WORST THING ABOUT LAMU COAL PLANT CONTRACT

Worst thing about ‪#‎ LamuCoalCon‬; @KenyaPower COMPELLED to pay for unconsumed electricity produced. Yes! You and I! ‪#‎ WiziUsioWaMabav u‬! ‪#‎ KOT‬ #LamuCoalCon: Lamu coal plant case classic example of how not to tender for big project via @JaindiKisero in @DailyNation Mr Fred Ngatia and Mr Ahmednasir Abdullahi were the star performers in the presidential election petition in March last year when they represented Uhuru Kenyatta and the Independent Electoral and Boundaries Commission respectively. They are very influential Kenyans in their own right — men of wherewithal and political clout. On Monday, the two top lawyers stormed a meeting called by the Ministry of Energy to brief stakeholders on the progress in procuring the proposed 900MW coal plant in Lamu. That performance gave the public a rare glimpse into the strong political undercurrents at play in the battle to win this lucrative contract. Indeed, the battle for the proposed Lamu coal plant is turning out to be a high-stakes political fight, a battle that has pitted the strong against the strong.

1. LEGAL BATTLE Mr Ngatia and Mr Abdullahi are representing two Chinese companies that the Ministry of Energy wants to knock out of the race on technicalities. The stage has been set for a vicious and protracted legal battle. Implementation of the project could be delayed for months. Yet we all know that the project is critical to the success of President Uhuru Kenyatta’s plan to increase Kenya’s electricity generation capacity to 5,000MW by next year. It is one of the projects the Jubilee administration is counting on to bring down electricity prices. Thus, a protracted legal case is something the administration is unlikely to be willing to countenance. It will not want to see this project go the way of other projects, such as the primary schools laptop project.
2. CRAFTED LOOSELY What are the main issues here? I can only say that this case presents compelling lessons on how not to conduct the procurement of a large infrastructure project of the size of the proposed Lamu coal plant. When you craft conditions and requirements in a tender document — the so-called Request For Proposal (RFP) — loosely and leave many issues and parameters to interpretation by bidders, you will inevitably end up with a big dispute. In the present case, the controversy at the core of the dispute is about the conditions in the RFP, which were crafted in a way that allows different interpretations, thus making it difficult to compare like with like. Going by the prices that were read out during the opening of the tenders, the Chinese companies had offered to give the consumer much cheaper power.
3. RIGHT FORMULA However, the technical evaluation committee insisted that they did not use the right formula in calculating the cost to the consumer. What do you say of a process where the actual offers by bidders — tariffs and prices — that were read out publicly are ignored? The controversy we have now has come about because bidders were evaluated on the basis of parameters derived by the evaluation committee. I cannot wait to see how the courts will handle this dispute. What is clear is that it is the perfect setting for litigations and allegations of bid rigging created at the level of drafting the RFP. The two Chinese companies are insisting that their offers be judged by the prices and tariffs opened publicly. Indeed, at the crux of the dispute is an issue described in jargon as coal of a “low calorific value of 21,000 per unit”. LOW CALORIFIC VALUE The Chinese companies are accused of having applied a low calorific value of 29,000 units in determining the tariff. They have maintained that their plant is designed on the 21,000 requirement in cases where the RFP required them to do so. They argue that the RFP document did not require the 21,000 per unit figure. I blame the framers of the RFP document for this mess. Fair and open competitive bidding is only possible where conditions are transparent so as to make it possible for even the most illiterate member of the public to judge the best offer. When — as an evaluation committee —you find that you are not comparing like with like, you must accept that you have blundered. The battle in court will certainly be a cause célèbre