Board deals Chinese firm blow in Sh1b KenGen tender

German Chancellor Olaf Scholz (left) with Energy CS David Chirchir when he toured Olkaria geothermal fields in Naivasha in May 2023. KenGen is looking for a contractor to connect three make-up wells at the site. [Antony Gitonga, Standard]

Chinese energy firm Sinopec International Petroleum Service has suffered a major blow in its fight for the tender to enhance one of KenGen’s power plants at the Olkaria geothermal fields. 

This is after the Public Procurement Administrative Review Board (ARB) threw out an application by the Chinese firm that sought to stop KenGen from re-advertising a tender to enhance its Olkaria One Additional Unit (IAU) power plant.

In the tender, which was advertised in March last year, the State-owned power producer is looking for a contractor to connect three make-up wells to the power plant that has an electricity generation capacity of 83 megawatts (MW).

Between October last year - when KenGen announced the tender outcome - and March this year, Sinopec has put up a spirited fight to reverse the tender award to its rivals.

Court of Appeal

The firm first moved to ARB and later the High Court and the Court of Appeal as it sought to have it overturned. 

Following the tender advert last year, Sinopec alongside Elite Builders Company Ltd, Lex Oilfield Solutions Ltd and H Young & Co Ltd had bid for the job. 

Elite Builders and H Young & Co were dropped at the preliminary stage as their tenders were found unresponsive.

Sinopec and Lex Oilfield Solutions, in a joint venture with EPCM Consultants SA, would fight out to the final stages, where Sinopec was knocked out on account of its higher financial bid. 

According to an analysis by ARB in its decision, the financial evaluation was to be based on the application of a margin of preference for local and open international tenders and thereafter comparison of tender prices to establish the lowest evaluated tender.

On October 16, KenGen awarded the tender to the joint venture of Lex Oilfield Solutions and EPCM Consultants SA.

“The applicant’s (Sinopec’s) tender was ranked the lowest of the two tenders prior to the application of the margin of preference. However, following the application of the margin of preference, the evaluation committee determined the second interested party’s (Lex Oilfield Solutions) tender price for Sh1.14 billion as the lowest evaluated tender price in the subject tender,” noted ARB. 

Dissatisfied, Sinopec filed a request for review at ARB on October 27 asking the board to overturn KenGen’s decision

The board issued a decision on December 17, dismissing the firm’s case. Sinopec challenged ARB’s decision at the high court in Nairobi and on January 4 this year, the high court dismissed the application. 

Sinopec further appealed the judgment by the High Court at the Court of Appeal, which on February 3 allowed the appeal and set aside the award of the contract by KenGen to Lex Oilfield Solutions.

Following the decision by the Court of Appeal, KenGen wrote to the companies informing them that it planned to re-advertise the tender. 

Sinopec, however, protested and on March 7 this year filed a request for review at ARB seeking to nullify KenGen’s plans to re-advertise the tender and instead wanted the board to compel KenGen to extend the validity of the earlier tender by 120 days “or such period as it deems necessary to allow for sufficient time for the respondent (KenGen) to conclude the subject tender process.”

On March 28, ARB dismissed the request by Sinopec while also noting that the board lacked authority to review the decision made by the Court of Appeal in February.

“The respondent’s (Kengen’s) notice of preliminary objection dated March 11, 2024 be and is hereby upheld only insofar the board is board is functus officio and that it lacks the jurisdiction to vary, amend, or review in any way the final decision in Civil Appeal number E012 of 2024,” said ARB in its March 28 decision, in which it also dismissed Sinopec’s request for review. 

“The request for review dated March 7, 2024 be and is hereby struck out.”