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State risks losing Sh5 billion in inflated costs for new generation number plates

NEWS
By Mwaniki Munuhe | October 25th 2015
Suspended Transport CS Michael Kamau displays a new generation number plate. (Photo:File/Standard)

Taxpayers risk losing more than Sh5 billion in inflated costs for new generation number plates.

The battle for the lucrative contracts has sucked in government officials including key decision makers in the Public Procurement Administrative Review Board (PPRB) and influential merchants with interests in the production of the current number plates.

The government begun the process of digitising number plates for motor vehicles and motor bikes in 2004 but this has been delayed due to merchants-driven interests.

Uganda, Tanzania, South Sudan, Burundi and Rwanda — all members of the East African Community —have already digitised their number plates.

The current status is no different from past experience with these contracts since the 2004 stalemate.

On May 28, the Government awarded the contracts to two companies. But PPRB overturned the decision, accusing the government of breaking procurement laws and inflating the costs for one bidder.

“The evaluation report for tender number 11 shows that instead of using the prices set out in the form of tender and the price schedule, the procuring entity went ahead to evaluate the applicant’s financial proposal using the prices of USD 17,406,350 which the applicant did not tender for,” says PPRB. PPRB further ruled that all the contracts for stamping foils and plate blanks be awarded to one company, Tropical Technology Limited.

A close look at tender documents shows that Tropical had quoted $4 million (Sh400 million) higher than the previously awarded bidder EHA Hoffmann International GMBH which had quoted $6,953,700 (approximately Sh695.4 million) for the supply of motorised number plates blanks.

The Government has protested the PPRB decision to ignore lowest qualified bidders and accused it of working in cahoots with merchants to inflate the costs for the execution of the contracts by at least $51 million (Sh5.1 billion).

In a letter dated October 21 — a copy of which The Standard on Sunday has seen – Interior Principal Secretary Josephta Mukobe told Attorney General Githu Muigai that the taxpayer stands to lose $51 million  (approximately Sh5.1 billion) if the ministry is compelled to award the contracts to Tropical Technology Limited as directed by PPRB.

Lowest bidders

“The procurement entity stands to lose USD3,097,300 in tender No. KPS/ICB/T/10/2014-2017 and USD 15,987,508 and USD 31,918,300 in Tender No KPS/ICB/T/11/2014-2017 if its decision to award the tenders to the lowest responsive bidders is annulled and is compelled to sign contract with Tropical Technology Limited,” reads part of the letter.

On Thursday last week, EHA Hoffmann International GMBH and MIG International Limited, the two companies that had been awarded the contracts which were later withdrawn, moved to court to challenge the PPRB’s decision. The court will hear the appeal Monday.

In March, the Government started evaluating bids for supply of motorised number plates blanks and motorised number plates stamping foils sizes 120mm x 305mm and 220mm x 305mm in five colours (Black, Blue, Green, White and Red).

Upon conclusion of the evaluation process, two companies won the two three-year contracts. EHA Hoffmann International GMBH (supply of motorised number plates blanks at a cost of $6,953,700 (approximately Sh695,370,000) and stamping foils size 220mm x 305mm at $20,797,500 (approximately Sh2,079,750,000).

MIG International Limited was awarded the contracts for the supply of motorised number plates stamping foils size 120mm x 305mm at a cost of $1,418,842 (approximately Sh141,884,200) being the lowest evaluated bidder.

Tropical Technology Limited, which had also submitted bids for the contracts, challenged the awards at PPRB which ordered a fresh re-evaluation be conducted.

Tropical Technology Limited is the supplier of materials used in the production of the  number plates currently in use. It has also been awarded the tender to supply the equipment that will be used to assemble the new generation plates. The production cost of the current plates is twice the cost of the new generation plates.

The procuring entity (Ministry of Interior) re-evaluated the contracts and ended up with the same conclusion except in the tender for the supply of motorised number plates stamping foils size 220mm x 305mm which the government recommended be re-advertised on the basis that $20,797,500 was too high.

This decision was yet again challenged at PPRB by Tropical Technology Limited which accused PPRB of illegally altering its bids to create a different figure from what it had submitted and using the same to evaluate them.

The lawyer for Tropical Technology Limited, Alex Thangei, told the board that, “At no one point had the applicant given a figure of USD17,406,350 as its price in the tender and the figure it had quoted was the figure of USD 4,856.2 (Sh485,620) for the three years which had been broken down to the sums of USD1,541.7, USD1,618.7 and USD1,615.8 USD for the three years.”

Compute the total costs

Tropical Technology Limited offered to deliver a single unit of blue motorised number plates stamping foils size 120mm x 305mm at $140.28 (Sh14,028) for the third year. This cost does not include delivery of the same in the first two years.

The price schedule for other bidders who, included EHA Hoffman International GMBH and MIG International,  captured the unit price and the total costs for the three years.

Indeed, whereas other bidders submitted the costs for 70,000 motorised number plates stamping foils, Tropical Technology Limited provided prices for 30 units.

PPRB explained that the prices quoted by Tropical Technology Limited were unit costs which they used to compute the total costs the firm would incur if it was awarded the contract and to also compare the same to the total costs offered by other bidders. But in its defence, the ministry says it would have been illegal for the evaluation committee to get into negotiations with a bidder in the course of an evaluation process.

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