Crane & Co quoted cheapest price to give Kenyans new currency

Central Bank Governor Dr. Patrick Njoroge during the announcement of the acquisition of Chase Bank customers/depositors by the State Bank of Mauritius on 12th January 2018. PHOTO:WILBERFORCE OKWIRI

The Central Bank of Kenya has been accused of influencing the currency printing tender to ensure a British currency printer got the deal.

The recent ruling by the Public Procurement Administrative Review Board places the Governor, who has garnered a reputation for playing by the book, in the eye of the storm.

A review of the tender by the procurement review board passes the buck squarely to Patrick Njoroge’s desk, faulting CBK for introducing a clause that made De La Rue get the deal despite being more expensive than its competitors.

De La Rue had won the tender after a 15 per cent preference was applied adjusting their price on evaluation down by a similar margin.

The review board, however, ruled that the preference was awarded illegally since the British firm was not located in Kenya and did not have local shareholding. Hence, the board cancelled the tender.

“For the procuring entity to resort to this provision at the tender evaluation stage was in the board’s view premature and could only have been intended to tilt the tender process in the direction and in favour of the successful bidder,” said procurement review board chairman Paul Gicheru.

The ruling indicates that prior to the award, CBK’s Director of Procurement and Logistics, had in his professional opinion requested Dr Njoroge to approve the application for sub-contracting by De La Rue International and for it to be awarded the tender.

Njoroge approved this request on November 29, last year. “I am very particular about the choice of your words especially intention. The orders did not say that. It declared that De La Rue got the tender irregularly and asked us to repeat the evaluation. We did make a point that we would appeal the ruling and the matter is at the High Court,” Njoroge said on Friday.

American firm Crane & Co quoted by far the cheapest price to give Kenyans new currency at Sh10.9 billion followed by French firm Oberthur Fiduciaire, which would have printed the currency for Sh11.2 billion.

German banknote printer Giesecke & Devrient had the most expensive bid at Sh12.6 billion while British firm De La Rue International was about to print the new-look notes and mint the coins at Sh11.7 billion.

The four firms passed the technical review and only had financial hurdle to cross, which put Crane & Co ahead of the pack. “The Central Bank of Kenya will award the contract to the successful tenderer(s) whose tender has been determined to be substantially responsive and has been determined to be the lowest evaluated,” clause 2.27.4 reads.

De La Rue, however, has been eyeing to clinch the contract at all costs. The British firm together with French firm Oberthur Fiduciaire linked to the OT Morpho firm (that supplied voter identification kits and computer servers for the recent elections) gave zero bids when the tender was first floated, tantamount to offering free service.

SUB-CONTRACT

This forced the CBK to cancel the tender and issue a new international tender restricted to the four pre-qualified firms. De La Rue then went to court to compel CBK to include its local affiliates De La Rue Kenya EPZ Ltd and De La Rue Currency and Security Print Ltd in the tender process.

CBK fought back claiming that the local firm could not print the currency and that they had illegally acquired tender documents which were used to file the case. This prompted the local firm to withdraw their case.

The firm then applied to include the local subsidiary as a possible sub-contractor if they were to win the tender, a claim they would use to negotiate for the 15 per cent preference. Curiously, the same CBK officials who swore an affidavit that De La Rue subsidiaries in Kenya lacked the technology and ability to print the currency turned around and allowed De La Rue International to sub-contract the tender to the local affiliates.

The review board noted that this was predetermined to blur the difference among the entities during the process even to note the extent that CBK went out of procedure to announce both firms at the tender opening.

“Of particular note is that during the tender opening meeting, the tender opening committee delved into issues that were outside its purview…the tender opening committee was only required to read out aloud the name of the bidder who had submitted a tender, the tender price and provisional sums and the details of the tender security offered by each bidder,” said Mr Gicheru.

LOCAL SUBSIDIARIES

“The tender committee however went into the issue of which bidder had applied for a preference consideration. This was not the function of the tender opening committee.”

The review board chairman said on Monday that De La Rue International was distinct from its affiliates De La Rue Kenya EPZ Ltd and De La Rue Currency and Security Print Ltd.

“The third and fourth respondents are separate and distinct legal corporate entities set up under the laws of Kenya and are not the same entities as De La Rue International Limited,” the local subsidiaries had argued seeking to be exempted from the review.

Mr Gicheru said that CBK was wrong in assuming that since the British firm had indicated it would sub-contract to the affiliates preference was applicable. Subcontracting is only applied way after a contract has been evaluated and awarded as you cannot subcontract what you do not have.

In fact, Weekend Business has learned that the Government has not yet acquired stake in the local subsidiaries as pen had not been put to paper even after setting aside Sh892 million in the supplementary budget last year to acquire assets including a ‘majority stake’ in De la Rue.

As at October last year, De La Rue EPZ shareholding was held by Thomas De La Rue AG and De La Rue Holdings PLC.

De La Rue Security Print Ltd is owned by Kenneth Hamish/Wooler Keith, a Kenyan with one share, De La Rue Holdings and Thomas De La Rue AG.

Efforts to get a response from Robin MacKenzie, marketing director of De La Rue International flown into the country to salvage the deal did not yield fruit by the time of going to press.

Initially at the review board, the CBK wanted the case thrown out on technicalities which included that Crane AB made the application out of time, as the case was filed outside the 14-day period and that the board did not have jurisdiction to determine the matter.

The bank also wanted the case dismissed on grounds that Crane AB did not deposit an equivalent of 10 per cent of the value of the tender.

However, Gicheru ruled that CBK failed to serve a notice of award to Crane AB and thus were not bound by the 14-day notice while the rule requiring 10 per cent deposit for the appeal to proceed is not applicable since the regulations on that law have not been promulgated.

CBK and De La Rue, however, have since moved to the High Court to appeal the decision by the procurement review board that cancelled the tender.

In a separate battle to break a five-decade monopoly over currency printing in Kenya, activist Okiya Omtatah wants British currency printer De La Rue banned from tendering to print new notes if the current tender is struck off.

The British firm has printed currency in Kenya since independence. It, however, lost the tender between 1966 and 1985 to Bradbury & Wilkinson of the UK, which it later acquired. The firm had long held the currency production business until 2002 with indications that it could lose the contract with change of regime.

Then, CBK signed a 10-year exclusive deal with De La Rue at the 11th hour which was however overturned by former Finance Minister David Mwiraria in 2003 who wanted an international tender. After backroom negotiations, it appeared that the Mwai Kibaki administration preferred the route of buying shares in De La Rue’s Ruaraka-based subsidiary.

NEW DESIGNS

De La Rue continues to print legal tender under opaquely-negotiated interim orders even after the new Constitution demanded new designs. In December last year, Omtatah moved to the High Court and successfully obtained temporary orders to stop the award until the case he filed is heard and terminated. The matter is scheduled for hearing on January 17, 2018.

Kenya is in almost two-and-a-half year breach of the August 2015 deadline to roll out the new currency notes as stipulated in the new Constitution. It had hoped to get the new currencies between April and June this year, but these cases now mean the county has to await a little bit more to see the image of Jomo Kenyatta off our money.

At a recent press briefing, CBK Governor Njoroge said the Treasury plans to issue the currency in the second quarter of 2018.