NSSF rocked by self interests Ombudsman demands the chief executive to take responsibility over irregularities in Tassia II tender award By David Wanjala The chief executive of the National Social Security Fund (NSSF) Richard Langat should be prosecuted for abuse of power in the award of Sh5 billion Tassia II Infrastructure Development Project tender, a report by a constitutional commission has recommended.
Mr Langat was confirmed on April 2, becoming the first CEO to be appointed by a Board in conformity with the new law on parastatals. In a report on abuse of power and disregard of procurement procedures by the NSSF’s acting chief executive and the management in the awarding of the Tassia II released last month, Commission on Administrative Justice (CAJ), also called Ombudsman, recommends that the Ethics and Anti-Corruption Commission should swiftly investigate and determine whether the glaring irregularities in the approval and tendering process for the controversial project were occasioned by corrupt intent on the part of the NSSF board and management. According to the report, that the board of trustees did not approve the project’s revised cost estimate of Sh5.053 billion as required by law and that the alleged approval by way of email circulation was improper and irregular. The controversy surrounding project came to the fore in December 2013 when Francis Atwoli, Secretary General of Central Organisation of Trade Union (COTU) and chair of the Fund’s Finance, Social Security and Investment Committee, raised integrity issues at a press conference. On January 14, 2014, COTU, which is represented on the Fund’s board, wrote to CAJ requesting investigations into the project’s approval and tendering. In the letter, Mr Atwoli denied knowledge of the proposal to approve Sh5.053 billion for the project and blamed Board chairman Adan Mohammed and Langat of making unilateral decisions and in disregard of other Board members. “As the Chairman of the Investments Committee and Member of the Board of Trustees of NSSF, I wish to confirm that this proposal did not go through my committee for recommendation nor was I circulated the said memo for approval,” Atwoli wrote. He also questioned the eligibility of the Board’s vote where mandatory quorum was not achieved. “At the same time, a Board of nine members and of which three have retired, thus remaining six without myself, a mandatory member as per the then old NSSF Act, leaving five that equally cannot constitute a quorum to discuss such serious business of the Board that involves (billions of shillings) could not take a decision,” the letter reads. The NSSF is established under the new National Social Security Act No. 45 of 2013, which replaced the NSSF Act Chapter 258, to provide basic social security for its members and their dependants for various contingencies as provided under the Act. The fund is directed and managed by a Board of Trustees and is comprised of persons representing different interests and stakeholders including Government, employers organisations and workers organisations. It is run by a managing trustee who is also the chief executive appointed by the Board. NSSF purchased the property in question now referred to as Tassia II Project between 1992 and 1995 as Block 97, Block 21190 and Block 21189 in in the expansive Embakasi region, at a cost Sh2.3 billion. The 350-acre piece was divide into in one eighth acre plots totaling 1,760. Towards the end of President Moi and KANU’s era in 2002, a lot of things went wrong. Squatters invaded any open space and claimed ownership. Unscrupulous individuals and shady land companies seized the opportunity and reaped big from the confusion. The NSSF land was not spared. Squatters and grabbers invaded the land in 2001 and sub-divided it into 5, 500 plots and claimed to have bought the same from land buying companies. The matter became a subject of litigation in the High Court and in 2004. Judgment was delivered in favour of the NSSF and an eviction order granted. The then City Council of Nairobi granted conditional approval and required NSSF as the registered owner to inter-alia; link the settlement to existing neighbourhoods; provide a major transport corridor to serve the scheme; mobilize funds needed for the provision of adopted and reticulated infrastructure services and designate roads, under and natural drains. It is from here that the floodgates were flung wide for all forms of corruption. To begin with, the NSSF went ahead and sold the plots without adhering to the physical development plan. Of the 5,500, about 792 plots were sold through the NSSF Tenant Purchase Scheme and the remainder 4,708, on cash basis. Then, NSSF procured the services of M/S MultiScope Consultancy Engineering Ltd to carry out design works, estimate cost, obtain regulatory approval from the Nairobi Council and oversee the project implementation without a substantial budgetary provision in place, thereby contravening the public procurement regulations and procedures. According to the Fund’s Board Paper No. BSIS/160/2011 headlined “Regularisation of Tassia II Scheme”, the Board approved Sh3.304 billion as preliminary cost estimates of infrastructure and instructed that plot owners be advised to part with Sh650,000 per plot as their contribution towards the cost of infrastructure. Further, the minutes reveal, approval for Sh21.2 million to M/S Multiscope Consulting Engineers Ltd was made. Even though the Board earmarked plot owners’ contributions to finance the scheme, the total amount to be realized from the contributions, at Sh2.5 billion, fell short of the approved preliminary cost estimates of infrastructure by nearly Sh1 billion. Still, only Sh1.1 billion had been received. “As at 31 May 2011, the total expected sale proceeds from the Scheme was Kshs.2.5 Billion of which Kshs.1.1 billion had been received. The outstanding balance of Kshs.1.4 billion is expected to be realized by the end of the regularization exercise,” the Board Paper says. Ironically, even the contracted consultant saw through the irregularities by the NSSF’s Board. MultiScope Consulting Engineers Ltd advised, to no avail, that the preconditions by the Nairobi Council should be met first. The consultant even unsuccessfully submitted a demand letter on behalf of the Council for Sh11.2 million submission, inspection and approval fee for the plans. CAJ was to later to discover that the Council was not paid. The chief executive, in an effort to hide the truth, attempted to present an invoice as proof of payment to the Council. “CAJ confirmed that the County Government of Nairobi did not receive the payment of Sh11,244,000 and that the “receipt” submitted to CAJ by NSSF is but an invoice,” the report reads. More telling was the revision, without approval by the Board of Trustees as required by law, of the cost estimate to Sh5.053 billion from Sh3.304 billion. The alleged approval of the revision by way of email circulation, CAJ says, was improper and irregular. Besides, CAJ says, there was no formal Board meeting where members could vote regarding the approval. The employees’ representative, whose presence together with that of the employers’ is mandatory, was sidelined. The entire Finance, Social Security an Investment Committee whose presence is, too, mandatory was sidelined. Heavily indicted in the report is the Fund’s chief executive who at the time of the procuring process was acting. “The NSSF (Acting) CEO/Managing Trustee misled CAJ by submitting a copy of “receipt” for Kshs11,244,000 to CAJ and pointing out in his response letter that the money had been paid to the City County of Nairobi for the fee required by the City County Government for inspection and submission of the project plan.”. Mr. Richard Langat, the report adds, conducted himself in a manner indicative of a desire to evade investigation by declining to honour invitations. CAJ found him uncooperative and unresponsive in the course of investigations. Not spared were o the NSSF Board chairman, Mr Adan Mohammed and the Fund’s Board members. “Mr Adan Mohammed was culpably negligent in the performance of his supervisory role insofar as he did not question the mode of approval of the project and oversaw in the irregular process of approving the contract via email,” CAJ says, adding that the chairman takes overall administrative responsibility for the improprieties. The Board members who gave approval for the contract via email were equally negligent in their capacity as the trustees of the fund, and in breach of their fiduciary responsibility. Among the recommendations of the report is that the award of the tender to China Jiangxi International (K) Ltd should be cancelled. Apart from the irregular tendering, NSSF has seen a high turnover of chief executives in the recent past. It has had three managing trustees in just a year: Langat comes after Hope Mwashumbe who served barely five months after replacing Tom Odongo last July.