Joho-linked firm suffers blow in grain facility plan

The Supreme Court has quashed the decision granting a firm linked to Mining Cabinet Secretary Hassan Joho permission to construct a second-grain bulk handling facility at the port of Mombasa.

A bench of five judges of the apex court ruled that the decision to grant Portside Freight Terminals Limited, the licence to establish the facility through Specially Permitted Procurement Procedure (SPPP) was inconsistent with the Constitution.

The court said whereas the construction of the second bulk grain handling facility was a matter of national security and public interest, the greater public interest required that the process of identifying proponents to implement the project be above board, fair, equitable, transparent, competitive, and cost-effective.

“In other words, the protection of the supremacy of the Constitution is critical and there can be no greater public interest or interest of national security than to uphold the Constitution, its values and principles, as well as obeying the law,” Deputy Chief Justice Philomena Mwilu and Justices Mohamed Ibrahim, Smokin Wanjala, Isaac Lenaola and William Ouko said.

The apex court said the SPPP method, though an alternative method to open tender, “must truly be seen, in terms of the Constitution, as a system that is fair, equitable, transparent, competitive and cost-effective, without the other elements of open tender”.

Busia Senator Okiya Omtatah had questioned the process used in awarding the tender to Portside Freight Terminals Ltd, Portside CFS Ltd, and Heartland Terminals Ltd.

Mr Omtatah argued that KPA and the government discriminated against other firms in choosing the method of procurement as bids by other companies were never considered in light of the adopted use of the SPPP.

The senator also questioned the speed at which the process was carried, contending that was a manifestation of bias in favour of Portside Freight Terminals Limited.

The government had defended the plans arguing that for over three decades, there has been only one bulk grain handling facility at the Port of Mombasa operated by Grain Bulk Handlers Limited (GBHL), using privately owned equipment conveying the grain directly to an offsite silo.

KPA submitted that GBHL has been operating in a near absolute or pure monopoly environment, hence the reason for considering more players as a matter of national strategic diversification.

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The court was told that KPA took into account the need for reducing over-reliance on one provider as an incident affecting the provider would cripple the entire country’s strategic food reserves, food security, and nutritional needs of Kenyans.

According to KPA’s master plan, the grain-handling berths produced a capacity of approximately 2.4 million tonnes per year.

The second justification by KPA was the advantage of the strategic partnership that Portside Freight Terminals Limited offered, in terms of adjacent land near the Port and the offer to construct a common user island berth facility at its cost.

This, according to KPA, presented a desirable opportunity for it to explore a strategic partnership with Portside Freight Terminals Limited, to enhance efficiencies at the Port, which would not be realised if the conventional procurement methods were to be used.

Portside Freight Terminals Limited opposed the case maintaining that their proposal was unique and, given the public interest and national food security risks involved, the Treasury approved the SPPP method.

The firms said SPPP is expressly permitted in matters concerning public interest or national security by Section 114A (2) of the Public Procurement and Asset Disposal Act.

Mr Yusuf Abubakar, the director of Heartland Terminals Ltd stated that the project would cost approximately $45 million (about Sh5.8 billion).

The judges, however, said KPA failed to observe and adhere to the minimum threshold of procurement as contemplated by the Constitution.

“KPA failed to demonstrate, in terms of Section 114A of the PPAD Act, that it chose the SPPP over other competitive methods of procurement due to exceptional requirements that would have made it impossible, impracticable or uneconomical to adopt a competitive system as envisaged by the Constitution,” the judges said.

The court quashed a decision of the Court of Appeal, which had cleared the way for the project, saying the judges of the appellate court erroneously reversed the determination of the High Court.

The court added that having chosen the SPPP, it was upon KPA to demonstrate that there were exceptional requirements that made “it impossible, impracticable or uneconomical to comply with the Act and the Regulations”, in addition to showing that the procedure adopted was in the public interest or interest of national security.

In 2004, KPA developed a master plan, a blueprint for its operational activities, which was later reviewed in 2009.

After engagement with stakeholders in 2019, KPA launched the master plan to run for 30 years from 2017 to 2047.

And since the first bulk grain handling facility is located at the Port of Mombasa, the master plan contemplated the construction and operationalisation of a second facility to be located either at Dongo Kundu or Lamu Port.

The Supreme Court said the SPPP, as an alternative method of procurement, cannot be used to avoid competition and once chosen, a procuring entity must follow every step laid down.

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