The Geothermal Development Company (GDC) has been ordered to conclude a tender for the construction and operation of a power plant that it had attempted to illegally cancel.
GDC had opened bids for the supply and installation of a 5-10 MW geothermal wellhead power plant (GWPP) at the Menengai geothermal project on October 18, 2024, but cancelled the tender on December 3 the same year — triggering a legal fight that was escalated to the Public Procurement Administrative Review Board (PPARB).
The tender was for construction of the power plant under a 25-year build-own-operate (BOO) contract, and GDC was seeking an independent power producer (IPP) to finance and construct it.
Under the BOO contract, GDC would supply 5-10 MW of steam and brine for conversion by the power plant, and the IPP would use the plant for captive power generation.
However, in the middle of the procurement process, GDC managing director Paul Ngugi cancelled the process, citing the collapse of MW-12 well - one of the production wells at the Menengai geothermal field - which was to be used for the GWPP.
While Mr Ngugi ordered the termination of the tender process on December 3, the PPARB noted that it had not yet received a report on the investigation into the well collapse.
“The departmental request to terminate was coming too late on 7th December 2024 the accounting officer having already issued instructions for the termination of the tender on 3rd December 2024.
“It would appear the accounting officer issued instructions for the termination before the recommendation had been obtained from the Geothermal Resource Management Department,” the PPARB noted.
The MW-12 is one of the wells planned to be used for the wellhead facility that was the subject of the tender.
GDC claimed that the well collapse compromised the initial plan of steam supply for the 5 to 10 MW well power plant andinvalidated the power plant designs submitted by the bidders.
PPARB, however, notes that GDC did not provide any evidence of when the investigation was undertaken, whoever conducted it and when it was done to confirm that there was a well collapse.
The board faulted GDC for going “to great lengths to initiate and justify the cancellation of the subject tender”, even though it disregarded laws and procedures.
The GDC had undertaken several rounds of tender evaluations for the project.
The consortium of Alpha Beta ED PTE Ltd and Ryce East Africa Ltd filed the request for review at the PPARB following the termination, describing GDC’s action as an afterthought and telling the board that the GDC was unable to justify the reasons for the termination.
“Counsel argued that the collapse of a well is a resource depletion issue rather than a technological change,” PPARB documents note.
GDC told the board that the MW-12 Discharge Collapse Report informed its decision to terminate the tender, just as bidders were about to enter the financial evaluation stage.
In the letters sent to bidders to inform them of the termination of the tender process, GDC cited a non-existent legal provision, which it termed a clerical error.
The board ruled that GDC was unable to prove that the well collapse had any substantial implication on technological changes on the subject tender, as it did not “establish a clear connection between scale deposition and technological change.”
In a decision on March 11, 2025, the PPARB cancelled the termination letters sent by the GDC to bidders and directed it to proceed with the procurement and conclude it within 21 days of the date of the ruling.
