E-Clips:- Business Pictorial - Passport Scandal Probe Moves Into Treasury

Investigations have been launched by the Kenya Anti-Corruption Commission into the controversial Sh2.7 billion tender for passport issuing equipment.

Instructions to the graft detectives were issued by the Permanent Secretary for Ethics and Governance, Mr John Githongo, immediately the deal was exposed in Parliament on Wednesday.

The move came as the Parliamentary Committee on National Security announced that it would summon Vice-President Moody Awori and four top Government officials next week to question them over the contract, which has been cast by MPs as riddled with corruption.

Mr Githongo said yesterday the authoritys instructions were to provide a complete report on the affair after which a decision would be made on whether a criminal investigation was necessary. "I have received documents on the issue and we have to establish where the truth lies. Only then can we decide on the next cause of action. My office is not taking the matter lightly," he told the Nation.

MPs have been asking why the Narc Government expanded a passports project from one costing slightly more than Sh800 million to one for which they eventually offered to pay Sh2.7 billion without even putting it out to tender.

Mr Maoke Maore, Kanu Ntonyiri MP, who first brought up the matter in the House, claimed someone in Government must have pocketed some Sh1.7 billion in the tender award.

When investigations by the House Committee and Mr Githongo office get under way, it is the Ministry of Finance which will find itself on the spot, having to explain why such an irregular deal was allowed to happen. The Directorate of Public Procurement - which is within the Treasury - is the ultimate authority on purchases by public institutions. But the critical question, which investigators will be asking, is who initiated the manifestly irregular deal.

So far, the evidence is that it was all conceived at the Treasury. Correspondence show that the idea of a grand "supply of immigration security and documents control project" was first mentioned in a letter by the director of the Government Information Technology, Dr Wilson Sitonik. Indeed, Dr Sitonik – whose office is within the Treasury – actually imposed the project on the Office of the Vice-President and Ministry of Foreign Affairs.

The letters he exchanged with the principal immigration officer, Mr Henry ole Ndiema, show that the latter had been against the grand project, pointing out that a project of the complexity and size suggested by the Treasury was beyond the scope of the ministry.

Treasurys culpability is further illustrated by the order by Dr Sitonik to Mr Ndiema that the the smaller project which Home Affairs was in the process of implementing be cancelled to pave the way for the expanded one. And, according to procurement rules, all projects of the size of the controversial project must be countersigned by the permanent secretary to the Treasury, Mr Joseph Magari.

Treasury will also have to explain how the grand project was sneaked into the budget of the Government through the backdoor. As Mr Ndiema explained in his letter to the Treasury of May 27, last year, the Office of the Vice-President and minister for Home Affairs did not have a budget for the grand project.

Was Dr Sitonik acting under the instructions of his superiors or did he make a decision on his own? This is one of the riddles the investigators will want to crack.

Who is Dr Sitonik and did he have the powers to cancel a project being implemented by another ministry? In a sense, the affair provides a glimpse into an explosive subterranean battle for control of large public computer projects going on within the Government. This battle has also been manifested in the creation of a multiplicity of offices, all clamouring for a share of control of computer projects. Only recently, the Office of the President established the directorate of e- government, which is under former permanent secretary Peter Gakunu.

In the past, the Treasury did not have oversight responsibilities over computer projects being implemented by other ministries. The situation changed in the year 2000 with the establishment the directorate of Government Information Technology Services (GITS) and following the amalgamation of the former Government Computer Services Department and the Micro Information Department at the Treasury.

This was done under the administration of the Dream Team under the former head of civil service, Dr Richard Leakey. In fact, it was Dr Leakeys team that negotiated a World Bank credit to pay the salaries of the first director of the department - Dr Juma Okech. It was through this department that the Treasury acquired the clout to vet all computer procurement projects in the public sector. From that time, literally all computer projects have had to be referred to GITS for technical evaluation.

What has emerged, however, is that in evaluating the passport project, GITS went beyond its mandate by altering the scope and bringing in aspects which the user did not have in mind.

Dr Sitonik invoked factors such as "security" and "terrorism" to propose a completely different project. His decision set the stage for the project by Anglo Leasing and Finance Ltd of Liverpool. Although the actual agreement for the contract still remains secret, the fact that a payment of Sh91 million has already been remitted to Anglo Leasing and Finance Ltd through the Central Bank of Kenya is also telling.

If, as the evidence suggests, it turns out that the UK-based company has made finances available for the project, then the Treasury will have to explain why it has contracted such a huge foreign loan without the authority of Parliament. The law requires that a sessional paper detailing the purpose and terms of the loans be tabled before Parliament before such a large foreign loan is contracted.

Parliament is also required to scrutinise the documents to determine whether the borrowing is within the set ceilings and whether it has been done in accordance with the External Loans and Credit Act. This would have allowed Parliament to scrutinise the viability of the project. Indeed, a project of this magnitude would ordinarily have been arranged in such a way as to allow a large dose of concessionary financing – with long-term maturity periods, low interest rates and high grant elements.

The Government has in the past experienced serious problems with projects negotiated in this manner. In 1994, the Moi government entered into a contract with a Canadian company, ICF International, to provide credit for the construction of Eldoret airport. Several months later – having remitted millions of shillings to the Canadian firm in the form of commissions – the financier defaulted and vanished without trace.

Not for the first time since the Kibaki administration took charge, the Treasury and permanent secretary Magari are the object of suspicion in a disputed procurement.

Last year, there was hue and cry when it emerged that Mr Magari had written letters to the National Social Security giving direction on how to award contracts to insurance brokers.

Indeed, the zeal with which new figures in the Narc administration have been moved to take control of public procurement is astonishing to civil service watchers.

In May last year, several circulars were issued to stop all public procurement of goods and services. Yesterday efforts to obtain comment from the four officials summoned by the House committee over the scandal, including Mr Awori, were unsuccessful.