Details emerging at Kenya Railways have unmasked a serious case of deliberate conflict of Interest in a tender to supply and deliver general office stationery for Kenya Railways Headquarters, Railway Training Institute and the Standard Gauge Railway operations.
The tender number KR/SCM/FRC/003/2023-2024 has come under sharp scrutiny with internal sources alluding to irregular award of the tender to proxy companies associated with senior management at the state corporation.
It is estimated that at least Sh200 million may have been lost to beneficiaries.
Kenya Railways is said to have disregarded the need for compliance with the provisions of the Public Procurement and Asset Disposal Act, 2015, Section 62 “Declaration not to engage in corruption”.
The award process was predetermined in favor of the proxy companies well known to the top management. This is also in total disregard with the provisions of the Competition Act 2010, regarding collusive practices in contracting.
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A supplier who is privy to the process claims the management engaged them in a wild goose chase game when they had already identified the company to award.
“In their own tender document,they talked about the need to avoid unfair competitive Advantage where fairness and transparency in the tender process require that the firms or their affiliates competing for a specific assignment do not derive a competitive advantage from having provided consulting services related to this tender,”
The supplier is inviting investigative agencies to probe the tender and narrow down to individuals who illegally awarded the tender.
This comes at a time when Kenya Railways has been earmarked by treasury as among state corporations’ financial management.
Treasury Cabinet Secretary John Mbadi issued a stern warning to parastatals that are circumventing rules by using surpluses in their accounts to fund capital projects without prior approval.
According to Mbadi, some Semi-Autonomous Government Agencies (SAGAs) have been diverting excess funds towards the acquisition of assets such as land, buildings, and machinery, instead of remitting the full 90 per cent of their operating surpluses to the exchequer.
Others include the Central Bank of Kenya, the Capital Markets Authority, the Kenya Ports Authority, and the Communications Authority of Kenya, among others, generate billions of shillings annually through charges on government services such as licenses and fines.
The Public Finance Act mandates that these State corporations retain only 10 per cent of their operating surplus for operational needs and remit the remaining 90 per cent to the government.
However, in a circular to the heads of State corporations, Mbadi expressed concern that some agencies were adjusting their reported surpluses by earmarking capital expenditure, which reduces the amount they surrender to the Treasury.
“No State corporation should provide for capital expenditure from operating surplus without a written National Treasury approval,” Mbadi said in the circular, which precedes the preparation of annual budgets for the financial year beginning July 2025.
His government had previously directed commercial State corporations to wire up to 80 per cent of their net profits to the Treasury, a directive now embedded as a performance indicator for the CEOs of these agencies for the current financial year.
This push to retrieve surplus funds has already shown some positive results. In the quarter ending September, non-tax revenue nearly tripled to Sh65.32 billion, up from Sh23.08 billion in the same period the previous year.
