Rubis Energy Loses a KES 8.7 Billion Deal

Following a 17-minute system failure by Kenya Power that excluded one of the bidders from the lucrative offer, a procurement tribunal has annulled a KES 8.7 billion fuel supply contract secured by French oil marketer Rubis Energy.

Under the terms of the agreement, Rubis Energy Kenya Plc would have provided 30 off-grid power units in northern Kenya with at least 53 million liters of diesel over a two-year period.

Kenya Power has also been ordered to re-advertise the tender and start a new procurement process by the PPARB, which hears complaints about procurement.

The board learned that Kenya Power employed an electronic procurement system that, minutes before the deadline for tender document submission, closed out Galana Oil Kenya Ltd.

The ruling established November 23, 2022, at 10 a.m. as the deadline for tender document submission. Galana was unable to use the KPLC e-procurement system from 9.42 to 9.59 am on the specified date, though.

The technical malfunction of the “KPLC SAP tendering portal,” an electronic procurement system, was not explained by Kenya Power.

“No explanation has been offered as to why Galana Oil Kenya was able to access the KPLC’s e-procurement system on November 22 but was unable to access the same on November 23 between 9.42 am and 9.59 am. This in our view was unfair to Galana,” ruled the board.

Before the deadline for tender submission, Kenya Power was obligated, according to PPARB, to make its e-procurement system available and open to all potential tenderers.

Rubis, the winner, was expected to supply and deliver 2,216,000 liters or more of low-sulfur diesel to the northern Kenyan stations each month.

The tender is worth more than KES 8.7 billion at today’s fuel rates, with a liter of diesel costing between KES 165 and KES 170 in the regions where the power plants are situated.

On December 2, 2022, a day before Rubis was formally informed of its victory, the tender was contested.

When the award of the offer was disputed, Rubis was getting ready to provide a performance bond security in the amount of KES 120 million to the utility company as required by the tender terms.

With the recent acquisition of properties owned and run by Gulf Energy Holdings and Kenol Kobil PLC, Rubis has increased its footprint and retail network across the nation.

By submitting letters of intent to award the tender to bidders on December 2, 2022, while Galana’s dispute was still pending, KPLC breached Section 168 of the Public Procurement and Asset Disposal Act, according to the board, which was presided over by Faith Waigwa.

The procuring entity is required by law to immediately halt the procurement process after receiving a request for review. Kenya Power in this case sent out the letters informing the public of the award of the contract on December 2, one day after learning of Galana’s request for a review.

The board declared the letters to be invalid.

The board decided to institute a new procurement procedure because it believed that allowing KPLC to permit Galana to submit its tender would violate the public procurement principle of competition because the bidder would have the freedom to modify its price schedule and tender amount if it were aware of the prices offered by the other bidders.

This is because the KPLC told the board that representatives from the other five tenderers were present when the other five tenders were launched.

“This means there is a possibility of the tender sum provided for by the five tenderers being in the public domain and being known to Galana,” said the board.