Nyayo car firm in yet another controversy

The State-owned Numerical Machining Complex Ltd––best known for manufacturing the infamous Nyayo Pioneer car––is in the news again.

On Friday the Privatisation Commission advertised for consultants to advise the government on what to do with the expensive machinery and equipment imported as far back as 1993 for the ill-conceived automobile project.

What is intriguing is that even as the Privatisation Commission was seeking advice on what to do with the 20-year-old machines in Numerical’s shops, the company is in the middle of a buying spree for new equipment.

Documents in our possession show that the company has just ordered expensive machines worth hundreds of millions of shillings through a procurement process that has raised integrity issues.

Early this month, the company purchased an air compressor at a cost of Sh55 million. It has also budgeted to buy stand-by generators for an estimated Sh136 million.

Last week, Industrialisation and Entrepreneurship Secretary Aden Mohammed wrote to the board of the company demanding an explanation about the procurement of the new equipment.

“We have written to the company to ask them to explain what is happening there on the issue of procurement,” Mr Mohammed told Sunday Nation.

Current chairman

Numerical Machining Complex is a parastatal under the ministry of Industrialisation. Its chairman is a former private secretary of President Kibaki, Prof Nick Wanjohi.

The unfolding saga offers a compelling look at the risks involved in procuring complex technology.

Apart from integrity issues, there are concerns that well-connected vendors and traders with no technical competence to implement the complex and multi-faceted upgrade project may just dump expensive equipment on the company, some of which it may not even have capacity to put into good use.

Documents show that Numerical Machining Complex has just issued local purchase orders for three gigantic steel- melting machines, one of them with a capacity of melting five tonnes of steel metal an hour.

A tender for expensive laboratory equipment for testing the quality of liquid metal is also in the works. But what has really raised eyebrows is the manner in which the equipment is being procured.

According to the paper trail, the company floated a tender in March inviting bidders to supply the gigantic steel melting machines referred to in jargon as induction furnaces. Subsequently, a 10-man tender committee was appointed to evaluate the tenders.

Following the evaluations, a Nairobi-based company, Redline Ltd, emerged with the most competitive bid for the furnaces with a quote of Sh237 million.

However, at a meeting on June 4, the tender committee decided against awarding the tender to Redline on two grounds.

First, that the offer price was way above the budget for furnaces: Numerical had set the budget for the machines at Sh178 million, while Redline had quoted Sh237 million.

But more fundamentally, the tender committee argued that due to the complexity of the procurement, it did not make sense to buy the expensive machines from a trader.

“This kind of project requires total long-term commitment to supply, install, commission, train, maintain and offer warranty,” said the committee.

Thirdly, that the bidder neither provided proof of technical competence of capacity required nor evidence of having executed a project of similar complexity.

Consequently, the tender committee unanimously agreed that the gigantic machines would be purchased directly from a renowned manufacturer of induction furnaces, M/S Inductotherm Group of the United Kingdom.

It was at this stage that the shenanigans began.

Without informing the bidders that none of them had qualified, the company quietly decided to take a new route to procure the big machines, choosing to purchase them through the supplies branch of the Ministry of Public Works.

Grossly opaque

The hurried manner in which the procurement was processed through this widely disreputed and grossly opaque route of procuring services is perhaps one of the most intriguing aspects of the saga.

Acting managing director, Ms Christine Mbando, fired off a letter to the officer in charge of the Supplies Branch department, Mr Wesley Nyariki, requesting to be provided with ‘a list of  suppliers which the department had contracted to supply induction furnaces and the prices at which the contracts had been signed’.

According to available correspondence, the letter to the Supplies Branch was written on June 28, a Friday.

Barely two days later, on Monday July 1, Mr  Nyariki had replied to Ms Mbando in a letter in which he gave the name of a local trader, Equip Agencies Ltd, as having been awarded a tender to supply induction furnaces by Supplies Branch.

Contrary to practice Mr Nyariki’s letter to Ms Mbando neither provided the specifications nor the prices on the basis of which Supplies Branch had awarded the tender for the heavy machines. But Mr Nyariki’s letter also made it clear that as of that date there was no contract in place for induction furnaces. Equip Agencies, he explained in the letter, had not yet signed a formal contract with supplies branch.

Yet despite the fact that no binding contract was in place, documents show that by Wednesday July 3, Numerical had handed Equip Agencies two local purchase orders valued at Sh120 million to supply two furnaces.

According to Ms Mbando, the decision was made between her and a smaller team of engineers after the company realised that it did not have enough procurement professionals in its ranks to execute a direct procurement of the furnaces from the UK.

Best option

“We did not have capacity to go directly to Inductotherm,” she said, adding that going directly to the manufacturer would have involved lengthy correspondences with the Public Procurement Oversight Authority.
Suddenly, all those solid arguments by the tender committee about technical competence were no longer important.

Meanwhile, two members of the tender committee who recommended direct procurement from  the manufacturers, Mr John Lesso and Antipers Oruko, were fired.

Ms Mbando explained that their contracts had expired.

Additional reporting by Walter Menya