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KPA managers caught up in Sh2.7bn scandal

Tuesday November 12 2019

Kenya Ports Authority

Kenya Ports Authority Managing Director Daniel Manduku addresses journalists at Mombasa port on September 20, 2019. He is accused of presiding over a mega procurement scandal. PHOTO | FILE | NATION MEDIA GROUP 

JOHN KAMAU
By JOHN KAMAU
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A special assignment team appointed to investigate an alleged multibillion-shilling fraud at the Kenya Ports Authority (KPA) has finally recommended the charging of top managers — a move that might trigger yet another change of guard at the parastatal.

The Nation has authoritatively established that among those recommended to be charged — if Director of Public Prosecutions Noordin Haji is satisfied with the investigation over a Sh2.7 billion procurement — includes Managing Director Daniel Manduku.

Dr Manduku has been at the helm for 17 months and the report says he should be charged with conspiracy to defraud and for authorising expenditures without procurement plans.

Others are General Manager for Operations William Rutto, senior works officer Anthony Muhanji and principal civil engineer Bernard Nyobange. Another on the radar of detectives is Mr Juma Chigulu, a works officer.

FUNDS DIVERTED

Dr Manduku was appointed on May 31, 2018 in the hope that he would clean up the port.

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But three months ago, on August 26, a worked-up President Uhuru Kenyatta warned port officials over their misdeeds and hinted at possible prosecution of senior managers.

By then, the President had been given a brief on preliminary investigations at the port, which had commenced on August 7 when a special team led by Mr Moses Gituathi from the Economic and Commercial Crimes Unit started the investigations.

On Sunday, Director of Criminal Investigations George Kinoti confirmed they had completed investigations.

“We have the report and the recommendations. What I can tell you is that we shall now move to the next stage,” said Mr Kinoti.

The Gituathi team, which reports to the DCI, discovered that Sh3 billion set aside and approved for the purchase of a piece of land for the Inland Container Deport in Nairobi (ICDN), in order to ease congestion, was diverted to finance the concreting of the Makongeni yard in Nairobi at a cost of Sh500 million, while Sh2 billion was used for dredging the Mombasa port. Only Sh500 million was retained for the original purpose.

FISHY DEAL

But KPA shared minutes indicating that the management proposed to wire Sh1 billion for paving works and marking of the yard at Makongeni.

Under minute 08.23, the board committee recommended that Sh500 million be allocated to the paving works.

Investigators now say that the Makongeni yard is owned by Kenya Railway Corporation (KRC) and that although KPA had intended to purchase the plot, the deal collapsed.

There is no explanation yet on why KPC moved ahead to develop a plot it never owned.

The matter is made complex since KRC is now demanding that KPA vacate its plot and restore the uprooted railway line, meaning that KPA cannot utilise the facility.

The KPA shared a letter of offer dated March 21, in which KPA had been given 30 days to pay Sh132 million to lease the plot.

The Nation has not been shown any evidence of the lease document.

PURCHASE ORDERS

On Sunday, when reached for comment, Dr Manduku insisted that he had the Kenya Gazette notice that gave the land to KPA.

“Even the Inland Container Deport in Nairobi land which we are using belongs to Kenya Railways. Don’t forget I also sit on the Kenya Railways board,” he added.

The KPA sent the Nation a gazette notice dated October 30, 2018 on the appointment of the “Makongeni KPA Peripheral Facility” as a customs area.

Whether this is the railway’s Makongeni goods shed that KPA wanted to lease is not clear.

“The facility was gazetted as a port in line with practice and policy. The requisite board approvals were all obtained,” said the note to the Nation.

The other problem, according to investigators, is that although KPA had requested the Treasury to approve the use of the Sh3 billion through a letter dated January 30, the necessary approvals had not been received before the KPA board of directors sanctioned the transfer.

Mr Muhanji prepared nine bills of quantities that were forwarded to the head of the procurement department for the issuing of purchase orders.

RULES FLOUTED

It now appears that the civil engineering department had no knowledge of these BoQs, and its boss, Mr Alfred Masha, told investigators that he asked the head of procurement, in writing, to annul the said BoQs.

“However, the HOD (head of department) procurement was instructed by the managing director to ignore the caution and proceed to award the works and issue purchase orders,” an inquiry report says.

And adds: “Subsequently, HOD procurement, Mr Nyamancha, issued nine purchase orders to eight contractors with a total contract sum of Sh506,444,204 to carry out concrete works at Makongeni yard.”

Why KPA decided to put money into a yard it did not own is now at the heart of investigations. The investigators accuse the management of flouting tender procedures.

Since this was to be charged on the capital vote head, the KPA management split the yard into nine zones of about 2,360 square metres each — and awarded them to nine contractors.

“The splitting is a clear conspiracy to avoid tender procedures to wit section 91 of the public procurement and asset disposal act,” says the final investigation report.

MANDUKU BLAMED

It has now emerged that four of the contractors never went to the site, but instead subcontracted one of the contractors to carry out the works.

“This clearly indicates that the works could have been awarded to one contractor and done perfectly, and therefore the splitting was unprocedural with the aim of avoiding open and competitive tendering process,” says the report.

It is Dr Manduku who is alleged to have authorised the use of biennial contractors — who are used on an as-needed basis to carry out repairs and maintenance.

“He further flawed the procurement process by authorising the charging of the works to repair and annual contracts vote head instead of capital expenditure vote head. This was (done) to avoid system budget locks placed on capital expenditures where there is no budget or where there is insufficient budget for the intended works,” says the report.

And since a repair vote head is not subject to restrictions, the report says that it has become “subject to manipulation” and is “rampantly misused”.

Dr Manduku is also being accused of authorising the procurement of 17,940 concrete barriers for Sh1.4 billion — whose expenditure was neither budgeted for nor captured in the KPA procurement plan for the 2018-2019 financial year.

BUDGET OVERRUN

It is now alleged that he ignored procurement procedures and asked the head of procurement to award the works to 13 select contractors.

Detectives found that the instructions were written on a yellow stick-on paper attached to the BOQ forwarded to the head of procurement for procuring processing.

And upon forensic examination and handwriting analysis, they now believe that this emanated from the MD.

Again, the KPA officials awarded the tender to biennial contractors — who are not used for capital projects.

Since the procurement for the barriers was not in the approved capital budget for the 2018-2019 financial year, the KPA procurement system could not authorise such expenditure.

To avoid this hurdle, the works were charged under the repairs vote head, which had only been authorised to spend Sh600 million for the 2018-2018 financial budget. By March 6, it had overrun its budget by Sh784 million.

OVERPRICED BARRIERS

Asked why he ordered such a huge consignment, Dr Manduku insisted on meeting with the writer to provide the documents.

“I know there is a fake report out there. Let us meet I give you the story,” he said on Sunday and agreed to share documents.

By last evening, we had not received the documents pertaining to the rationale of ordering the huge consignment of barriers.

Detectives say Mr Rutto and the head of security told them that they did not requisite the concrete barriers and that they were not in need of them. Again, detectives believe that the barriers were overpriced.

In April 2018, the report says, ICDN manager Symon Wahome had procured similar barriers at a cost of Sh25,175 each, while in December 2016, KPA had procured 7,600 pieces at a cost of Sh10,281. But in the latest procurement, KPA agreed to pay Sh79,193 per barrier.

The MD is also caught up in a Sh800 million procurement row for the Kisumu port for, detectives say, assuming the duties of a procurement officer.

He told investigators that he had received a presidential directive to fast-track the Kisumu works.