The National Transport and Safety Authority may have lost close to Sh395.6 million it paid to a local bank for the supply, delivery, installation and the maintenance of smart card-based driving licenses.
A report by Auditor-General Nancy Gathungu on the NTSA’s finances for the year ending June 2021, shows that the Authority did not get value for the money it paid to the bank for the driving licenses.
According to the report, NTSA had in March 2017, entered into a three-year contract with a local bank for the supply, delivery, installation and maintenance of second-generation smart card-based driving licenses and associated services.
Ms Gathungu says that information given by NTSA shows that the bank would also later enter into an agreement and a sub-contract with another firm pursuant to the award of tender and execution of the contract.
The sub-contracted firm was to supply five million smart cards driving licenses by December 312, 2019 to the bank as outlined in the contract.
However, as at June 30, 2021, a closing balance of 1.27 million blank driving licenses cards were still at the Authority’s head office stores.
Included in the number are 296,000 blank smart cards valued at Sh91.1 million that have been rendered obsolete due to changes in printing technology.
“It was not explained how value for money would be derived in the receipt and continued storage of obsolete stocks of blank smart driving license cards,” Ms Gathungu says.
Equally, the ownership of the printing technology for smart driving licenses and the role of the bank – which was the main contractor, was not clearly spelled out in the contract.
Further, under the clause 9.0 of the sub-contract, the bank was required to pay the sub-contractor all amounts paid to it by the authority under the main contract with no deductions whatsoever.
Consequently, according to the agreement, the contract was originally supposed to run up to March 8, 2020, with an extension of two years ending March 8, 2022.
“The Authority management has not justified the extension of the contract for two years and no evidence of contingency arrangements in place to ensure that service delivery is not disrupted in case the contract is discontinued,” Ms Gathungu says.
The National Bank of Kenya (NBK) secured the Sh2.3 billion deal from National Transport and Safety Authority (NTSA) for the smart card driving licenses.
The audit shows that on March 3, 2017, NBK entered into a sub contract with another firm Pesa Print for the supply, delivery, installation and maintenance of the second-generation smart-card based licences and associated services.
NBK entered into a deal with Ecobank on account of Pesa Print that had been subcontracted to supply the digital driving licenses.
According to the agreement, NBK had committed to pay Ecobank within 150 days after signing the license deal for a loan the lender had offered Pesa Print, to finance the production of the second-generation smart card driving licenses.
On failing to meet the obligation, EcoBank sued NBK and won over half a billion in award over breach of contract.
Justice Nzioka found NBK had breached terms of the financing deal after it failed to make payments due to Pesa Print directly to Ecobank to settle a $3.5 million loan offered to the subcontractor.
NBK had said payment to Ecobank was based on it receiving payment from NTSA for the contract, arguing that the transport regulator had delayed settling the bill.
Aggrieved by the high court decision NBK moved to court of appeal.
In its appeal papers NBK had said that the payment of the said monies will cause it to take the position of primary obligor for the credit facility; that the decretal sum is a substantial amount of money and if it is compelled to pay at this stage, its services will be severely hampered.
It faulted the high court judge for: misconstruing the import and meaning of “Receivables”; for failing to hold that the NBK’s obligation to pay the receivables only arose once it received the receivables under Invoice No.00229, and therefore since NTSA had not yet made the anticipated payment the applicant’s obligation to pay Ecobank under the Deed of Assignment of Receivables had not crystalized.
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