Kenya Power system hitch costs Rubis $70million loss

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  • The procurement tribunal has annulled a Shs 8.7 billion (US$70.4 Million)fuel supply contract secured by French oil marketer Rubis Energy
  • Rubis, the winner, was expected to supply and deliver 2,216,000 litres or more of low-sulfur diesel to the northern Kenyan stations each month
  • Kenya Power electronic procurement system closed out Galana Oil Kenya Ltd Minutes before the tender document submission deadline closed out

Following a 17-minute system failure by Kenya Power that excluded one of the bidders from the lucrative offer, a procurement tribunal has annulled a Shs 8.7 billion (US$70.4 Million) fuel supply contract secured by French oil marketer Rubis Energy.

Under the terms of the agreement, Rubis Energy Kenya Plc would have provided 30 off-grid power units in northern Kenya with at least 53 million litres of diesel over two years.

Kenya Power has also been ordered to re-advertise the tender and start a new procurement process by the PPARB, which hears complaints about procurement.
The board learned that Kenya Power employed an electronic procurement system that, minutes before the deadline for tender document submission, closed out Galana Oil Kenya Ltd.

The ruling established November 23, 2022, at 10 a.m. as the deadline for tender document submission. Galana could not use the KPLC e-procurement system from 9.42 to 9.59 a.m. on the specified date, though.

Kenya Power did not explain the technical malfunction of the “KPLC SAP tendering portal,” an electronic procurement system.

“No explanation as to how Galana Oil Kenya was able to use the KPLC’s e-procurement platform on November 22 yet was unable to do so between 9.42 a.m. and 9.59 a.m. on November 23 has been given. This, in our opinion, was unjust to Galana, the board decided.

Before the deadline for tender submission, Kenya Power was obligated, according to PPARB, to make its e-procurement system available and open to all potential tenderers.

Rubis, the winner, was expected to supply and deliver 2,216,000 litres or more of low-sulfur diesel to the northern Kenyan stations each month.

The tender is worth more than shs 8.7 billion (US$70.4 Million)  at today’s fuel rates, with a litre of diesel costing between shs 165 and shs 170 in the regions where the power plants are situated.

On December 2, 2022, the tender was contested a day before Rubis was formally informed of its victory.

When the offer award was disputed, Rubis was getting ready to provide a performance bond security of KES 120 million (US$971,266) to the utility company as required by the tender terms.

With the recent acquisition of properties owned and run by Gulf Energy Holdings and KenolKobil PLC, Rubis has increased its footprint and retail network nationwide.

KPlC Breached Procurement Law

By submitting letters of intent to award the tender to bidders on December 2, 2022, while Galana’s dispute was still pending, KPLC breached Section 168 of the Public Procurement and Asset Disposal Act, according to the board, which was presided over by Faith Waigwa.

According to the law, once a request for review is filed, the procuring entity must immediately suspend the procurement proceedings. In this case, Kenya Power issued the letters for notification of the tender award on December 2, a day after being informed of Galana’s request for review.

The procuring entity is required by law to immediately halt the procurement process after receiving a request for review.

Kenya Power, in this case, sent out letters informing the public of the award of the contract on December 2, one day after learning of Galana’s request for a review.
The board declared the letters to be invalid.

The board decided to institute a new procurement procedure because it believed that allowing KPLC to permit Galana to submit its tender would violate the public procurement principle of competition.

After all, the bidder would be free to modify its price schedule and tender amount if it were aware of the prices offered by the other bidders.

This is because the KPLC told the board that representatives from the other five tenderers were present when the other five tenders were launched.
This suggests that there is a chance that Galana is aware of the tender sum proposed by the five tenderers and that it is in the public domain, according to the board.

Read: Rubis Energy creating artificial petrol shortage in Kenya

Maingi Gichuku is passionate about helping African businesses grow by offering technology solutions. With a BSC in Zoology and biochemistry, Gichuku yearns for an Africa that can find solutions to its challenges. My drive is to see an economically dynamic Africa and embrace its populations by creating opportunities cutting across the social and economic strata.

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