German, US, UK envoys fight over EC tender

By Independent Team  

Museveni awards Shs 200 billion deal at midnight

On July 25, 1996 Consolidated Sales Corporation (CSC), an offshore company, submitted an offer to the Ministry of Defence in Uganda proposing to supply MI-24 attack helicopter gunships. CSC’s representative in Uganda, Emmanuel Katto, gave the offer to then Special Advisor to the President on Military and Political Affairs in Northern Uganda, Gen.

Salim Saleh who gave it to President Yoweri Museveni. The procurement ran into legal and financial troubles leading to an inquiry into the transaction.

According to the Commission of Inquiry report, Museveni wrote to the then Minister of State for Defence, Amama Mbabazi, on October 24, 1996 instructing the Ministry to: ‘… immediately acquire four helicopters, of which two shall be MI-24V and two MI-24P, manufactured not earlier than 1988 and to handle the matter with utmost urgency.’ The president attached the CSC offer to his letter to Mbabazi.

On the basis of Museveni’s letter, the Ministry of Defence purchased the helicopters through CSC without competitive bidding. Later, CSC delivered the helicopters which were not airworthy. The Commission of Inquiry chaired by Lady Justice Julia Sebutinde concluded that by attaching the offer to his letter, the president had indirectly ordered the ministry to buy the helicopters from CSC. The Commission report concluded that this was a clear case of influence peddling.

Fast forward: In Dec. 2009, the United States Congress passed an Act directing ‘the Secretary of State to closely monitor preparations for the 2011 elections in Uganda, and to actively promote in coordination with the European Union, Canada and other nations, the independence of the Electoral Commission.’ The directive also called for ‘the need for an accurate and verifiable voter registry.’

The resolution further directed the Secretary of State ‘to submit a report to the Congressional Committee on Appropriations not later than 90 days after the enactment of this Act and every 120 days thereafter until 30 days after the elections detailing actions taken by the government of Uganda to address these concerns.’

The resolution took effect on Dec. 17, 2009 and the first report by the Secretary of State, Hillary Clinton, was issued on Mar.17. In her report, she said Uganda ‘took no additional actions to establish an accurate and verifiable voter registry.’

The report notes that the EC had dedicated a significant portion of its limited funds to procurement of a biometric voter ID system ‘intended to clean up the voter registry and weed out double registrations;’ it notes that (earlier) procurement had been cancelled due to ‘bidding irregularities.’

‘However,’ continues the report, ‘this system is unlikely to resolve longstanding problems with the voter registry, and the Commission’s original intention to use biometric voter IDs only in urban areas that are opposition strongholds triggered questions of fairness, transparency, and constitutionality.’  The report says the need for an accurate and verifiable voter registry was ‘underscored’ by two recent by-elections, on Jan. 25, and Feb. 16, in Uganda.

Voter registries in each of the by-elections were finalised just two days before the elections by the Electoral Commission, ‘thereby depriving stakeholders of a reasonable opportunity to verify the registries’ accuracy’ notes the report. ‘The Commission’s failure to produce in a timely fashion a transparent, accessible, and verifiable voter register for these by-elections disenfranchised voters and undermined the credibility of the electoral process,’ the report states, noting that U.S. State Department officials raised ‘concerns’ with the Uganda government on Feb. 8; and again, on Mar. 3, together with Dutch and British diplomats.

What’s more, on Mar. 3, the United States Agency for International Development (USAID), ‘offered to help the Electoral Commission render the voter registry more transparent and accessible by posting the entire document online.’ These statements make the US government an interested party in the voter registration exercise.

However, what Clinton did not report is that on Nov. 3, 2009, the US Ambassador to Uganda, Jerry Lanier, had written to the Chairman of the Electoral Commission, Badru Kiggundu fronting an American company for the tender to supply a voter identification system.

Thus, while America is officially calling for an accurate and verifiable voter register, the embassy in Kampala is quietly lobbying for this work to be given to an American company. Although Lanier’s letter does not say so directly, its contents would amount to a violation of the government’s public procurement rules and ethics.

‘With the upcoming elections,’ wrote the American ambassador, ‘Uganda has a unique opportunity to demonstrate its commitment to a free, open and fair democracy. One key element of this is ensuring the principle of ‘one person, one vote’ through a credible voter ID system. I applaud your efforts to make this a reality through the competitive tender you currently have out for the Voter ID system.

‘Related to this tender, I was recently contacted by L-1 Identity Solutions. L-1 is a major American company competing for this tender in partnership with Balton, Uganda. L-1 informed me that they have been shortlisted for this tender. As L-1 is a market leader in the area of secure identification, I would like to take a moment to highlight some of the areas where L-I may be able to bring value to your organisation.

‘As I am sure you are aware, L-1 has global experience in implementing Voter enrolment and ID cards, including providing the Voter ID systems in Mexico, Angola and Panama. Further, forty-five of the fifty US states use L-1 for the issuance of their driver’s licenses.

‘Finally we at the embassy are intimately familiar with the L-1 identity products as they provide card production capability for US passports and developed the US State Department’s visa issuance facial de-duplication system, the largest facial knowledge discovery database of its kind with more than 80 million records.

‘I understand that some of your personnel were recently hosted by the United States Trade and Development Agency for the Identity Solutions Orientation Visit to the US during the week of October 19. I further understand that they were able to visit the L-1 facilities and meet with some of their customers. I trust the meetings were productive and gave your personnel the opportunity to see how L-1 products may be applicable to the Electoral Commission.’

The Ambassador’s letter ends with a caveat that ‘I encourage the Electoral Commission to look at all companies competing and judge them on their merits and the strength of the bid. A fair and open bidding process is extremely important…’

Question: If the American was already shortlisted, what was the purpose of Ambassador Lanier’s letter to the EC?

The Public Affairs officer at the American Embassy in Kampala Joann M. Lockard said it was within the mission’s mandate to send that letter.

She said this was part of the U.S. government’s normal role as an advocate for U.S. companies and exports.  ‘U.S. Government advocacy promotes U.S. exports, supports U.S. employment and increases global market share for U.S. businesses.  U.S. Government advocacy also encourages transparency, promotes fair treatment of U.S. companies and addresses bribery and corruption in tender processes…. This remains the cornerstone of U.S. trade advocacy policy.  Any insinuation to the contrary is false,’ Lockard said.

Some concerned persons have said, however, that if the US ambassador did not want to influence the decision of the EC, he would not have written the letter. This is especially so because all the information he put in his letter should have been submitted by L-1 to the EC as part of its technical proposal i.e. the proposal showing its technical capacity and experience to do such kind of work.

Besides and more seriously, by writing to the EC in the manner he did on behalf of a company involved in the bidding process, the ambassador was flouting the bidding guidelines, an act that should have automatically led to the disqualification of L-1.

According to the Bid Instructions, a copy of which The Independent has seen, any lobbying of or canvassing for support from the EC by any entity engaged in the bidding process, would lead to automatic disqualification.

According to an EC official who did not want to be named, the ambassador’s letter is a clear case of influence peddling. L-I must have thought that by having an ambassador write on their behalf, they would get unfair advantage over competitors. When pressed further as to why the EC did not automatically disqualify L-1, the official retorted: ‘We just opted to remain impartial. We did not act on the ambassador’s request because we believe that was the most responsible action on our part.’

The US ambassador is not the only diplomat involved in pressuring the Uganda government to give important contracts to the companies from their home countries. On Mar. 19, the Uganda government signed a contract with a German firm, Muhlbauer High Tech International involving three deals; the provision of mobile data enrolment systems for the capturing of personal data, the creation of a central population data base and the establishment of a personalisation centre for the biometric identity of documents.

However, the agreement did not follow Uganda’s procurement rules. Instead, insiders say, Muhlbauer was taken to President Museveni at State House ‘in the middle of the night’ by the German ambassador to Uganda, Reinhard Butchnolz. The deal was signed thereafter without competitive bidding. A highly placed source in the diplomatic community told The Independent that ambassadors of donor nations have been trying to ensure the tendering of this deal follows the country’s tendering rules.

‘But when one of our colleague turns up at State House and is seen to be involved in a clear case of an irregular award of a procurement contract worth over Shs200 billion, then we lose our credibility as the community that seeks to promote the rule of law in a partner country,’ a highly placed diplomat said on condition of anonymity.

In the case of the German ambassador’s involvement in the deal, the outcome has caused a lot of concern. The previous contract to do a national ID that was won by Face Technology at US$92m (about Shs180 billion) was cancelled by the Inspector General of Government, forcing Face Technology to take the matter to court where it is still pending. Muhlbauer’s website now says the project Museveni awarded it is worth 64m Euros (Shs200 billion).

Indeed, the head of the Public Procurement and Disposable of Assets (PPDA) authority, Edgar Agaba, had written stating that the tender should be subjected to competitive bidding. The Independent has learnt that Museveni personally directed the Attorney General to write to PPDA that the national data system to be installed has ‘serious security implications.’ Therefore the tender had to be handled as classified expenditure and thereby be exempted from competitive bidding.

A national ID is a requirement of the EAC under the East African Common Market Protocol. Only Uganda and Tanzania do not have a national ID. Tanzania has five firms competing for the US$176 million tender. The Rwanda US$18 million tender was won by UK’s De-La-rue. All are open competitive bidding. So what makes the Ugandan one an exception?

Reinhard told The Independent that Uganda did not do something unique as there are no competitive bids for such services in UK and the USA.

Highly placed sources told The Independent that the government of Uganda was only willing to accept the German deal in exchange for a soft loan of 10m Euros. However, the Germany ambassador also denied this allegation saying there was no money that changed hands. ‘It is true we met the president late at night. But it is not because we were trying to hide something. It was because of the President’s time schedule.’

The Muhlbauer deal has run into trouble with Parliament. MPs on the Parliamentary Committee on Information Technology have declined to grant a no-objection to the request for Shs21 billion by the ICT Ministry to pay Muhlbauer. According to the MPs, the contract was awarded without following the proper procurement rules and also because, according to the MP Miriam Nalubega (NRM), ‘this is a lot of money whose burden will be felt by the taxpayers.’

The involvement of Uganda’s ‘development partners’ in these irregular procurement deals takes a worse twist with the US ambassador’s letter to the EC which reveals that L-1 has partnered with a local company called Balton. According to information available to The Independent, Balton’s local top-dog is an Israeli businessman called Zeev Shiff who is a survivor of the plane crash that claimed the life of the NRA bush-war hero ‘ Col. Jet Mwebaze. Shiff is also a former business partner of Gen. Salim Saleh.

Sources inside the EC had informed The Independent that Security Minister Amama Mbabazi is associated with the company and was using his influence to give it the deal. Although Mbabazi denies any link to Balton, there is evidence of his association with Shiff.  Sometime in 2007, Shiff travelled with Mbabazi and his wife, Jacqueline Mbabazi, to Israel and met the current Israeli Foreign Minister Ehud Barak and even took pictures together. More critically, Mbabazi’s daughter is Balton’s local manager.

Balton’s political clout was demonstrated by the fact that although it had come fifth in the bidding competition in November 2009, it mysteriously acquired more points by using some insiders in the EC and climbed to Number One position by Jan. Observers say that when a US ambassador gets involved in procurement deals involving shady local companies, he tarnishes the name of a country many Ugandans love to respect.

It is not the first time L-1 gets itself entangled in local procurement deals. In the days leading to the Commonwealth meeting in Kampala in Nov. 2007, L-1 through a former White House staff and a prominent Kampala lawyer, tried to procure a deal to supply and install all security equipment to the Civil Aviation Authority (CAA). In a letter The Independent has seen, the then CAA Managing Director, Ambrose Akandonda, wrote to the lawyer acknowledging receipt of L-1’s letter and advising that he would be informed when the tender was out.

Even the usually more cautious British did not want to miss out on the action in the EC biometric tender. On the April 12, the Deputy High Commissioner Phillip Mani wrote to the EC Secretary, on behalf of a British company involved in the bid process, allegedly forwarding a complaint by the company.

The company is called Adare. The diplomat’s conduct begs the question: Why would a Deputy High Commissioner receive and forward a letter for and on behalf of a bidder who is already in contact with the EC? While the British letter was less demanding than the American one, the outcome and intent is the same ‘ to influence the decision of the EC in favour of the company lobbied for by the particular embassy.

The Press Officer at the British High Commission, Chris Ward, told The Independent: ‘We were acting only as a mail box for the British company. We support British business in Uganda and the letter was signed by the Deputy High Commissioner because he heads the trade and investment department.’

By doing what they did and probably continue to do behind the scenes, these foreign governments are directly weakening the institutions they claim to support and strengthen. They feed corruption and encourage ‘first world’ givers of ‘third world’ bribes.

If an ambassador can flagrantly flout public procurement ethics and regulations, why would the entity he ‘represents’ not offer a bribe whether solicited or not in order to ‘win’ a tender? That company itself has already demonstrated that it is unable to play by the rules, in soliciting the ambassadors’ support to influence the result of a tender.

Charles Onyango-Obbo, one of Africa’s foremost political commentators said that in earlier times, one of the main criticisms of aid was that it was ‘tied’. ‘So if the Americans gave you money to buy books,’ Obbo said, ‘you had to buy from American publishers. To manage the negative perceptions of that, donors went into project support, which limited but didn’t eliminate `tied’ aid.’

According to Obbo, donors later shifted to budget support. Under this arrangement, ambassadors would not have to write as in the good old days when contracts were determined in London or Washington. ‘The eating surface, to use Museveni’s words, has remained the same,’ reasons Obbo, ‘The only thing that has happened is that it has moved its location to ‘native’ Treasury departments.’
‘The case of the US, German and UK ambassador’s actions reveal what I see as a ‘reversal’ to the tied aid regime,’ Obbo told The Independent, ‘One reason for this, is, of course with the global financial crisis and increasing competition from China, Brazil and India for contracts in developing economies, the pressure on the donor agencies to bolster their domestic industry is higher. I think we are likely to see more, not less of these kinds of actions.

‘But more interesting to me, is that it tells us something about how corruption will be defeated: Honesty and transparency cannot be supplied by honest donors and businesses. They can only come about as a demand by citizens and voters, who offer incentives to politicians to be honest by rewarding them for it. As of now, the primary incentive for politicians and officials is to be corrupt, because voters expect some ‘groceries’ in elections, and will almost always vote for the politician who bribes them most.’

Clearly, ending pettier forms of corruption then becomes almost impossible when there is no explicit commitment on the part of ‘development partners’ to fight grand corruption of the kind we have witnessed in the EC biometric tender saga. The conduct of the diplomats knocked all integrity out of the process and opened way for all to meddle in and mess up the process.

The British and Americans are, in the face of the Muhlbauer controversy, morally incapacitated to reign in on government or their German colleague. These secret deals therefore may continue unchecked and it is not possible to disturb and disrupt them. How can anyone then fault the EC for any wrongdoing if those that should be setting the example and reading the ‘Riot Act’ to them are less than ethical? By ignoring the ambassadors, the EC came out on top.