KISERO: Procurement rules place roadblocks in way of State corporations - Daily Nation

Procurement rules are placing road blocks in way of State corporations

Tuesday August 14 2012

Jaindi Kisero

Managing Editor, Investigations

Jaindi Kisero Managing Editor, Investigations & Economic Affairs 

By JAINDI KISERO

The public procurement system needs an overhaul. First, we need to come up with a new system for State corporations involved in commerce.

A parastatal that operates in an environment where prices change frequently and at short notice, where procurement decisions have to be made quickly in response to fast-changing market conditions, cannot survive under the stifling conditions of the current regime.

How can Uchumi Supermarkets or the Kenya Wine Agencies Ltd survive under a system where procurement decisions are routinely contested, and where disappointed contractors can drag you into lengthy appeals.

I was surprised the other day to read that the chief executive officer of the National Oil Corporation of Kenya (Nock), Ms Summaya Athman, is under investigation for directly procuring gas oil without competitive bidding.

If you insist that Nock must operate within the current public procurement regime, you might as well ask the organisation to get out of the oil business altogether.

Oil prices change every day. And, since international prices are published transparently, it is not difficult to determine whether a cargo has been imported uncompetitively. Let us wait and see whether the parties behind the investigation will manage to prove that a procurement illegality was, indeed, committed when Nock brought in the controversial cargo.

This case has major implications for parastatals involved in commercial activity. I say so because the evidence in the public domain is that Ms Athman sought and received the go-ahead from both her board and the Public Procurement Oversight Authority before procuring the cargo in the manner she did.

You have to look at the power politics surrounding this very strategic parastatal to understand Ms Athman’s current predicament.

She came on the scene as an “outsider” who did not enjoy the patronage of those who wield power in the energy sector. The moment the government decided to give the Nock the mandate to import 30 per cent of the country’s oil requirements, the dynamics of power changed.

The fact that the government also mandated Nock to import and keep strategic oil reserves raised the stakes even higher. Then late last year, Nock embarked on  a multi-billion project to construct a new oil jetty to be financed under the so called private-public partnership (PPP) arrangement.

Ms  Athman became an unwitting pawn in a  battle between  sharks who want to have their way at Nock.

The political  pressures she had been subjected to exploded  publicly when, during deliberations of the parliamentary committee on energy, it emerged that she had been given gagging orders to cease any communication  with Parliament by her board.

Clearly, the sharks are now prepared to employ all tools to get the lady out of her job. Which brings me back to the need for a new and strong legal framework for infrastructure concessions  in Kenya.

We did not have a legal framework for procuring large infrastructure concessions until 1999, when the government introduced the PPP regulations.

It then created a national PPP steering committee — a Cabinet-level body chaired by the permanent secretary in the Ministry of Finance and a fully-fledged secretariat charged with putting deals together.

The problem is that the Treasury-based secretariat is poorly staffed.

How we expect such a weak institutional framework to deliver a whole bunch of PPP projects we have put in the pipeline, including the much-vaunted Lamu project, beats logic.

In Africa, Nigeria is reputed to have the most dynamic market for infrastructure concessions, both by number of transactions negotiated and completed and PPP projects that are up and running.

Nigeria has established a fully-fledged infrastructure Concession Regulatory Commission mandated to market, negotiate, and deliver PPP transactions.

We do not have a good record of negotiating and procuring PPPs, apart from the Independent Power Producers in the electricity sector. The much-hyped Nairobi road toll concession failed several years ago. We still have major problems with providing financial support, especially sovereign guarantees, to PPP projects.

At the rate we are going, Vision 2030 may never happen.