SGR project: Appellate Court rules Kenya Railways failed to comply with the law

The Court of Appeal has dealt a huge blow to the Kenya Railways Corporation after it ruled that it failed to comply with the law when procuring the Standard Gauge Railway (SGR) project.

On Friday, Justices Martha Koome, Gatembu Kairu and Jamila Mohamed set aside the part of the judgment of the High Court that held that the procurement of the SGR was exempt from the provisions of a section of the Public Procurement and Disposal Act, 2005.

“We substitute therefore an order declaring that Kenya Railways Corporation, as the procuring entity, failed to comply with, and violated provisions of Article 227 (1) of the Constitution and Sections 6 (1) and 29, of the Public Procurement and Disposal Act, 59 2005 in the procurement of the SGR project. The appeals succeed to that extent only,” the ruling reads.

The appellants in the case–Okiya Omtatah and Wycliffe Gisebe Nyakina–had argued that there was no due diligence or independent feasibility conducted and that the design of the project was undertaken before seeking contractors to implement it.

Further, Omtatah and Gisebe alleged that that there was a conflict of interest in the Government contracting the China Road and Bridge Corporation (CRBC) to implement the project whose feasibility study and design it had carried out for free.

“….that in any event CRBC was ineligible for the award of the contract as it had been blacklisted by the World Bank for engaging in corruption in a road project in the Philippines,” court papers read.

They insisted that the Ksh. 327billion project should have been procured through competitive bidding.

On Friday, the Court of Appeal further ruled that claims by KRC Managing Director A.K. Maina that the engagement of CRBC as the contractor was as a result of dictation by the financing agreement were inaccurate.

According to the Court of Appeal Judges, the engagement of CRBC was not an obligation arising from “negotiated grant or loan” agreement for purposes of Section 6 of the Act.

“This is because as indicated above, the contract with CRBC as the contractor was procured long before the financing agreement was entered into. The holding by the learned Judge to the contrary, is with respect, not supported by the facts as set out above,” the ruling reads.

It further states that it is the procurement that dictated the terms of the loan that ousted the procurement procedures under the Act as opposed to the terms of the loan agreement dictating the procurement procedure or who the supplier of the goods and services would be.

“We conclude and hold, therefore, that in this instance, Section 6(1) of the Act did not oust the application of the Act from the procurement and KRC, as the procuring entity, was therefore under an obligation to comply with the requirements of the Act in the procurement of the SGR project,” the judges ruled.

Background

On November 21, 2014, the High Court declined to stop the construction of the SGR.

Justice Lenaola ruled that documents tendered by the appellants as evidence in support of the petitions were inadmissible having been obtained illegally.

This was eight months after they had sought orders to stop the implementation of the SGR project.

Omtatah and Gisebe had presented documents that according to them were from a whistleblower.

Their case against KRC would be later consolidated with that of the Law Society of Kenya that averred that under Article 227 of the Constitution, KRC is enjoined to contract for goods and services in accordance with a system that is fair, equitable, transparent, competitive and cost effective.

Further, that KRC was required to comply with the provisions of the Act which, under Section 29, required a procuring entity to use open tendering or an alternative procurement procedure.

Documents presented to the court included a feasibility study report of the project; copies of award of contract; contract agreement and a letter from KRC withdrawing the letter of award of contract on the basis that the procurement was to be funded by a negotiated grant/loan and therefore exempt from the application of the Act by reason of Section 6 (1).

There was also correspondence from the office of the Deputy President Chief of Staff and a press statement from the office of the President relating to the project.

The appellants moved to the Court of Appeal in 2015 to challenge the ruling by the lower court to expunge documents that had been presented as evidence.

Omtatah argued that in addition to failing to heed Article 35 of the Constitution which recognizes that every citizen has the right of access to information held by the State, the High Court Judge failed to appreciate that the documents in question had been tabled before Parliamentary Committees that were investigating the project and were not confidential.

He also challenged Justice Lenaola’s ruling that concluded that the procurement of the SGR project did not contravene the Constitution of Kenya; in holding that the Act did not apply to the procurement.