A contentious Sh63.4 million tender for construction of a cane buying centre at Nabakholo town was not fairly awarded by Mumias Sugar Company, an audit revealed.
The auditors KPMG, found a lack of fairness in the whole process.
The winning bid was by Hain Building Construction Company. Although the company had the lowest bid, it also scored the lowest evaluation mark from the tendering committee. In addition, it was discovered that Hain had gaps in terms of access to credit. The company also did not have any experience handling projects of such magnitude.
The tendering committee thus resolved to begin negotiations with the second lowest bidder - Associated Construction Limited. The minutes to this meeting were approved by then Mumias Sugar Company Managing Director Peter Kebati.
However, in what seems to have been another meeting held on the same day, Mr Kebati, signed off another set of minutes indicating that Hain provided supporting documents for all the queries that had been raised about it in the earlier meeting.
“We could not find documentation to establish who instructed Hain to provide additional information,” KPMG said in its report.
The report also points to blatant procurement fraud directly perpetuated by senior management.
On June 14, 2011, a proposal for provision of pest control and fumigation services was sent by Keybay Pest Control Services to the then Managing Director Evans Kidero, now Nairobi Governor. He received it the next day. The proposal to rid the premise of many pests, including mosquitoes was for a quoted price of Sh423,155 per month.
At the time of the proposal, all sanitary and fumigation services were being done by the in-house health and safety department. But on the same day, even with this information, Dr Kidero approved the tender and on June 15, a day after sending the proposal to Mumias, Keybay was in business with the sugar miller.
On July 14, the tender award was made official for a period of one year. The letter bearing this good news to Keybay was approved by Kidero.
Two months earlier, the company’s Safety and Health Manager Elias Muriithi had expressed reservations on the deal to outsource the fumigation services since he felt his department had a cost effective way of dealing with the pests.
“Since we have not concluded our review, please delay the award of the tender as we undertake further analysis on the effectiveness of the other control measures. We shall advise you if it will be necessary to progress with the award and when to do so,” Muriithi’s memo read. His recommendations were subsequently ignored.
Investigations by KPMG revealed that Keybay’s director was married to Mumias’ Company Secretary Emily Otieno.
In just one year, the value of the tender had shot from Sh423,155 to Sh1.4 million per month. This was attributed to the high cost of chemicals and an expanding job scope. Changes that were never presented to, or approved by the tendering committee. The audit also found that Emily would prepare legal documents for Kebay.
“We found in her laptop a template of an engagement letter with Kebay’s letterhead. We further found a template of the proposal of provision of pest services dated October 29, 2010 addressed to Mumias Sugar Company,” reads the report.
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The auditors also discovered that she used her position to fast track payments to Keybay. As the company secretary, Emily was responsible for the drafting of contracts between Keybay and Mumias.
On July 24, 2013 during a board meeting, it was stated that Mumias was in the process of terminating all contracts where employees were involved.
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