How Ex-PS Kibicho Letter Cost Taxpayers Sh1.6B In Fuel Tender

Former Interior Principal Secretary (PS) Karanja Kibicho pressured the energy regulator to cancel a competitive and cheaper fuel marking tender in favour of a handpicked Swiss multinational in a deal that will cost taxpayers Sh1.6 billion in the three years to June 2025.

Mr Kibicho fired a stern letter to the Energy and Petroleum Regulatory Authority (Epra), ordering its director-general, Daniel Kiptoo, to cancel an earlier tender and award the deal to SICPA SA.

The letter dated December 6, 2021 arrived as Epra prepared to award the multi-million-shilling deal to two firms- Intertek Testing Services and Authentix—after weeks of tendering.

Ultimately, Epra gave the tender to SICPA SA for Sh2.35 billion, dropping the two firms that had offered to do the job for Sh694 million.

The deal caught the eye of the Auditor-General, Nancy Gathungu, who last month argued there was no justification for single-sourcing the multi-million-shilling tender, and that taxpayers would not realise value for money.

Ms Gathungu also flagged the speed at which SICPA SA closed the deal, arguing that the Swiss firm inked the contract within two days after notification and before the lapse of the 14 days provided in the law.

This shines the spotlight on Mr Kibicho, then a powerful PS under the Uhuru Kenyatta administration.

“Consider rescinding the ongoing tendering and procurement process for fuel marking and monitoring services,” Mr Kibicho wrote to Mr Kiptoo.

“Engage with SICPA, the service provider of the reconfigured EGMS to migrate to the EGMS before 31 December 2021 since the reconfigured interim system is ready for fuel marking and monitoring.”

Epra had advertised the three-year fuel marking tender in November 2021 and reviewed bids that saw Intertek Testing Services and Authentix emerge top.

But Mr Kibicho reckoned that a decision had been made for Kenya to have a centralised platform for tracking the quality of products, which was under SICPA SA — the Swiss firm eyeing control over public contracts for products-marking.

The Swiss firm already had a lucrative contract with the Kenya Revenue Authority (KRA) for curbing tax evasion via security stamps that were the subject of a parliamentary probe and court action. The courts and MPs gave the Swiss firm the go-ahead.

While acknowledging sending the letter to Epra, Mr Kibicho told the Business Daily in a text message on August 13 that he could not recall all events that led to his notice to Mr Kiptoo. He noted that the directive was not personal, but the decision of a multi-agency committee where he was the chairman.

“The letter does not cancel any tendering process and only reacts to a request raised by KRA in the Multi-Agency Steering Committee. ⁠The letter refers Epra to NT (National Treasury) for guidance on another tendering process aligned to the recommendations of the Committee and nowhere is Epra being DIRECTED to cancel a process,” Mr Kibicho said in the WhatsApp message.

Mr Kibicho signed the letter as “PS, Interior and Citizen Services” and copied then Petroleum PS, Andrew Kamau, asking him to “Kindly guide Epra accordingly.”

“This is just my reading of the letter but will be unable to comment further in the absence of a whole file. 2021 is a long time to expect precise recollection of all committees’ deliberations,” he added.

Following Mr Kibicho’s letter, Epra on December 28, 2021, cancelled the tender just after Intertek and Authentix had been declared winners.

SICPA got a tender in a similar fashion in Tanzania where the State cancelled a tender offered to Intertek Testing Services and Authentix and directly awarded the Swiss firm.

The Swiss firm maintained its system is running.

Mr Kiptoo requested the Treasury to engage SICPA SA on the contract through a “specially permitted procurement procedure.”

“The government has identified SICPA who are the current service provider for the EGMS to undertake a fuel marking and monitoring program under the same system to ensure increased efficiency. SICPA has confirmed its readiness to offer the fuel marking and monitoring services as envisaged under IPMAS,” Mr Kiptoo said in a December 28, 2021 letter to then-Treasury PS Julius Muia.

The Auditor-General in a July report indicated that Mr Kiptoo and his head of procurement had approved the tender award to Intertek and Authentix, before termination.

The public auditor says Mr Kiptoo later changed the narrative to indicate that SICPA was the sole company with technology to track adulterated fuel and petrol meant for export markets.

“The tender was terminated on December 28, 2021, but Management (Epra) did not provide a report to the Public Procurement and Regulatory Authority (PPRA) indicating reasons for termination,” the Auditor-General revealed last month.

The PPRA says it was not involved in the cancellation and the award of the contract without tendering.

“Upon reviewing our records, we have not found an advisory request from Epra relating to the subject tender,” said the head of PPRA, Patrick Wanjuki.

The Auditor-General reckons that there was no evidence to indicate that the SICPA system had been implemented as at the time of the conclusion of the audit in March 2024, which was nine months after the contract kicked off.

“Marking is done through a marking application anchored on advanced IT infrastructure with connected scales for accurate dosage preparation guided by precision bars,” SICPA said in an e-mail response.

Intertek and Authentix challenged the cancellation of the open tender at the PPARB, saying there was no justification for stopping the tender at the tail end.

“By failing to provide real and tangible reasons for termination of the procurement process, the respondents usurped powers in purporting to exercise discretion and unfettered powers,” they argued.

In deciding the matter, the PPARB faulted Epra for proceeding with the initial open tender process when it had all along been aware of the government’s plan to centralise fuel-marking services under IPMAS.

“It was a malpractice on its part to commence the procurement proceedings of the subject tender knowing very well that implementation of the subject tender may encounter operational challenges attributed to the said government policy of integrating marking, tracing and authentication of products by government ministries, departments, and agencies,” the review board said.

Epra in its defence said it was aligning with government policy. The board rejected the bid by Intertek and Authentix to overturn the cancellation of the contract but asked Epra to follow the law in nullifying the tender.