PPOA defends KRA for award of e-tax tender

NAIROBI: The taxman was justified to use direct sourcing to hand a Swiss company a Sh15.9 billion tender, the Public Procurement Oversight Authority (PPOA) has said.

The award of the Excisable Goods Management System tender to Switzerland- based SICPA Security Solutions left Kenya Revenue Authority (KRA) under pressure to explain why it locked out potential bidders when awarding the tender.

But according to PPOA Director General Maurice Juma, engaging the Swiss firm for provision of additional stamps was a reasonable option. The authority has written to the clerk of the National Assembly Justin Bundi, providing its regulatory advice on the matter that is under investigation by the Public Investments Committee (PIC).

“Management of two separate contracts for the same services and goods could have posed contract management challenges such as aligning delivery schedules and compatibility of services and associated goods,” said Juma. KRA is currently being probed by PIC for engaging in a direct process to procure the EGMS solution for alcoholic, bottled water and soft drinks from SICPA Security Solutions, an international security solutions provider.

Revenue stamps

In response to the PIC, Juma added that the firm had already installed software for stamp verification, which had proprietary features, in the previous Sh4.55 billion tender. Prior to engaging SICPA for an expanded mandate, KRA had, in 2013, retained the same firm for an EGMS solution covering tobacco, wines and spirits.

• .

  Keep Reading

• 
  Military top shots likely to succeed CDF Ogolla
• 
  Nine killed in overnight Russian strikes, as Ukraine downs bomber
• 
  IMF lifts global growth forecast but signals pessimism over medium term
• 
  Zelenskyy calls for same defense from allies as Israel

In its review note, the procurement authority noted KRA had processed applications from six bidders. The Swiss-headquartered firm, the authority said, had been assessed as the best provider of the services after scoring 75.5 per cent.

KRA has held that it awarded the tender to fix revenue stamps on tobacco, wines and spirits to SICPA because the additional items also required stamps with features similar to previous ones so as to run on software installed by the Swiss firm. This, it says, could only have been provided by SICPA to avoid operational challenges.

Recently, KRA Head of Marketing Surveillance Caxton Masudi told PIC that the country risks losing Sh200 billion in taxes if the tender is cancelled since it had helped seal tax loopholes. Varying the previous five-year tender, which was to run until March 2019, PPOA said, was not feasible since it would have meant varying more than allowable limit of 25 per cent of existing contract.

“Engaging SICPA for the extra scope of the assignment was a reasonable option based on the fact that the bidder installed software for verification of stamps that had proprietary features,” said Juma in the letter to the National Assembly.

In the previous tender, awarded in December 2012, the firm was supposed to fix about 3.55 billion revenue stamps on tobacco, wines and spirits. However, following an amendment to Customs and Excisable Regulations in June 2013 to allow similar stamps on all excisable goods except motor vehicles, demand for stamps shot up to 12.8 billion.

The new law roped in beer, mineral water, soft drinks and cosmetics, which have seen companies such as Coca-Cola threaten to relocate from Kenya. Open tendering method is the preferred method according to PPOA. However, firms are also allowed to use other methods such as single sourcing (also called direct procurement) for as long as they meet conditions in the Act.

Section 74 (1) of the procurement Act allows firms to use direct sourcing for as long as it is not meant to avoid competition. The Act further states that firms must prove that no other person can supply goods or services being procured or that there is no reasonable alternative.