Tough questions to CBK over De La Rue

March 29, 2012
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CBK Governor Njuguna Ndung'u
NAIROBI, Kenya, Mar 28 – Central Bank of Kenya (CBK) Governor Prof Njuguna Ndung’u was on Wednesday hard pressed to explain why three international companies bidding to print the currency were willing to be paid a third of what they had quoted in a previous contract.

Bura Member of Parliament Abdi Nuh who is a member of the Public Accounts Committee (PAC) wondered why the firms quoted nearly a third of what British firm De La Rue Currency and Security Print Limited was getting before the 10-year money-printing contract it had with the government was cancelled.

Given that the contract entailed the printing of new designs with advanced security features, Nuh argued that it would be expected to cost more to undertake the exercise.

“We should have expected the prices to go up because of cost and the new features and not down,” he said.

The firms had initially quoted amounts ranging from $148.6 million, $139.5 million and $104.1 million but after the re-tendering asked for $76.3 million and $51.1 million.

CBK has floated the tender to competitive international bidding after the NARC government cancelled the 10-year contract which had been single-sourced.

Of the six firms that were invited to tender, only three including De La Rue, a German and a French firm responded. However, De La Rue won the re-tender after it emerged that the French firm was not evaluated because it did not meet the mandatory (tender) requirements while the German firm is said to have ‘opted out’.

Nuh however doubted the reasons fronted as to why the two firms, which also quoted lower bids that De La Rue were disqualified from the process, arguing that it was part of a larger scheme to continue minting money from the ‘lucrative’ deal.

De La Rue went ahead to sign a three year contract with the CBK to print 1.71 billion pieces of bank notes at a cost of $51.2 million. A deposit of $25 million was paid as down payment but the contract was once again revoked following orders from the then Finance Minister Amos Kimunya.

Prof Ndung’u explained that they were no cost implications to CBK for terminating the agreement a second time prompting the MPs to read ‘corrupt intent’ in the deal.
In addition, the committee observed that cancellation of the contract prompted the Central Bank to revert to the previous rates which were three times higher than what De La Rue wanted to be paid. The country has not had a money-printing contract for 10 years but CBK has had to make stop gap orders to ensure there is adequate supply of bank notes.
Committee chairman Boni Khalwale was of the view that although the reasons for canceling the contract were valid (the need to open up the process to competitive bidding and have the contract limited to five years) the deal turned out to be a ‘cash cow’ for people in government.

“On the face of it, the cancellation was in good faith. But the government saw a cash cow so they cancelled (the 10 year) contract, gave an international tender that was won by De La Rue but cancelled it again so they could go to the good old bad habits where money used to be made,” Khalwale charged.

Further, CBK was required to explain why only 554 million pieces of currency have been supplied from the deposit of the $25 million, which was 50 percent of the total value of the contract as opposed to at least 850 million.

CBK Deputy Governor Harun Sirima explained that this would be an erroneous way of calculating how many pieces should have been delivered from the $25 million down-payment since the price for printing each note is different.

“The comparability of the contract amounts on lump sum basis will not do justice to this matter,” he said in their defense.

PAC however felt that CBK needed to present crucial documents such as correspondence between Central Bank and the printing firm and minutes of the tender committee to back up their claims.

The governor and three other officials were expected on Thursday to once again appear before the Committee to make available the documents that will enable the team to get to the bottom of a multi-billion currency printing scandal.

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