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Kenya: Weak KPA Systems a Cash Cow for Cartels, Errant Staff

by kenya-tribune
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From providing suppliers with operating capital to using water delivery, companies and Kenya Ports Authority (KPA) employees have taken advantage of the agency’s weak procurement system to make millions of shillings in questionable deals.

Even as the KPA’s revenue rose to Sh26.42 billion in 2019, it almost matched its expenditure of Sh21.42 billion, with many of the payments raising eyebrows.

These are some of the concerns raised by the KPA Board Audit and Risk Committee report last week, pointing to a parastatal held hostage by crooked workers taking advantage of a weak system that can be easily manipulated.

Supplying water to the parastatal has become the easiest cash minting venture for the crooks.

The report, seen by the Nation, shows that KPA paid Sh200 million for water without any delivery note from the supplier.

INFLATED PRICE

In some cases, the contract delivery price was inflated by up to 25 per cent.

“Instances where delivery notes for the supply of water were missing were noted. Payments were processed, based on the quantities stipulated in the contract — fixed at 1,000 cubic metres daily — regardless of the quantities delivered,” the audit report says.

“For instance, payments for the supply of potable water — Tender No KPA/054/2014-15/ID by Logitech Ltd — is processed based on production reports and not delivery notes. In the period under review, two LPOs amounting to Sh205.2 million were paid without receipt of delivery notes.”

The contract for supply of water — Tender No KPA/054/2014-15/ID — was also varied in price and scope of activities by more than 25 per cent of the original price in contravention of the 2015 Public Procurement and Disposal Act.

“There was overall variation of 289 per cent on the original contract price, which resulted in change from Sh180 to Sh450 per cubic metre and introduction of distribution and maintenance works at Sh250 per cubic metre,” the report adds.

In another instance, KPA entertained an inflated a water supply charge without raising a finger, allowing the supplier to demand twice the market rates and outside the contractual terms.

As per the contract for tender No KPA/054/2014-15/CE — Supply of Potable Water at Mombasa port — the price charge per tonne was not to exceed Mombasa Water Service Company (Mowasco) rates.

DIRECT PROCUREMENT

However, the auditors pointed out that the price for the supply of water was 125 per cent above what Mowasco charged.

“Mowasco water tariff structure as at November 25, 2019 was between Sh75 and Sh200 per cubic metre, whereas that of Logitech is Sh450 as per the deed of contract variation,” the report says.

“This price was arrived at following negotiations on July 3, 2018. Nevertheless, the prevailing market rates were not considered.”

The board is considering setting up a desalination plant to ensure the parastatal has its own fresh water.

It has sought for a report on the cost of setting up the plant. It also emerged that the water service level agreement signed by the management of the agency is not being observed.

“The supply of water to ships and other major users, dust suppression through sprinkling of water at the port and the supply of bottled water with KPA logo within port premises has not been rendered,” the report goes on.

“The head of the internal audit and risk management unit informed the committee that there was a challenge in establishing water consumption at the authority since metering has not been done.”

The procurement department and the agency’s top management are on the spot after the internal audit found that several contracts for the provision of services were extended after the lapse of their expiry period.

SUPPLY OF GOODS

“This led to the award of construction work or supply of goods to the same companies for an extended period without fresh competitive bidding,” the damning report says.

There were cases of direct procurement, where civil works for painting were procured directly and quoted under Tender No KPA/084/2016-16/CE for specialised painting.

However, neither the tender nor any related contract documents could be traced.

There was also non-adherence to the asset capitalisation policy, with works which were capital in nature expensed.

This goes against the parastatal’s policy on management of non-current assets under capitalisation.