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How Sang signed his way into the ever revolving Kenya Pipeline Company scandal door

By Nzau Musau and Dominic Wabala | Mar 19th 2017 | 4 min read
The confirmed KPC CEO Joe Sang at the company's head office Nairobi 19/04/16 PHOTO BY MOSES OMUSULA

A controversial cancellation of a lucrative Sh1.2 billion tender has come back to haunt Kenya Pipeline Company (KPC) boss Joe Sang, with the Ethics and Anti-Corruption Commission (EACC) setting its sights on him and his board.

The EACC summons on Sang and some KPC staff earlier this week came in the middle of a vicious infighting within Jubilee rank and file over control of the lucrative parastatal few months to the election and a year after Sang took over.

In the matter, EACC is seeking Sang out over controversial cancellation of Sh1.2 billion Supervisory Control and Data Acquisition (Scada) tender which Sang insists was done overboard.

The summonses obtained by The Standard on Sunday were issued on March 2 with the MD and other senior staff required to appear before the commission between Monday and Thursday this week for interrogation. EACC later postponed the exercise citing unavailability of the interrogators.

The summonses sent shivers down the spines of top KPC management, since a similar process had been used to hound out the previous MD Charles Tanui.

Good faith

“We were ready to demonstrate to the EACC that no contract was ever duly signed between KPC and Siemens, that the matter ended up at the Public Procurement Administrative Review Board (PPARB) and we won, and that a court case on the same is due for ruling on March 30,” Sang told The Standard on Sunday.

Sang and his group do not understand EACC’s interest in the matter in view of the pending court case and past determination of the PPARB. Their argument is that EACC will eventually revert to the same institutions for guidance on the matter, hence the feeling they are being hang out to dry in the court of public opinion.

“The upshot of our argument is that the cancellation of the tender to Siemens was done in good faith and out of the need to save public funds. The scope of the works for the tender which had been initiated before I came in changed, there was concern over the price of the tender and our needs were not going to be fully met despite the price. What else could we have done as a company?” Sang posed.

Documents obtained by The Standard on Sunday on the tender paint a picture of boardroom intrigues, internal confusion, resistance and a murky path leading to its cancellation on the eve of its signing.

The tender for the system, which essentially monitors the integrity of the pipeline, was floated on February 5, 2015, months after KPC had awarded another multi-billion shilling tender for construction of a modern second pipeline between Nairobi and Mombasa.

When Sang joined KPC as acting MD, he found the process on the tail-end and he formally sent Siemens, the lowest of the bidders, the notification of award on January 29, 2016.

Siemens accepted the award, forwarded the performance bond and contract negotiations between the two started. By April 15, 2016, KPC and Siemens had agreed on the contract draft and Siemens had signed their part. However, before the final execution by KPC, things happened fast.

“The board was informed that during the process of contract formulation and execution, concerns were raised about the possibility that the Scada system being procured from Siemens Ltd was a duplication of the Delta V supplied by Emersom Ltd for the new pipeline,” according to minutes of the 66th board meeting held on May 30, 2016 which were obtained by The Standard on Sunday.

The board minutes do not indicate where the concerns originated from. However, they say that arising from the concerns, the board’s technical committee invited both suppliers to special board meeting on May 20, 2016 and interrogated the scope of supply by both parties.

The board, supported by KPC engineers, concluded that there was no duplication. “However, during their presentation, the suppliers of the Delta V System indicated that they were able to offer a solution to the Scada system at a lower cost. On the other hand, the suppliers of Scada introduced additional features that were not part of the scope of the tender that had been awarded to them,” the minutes say.

Shortly thereafter, the management considered it in its best interests to cancel the tender altogether and re-tender in accordance with the law. The decision, according to board and management papers in our possession, was to test the market for latest solutions, incorporate all requirements of the company, give all bidders a fair chance to compete and satisfy public interest.

The board endorsed this move and directed the management to ensure that the new tender is “clear, precise and contained a comprehensive description of the services required in order to ensure the company got value for money.”

On September 7, 2016, however, Siemens moved to the PPARB seeking to nullify the decision cancelling the award, compel KPC to sign their contract dated July 15, 2016 and award of costs of the review.

In its determination, the PPARB easily, and citing precedents, found there was no way KPC could legally cancel a tender after it had issued a letter of notification of award.

Bitter pill

“The procuring entity in this case acted in error in terminating the award issued to the applicant,” the PPARB said.

However, the PPARB refused to compel KPC to sign the contract on account of change of scope of works. Essentially, the board left room for KPC and Siemens to negotiate a variation of the contract as both sides had, in significant respects, won and lost in the review.

The case and how it has turned has left a bitter pill on the current management at KPC which blames two senior bureaucrats in the energy docket, a senior manager at KenPipe Plaza, an influential board member and powerful oil industry operative.

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