Port of plunder: How billions of taxpayer money could be lost in KPA tender scandal

A ship docks at the Mombasa Port. [File, Standard] An explosive documents and insider testimonies have blown the lid off in what appears to be a well-orchestrated web of procurement fraud at the Kenya Ports Authority (KPA). The disturbing revelations, touching on one of the country's most important revenue generating installations headquartered at the Coast, point to a pattern of inflated contracts, shadowy tenders and what looks like a deliberate bypassing of procurement laws that has seen billions of taxpayers' money go down the drain. At the heart of the scandal are deals brokered behind closed doors and tenders awarded in secrecy plus a system rigged to serve only the extremely well-connected individuals. Shockingly, even the very institutions meant to safeguard public funds, oversight state bodies, internal auditors, regulators all appear to have deliberately looked the other way. KPA stands tall in the region operating at the port of Mombasa, which is regarded the region's busiest port handling millions of tons of cargo annually, and a critical gateway for landlocked countries such as Uganda, Rwanda, South Sudan and the Democratic Republic of Congo. The Standard's investigations unit has pored through tons of documents revealing shocking patterns of violations, inconsistencies and questionable dealings at the state body. Despite a clear directive by the government to freeze all new capital expenditure for two consecutive fiscal years at KPA, The Standard can now reveal that the state body went ahead and committed over Sh100 billion in questionable contracts, that included Sh46.34 billion in the 2023/24 period and a staggering Sh53.85 billion for 2024/25. Perceptibly, none of these projects appear in the approved annual budget or procurement plan and even more damning: Several capital-intensive civil works have been disguised as simple operational maintenance projects, an apparent scheme to bypass competitive tendering and laid down operational procedures. "Many of these works were neither budgeted for nor approved by the KPA board," a source familiar with the procurement documents said. "Some appear to have been given the greenlight via internal memos without any trace of public advertisement." Among the projects that have gobbled up billions of taxpayers money include the construction of a 0.9 kilometre concrete road. The tender was allegedly awarded to M/s Stecol Corporation at a cost of Sh8.344 billion against an approved budget of Sh800m and an engineer's estimate of Sh1.7 billion. "The same road has consumed a lot of funds in the past through concreting and changing from tarmac which was done three years ago," intimated a source familiar with the deal. KPA allegedly made an advance payment of more than Sh1.6 billion (20 per cent) of the tender award to a Standard Chartered Bank account but no significant work has been done on the road. In 2022, KPA proposed to extend Berth 19B, and sought approval from the Treasury through a letter dated February 11. KPA, as per the letter, was seeking approval to vary the Kipevu Oil Terminal (KOT) contract within the maximum allowable limit to include the above component and commence the works utilising internally generated resources to complete the project. KPA noted that the undertaking was a mega project with an estimated project total cost of USD 97,308,372.40 to be funded by government. It noted that the revised total cost of the project is USD 108,805,858 to be funded by the authority's internally generated resources. The authority noted that the main reasons for the expansion was to increase port efficiency and productivity through construction of Berth 19B. The then Finance Cabinet Secretary Ukur Yatani approved the request. "The purpose of this letter, therefore, is to grant you approval to proceed with project preparation and implementation, within the existing legal and regulatory framework," stated Yatani in his response. Two years later, in 2024, a consultant was paid fee totaling Sh501,631,358.62 vide LPO 4500095298. The project, however, did not appear in the budget or in procurement plan for the Financial Year 2023/24 and or Financial Year 2024/25. Berth 19, with a length of approximately 200 meters, was allegedly awarded Sh18 billion compared to previous similar works done on a larger Berth 22 constructed at Sh13 billion. KPA allegedly approved various capital works single-handedly through an internal memo, disregarding the procurement act and public finance management guidelines. The Public Procurement and Asset Disposal Act (PPADA), 2015, offers that all procurement by public entities must be guided by principles of transparency, competitiveness, and accountability. Section 68 stipulates that contracts can only be awarded following recommendations from an evaluation committee and after all necessary approvals have been obtained. The Public Finance Management (PFM) Act, 2012 obligates accounting officers to ensure that public funds are used lawfully and that all expenditures are within the approved budget. A memo by Eng Samuel Mwaura, Manager Civil Engineering, dated April 22, 2024, sought approval to implement various projects worth Sh335.1 million. Further, tender No KPA/156/2023-24/TE for the design, manufacture, supply, testing, and commissioning of ten (10) fully built Rubber Tyre Gantry cranes (RTGs) is alleged to have been fraudulently done and awarded. RTG cranes are special mobile machines designed to handle inter-modal containers within the port's container yards, facilitating the efficient stacking and retrieval of containers. KPA in the tender allegedly restricted it to three firms. The firms to participate which were approved included M/s Zhenhua Port Machinery Corporation (ZPMC), M/s Mitsui E&S Machinery co Ltd and M/s Kalmar. KPA in a letter signed by Anthony Ndungu, for the Manager Container Terminal Engineering and dated March 8, 2024, noted that the authority had budgeted to procure ten RTG machines for Terminal II as it was under-equipped. He noted that the authority at the time had 56 RTGs spread across the ports of Mombasa, Lamu and the Inland Container Depot in Nairobi. The fleet of the RTGs, he stated, is composed of Kalmar, Mitsui, and ZPMC brands and has served them well. He added that they were holding stock of spare parts and tools for the maintenance of the cranes. "It is strongly recommended that the upcoming tender for the RTGs is restricted to manufacturers who already have presence within the authority," read the letter addressed to the General Manager Supplies Chain Management. KPA, as per the letter, by restricting the tender to the three companies will reap benefits including reducing on stock-holding of spare parts due to interchangeability of spare parts, reduction in the cost of training engineers on operation of new machines and compatibility with the existing infrastructure. "The existing RTG brands are tried and tested and our engineers and operators are familiar with areas where improvement can be done via specifications vis a vis new equipment, which they may not be familiar with their operations and performance," read the letter in part. In the letter the MD was requested to restrict the tender for procurement of the 10 Rubber Tyred Gantry Cranes to ZPMC, Mitsui and Kalmar or their agents who already have presence in the authority. Zhenhua Port Machinery Corporation (ZPMC), M/s Mitsui E&S Machinery co Ltd were invited to participate in the bidding. Another firm M/s Jiangsu Rainbow Industrial Equipment co Ltd, which had not been approved, was also invited. From the approved list of eligible firms invited as per the approved Memo, M/s Kalmar allegedly did not get a document to bid for the tender, instead, it was sent to M/s Jiangsu Rainbow Industrial Equipment Co Ltd. The other firms did not even get a document to bid for the tender in contrast to the approved memo. The tender reportedly went through a confidential bidding process to a company that had not approved in the first place. KPA Managing Director Captain William K. Ruto on April 26, 2024 informed Jiangsu Rainbow Industrial Equipment Company Limited that it had been awarded the tender (Tender No: KPA/ 156/2023-24/TE Design, manufacture, supply, testing, and commissioning of ten built rubber-tyred gantry cranes). "This is to notify you that you have been awarded the above tender at your total quoted bid price USD 21,200,000 CIF Mombasa with a delivery period of 64 weeks," read the notification letter to Jiangsu Rainbow Industrial Equipment Company Limited, signed by Captain Ruto. The Standard contacted KPA Managing Director Captain William Ruto regarding the allegations at the state corporation. In response, he sent a brief text message to our reporter stating: "You can visit our offices as everything has been done above board with all necessary approvals." However, an official email sent to KPA containing a list of pertinent queries and copied to the MD and the communication department, remained unanswered by the time of going to press. Despite an ongoing investigation by the Ethics and Anti-Corruption Commission (EACC), KPA proceeded to award the tender to Jiangsu Rainbow on April 26, just three days after receiving an official request for documents from the anti-corruption body. The award stood at USD 21.2 million (Sh2.7 billion), placing the unit cost of each RTG at over Sh273 million, double what is considered the market average. What's worse, some experts have confided that Jiangsu Rainbow is not a known manufacturer of RTGs and has no record of prior experience. Efforts by the EACC to initiate investigations into the alleged irregular tender appear to have hit a dead end. EACC in a letter dated April 23, 2024 to the KPA said it was in receipt of a report on allegation of corruption and malpractices in tendering process. In order to facilitate their investigations EACC sought for certified copies of approved budget and procurement for the Financial Year 2023/2024, tender invitation, approval for procurement among others. The tender documents were to be supplied to the commission on or before April 24, 2024. KPA in response to the demand by the commission, stated that the tender No. KPA/156/2023-24/ TE-design, manufacture, supply, testing, and commissioning of ten (10) fully built rubber tyre gantry (RTG) cranes was the subject of proceedings currently before the Public Procurement Administrative Review Board under the PPARB Application No. 41 of 2024 - ZPMC vs Kenya Ports Authority filed on May 9, 2024. "The procurement proceedings are therefore suspended per the provisions of Section 168 of the PPAD Act," stated Ruto. Ruto noted that the authority was required to submit a response and to furnish all the confidential documents to the Review Board for purposes of the review proceedings. Given the circumstances, Ruto said they were therefore unable to provide the documents in respect of the tender to the EACC at the moment, under the provisions of Section 40 of the PPAD Act. In another instance, a framework contract for Danfoss hydraulic parts was awarded to Ms Floema Investments through direct procurement. Evidence suggests the manufacturer authorisation letter from Danfoss was forged, and the part numbers used in the tender documents were fraudulent, an amalgam of codes from other Original Equipment Manufacturers (OEM). Some parts listed in this contract also appear in procurement plans for the 2024-2025 financial year, suggesting premeditated fraud to edge out genuine suppliers. Blucon Industrial Spares was also awarded a contract to repair assorted types of hydraulic cylinders in the engineering department. The costs of these repairs done, however, some experts suggest are way above market rates and that KPA engineers and technicians have the capabilities to carry out some of these works. KPA engineers, capable of conducting these repairs, were sidelined in favor of outsourced contracts costing tens of millions. Sample LPOs indicate repetitive jobs costing between Sh2 million and Sh11 million each. The same trend was observed in radiator repair contracts awarded to Cemtec Engineering Ltd and MZ Radiators Ltd. These jobs, which previously cost under Sh100,000, are now being billed at upwards of Sh1.8 million per radiator, prices that exceed the cost of a brand-new OEM radiator. While productivity at the Port of Mombasa remains heavily dependent on equipment reliability, maintenance has reportedly stalled. Equipment in the Marine, Conventional, and Terminal divisions is in disrepair due to spare part shortages, despite the ballooning costs. Multiple ICT tenders have also been flagged for lacking value-for-money analyses and for duplicating systems. KPA has allegedly been running two similar systems-KWATOS and CIMS-with the latter procured at a highly inflated cost. While KWATOS costs Sh51 million annually, various components of CIMS were awarded to Brinker Solutions Ltd at a cumulative cost exceeding Sh1 billion. These include professional services, gate management systems, and inventory modules, some of which mirror functionalities already present in KWATOS.

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