Gas dealer Leah & Moses has withdrawn its petition against a move by Kenya Pipeline Company (KPC) to block joint ventures and subcontracting of foreign firms in a Sh4.9 billion tender.
At the time Leah & Moses filed its application to withdraw the court case, Justice Bahati Mwamuye had lifted orders suspending the tender for building mega tanks to increase the flow of fuel to western Kenya.
Under the KPC deal, bidders can only subcontract local suppliers and cap the ceding of works to other contractors at 25 percent of the deal value.
It also bars joint ventures or multiple firms working together to get a piece of the Sh4.9 billion deal, which will see Kisumu works cost Sh2.73 billion, Eldoret Sh2 billion and Nakuru Sh119.6 million.
KPC told the court that it chose the national open tender method following past big-money contracts being allocated to local firms, which would then subcontract most of the works to foreign companies on the cheap.
The State agency reckons it wants to stop the emerging practice where bidders seek mega contracts and ultimately sell them to third parties for a profit.
“From experience, the applicant’s [KPC's] previous projects awarded under joint venture format with international companies have encountered challenges due to disagreements between the partners, including local parties that are sometimes merely seeking to hoard opportunities and in turn subcontract the entire scope to international companies,” KPC’s General Manager, supply chain, Maureen Mwenje, said in court papers.
“As a result, the applicant [KPC] was in the present case seeking a more streamlined subcontracting approach where the project is less likely to be abandoned or stall as a result of disputes between the joint venture partners.”
The withdrawal of the petition is a reprieve for KPC, which had told Justice Mwamuye that further delay in the procurement process could see the State corporation lose the budgetary allocation for the fiscal year ending June.
KPC argued that Leah & Moses was forum shopping, as the gas dealer filed a similar case on the same grounds before the Public Procurement Regulatory Authority (PPRA).
The State corporation added that the PPRA was the right forum for addressing tender-related disputes, and not the constitutional and human rights court.
It argued that it might lose an opportunity to boost the flow rate of aviation fuel, super and diesel to western Kenya and the neighbouring countries.
KPC reckoned that over 30 bidders took part in pre-tender site visits, and the time and expense spent in participating in the tender process were in danger of being irreversibly lost.
KPC wants to build tanks in Eldoret, Kisumu and Nakuru, adding to the widened pipelines for transit of refined fuel products locally and to neighbouring countries.
Many of Kenya’s refined fuel imports, as well as those in transit to neighbouring countries, have to be transported by truck, a slow and unreliable method that clogs roads.
KPC reckons that the tender is restricted to locals in efforts to support local firms, curb capital flight, and rev up employment.
It has also put curbs on subcontracting in a bid to place heavy responsibility on the main contractor.
Besides locking out foreign firms from sharing parts of the contract, the main bidder must handle at least 75 percent of the work.
Leah & Moses claimed that the contract had been listed as a national open tender, limiting participation of cash-rich foreign firms and the ability of local firms to seek technical expertise from international companies.
Limiting foreign involvement in public contracts emerges amid an outcry about an influx of Chinese businesses driving out local companies, and the US recently termed the protectionist stance as a barrier for investments.
A recent wave of Chinese investments in real estate, retail and road construction sectors has further added to the unease.
Like other African nations, Kenya had turned to China over the past few years for funds, technology and equipment to develop its infrastructure, including its biggest project since independence, the Mombasa to Nairobi standard gauge railway (SGR) line.
