By Patrick Kagenda
Katosi Road re-tendering, CICO blacklisting expose government legal defender
Turkish company ahead in new bids By Patrick Kagenda
What would you do if you contracted a company for a job, paid it 15% of the cost and, even as work was going on smoothly, you found out it is a fake? That is the dilemma that President Yoweri Museveni, at a meeting at State House on Sept.4, set out to resolve over the Shs161 billion Mukono-Kyetume-Katosi-Nyenga road.
The 74 km road hit the headlines in September when it became public that EUTAW, the company that had won the contract to upgrade the road from gravel to bitumen was a briefcase company and had subcontracted a Chinese company Chongquing International Construction Corporation (CICO) to do the road works.
Up to this point, investors on the saga are not focusing on any money lost, although up to Shs5 billion of the advance payment is unaccounted for. Interestingly, the unaccounted for Shs5 billion is equal to the difference, or as Ugandans would say `njawulo’ between the Shs161 billion contract price and the Shs155 billion the job was sub-contracted for to CICO.
Bank documents and government reports indicate that the fake company, Eutaw, received the Shs25 billion from the government on its account on Tuesday Jan.28.
On Monday Feb.3, which was the first working day when the cheque matured, Eutaw transferred Shs 12 billion to CICO and Shs5 billion to a shielded account at 622 Beachland Boulevard, Vero Beach in Florida, USA.
It is not clear what happened to the balance of Shs5 billion. According to some unconfirmed reports, only Shs10 million remained on the account by August when the story first broke.
But several investigations, including one by the Inspectorate of Government (IG), are not attempting to unravel what happened to Shs25 billion the government paid to the fake company.
Although the IG in July slapped a ban on further work on the Katosi road, the investigation is instead focused on whether CICO, which was until October doing an apparent good job on Katosi, should be penalised for alleged collusion with Eutaw.
By Oct. 3 CICO had abandoned the site forcing the consultants; Arab Contractors, to write to them warning of a surcharge of Shs82.6 million per day for not working.
Almost a month earlier, President Museveni had met with the top players in the saga. They included the Inspector General of Government Irene Mulyagonja, the Minister of State for Transport, John Byabagambi, then-AG Attorney General Fred Ruhindi, the Chairperson of the Uganda National Roads Authority (UNRA), Angela Kiryabwire, and the Executive Director of the Public Procurement and Disposal of Public Assets Authority (PPDA) Executive Director, Cornellia Sabiiti. On the table was one question: What to do about Katosi?
At this point, the UNRA Head of Communications Dan Alinange told The Independent, the favoured position was to let CICO continue with the works.
Minister Byabagambi is reported to have told the meeting that CICO had already mobilised equipment and was “doing a good job”.
It was noted that CICO has done work on several UNRA projects including strengthening of Olwiyo to Pakwach Road, strengthening of Fort Portal to Hima Road, upgrading of Matugga-Semuto-Kapeka Road to Paved (Bitumen) standard, and Upgrading of Fort Portal-Bundibugyo-Lamia Road to Paved (Bitumen) Standard.
Still, Museveni disagreed. He reportedly said CICO “should not be rewarded for their wrong-doing”on the Katosi road.
Museveni was supported by the deputy AG, Fred Ruhindi who, on Sept 23, 2014, wrote a five-page legal opinion addressed to Byabagambi, the minister of state for Works. In the deputy AG’s opinion, since CICO was found to be part of the fraud, it should not be allowed to continue.
“It (CICO) should therefore not benefit from the alleged collusion in getting the subcontract. CICO is on the site illegally. It has no clean hands and it is therefore not prudent to retain them on site”.
Ruhindi continued: “our opinion is that UNRA should initiate a fresh procurement process under emergency situations provided under the law with a view of procuring another contractor to undertake the uncompleted scope of works.”
Against this background, UNRA board chairperson Kiryabwire on Oct.15 wrote to Mulyagonja to lift the ban on UNRA so that it can get a new contractor for the job. Mulyagonja complied on Oct.20.
It is therefore not right away clear why weeks later, on Nov. 3, the IGG felt compelled to write a 10-page public elaboration on why CICO should not be allowed to participate in the fresh contracts.
It all apparently has to do with an opinion on the matter given to President Museveni by the Attorney General, Peter Nyombi which contradicts the earlier opinion of his deputy, Ruhindi.
Insiders tell The Independent that in mid-October, one Flora Kiconco of Legal Affairs Department at State House wrote to AG Nyombi asking for a legal opinion on the matter. Although the deputy AG Ruhindi had already been asked and given one to the president, Kiconco wrote “as if no opinion has ever been given.”
On Oct. 29, however, when Nyombi gives his 4-page legal opinion directly to the President, he refers to Ruhindi’s opinion and agrees with it on some points; including there being no contract between UNRA and EUTAW. However, he says CICO should not be locked out.
“To date there is no incontrovertible evidence to prove that CICO and EUTAW did collude to commit the fraud. Mere suspicion cannot be construed to constitute evidence of commission of the crime,” he says.
He adds: “A buyer who purchases a shirt from a market not knowing that the seller stole the shirt from somewhere cannot be accused of having committed a crime of theft.”
AG went to great length to absolve CICO and even stated that if CICO is to be found guilty then people who supplied it with food to feed its staff should be found guilty as well.
Nyombi’s position is in line with that of ministry of Works and CICO/EUTAW lobbyists. Therefore, IGG Mulyagonja appears to have written her Nov.3 press statement.
“This is now to clarify the position of IG on the possibility of CICO being considered in the new procurement or being granted a substantive contract,” Mulyagonja writes.
No reward for wrong-doing
Mulyagonja’s press statement appears directed at UNRA.
She writes: “A direct or any procurement of CICO is certainly out of the question because of the deceitful manner in which they procured their alleged sub-contract and accessed the site.”
“It has also been established from your organization that the works so far carried out by CICO are stable and will not be affected during the procurement which will be carried out in a short time since it will be an emergency procurement. Loss to Government on account of deterioration of works has been ruled out”.
At UNRA, even after the IGG’s public statement, the Head of Corporate Communications Dan Alinange told The Independent that two companies have picked bids for the new Katosi road contracts.
“We expect them returned during the week starting 10th November 2014 although I can’t reveal the identity of the companies at the moment,” he said.
The Independent has established from other sources that KolinKonstrakt of Turkey is most favoured to take the contract.
It is said to have done good work when it built the Hoima -Kaiso Tonya road. Sources say KolinKonstrakt is also favoured because they are the only company that can easily mobilise equipment as it has no ongoing project.
But Alinange defended CICO: “The Chinese were not part of this fraud and they have been following our law. We have not blacklisted any Chinese company; most of the blacklisted companies are Ugandan owned.”
He also seemed to suggest that CICO’s fate is far from sealed. He was commenting on what would happen to the money already advanced to CICO and Eutaw.
Some people with knowledge of work so far done on Katosi road say it can be valued at about shs5-6 billion. In that case, kicking out CICO would mean forfeiting Shs20 billion.
“This is the challenge we are facing and it is the reason why there is still debate as to whether the Chinese sub-contractors should be thrown off the project,” Alinange told The Independent, “The easy way to recover the Shs 24.6 billion advance payment, is to let the current contractors continue with the works.”
Alinange says UNRA favoured that option in the beginning.
Then he adds: “We also believed that it may set a bad precedent where contractors are rewarded for wrong doing and create impunity.”
He says UNRA and the government are now left with only the legal path to recover some of the money advanced.
“It is very unfortunate because we have been drawing most of our strength from the fact that no financial loss will be made on this project,” he says.
Alinage also attempted to project UNRA’s record.
“UNRA’s record should be looked at entirely over the last five years and let people not judge us based on only this unfortunate procurement,” he said, “The management of UNRA knows this problem happened and systems are already in place to shield the organisation against another Katosi-like scandal.”
He explained that UNRA has in place a parallel bidding process where contracts are evaluated at the same time by teams in Uganda and independent evaluators in London. He said reports from both teams must correspond otherwise a red flag will be raised. He says this has enabled UNRA to award over 20 multi-billion contracts in 2014 alone without any problem.
“No other organisation in Uganda has been able to do that under our challenging environment,” he says.
He explains that the mistake made on Katosi was a result of reviving an old contract which was procured under an old system that UNRA abandoned.
“We are paying a price for the pressures involved in delivering a manifesto,” he said, “We all thought reviving one or two of the old procurements would save time, but it has been costly to us.”