seeking Mutual Legal Assistance (MLA) to ascertain the authenticity of the documents used to secure tenders at the Kenya Bureau of Statistics. Once the matter is finalised we shall revert,” Mr Kariuki said in the letter.

From here it gets even more interesting.

After Mr Kariuki, who heads investigations at DCI, wrote the letter on May 7, his boss George Kinoti unprecedentedly wrote to KEBS and the PPRA’s Debarment Committee that the evidence against EAA and ATJ was overwhelming. This is despite the fact that the Mutual Legal Assistance the DCI was seeking to send its officers to Japan to verify the documents and physical facilities had not taken place.

Mr Kinoti’s letter was unprecedented because in the ordinary course of events he hardly writes letters concerning investigations. The assignment is often left to the head of investigations, in this case Mr Kariuki. Why was it different this time? We may not know what prompted it.

Fearing that the Debarment Committee, which has not hidden its leanings on the matter, would act on Mr Kinoti’s letter and debar them, EAA moved to court and obtained temporary court orders stopping the committee from proceeding with the hearings.

In the whole confusion surrounding the investigations, there is also the issue of which report(s) to believe. There are at least four different reports: The Special Audit by the Auditor General and the PIC report which was based on the Special Audit. Then there is the 2017 PIC report that was based on actual physical presence of MPs on the ground to verify facilities used by EAA and ATJ and which found that they were compliant. The fourth report is by Interpol, which on several accounts, contradicts the AG’s Special Audit.

Dr Nzai and the hidden hands in the KEBS tender want the Debarment Committee to make its finding based on the Special Audit report and the other by PIC – these two agencies also recommended further investigations.

Both ATJ and EAA have raised several objections to the PIC report, among them its validity arguing that it was prepared outside the timelines and also that the officers from the Office of the Auditor General who conducted the audit were conflicted.

The Auditor General’s audit report was received in Parliament on August 20, 2019. However, the Parliamentary report was concluded in June, 2020 which surpassed the three-months timeline given to Parliament, meaning it violates Article 229(8) of the Constitution of Kenya, thus raising the questions on validity.

Moreover, emails and other documents made available to PIC showed that the auditing team had their travels and accommodation in Japan arranged by QISJ, an interested party. And while the auditors claimed in the Special Audit report that they had travelled to South Africa, they later recanted this version on record, meaning they were lying.