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Sh24bn laptops price mystery deepens [Business Daily (Kenya)]
[March 23, 2014]

Sh24bn laptops price mystery deepens [Business Daily (Kenya)]

(Business Daily (Kenya) Via Acquire Media NewsEdge) The mystery of how the cost of President Uhuru Kenyatta's laptops for schools programme was inflated by Sh1.4 billion has deepened after it emerged that the tender committee included in the final price the cost of services that the bidders had agreed to offer free of charge.

Documents that the Ministry of Education's tender committee presented to the procurement appeals board during the hearing of the appeal against the award of the contract to Olive Telecommunication show that the Indian marketing firm had on December 13 last year quoted Sh23.03 billion ($268,899,669) as its best and final offer, but the amount was later increased to Sh24.69 billion ($284,814,957) at the award stage.

Arun Khanna, the chairman of Olive, said in a recent interview that the price inflation was to cover transportation of the laptops out of Nairobi to the districts. But the Public Procurement Administrative Review Board (PPARB) found that the price alteration was illegal and nullified the award of the tender to Olive.

Olive has since challenged the review board's decision in the High Court and obtained orders stopping the ministry from continuing with the procurement as directed by the board until the case that the Indian firm has filed is heard and determined.  READ: Olive appeals against loss of schools' laptops tender Ministerial Tender Committee (MTC) documents seen by the Business Daily show that the bidders had been expressly asked to indicate how far they would distribute the devices without increasing the cost.

Olive and rival Hewlett Packard (HP) promised to take the devices to the district headquarters countrywide while the third bidder Haier Electricals Appliances Corporation had agreed to transport the laptops to the 47 county headquarters free of charge.

When the bids were opened, Olive's Sh23.03 billion final offer was the cheapest followed by HP's Sh25.02 billion. The Chinese firm Haier was third with a Sh25.12 billion quotation.

READ: HP says laptop bid price changed to favour rival Olive Mr Khanna last week attributed the $15.9 million (Sh1.4 billion) price variance to additional transport costs charged at one dollar per laptop, but the math does not add up given the firm was to supply a total of 1.28 million laptops.

"We had initially agreed to supply Nairobi and Mombasa but the government offered an additional dollar for each laptop to supply to the districts," Mr Khanna told the Daily Nation last week.

The procurement review board had in its ruling found that the extra charges for logistics were in breach of the tender rules which required suppliers not to charge for value-added services such as transport, spare parts and replacements during the warranty period.

"They were reminded that value-added services were to be free of charge i.e. they were to be offered at no extra cost to the procuring entity," reads one of the MTC's documents.

The mystery surrounding Olive's bid is further deepened by the fact that tender documents that the MTC submitted to the PPARB show that the Indian firm had partnered with Orange Telkom Kenya and indicated that it would use the telecom operator's vast network to distribute the laptops to sub-county headquarters but Orange has since said that it was not in the Olive consortium for the second round of bidding.

"The bidder (Olive Telecommunication Pvt Ltd) offered to transport the computing devices to all district headquarters and have storage facilities at 126 Telkom Orange exchange centres countrywide," said the tender team in a report marked 'confidential.' READ: Schools laptops project runs into fresh headwinds It therefore remains unclear who was behind the scheme to fleece taxpayers of Sh1.4 billion – an attempt that has now scuttled prompt execution of President Kenyatta's signature project.

Mr Kenyatta has personally admitted the existence of powerful cartels in government that are helping shadowy investors to clinch State tenders.

Focus now shifts to the eight-member ministerial tender committee that handled the now controversial one laptop per child scheme – and the role each may have played in the high-stake project.

The tender team included Victor Kyalo, chief executive of the ICT Authority, Francis Mwarucha (director of ICT at the Teachers Service Commission), State counsel Edith Torome and Martin Kungania, an assistant director of ICT at Ministry of Education.

Others were Eunice Gachoka, a curriculum expert at the Kenya Institute of Curriculum Development (KICD), computer software consultant Justus Kananga and two supply chain specialists Kenneth Mwangi and Peter Tanui.

The team of eight also splurged taxpayers' money on fact-finding trips to China and India to conduct due diligence on Olive's assembly lines.

In its ruling early this month, the procurement review board found that Olive had neither the financial nor technical muscle to execute the Sh23.3 billion tender.

The Josephine Mong'are-led board said Olive did not meet the basic tender rules that restricted the bidding to companies that manufacture devices, technically known as original equipment manufacturers (OEM).

Another discrepancy noted in the review of the tender was that Olive did not disclose whether it would assemble the laptops locally, instead choosing to leave the box blank.

HP's tender submissions show it had plans to assemble the laptops locally and had qualified for a three per cent rebate – meant to stimulate job creation and encourage skills transfer to build capacity in Kenya's nascent IT industry.

Tender documents show Olive presented two sample laptops with different specifications in terms of storage capacity and operating system.

The tender committee noted the devices had 231 GB and 297 GB and ran on Windows 7 and Windows 8 Pro respectively. The MTC, however, found the latter to be considerably inferior in performance.

"The tests revealed that Windows 7 is slightly advantageous to the beginners' level because of its look and feel when accessing it," the tender committee said in reference to Olive's samples.

Haier's model laptop was installed with two operating systems, namely Windows 8 and Ubuntu, and the committee concluded that an attempt to run the designated content on Ubuntu had failed because it lacks support system files to run it.

Olive's books of accounts filed with the procurement watchdog show that the marketing firm did not meet the financial threshold of Sh8 billion in annual revenue, cash flow of Sh3 billion and experience in undertaking big-ticket deals worth at least Sh500 million.

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