Row Over Sh470m tender increases Portland’s Woes

Row Over Sh470m tender increases Portland’s Woes
Published: 20 March 2007

Succession, two key vacancies and a Sh470m deal are at the centre of problems bedevilling East African Portland Cement Company. The firm is said to have lost business estimated at Sh300m last month alone due to its inability to operate at optimum capacity.  
 
And with the problems still far from resolved, a loss of another Sh300 million is anticipated this month.  
 
At the centre of the storm is acting managing director Ndegwa Kagio and the chairman of the board, Mr Benson Ndeta, both of whom have been to Nairobi’s Integrity House, the home of the Kenya Anti-Corruption Commission (KACC), to explain the deal for the supply of clinker, a vital ingredient in cement making.  
 
The losses are likely to continue unless the company resolves when to close for annual servicing of its machines and the arrival of 110,000t of clinker agreed upon last month. The closure has been postponed three times - from last July to December, and then to January.  
 
The delay in carrying out the servicing has made the company operate at only 50 per cent capacity, producing a mere 30,000 tonnes of cement. Its full capacity is about 60,000t.  
 
A senior official based at Athi River, near Nairobi, told the Sunday Nation that the Sh470 million clinker deal awarded to Mauritius company Revel International is just a tip of the iceberg.  
 
The row over clinker came to the fore two weeks ago, the same day the position of procurement manager was advertised in the media. It is currently held by Mr Luke Obiri.  
 
Also advertised was that of general manager, finance. Mrs Rosemary Gituma is the finance manager.  
 
This is the second time the award of the clinker deal to Revel International has caused a storm, with allegations of irregularities.  
 
In 2005, the company was awarded two tenders worth Sh325 million. It was first awarded a contract to supply clinker worth Sh175 million on February 14, 2005, through single sourcing. Six months later, it was given a contract to supply clinker Sh150 million. While the company claims to be Mauritian, documents sent to Portland in 2005 showed that they were faxed from a AIA House at Kileleshwa, Nairobi.  
 
When the Sunday Nation reported the irregular importation of clinker by Portland, the then managing director, Mr Zakayo ole Mapelu, defended the deal. Mr Mapelu who was sacked last year, claimed that the importation was the first to be undertaken by the company in its history.  
 
However, investigations showed that, contrary to management claims, Portland imported 36,000 tonnes in February. The then managing director wrote to Mr Ndeta seeking approval to import 30,000 tonnes on January 31, 2005, because "there is a sudden upsurge in demand for cement in the local and export market."  
 
The chairman approved the importation on the same day the letter was received, paving the way for the MD to invite tenders. But this did not happen.  
 
Instead, less than 12 hours later, on February 1, 1005, Revel faxed its bid. This is the letter which was faxed from Nairobi, on telephone 570896 (now 3870896). 
 
This week, Mr Mapelu would not be drawn into discussing the deal, saying only that he was no longer an employee of EAPCC. In what is seen as a repeat of the first scenario, Revel was awarded a contract to supply 110,000 tonnes of clinker for its lowest bid of $62.50 (about Sh4,500) a tonne despite having failed to meet all the tender regulations.  
 
The second lowest bidder, Emirates Trading Agencies, quoted $65 (Sh4,680) a tonne, while Metro Petroleum was the third at $93.45 (Sh6,700). It is only Metro that met all the requirements.  
 
Initially, the tender committee disqualified the Mauritian firm on the ground that it had contravened Section 47(1c) of the Procurement and Disposal Act (2005) - failing to present its price schedule in the manner prescribed by EAPCC, and presenting its quotation in the form of an unsigned sale contract.  
 
But writing to Trade permanent secretary David Nalo, the Portland acting MD gave reasons why the committee’s decision was overturned and Revel awarded the tender. Mr Kagio informed the PS that Revel had been awarded the tender on the ground that it would save Portland Sh19.2 million and that the delivery would be done in 30 days.  
 
The tender which was advertised on November 1, 2006, seems to have run into problems from day one.  Bamburi Cement Company that owns 42 per cent of Portland, dismissed the tender in a letter to Mr Kagio on December 19, 2006, as non-compliant on at least four grounds.  
 
Bamburi MD Michel Puchercos advised the EAPCC management to cancel the tender and invite fresh bids.  
 
But EAPCC ignored the advice given by Bamburi and met on February 19, 2007, to award the tender to Revel International.  
 
The Bamburi management has been reluctant to discuss the issue despite calls to Mr Puchercos office.  
 
Contrary to claims by the Trade and Industry ministry that the award to Revel was unanimous, the Sunday Nation confirmed that two members of the tender committee, Mr Obiri and Ms Miriam Gaituri, objected.  
 
Mr Obiri, the committee secretary, argued that Revel did not conform to all requirements outlined in the tender documents, while Ms Gaituri based her objection on the fact that the committee was not properly constituted. Members who supported the award were Mr Caleb Kapten (chairman), Ms Gituma (vice-chairman), Alex Mutisya and Mr Harris Njuguna.  
 
In its deliberations of February 14, the committee noted that awarding the contract to Metro would lead to a loss of Sh238 million to Portland, while awarding it to Emirates would lead to a Sh19 million loss.  
 
The cement factory was also unhappy with the 60-day delivery period offered by the two companies. Our efforts to talk to Mr Ismail hit a snag when he referred all our queries to the Revel website and offices in Mauritius.  
 
The tender documents for Revel were collected by a Kenyan, Mr Riyaz Ismail, and although he says he is the company’s representative in Kenya, he is reluctant to disclose the address of his office.  
 
A message the Sunday Nation sent to Revel on Tuesday had not been responded to by Friday. Soon after Portland awarded the tender to the Mauritian company, KACC was tipped off and swung into action. Its two officers, Mr Dan Aura and Mr Gideon Rukaria, visited the Portland offices at 3.30pm on February 21, and quizzed the acting MD before carting away all files relating to the clinker deal. 
 
The next day, Mr Kagio was summoned to Integrity House where he was further questioned by Mr M. K. Bosire for the better part of the afternoon.  
 
Mr Ndeta presented himself to Integrity House on his own volition to shed light on the clinker issue. But KACC claims that the chairman was formally summoned and that after its officials were through with him, they went to his offices and seized computer hard disks and some files.  
 
But Mr Ndeta told the Sunday Nation that KACC officials did not raid his office. 
 
"I invited them to my office and even offered to give them any information and documents that could help them get information relating to Revel International," he said.  
 
While he agreed that due process was not followed in giving the contract to the Mauritian company, Mr Ndeta says the decision did not lead to a loss of money. EAPCC was operating under difficult circumstances, he says, adding that the fact that Revel did not present its bid in the right format was not enough reason to disqualify the firm.  
 
"They have supplied clinker to Portland before and met their obligations," he points out.  
 
Mr Ndeta elaborates that what was offered Revel was a letter of acceptance, which has a 21-day period before a deal is signed. "During this period any firm that is not satisfied with the process is free to appeal," he notes. 
 
He says that if an appeal was made against Revel’s letter of acceptance it could complicate cement manufacturing at EAPCC.  
 
Mr Obiri must be an unhappy man after the EAPCC management advertised his job while he is still in office. And while he was involved in the drafting of the new procurement rules, he has not been able to practically apply them, his critics say.  
 
However, the most controversial job at the firm is that of GM, finance, which has been vacant for more than two years. The position, together with that of the managing director, are said to be giving Treasury and the Office of the President quite some headache.