KDC Rocked With Fresh Sh500 Million Tender Scam

The Kenya Development Corporation (KDC) is facing mounting allegations of systemic procurement fraud, with the Public Procurement Regulatory Authority (PPRA) launching an audit into nearly fifty tenders worth half a billion shillings amid claims of deliberate opacity and possible collusion between officials and politically connected contractors.

In a devastating blow to the debt-stricken development finance institution, PPRA Director General Patrick Wanjuki has written twice to KDC boss Norah Buyaki Ratemo demanding immediate disclosure of tender awards, evaluation reports and contract details for flagged procurements that investigators believe may have bypassed competitive bidding processes.

The procurement watchdog’s intervention follows a damning whistleblower complaint alleging an intricate web of tender irregularities at the state corporation, which has already been hemorrhaging under a Sh33.44 billion bad debt crisis that threatens to paralyze its operations entirely.

PPRA’s letter dated November 10 warns that compliance officers are authorized to descend on KDC’s Uchumi House headquarters and carry away any documents that may assist the investigation.

The correspondence, which has been copied to the Ethics and Anti-Corruption Commission, signals that the matter has escalated beyond mere administrative oversight into potential criminal territory.

According to documents obtained by Kenya Insights, KDC stands accused of violating procurement laws by failing to publish key contracts on the Public Procurement Information Portal as required under the Public Procurement and Asset Disposal Act.

The failure to disclose these multi-million shilling deals has raised red flags about possible fraud, inflated costs and conflicts of interest that may have cost taxpayers hundreds of millions.

Among the suspicious contracts now under scrutiny are a Sh35 million medical insurance tender for KDC directors and staff, a Sh64 million deal for lift installation at Finance House, and a Sh33 million CCTV installation contract at Utalii House.

Other flagged procurements include a Sh26.4 million proposal for wet areas overhaul at Utalii House and Sh13 million in general insurance services.

Internal documents reportedly show glaring inconsistencies between approved budgets and amounts actually paid to select suppliers, pointing to possible collusion between procurement officers and contractors with political connections.

Sources familiar with the probe say several tenders appear to have dodged open competitive bidding through restricted processes lacking proper justification.

The scandal erupts at the worst possible time for KDC Director General Ratemo, who has been battling to stabilize the corporation since her confirmation in July 2023.

Earlier this year, Auditor General Nancy Gathungu exposed that KDC was drowning in Sh33.44 billion of non-recoverable loans, representing a staggering 86 percent of its entire loan portfolio.

The audit revealed that most borrowers from KDC’s predecessor entities, Industrial and Commercial Development Corporation, Tourism Finance Corporation and IDB Capital Limited, are long deceased and their securities, including ancestral lands, are missing, impaired or irredeemable.

The corporation has been forced to stop accruing interest on these zombie loans, choking off desperately needed revenue.

Kenya Development Corporation (KDC), DG Ms.Norah Buyaki Ratemo at a past event.

Now, with procurement fraud allegations threatening to engulf the institution, KDC faces a dual crisis of financial insolvency and governance collapse.

Critics say the timing could not be worse, as the corporation is meant to be a key vehicle for President William Ruto’s Bottom Up Economic Transformation Agenda.

PPRA has given KDC a strict deadline to upload all contract documents, including tender invitation notices, evaluation reports, appointment of tender committees, award notices and full contract details to the PPIP portal.

The directive follows PPRA Circular No. 04/2022 and Circular No. 05/2022, which mandate all procuring entities to maintain transparent procurement records accessible to the public.

When contacted for comment, Ratemo sent a brief text message stating that the corporation’s communications team would be in touch.

However, no official statement had been issued by press time, fueling speculation that KDC leadership may be scrambling to contain the damage.

The procurement fraud probe adds to a growing list of controversies plaguing state corporations under the current administration.

Just months ago, Kenya Pipeline Company saw four officials convicted in a Sh550 million procurement scandal, while revelations about budgeted corruption in government procurement have become disturbingly routine.

Procurement expert and anti-corruption activist John Githongo has previously warned that public contracts have become a vehicle for what Kenyans now cynically call budgeted corruption, with politically connected middleman companies winning lucrative tenders for goods and services they are not qualified to supply.

The KDC case follows a familiar pattern. Whistleblower complaints, delayed or missing contract disclosures, restricted tendering processes lacking justification, budget overruns and the unmistakable whiff of insider dealing.

If PPRA’s investigation confirms what sources are alleging, heads will need to roll and prosecutions must follow.

For a corporation already on life support financially, this procurement scandal could prove fatal.

With 86 percent of its loan book written off as bad debt and now facing allegations of half a billion shillings in questionable contracts, KDC may have squandered its last reserves of public trust.

The question now is whether the investigations by PPRA and EACC will yield prosecutions or whether, as so often happens in Kenya’s procurement scandals, the wealthy and well-connected will escape accountability while taxpayers foot the bill for their plunder.