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World Bank Statement on Suspension of Roads Projects in Uganda (08.01.2016)

JinjaRoad Roundabout Kampala

Following the cancellation on December 21, 2015 of the World Bank-supported Uganda Transport Sector Development Project, overseen by the Uganda National Roads Authority (UNRA), the World Bank has suspended the disbursement of funds for civil works in two other projects in Uganda. Those projects, overseen by the UNRA, are the North Eastern Road-Corridor Asset Management Project and the Albertine Region Sustainable Development Project which are suspended pending a review and strengthening of the capacity of UNRA to adhere to the required  environmental and social standards. We are continuing to work with the Government to ensure all Bank-supported projects help Ugandans improve their lives while protecting the poor and vulnerable.

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Project 1034: Mukono-Katosi Road Scandal

Mukono-Katosi Road pic

There been written a lot by this scandal. I have looked through a dozen dose of documents and found this linking the upgrading of the road from Mukono to Katosi. Which was contracted out from UNRA to two other companies, wasn’t properly checked before contracts and authorization. There also been reported on missing monies. Therefore when you read through the quotes and numbers you will have the ability to see through what you have read other places. It’s should be an enlightenment journey through a new path.

The road construction and rebuilding of the road from Mukono-Katosi was to upgrade the road from gravel to bitumen standard. The project started 31.1.2014 and is anticipated to be done by 31.1.2017 (MPS, P: 197. 2014).

The Government of Uganda put into the project 960,000 UGX. The releases of funding in July were 80, 000, 00 UGX, in August was 160,000 UGX and in November it was 240,000 UGX. The total release from July to August for the project was 480,000 UGX. Release of the total budget in that time was 50% of that year. (MoFPED,P: 18, 2009).

On the 1st December 2010 the Government of Uganda made a memorandum of understanding between the government and the company of High Tides Limited and also with the Eutaw Construction Company of United States of America. High Tides Ltd will pay Eutaw Construction Company the monies $1.750.000. That agreement is for the license for UNRA/Works/2009-10/00001/18/08 for tarmacking of Mukono – Kyetumo – Katosi/ Kisonga – Nyenga Road (72km) (MOU – 2010).

The Strategic Plan from UNRA had the development plan set for finishing tarmacking the road from Mukono – Kyetume – Katosi done by 2017. And the works would be started by 2014 (UNRA, P: 57, 2012).

The budget performance Financial Year of 2011/2012, the Government budget that was revised was 6,841,489,157 UGX. Released for FY 2011/2012 6,697,682,837 UGX, and the expenditure of the FY 2011/2012 it was 6,697,682,837 UGX. The release performance for the FY was 98% and absorption rate was 100%. (MoFPED, P: 41, 2012).

PPDA findings:

“The procurement for the contractor for upgrading the Mukono-Kyetume-Katosi/Kisoga-Nyenga road commenced in July 2010 and by 19th January 2011, the procurement had reached award stage. However due to lack of funding as stated by the PDU the contract could not be awarded hence the request by PDU on 22nd March 2012 to have it cancelled. The First request by PDU to have the contract cancelled was rejected by the CC. However on re-submission by the PDU on 9th May 2012, the CC approved the cancellation” (…) “The HPDU also recommended that negotiations be held with M/s Eutaw Construction Company Inc. to confirm cost adjustments. The negotiations were held by the appointed members (see annex) and this culminated into signing of the contract with M/s Eutaw Construction Company Inc. on 15th November 2013 at UGX. 165,272,156,814 after SG approval” (…) “The Authority noted that the UNRA Directorate of Planning prepared BoQs from which the estimated value of the procurement was derived amounting to UGX. 184,357,246,540. It was noted that the Contracts Committee approved the solicitation document to be used on 2nd November 2010” (…)“The negotiation team recommended that a price of UGX 165,272,156,814 was sufficient to carry out the works”(PPDA P:2-3). “On 2nd October 2013, supplementary negotiations were held between the appointed UNRA negotiations team and M/s EUTAW Construction. The negotiations concluded that a price of UGX. 165,272,156,814 was sufficient to carry out the works” (…) “On 10th October 2013, the HPDU submitted the conclusions of the negotiations to the Contracts Committee for approval. The HPDU recommended for the award of contract for the Civil Works for the upgrading of Mukono-Kyetume-Katosi/Kisoga-Nyenga road from gravel to paved standard to M/s EUTAW Construction Company Inc. at a contract price of UGX. 165,272,156,814 inclusive of taxes” (…) “On 7th November 2013, the AO wrote to M/s EUTAW Construction Company Inc. informing the bidder that the bid with the corrected amount of UGX. 165,721,156,814 had been accepted. The AO also asked M/s EUTAW Construction to furnish the entity with the performance security within 28 days in accordance with conditions of the solicitation document” (…) “On 15th November 2013, the contract between M/s EUTAW Construction Company Inc. and Uganda National Roads Authority for Civil Works for Upgrading of Mukono-Kyetume-Katosi/Kisoga-Nyenga was signed at a price of UGX. 165,272,156,814 inclusive of taxes” (…) “On 13th February 2014, the Authority received a letter from the Inspectorate of Government. In the letter, the Inspectorate of Government alleged that the award of contract to M/s EUTAW Construction Company for Civil Works for Upgrading of Mukono-Kyetume-Katosi/Kisoga-Nyenga was done in a dubious manner and that the costs were unrealistic. 2.40 On 27th March 2014, the Authority wrote to the Uganda National Roads Authority informing the entity that it had instituted an investigation into the award of contract for the for Civil Works for Upgrading of Mukono-Kyetume-Katosi/Kisoga-Nyenga road from bituminous to paved standard” (PPDA, P:10-12).

Unrealistic pricing on the road:

“The directorate of planning prepared BoQs from which the estimated value of the procurement was derived amounting to UGX.184,357,246,540. It was noted that the Contracts Committee approved the solicitation document to be used on 2nd November 2010” (…) “on 7th November 2013, the AO wrote to M/s Eutaw Construction Company Inc. informing the bidder that the bid with the corrected amount of UGX. 165,272,156,814 had been accepted. M/s Eutaw Construction wrote to the HPDU acknowledging receipt of the bid acceptance from the entity on 8th November 2013, and also confirmed acceptance of the offer to commence work as soon as the contract was signed. The Authority noted that the reduction in price from UGX 182,983,576,600 to UGX. 165,272,156,814 after negotiations was irregular and contrary to the requirements of PPDA Regulation 219 (3)” (…)“The Authority noted that on 14th November 2013, the Hon. Minister for Works and Transport, Hon. Abraham James Byandala wrote to the Accounting Officer UNRA directing him to implement the contract for the Civil works for upgrading of Mukono-Kyetume-Katosi/Kisoga-Nyenga road from gravel to paved standard immediately while due diligence was still being carried out by the UNRA Technical team. The Authority also noted that on 14th November 2013, the Legal Counsel UNRA, Mr. Marvin Baryaruha wrote to the Accounting Officer advising him that the contract with M/s EUTAW Construction could be signed while due diligence tests were still continuing. The Authority also noted that the PDE proceeded to sign the contract before the completion of due diligence tests. The Authority notes that it was highly irregular for the Accounting Officer to sign the contract before the completion of due diligence tests contrary to the requirements under Regulation 34 of the PPDA Regulations, 2003”  (PPDA P:12-15).

Grand Corruption: 

Inspector of Government Irene Mulyagonja Kakooza where it was said in the introduction: “While Uganda has developed excellent laws to prevent and combat corruption, the challenge remains the implementation and enforcement of the laws. Uganda has ratified a number of regional and international instruments aimed at fighting corruption. It is now crucial to ensure these instruments are implemented and enforced in order to achieve their intended purpose. If corruption is not addressed, it will continue to have a drastic negative impact on public service delivery. In turn, this will prevent all Ugandans from fulfilling the aspirations articulated in the Vision 2040” (Inspectorate of Government P: 6, 2014). Further on: “A significant amount of evidence supports the view that the incidence of grand corruption in Uganda has increased over recent years. Recent cases involving the embezzlement of public funds suggest the effectiveness of state institutions in monitoring government programs is limited. Recent examples of cases of grand corruption include the fraudulent procurement of a contractor for the Mukono-Katosi road and subsequent advancement of UGX 24 billion to nonexistent contractor to kick-start the road construction in 2014; of UGX 205 billion through the national identity card system scam in 2011; and of UGX 58 billion lost in the OPM in 2012, among others” (Inspectorate of Government P: 33, 2014).

MoFPED quick analysis;

Mukono-Kywetume-Katosi/Kisoga-Nyenga: 74km, how much work completed by May 2014:  0% (BMAU, P: 14, 2014). “Limited capacity within UNRA and the Uganda Road Fund: For example UNRA is faced with in the Mukono- Katosi road procurement scandal and sluggish performance of other roads such as Ishaka-Kagamba, and Mbale-Soroti” (BMAU, P: 19, 2014).

MPS on the Project:

“Mukono – Katosi/ Kisoga – Nyenga (72km) – Contractor is on site mobilizing to commence works in July 2014. Payment of land and property compensation was ongoing” (MPS, P: 6, 2014). By the June 2014 progress of the reconstruction and rehabilitation of the gravel roads of 20% of the road and 80% cumulative (MPS, P: 14.15 2014). Workplan output for the road was 160 Acres in 2013/2014 and 2014/2015. By 2013/2014 there was expected to be 5% of the work. By 2014/2015 will be 20% of the road. In the 2013/2014 we’re the budget for road 40.000.000 UGX. And in 2015/2016 it was expected to cost 50.000.000 UGX for the progress of the road. Of the 20% – 10% was for Supervision and 15.9% funds for works (MPS, P: 197, 2014).

EU speech on Infrastructure in Uganda:

“First, Institutional Reforms and Strengthening of good practices as Uganda prepares for an important expansion of the infrastructure works, present and future investors need to be reassured that there are well-functioning Regulatory Institutions; clear, transparent and efficient procurement procedures and respect for the rule of law” (…) “This leads to the loss of significant amounts of public resources, as in the case of the Mukono-Katosi contract that you have mentioned this morning. Development Partners are encouraging you and will support you, Hon. Minister, in all your efforts to take efficient and rapid corrective measures in order to avoid these episodes from happening again in the future” (EU, 2014).

Ruling from the High Court of Uganda in 2014:

“The order of Her Worship Lillian Mwandha issued on 06th November 2014 in Miscellaneous Application No. 704 of 2014, restraining the Attorney General and  (UNRA) or their agents from implementing the order/directive of the 1st Applicant to  exclude the 2nd Applicant from participating in the emergency procurement for the construction of Mukono-Katosi-Kyetume/Kisoga-Nyenga Road be set aside” (…) “A Court of law cannot sanction what is illegal, and an illegality once brought to the attention of the Court overrides all questions of pleading, including admissions made thereon.  In the premises, and in view of what I have outlined above, I do hereby allow preliminary objection by Counsel for the 3rdRespondent” (…) “Accordingly I do hereby set aside and/or vacate the Interim Order issued by the Deputy Registrar of this Court on 6th November, 2014.  Since the main Application for Temporary Injunction and Judicial Review are still pending, I order that costs be in the cause” (IGG, 2015).

Timeline: 

“On 15th November 2013, UNRA entered into an agreement with Eutaw Construction Company Inc. of 622 Beach land Bivd Suite 201 Vero Beach Florida USA for upgrading of Mukono- Kyetume -Katosi/Kisoga –Nyenge Road (74 Km) from gravel to paved (Bitumen) for a contract price of UGX.165,272,156,814 including all local taxes. Examination of expenditure vouchers showed that only UGX.24,790,823,522 (15% of the contract price) was paid to the construction company as advance payment” (OAG, P: 6, 2015). “On 18th November 2013; UNRA received the contractor`s performance guarantee from a local bank dated 13th November 2013. On the 19th November 2013, UNRA management wrote to the contractor rejecting the performance guarantee on condition that it was not consistent with the provisions of the contract data. A second performance guarantee from the same bank dated 21st November 2013 was tendered in by the contractor. On receipt of the performance guarantee, the Acting Director Procurement wrote a memorandum dated 26th November 2013 to the Director Finance and Administration (DFA) requesting him to verify the authenticity of the performance guarantee and requested the DFA to inform them of the results of the verification” (…) “The due diligence report was dated 8th November 2013 and the agreement was signed on 15th November 2013. It was evident that management ignored the findings and recommendations of the due-diligence team by going ahead to conclude the contract” (…) “the agreement details revealed that management later entered into an agreement at a contract price of UGX.165,272,156,814 far less than the bid price of UGX.183,285,341,234 translating into a reduction in price of UGX.18,013,184,420 (183,285,341,234 – 165,272,156,814) which was 9.9% of the bid price. I could not establish the cause of the reduction” (OAG, P: 7-9, 2015). “Examination of expenditure vouchers showed that UGX.24,790,823,522 (15% of the contract price) was paid to Eutaw Construction Company Inc. of 622 Beach land Bivd. Suite 201 Vero Beach Florida USA on the 24th of January, 2014. However, I noted that management had not made any effort to recover the money advanced after the failed contract. In response, management explained that the issue is under investigation by the IGG and Police. UNRA Board and indeed the Police and IGG are in charge of these investigations and they shall take action based on the findings” (…) “I noted that on 12th January 2015, the same construction work of Upgrading of Mukono- Kyetume -Katosi/Kisoga –Nyenge Road (74 Km) was contracted to another company for a contract price of UGX.253,940,121,150. This was far higher than the original contract price of UGX.165,272,156,814 in a failed contract earlier awarded to Eutaw Construction Company Inc. of Suite 201 Vero Beach Florida 32963 United States of America. This reflected additional spending” (…)”The schedule of other receivables includes a figure reflected as Prepayments in ABC Capital Bank of UGX.173,701,010. This amount has been held in ABC Capital Bank for over a year under unclear circumstances. During the review, I noted that there were been no significant steps taken to recover the money held since the previous audit. In response, management explained that this amount was fraudulently transferred to ABC Capital Bank with the assistance of some UNRA Staff members and officers working with ABC Capital Bank. Police instituted investigations where suspects were arrested” (OAG, P: 10 -12, 2015). For the road building even by 2014 there was no acquisition of land by the government because of the requirement of the TIN (Tax Identification Number), there have been issued with the payment for the land. And have been relaxed by the MoFPED. When it comes to the construction of the road there wasn’t any signs when the review was written (OAG, P: 23, 2015).

UNRA clarified their story:

“The contract for construction of Mukono-Kyetume-Katosi/Kisoga-Nyenga road project was awarded to EUTAW, an American road construction firm, after an international bidding process. This project is being supervised by another international company, M/s Arab Consulting Engineers, from Egypt. UNRA is working with both the consultant and contractor for this project to make sure all contractual obligations are met, project specifications are followed and the project is completed on time” (…) “The purpose of Advance Payment is to allow the contractor mobilise equipment, personnel, materials, set up camps and commence works. The contractor on Mukono – Kyetume – Katosi / Kisoga – Nyenga road project has fully mobilized, there is active equipment on site, the site camp is ready and works have commenced” (…) “While it is true that UNRA may have potentially been exposed to a fraud with a risk that the UGX 24 Bn advanced to EUTAW would not have a security backing it up, this situation has been largely avoided for now. UNRA is currently reviewing its due diligence protocol to make sure Government funds are not exposed to this kind of risk again. UNRA is cooperating with the Inspectorate of Government, the Uganda Police and other enforcement institutions to make sure that a thorough investigation is carried out as per their mandates” (Kitakule) .

Afterthought:

When the courts are over and all the numbers will be on the ground they will be different then the official documents I have in my possession. The IGG and the courts should after the trials deliver that documents to the public. So that the people involved could be scrutinized. Though that might hurt people in power, like infrastructure ministry and UNRA which also deserves that after not even doing a proper “due diligence” on the agreement between UNRA and the companies involved in the project and upgrading of the road. This should still be able for folks to look through the paper trail left behind and get information. Because this scandal didn’t happen overnight… happened with money and where it went should be interesting. Especially when it all will be put into place, because I don’t have the shadow budget of this or the rates of the monies that got pocketed by somebody else, that is for sure! But compare that to the basic budgets and appropriate funds from the government of Uganda to the tarmacking for years. And will until 2017 when its estimated to be done. Peace.

Reference:

Alnange, Dan Kitakule – ‘CLARIFICATION ON ALLEGATIONS THAT 24BN HAS BEEN LOST ON MUKONO-KYETUME-KATOSI/KISOGA-NYENGA ROAD PROJECT’ Link: https://www.unra.go.ug/index.php?option=com_content&view=article&id=423:clarification-on-allegations-that-24bn-has-been-lost-on-mukono-kyetume-katosikisoga-nyenga-road-project&catid=1:latest-news-first=.-title=Clarification

Delegation of the European Union to Uganda- H.E AMBASSADOR KRISTIAN SCHMIDT – ‘EU Head of Delegation Speech at the 10th Joint Transport Sector Review October 24, 2014’ (24/10/2014) Link: http://eeas.europa.eu/delegations/uganda/press_corner/speeches/2014/20141024_en.htm

IGG: THE REPUBLIC OF UGANDA – IN THE HIGH COURT OF UGANDA AT NAKAWA- MISC. APPLICATION NO. 744 OF 2014: [Arising from Misc. Application No. 703/2014 and 704/2014 and Misc. Cause No. 63 of 2014] (12.01.2015) Link: http://www.ulii.org/ug/judgment/high-court-civil-division/2015/1

Inspectorate of Government (IG) & Economic Policy Research Center (EPRC): Tracking Corruption Trends in Uganda – Using data tracking mechanism – Annual Fourth Report 2014.

Republic of Uganda – MoFPED: Budget Monitoring Report October – December 2008 (January 2009)

Republic of Uganda – The CONTRACT ACT CAP 73 – Memorandum of Understanding – The Agreement is made this 1st Day of December 2010 Between High Tides Ltd and Eustaw Construction Company.

Republic of Uganda – MINISTRY OF FINANCE, PLANNING AND

ECONOMIC DEVELOPMENT (MoFPED) – Budget Monitoring and Accountability Unit (BMAU): Improving Service Delivery in Uganda – BMAU Discussion Paper 1/14 November 2014

Republic of Uganda – Office of the Auditor General (OAG) – ANNUAL REPORT OF THE AUDITOR GENERAL FOR THE YEAR ENDED 30TH JUNE 2014 – VOLUME 2(B) CENTRAL GOVERNMENT AND STATUTORY CORPORATIONS (June, 2015).

Republic of Uganda – Ministry of Works and Transport: MPS 2015/2016 – Presented to Parliament for the debate on the budget estimates of the Revenue and Expenditure for Financial Year 2014/2015 (June 2014) Link: http://www.csbag.org/docs/Ministry%20of%20Works%20and%20Transport%20Ministerial%20Policy%20Statement%20FY2014-15.pdf

Republic of Uganda- MoFPED – ‘Annual Budget Monitoring Report FY 2011/12’ (December 2012)

PUBLIC PROCUREMENT AND DISPOSAL OF PUBLIC ASSETS AUTHORITY  (PPDA) – “INVESTIGATION INTO THE ALLEGED IRREGULARITIES IN THE AWARD OF A CONTRACT FOR THE UPGARDING OF MUKONO-KYETUME-KATOSI/KISOGANYENGA ROAD FROM GRAVEL TO PAVED STANDARD TO M/S EUTAW CONSTRUCTION COMPANY” (June 2014)

UNRA – ‘5 Year Corporate Strategic Plan’ (2012/2013 -2016/2017) – (June 2012) link: http://ric-uganda.com/rc/files/1.7_UNRA_5Year_Corporate_Strategic_Plan.pdf

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