Following the release of the leaked KPMG report which has made damning allegations against mobile operator Safaricom’s procurement processes, various firms mentioned in the report as well as those who’ve had dealings with the telco are coming out in a bid to clear themselves from the accusations.
Among those who’ve since issued statements (and even run print adverts on the issue) include Safaricom itself, WPP Scangroup (whose local affiliate Scanad has been adversely mentioned in the report), while joining the fray now is Mentor Management Ltd (MML), the high-end property development and management firm which pitched the Garden City idea to Safaricom.
(TOP: James Hoddell, CEO, Mentor Management Ltd, MML)
Below is the complete statement, where MML concludes that it is “not in a position to comment on Safaricom’s procurement practices”. Read on…
Mentor Management Statement on Procurement Practices
Mentor Management Ltd (MML) notes with grave concern the issues raised recently in the media following a KPMG audit of the procurement practices of Safaricom.
Following from these reports, MML Development’s CEO Mr James Hoddell has immediately conducted a full review of the matters raised by the auditors to determine precisely the implications for MML as a supplier to Safaricom.
Specifically, MML has reviewed whether there were:
1. any additional actions that MML should have taken as a supplier, or
2. any actions that it took as a supplier that it should not have taken.
“MML has at all times upheld the highest levels of ethical business practice, as well as leading in introducing new levels of sustainability practice within Kenya’s real estate sector, meaning we take this matter extremely seriously,” said Mr Hoddell.
MML has examined the six issues raised in the audit in relation to MML’s supplies to Safaricom and reached the following conclusions:
1. Pitching new property developments
KPMG has raised the fact that Mr James Hoddell pitched Garden City to Safaricom as a possible office space at a time when MML was not a pre-qualified Safaricom supplier, and more than 15 months before Safaricom opened a subsequent tender process for research and feasibility services relating to the location of its new offices.
Mr James Hoddell also presented Garden City to many other corporates as a potential location during 2013, as a service provider to Actis. In almost every case, MML was not a prequalified supplier of the corporates that it presented the Garden City development to as a potential office location.
MML has reviewed the regulation and legislation on presenting information about new products, pitching for new business, and sales approaches, and finds no record of any requirement that businesses must be qualified as suppliers before presenting new products to potential buyers.
Indeed, this appears to be an entirely new responsibility on potential suppliers that they should be prequalified before being allowed to meet, discuss, present, or pitch new projects as potential sales.
Regarding the subsequent and entirely different work that MML undertook for Safaricom, Mr James Hoddell had no foreknowledge of the need that Safaricom would later have for detailed research and feasibility reports – a field in which MML is the market leader.
MML was asked separately and much later to quote for the research work, which it did, and it was then awarded the work solely on the basis of that quote.
MML has reviewed the business implications of refusing to deliver any quotes, proposals or tenders for any client that it has previously presented to, met, or talked to, and sees no viability in this self-imposed limitation, or any precedent for it in any sector in any nation globally. It appears to be an entirely new concept that businesses should refuse to submit any future proposals or take any future work from any business they have previously spoken to or presented to.
2. Delivering work without a tender
MML was in 2014 selected by Safaricom to deliver the review of available properties and land as the result of a tender selection process. The auditors have raised as irregular the award by Safaricom of subsequent work to MML – which included designs, reviews of Vodacom’s specifications, and further research work that was not originally specified in the opening scope of work – without that new and different research work also being put out to tender by Safaricom.
MML, as with all business suppliers, is often asked to quote for work that it is then commissioned to deliver, or not commissioned to deliver. It has reviewed whether it should in future refuse all orders of work and services unless the buyer proves they have held a competitive tender.
MML sees no precedent for suppliers being required to enforce the terms and conditions of customer’s procurement processes, or being required to insist on proof of a tender process before accepting orders or work.
3. Delivering work on a purchase order, without contract
The auditors have criticised Safaricom for procuring work from MML on a purchase order, but without a contract. MML was told by Safaricom that it did not issue contracts for the delivery of such services, but only issued purchase orders. MML has been issued contracts by all of its other clients, and has not previously or since been asked, as it was by Safaricom, to commence, undertake, and complete work on the basis solely of a purchase order.
MML has concluded that it will not proceed to execute any further work for any party without a signed contract even on the issue of a purchase order. However, it observes that it in no way represents wrongdoing by a supplier to provide services on the issue solely of a purchase order.
The auditors have further stated that the additional research contracts undertaken by MML ended up costing more than if an alternative supplier had been given the initial work. But the total research work encompassed many more tasks and deliverables than specified in the original tendered scope of work.
None of the original tenders encompassed the additional deliverables and the only correct comparison would be between quotes for the full research delivered and not a comparison to the cost from an alternative supplier of only one part of the research work.
4. Conflict of interest
The auditors have raised the conflict of interest in MML undertaking research on potential office locations for Safaricom when it was owned, in part, by Actis, which also owned some of the potential locations.
MML repeatedly and demonstrably declared the Actis shareholding in its business, as is fully proven by the records submitted to the auditors by Safaricom. MML was not wholly owned by Actis, nor a division of Actis, but one of many companies that Actis has invested in, from its position as Africa’s largest private equity fund.
MML is Kenya’s largest provider of real estate project management, development and feasibility and advisory services. Until now, MML has never been limited in fulfilling its sole business of real estate project management, development, and advisory services to any previous client by virtue of the Actis shareholding in its business, despite Actis’ many parallel investments in real estate projects.
MML has concluded that it will continue to declare all of its shareholders and insistently assure that any client be aware of all of its shareholders, with any potential conflict of interest explicitly stated, exactly as it was to Safaricom during the research work on Safaricom’s potential office locations.
it is further the case that MMl absolutely and explicitly worked for no other party in this matter, but solely represented Safaricom.
5. Land costs
The auditors have raised issues concerning the price paid for the land that was finally bought by Safaricom for its new HQ, at Sh230m per acre, citing a comparison with a notional acre in the district, priced at Sh100m.
MML is a leading consultant in real estate and knows of no land with frontage onto this section of Thika Road and direct access from Thika Road that is priced at Sh100m per acre, so cannot comment on which notional land price this might be.
The facts are that Safaricom only had two years’ left until it’s current office lease expiry by the time of purchase and needed to build at speed. Actis had built infrastructure, as well as getting NEMA approval for the land and development, and securing its change of use certification.
All of these elements of new roads, road rerouting, the building of internal roads, connection of electricity, piping of water, boundary fencing, full and adequate drainage, and regulatory approvals and certification, are costly. It seems deeply inappropriate to suggest that these should be non existent costs and values.
If Safaricom had bought the notional comparative land for Sh100m an acre, it would have needed to add the very considerable extra costs for the whole process of submissions, engineering and development that had already been completed by Actis. This would have added costs that the audit appears to have overlooked, and would also meant that they would not have been able to meet their stated timescale by Up to a year.
MML has reviewed the costs and the pricing and is fully satisfied as to their cause, rationale, the transparency on the pricing structure, and its substantive nature.
6. Bidding process
KPMG has raised concerns about the arrival times of the proposals submitted following the Request for Proposals (RFP). However, all three proposals arrived during the course of the submission day, on 22nd August 2014.
When MML extended the deadline for submissions from 12pm on 15th August 2014 to 22nd August 2014, it did not specify a time for the extended deadline, meaning that all of the three submissions that arrived on 22nd August 2014 were on time, including those submitted during the afternoon of the 22nd August 2014.
The auditors also suggest that the Actis submission was late, based on the electronic submission from Actis on 26th August 2014. But Actis submitted its hard copy, paper submission on 22nd August 2014, and was, in fact, the first submission to be received on the morning of 22nd August 2014. This is further proven by the fact that Safaricom and MMl had met to review the three submissions prior to Actis’ subsequent sending of the electronic version on 26th August 2014.
There were no other submissions, and no late submissions received by MML as part of the RFP process. Any other late submissions that may have been received by Safaricom’s lawyers were never submitted to MML. Nor was MML ever notified that any late submissions were received by any party within or related to Safaricom.
“Integrity is a deeply held value within MML. We are not in a position to comment on Safaricom’s procurement practices, but we have examined the statements made about MML during the course of the enquiry into Safaricom’s procurement practices, and believe the conclusions above fully reflect the appropriate responsibility on ourselves as suppliers in relation to our own direct and full compliance with the law and with best practice,” said Mr Hoddell.