Inquiry into Allegations of Irregular Award of Tender for Construction of Langata Phase IV and V Residential Units at KSh. 1.1 Billion by National Housing Corporation to Lemna International Inc. Limited during the Financial Year 2009/2010 whose cost was exaggerated by KSh100 Million

The Ethics and Anti-Corruption Commission (EACC) commenced investigations following a report made that the National Housing Corporation (NHC) had made double payment of KSh100,000,000 to Lemna International Inc. Limited. The company was allegedly incorporated in the USA and subsequently registered in Kenya.

Lemna International Inc Limited Saga

On 19th October, 2009, the NHC commenced procurement for construction of 230 three-bedroom units [Tender Number: NHC/TECH/275/2/2010-Proposed Infill Flats at Langata IV and V]. The NHC opted for the Request for Proposals Method and on the 15th April, 2010, the Tender Committee recommended 19 firms, among them, Lemna International Inc. Limited, to be invited to submit their proposals under three options; conventional (Option 1), contractor financed (Option 2) and contractor financed-technology (Option 3). Lemna International Inc. Limited submitted their bid under the contractor financed (option 2).

Investigations established that the evaluation process was flawed as all bidders were non-responsive but the Tender Evaluation Committee nonetheless recommended the contract award to N.K. Brothers Limited.

On 3rd June, 2010, the Tender Committee considered and disagreed with the recommendations of the Tender Evaluation Committee, they instead awarded the tender to Lemna International Inc. Limited at a contract sum of KSh902,142,259.80.

Investigations further established that the contract was signed on 31st December, 2010, between the Corporation and Lemna International Inc. Limited. The terms of the contract were that Lemna International Inc. Limited would receive 20% of the contract amount upon submission of an Advance Payment Guarantee (APG) and the balance on completion. Lemna International Inc. Limited
subcontracted EPCO Builders Limited to implement the contract.

Investigations further revealed that, subsequently, the parties varied the terms of contract from contractor financed to conventional execution of an addendum. The variation required the NHC to pay Lemna International Inc. Limited for works done based on the payment certificates raised.

Investigation established that Certificates Nos. 1-4 were prepared for the sole purpose of measuring the works done while certificates 5-9 were raised for purposes of payment.

Overpayment of KSh 1,075,895,612.42.

However, a dispute arose in Payment of Certificate No. 10, the issue was referred to arbitration. The arbitrator found in favour of both the Contractor and the Corporation. Investigations further established that as the result of the dispute, the Corporation overpaid the Contractor by KSh 1,075,895,612.42.

A report was compiled and forwarded to the DPP on 20th June, 2023 recommending that the suspects be charged with:

• Three counts of abuse of office contrary to section 46
• Four counts of wilful failure to comply with the procurement laws Contrary to section 45 (2) (b)
• Unlawful acquisition of public property contrary to section 45 (1) (a)
• And conspiracy to commit an offence of economic crime contrary to section 47A (3) all as read with section 48 of ACECA.

The DPP’s response is awaited

[Source: Kenya Gazette EACC/PI/INQ/16/2021]