Watchman’s tender role costs taxpayers Sh150 million

Chief Justice David Maraga with Lady Justice Hedwig Ong'udi the president of Kenya Magistrates (KMJA) arriving for the Kenya Magistrates and Judges Association annual conference in Nakuru on December 8, 2017. [Photo:Kipsang Joseph/Standard]

The irregular appointment of a gate keeper to sit in a tender committee has cost taxpayers Sh150 million.

The High Court on Monday ordered School Equipment Production Unit (Sepu) - a unit in the the Education Ministry - to pay the money to a supplier for breach of contract.

It all began in 2009 when one Edward Makamu, referred in court papers as a gate man, was appointed by Sepu Managing Director to sit in the committee that awarded Vulcan Lab Equipment a Sh226 million tender for the supply of science equipment and chemicals.

But the Ethics and Anti Corruption (EACC) questioned how the tender was awarded, and in the process Vulcan Lab Equipment director, Vishal Kacha and four other people from Sepu ended up in court on corruption charges.

Subsequently, the Education ministry’s agency rejected Vulcan’s supplies. The warehouse where the supplier had stored the material intended for public secondary schools sold them off to recover storage fees.

Corruption charges

Mr Kacha was however acquitted of the corruption charges and sued Sepu and EACC for the cancellation of the tender.

On Monday, the High Court agreed with the supplier that the contract was illegally revoked and ordered the ministry to pay the supplier Sh150 million.

Justice Hedwig Ongu’di noted that SEPU managing director appointed a gate man to sit in the tender committee despite knowing that he was not qualified.

The presence of the gate man in the committee led to cancellation of the contract and triggered a protracted corruption case that roped in the supplier.

Justice Ong’undi noted that the supplier, at the time of tendering, was not aware of any mischief by the procuring entity’s employees.

She also noted that the supplier’s goods were rejected by the  agency and eventually sold off by the warehouse after failing to service storage fees.

 “A whole Government entity placed a gate man on a procurement committee and the first respondent (Sepu) expects the plaintiff (Vulcan) to have known that,” the judge observed.

“The first defendant, through the acts of its employees, caused all this mess and put the plaintiff in a very awkward position,” she noted.

The deal between the two was worth Sh226 million.

According to court documents, it was to run for two-and-a-half months and Sepu ought to have availed 33 per cent of the contract sum at the execution of the contract. The balance was to be cleared upon delivery of all goods.

The court heard that Sh75 million was paid through a cheque deposited to Southern Credit bank and Vulcan director left for India to source for the goods. It is then anti-graft watchdog moved to court and froze Vulcan’s account.

In reply, the managing director of Sepu told the court she signed the Sh75 million cheque while out of office on sick leave.

She told the court she had doubts of how the cheque was issued, but got assurances from her predecessor and the cashier that all was well.

Vulcan lawyer Mogere Guto told the court that his client had already imported items worth Sh94 million. Upon delivery, the ministry rejected them saying EACC was investigating the contract.

Due to the rejection, the items were stored at Express Kenya which then sold them to recover Sh9 million storage fees.

Silent Ministry

Kacha was also charged alongside four other people, convicted by a magistrate’s court but set free by the High Court, which ruled that he was not to blame for the blunders in Sepu.

The court heard the ministry remained silent on whether the contract had been cancelled yet Vulcan had used its own money to acquire the goods.

The judge ordered the ministry should pay the supplier Sh94,279,202 for the value of the goods, Sh50 million for breach of contract and Sh5 million for accrued insurance premiums.

Justice Ong’undi ruled that the supplier expected the ministry’s agency to have followed the right procurement procedures.

“The plaintiff could not have known that a gate keeper’s name was appearing as a tender committee member,” she said.

“I find that the first defendant’s refusal to accept the goods it had ordered amounted to breach of contract. It did not offer any mitigation to the plaintiff who was not a party to the conspiracy by the first defendant’s employees,” she ruled.