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Corruption cartels discover new tricks to rig State tenders

Saturday May 16 2015

President Uhuru Kenyatta and Deputy President William Ruto (right) are shown how the Treasury’s e-procurement system works by IFMIS director Jerome Ochieng during the launch on August 13, 2014. Kenya does not have back-up for its financial system, putting government transactions at risk if it is compromised. FILE PHOTO | EVANS HABIL |

President Uhuru Kenyatta and Deputy President William Ruto (right) are shown how the Treasury’s e-procurement system works by IFMIS director Jerome Ochieng during the launch on August 13, 2014. FILE PHOTO | EVANS HABIL | NATION MEDIA GROUP

WALTER MENYA
By WALTER MENYA
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Crafty middle-level and senior officials are devising new schemes to rig tenders and line their pockets with huge sums of money in shady deals, even as President Uhuru Kenyatta on Friday reiterated his order that all government procurement must be electronic and warned corrupt officials will be sacked.

Multiple Sunday Nation sources disclosed that an increasingly popular scheme is “support tendering” which involves crooked government officials colluding with a closed group of tenderers to ensure various contracts are awarded to the group’s members on a rotational basis to crowd out other bidders.

Under the plan designed to beat the scrutiny of auditors and anti-corruption investigators, the individual or entity from the closed group marked to win the bid is required to quote a reasonable figure and meet all the technical specifications — using insider information.

The figure includes mark-ups for officials who manipulate the process to ensure only the cartel members are listed. The other bidders in the group will then deliberately quote outrageously high amounts or unreasonably low figures to allow the chosen one to win the tender. The winner will then pay them a “thank you” fee that has also been loaded onto the price quoted.  

The “support tendering” cycle rotates to allow other members of the cartel to benefit in turn.

Suppliers who follow the regular channels have absolutely no chance of even being pre-qualified by the Supply Chain Management Department, let alone being awarded tenders by the procuring entity.

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“It is a deliberate, calculated, sinister and sustained effort by individuals across the public sector with a similar agenda and attitude. It works through inefficiency, deceit, outright lies, bribery, intimidation, and manipulation of accounting and procurement systems,” said an official of the National Anti-Corruption Campaign Steering Committee, who spoke in confidence.

The cartels position themselves to control the paper trail in ministries, from anticipated tenders to minutes of various meetings and the entire procurement process.

“Where and when necessary, paperwork is altered, minutes doctored, letters disappear and reappear when the deal is done,” said our source.

The key players in the schemes are the deputy secretaries who normally double as the administrators for the ministry and chairpersons of the ministerial tender committees, the heads of procurement, the legal officers, and the directors in ministry projects and commissions, committees and other strategic projects in ministries that have their own budgets.

Another important link in the chain are the accountants without whom no payments can be made.

Sometimes things get dirty with officials deemed uncooperative ending up “fixed” and exposed to auditors and other investigative agencies, according to our source.

VANISHING INK

In what reads like a script for a Mafia movie, some of the cartels go to the extent of purchasing pens that use disappearing ink which ensures any writing vanishes in between 24 and 48 hours.

The disappearing ink pen is used by a government official, who is part of the cartel, to write a cheque with the correct details. This is then presented to a senior official, who is unaware of the scheme, with authority to sign the cheque using ordinary ink.

Once the cartel has obtained the genuine signatures from the unsuspecting officials, the payment vouchers and cheques are kept for between 24 to 48 hours after which the details of amounts and payees are changed.

When the auditors eventually show up, the approving officer finds himself in hot water as his records of what was signed on differ with what was actually paid.

“Some of the people you see being investigated by the Ethics and Anti-Corruption Commission (EACC) may be innocent. Often their only mistake is usually that they refused to dance to the tune of the entrenched interests,” an official said.

The cartels are so entrenched that some insiders believe President Kenyatta’s order for electronic procurement may not solve all the problems.

“I am convinced that the single largest avenue for loss of public funds is through these cartels that are faceless and ruthless. They design internal systems that for all and sundry look to be protecting public funds, but because they themselves have designed them, they also know their inherent weaknesses and how to exploit the same,” the NACCSC official said.

Another opportunity that officials exploit to loot is the production of goods and services for mass distribution like the printing of government documents. Because of the volumes involved and the wide distribution, the officials produce less than the numbers budgeted for well aware nobody will take time to count them, so they pocket the difference.

VARY SPECIFICATIONS

In the construction industry, the government may budget and release funds for say 10,000 bags of cement. However, in collusion with the implementers of the project, only part of the consignment is delivered.

In road construction, resident engineers who oversee the implementation of the projects often collude with contractors to vary specifications and fleece the government of tidy sums of money.
Other avenues that are being brazenly exploited by these corrupt officials are trainings and workshops.

Last October, two employees of the Export Promotion Council (EPC), Rebecca Mpaayei and Reuben Wanjala, publicly spoke about the brazen looting of government through fictitious projects and “capacity building” workshops.

“I am here today because of the misappropriation of funds at EPC that has resulted in poverty among many Kenyans. This is an institution in crisis and the negative trade balance by Kenya is because of these people,” Ms Mpaayei, then EPC’s Women Enterprise Development manager, said.

The two accused the EPC of massive misappropriation of funds disguised as training workshops for exporters in Kenya.

“There is no clear monitoring and evaluation to guide the council’s activities,” Mr Wanjala, who at the time was the EPC’s ICT and e-Trade Services manager, said.

Sunday Nation was also told of a parastatal making a proposal for countrywide training of 40 people in 100 centres.

Because the “capacity building workshops” were to take place across the country, the institution had to book hotels, pay per diem for staff involved and provide transport.

The institution made a proposal and sent it to a United Nations agency that agreed to partially fund it. In reality, only a handful of the workshops took place yet the hotel bills were paid and the attendees paid their fare, accommodation and subsistence allowance. The ‘attendees’ also signed against their names.

“People create hypothetical projects, and they can even invest in professionals to develop proposals for imaginary projects. Every other public institution has something they are doing and which on the face value looks pretty convincing,” a civil servant with knowledge of the transactions said.

While a lot of national and media focus has been on the “mega audit queries”, the breathtaking reach of corruption by public servants and the cartels that work with them continues.

The local chapter of Transparency International, the anti-corruption watchdog, said while there has been no specific study on the issue, “a significant amount of money is lost in government”.

“If you combine wastage and this type of sleaze, the amounts of money the public loses to these cartels is huge,” Mr Samuel Kimeu, the executive director of Transparency International (Kenya), said.

FORENSIC AUDIT

Edward Ouko, the Auditor-General, remained guarded on the matter. “In addressing the issues raised, our policy dictates that we do not discuss specific client issues. Our discussion is only through audit reports that are public documents. If there are any specific issues that anyone wants the Auditor-General to consider, they could be forwarded to his office to consider carrying out a forensic audit/special audit,” Mr Ouko said.

Kenya Institute of Supplies Management (KISM) chairman Chris Oanda said people who “manufacture” documents are not professionals.

“Organisations by their very nature are not bad, but there could be one or two bad eggs which should not be generalised to vilify the procurement professionals who do their work [honestly]. In a situation where people manufacture documents, the criminal justice system should take its course,” said Mr Oanda.

Mr Oanda said a procurement process can only be completed with the involvement honest suppliers who can deliver value. “But sometimes things do not go right because of misdirection of the procurement process and the many players involved,” he said.

He said that to improve professionalism, a legal framework should be put in place to eliminate ambiguity and place the procurement professionals at the centre of the process. He alluded to a proposed procurement law that will replace the existing Public Procurement and Disposal Act.