Former AG’s opinion on SGR ignored as Kitany queried deal

The Attorney General had questioned the procurement process of the Sh500 billion Standard Gauge Railway (SGR) but his advise was ignored, it has now emerged.

Documents filed before the Court of Appeal reveal that former Attorney General Githu Muigai (pictured above) had informed the Public Procurement Oversight Authority (PPOA) that the government-to-government loan arrangement between Kenya and China did not exempt the Kenya Railways Corporation (KRC) from ensuring the procurement method it adopted was fair, equitable, transparent, competitive and cost-effective.

Prof Muigai was replying to a PPOA letter dated April 5, 2013, asking for a legal opinion on whether such loan arrangements are recognised in procurement law.

“It is my opinion that the so-called government-to-government agreement is not a method of selecting suppliers so as to support an award of a contract,” the AG cautioned.

Six months later, the Office of Deputy President William Ruto wrote to the AG seeking his opinion on the legality of the tender.

Former Chief of Staff Marianne Kitany informed the AG on October 28 that after reviewing the project documentation, they had concerns about the procurement process.

In her letter, Kitany revealed she was worried that President Uhuru Kenyatta would, on November 28, launch a project that had ‘questionable footprints’. She asked the AG to revert on or before November 5.

“We have reviewed the documents for the project and we have detected numerous prima facie (on the face of it) anomalies in the tendering-award process and documentation contrary to the Public Procurement and Disposal Act (Act No 3 of 2005) and other laws of the Republic of Kenya,” she wrote.

Kitany continued: “It is imperative that His Excellency the President should not be seen as giving the project a seal of approval unless all the required procedural and legal steps have been undertaken and the project is one which is completely overboard.”

Correspondence between then China’s Ambassador to Kenya Deng Hingbo and China Road and Bridge Corporation (CRBC) General Manager Du Fei, on one hand, and Kenyan officials reveals that the government was interested in an electric railway system to boost her investment across the country.

It was also to serve as a transport hub for Uganda, Rwanda, Burundi and the DRC. 

The government was of the view that the metre-gauge railway system was not sufficient to drive the country to Vision 2030.

The initial arrangement was that the trains would rely on a 33-kilovolt system running along the railway corridor for the whole length of the project (Embakasi to Mombasa) and supplied from the national grid connecting Mombasa to Nairobi.

Power supply

To ensure that the trains did not stall from power blackouts, the 33kV line would be fed from several points to guarantee an uninterrupted power supply. Step-down transformers would also be provided at every station.

PPOA Director-General Maurice Juma also asked the AG to interpret whether tenders would be exempted from procurement laws in arrangements where Kenya negotiated for a loan but contributed resources towards the procurement activity.

Mr Juma’s letter to the AG was triggered by two conflicting positions held by KRC on the lucrative deal.

Kenya Railways had initially signed a direct procurement contract with CRBC that it withdrew five months later.

It had informed PPOA on October 2, 2012, that SGR had been directly procured from CRBC.

Documents filed before the Court of Appeal showed that five months later, Kenya Railways asked PPOA to withdraw the October 2 report, terming it an error.

Kenya Railways directed PPOA to replace the direct procurement report with another indicating that the contract with CRBC to build the railway was the result of a negotiated grant between Kenya and the Chinese Government, or ‘G-to-G’ funding.

This way, KRC believed the deal would not be subjected to procurement laws.

Faced with two contradictory reports from the same entity, PPOA asked KRC to send it further information as proof that the deal was borne out of a grant given to Kenya by China.

On March 21, 2013, Kenya Railways expressed regret that it would not supply any documents because the negotiated agreement between the two governments was not available.

In its reply, KRC said Kenya was discussing funding arrangements with the Exim Bank of China.

The PPOA wrote to Muigai, “Through a letter dated March 25, 2013, the procuring entity has reported to PPOA cancellation of this subject tender as to M/S China Road and Bridge Corporation. The reason for termination has been reported as follows: the procurement is G-to G procurement which is to be funded by a negotiated grant/loan and therefore exempt from PPOA 2006 pursuant to Section 6(1) of the Act.”

The AG replied that the issue on whether Kenya’s deal with China was a procurement method was a weighty one.

“More worrying, however, is the increasing phenomenon of government MDAs (ministries, departments and agencies) employing the G-to-G tool to circumvent the requirements of the Public Procurement and Disposal Act 2005. I would favour a construction that holds government-to-government agreement as not being methods of procurement,” said Githu.

He continued: “In effect, it is my opinion that the so-called government-to-government agreement is not a method of selecting suppliers so as to support an award of a contract.”

Githu’s fears would be confirmed by the Court of Appeal, which found that KRC bent the law to award CRBC the Sh500 billion deal to build a railway between Mombasa and Malaba.

The Chinese firm had initially been contracted to do a feasibility study for the project.

Despite the questions raised by the AG and the DP’s office, the project kicked off with much fun-fair.

In the Court of Appeal case, KRC objected to having the exchanges with the AG and Ruto’s office admitted as evidence, saying that one of the appellants, activist Okiya Omtatah, had obtained them illegally.

The corporation urged justices Martha Koome, Gatembu Kairu and Jamila Mohamed to expunge copies of numerous letters exchanged between the Ministry of Transport and CRBC, correspondence between CRBC and former Prime Minister Raila Odinga’s office, and a memorandum of understanding between the Transport ministry and CRBC dated August 12, 2009.

It also implored the judges to strike out the correspondence between the Chinese Embassy and the Transport ministry, and Raila’s office and the Chinese ambassador on a feasibility study for the project.

Omtatah had told the court he obtained the documents from a whistleblower after his formal requests to KRC were ignored. He also argued that KRC had failed to conduct due diligence on CRBC, saying the World Bank had blacklisted the Chinese firm from undertaking projects funded from its coffers.

But CRBC Deputy General Manager Xiong Shiling said the firm had challenged the World Bank’s decision, which it termed as unilateral. According to Xiong, the World Bank failed to provide evidence to support its sanctions.