Schools Laptop Project In Limbo

The Kenyan government has cancelled the tender for the procurement of laptops and other IT equipment for the schools computerisation project. According to the cabinet secretary for education, Jacob Kaimenyi, the decision was taken on the back of astronomical figures quoted by all the bidders, the least of which was almost three times more than the government's budget. This development leaves the current administration's flagship education policy hanging in the balance. It also poses a downside risk to BMI 's growth forecast for the IT sector, at least in the short term.

Under Threat
Kenya IT Market Sales Growth

The tender to supply 1.3mn laptops, 20,367 projectors and 20,367 printers was launched on August 2 2013. A total of 126 firms bought bid documents, with only 20 submitting completed bids afterwards. Of the 20 submitted bids, HP Commercial was the lowest bidder with a quoted price of KES32bn (US$376mn). This was nearly three times the government's budget of KES12bn for the first phase of the project. Other bidders with higher quotes included Samsung Electronics, Symphony Technologies, Haier Technology, ZTE Corporation, Telkom Kenya and Huawei PTE Ltd, which quoted the highest price of KES60.5bn.

It is difficult to justify the variance between the government's estimate and the quoted prices (the difference between the budget and the lowest bid was KES20bn). One possible factor is a gross underestimation of the cost of delivering the project by the government's procurement officers. Another could be the high duty on imported consumer electronics products which the suppliers may have included in their bids. Meanwhile, Kaimenyi was quoted as saying that the bidders may have collaborated to hike prices. BMI believes this is unlikely considering the difference between the lowest and highest bids (KES28.5bn) and the lack of incentive to do so.

What Next?

The Education Ministry justified the cancellation of the tender with provision of the Public Procurement and Disposal Act, reducing the likelihood of damage claims by the bidders. The ministry is now in consultation with relevant government departments to come up with an appropriate competitive procurement mechanism in order to meet the Q114 launch date for the project.

BMI believes the government's chance of meeting the Q114 deadline depends on it ramping up the budget, scaling down the size of the project, or a combination of both. However, any of these measures is expected to fuel the growing opposition to the laptop project. It is worth noting that the likelihood of the project overshooting its budget was not among the original concerns expressed by opposing voices ( see 'Questions Remain As Laptop Tender Launches', August 5).

BMI notes that the delay or cut back to the schools computerisation project poses a considerable downside risk to our short term growth outlook for Kenya's IT market. Our current forecast expects the computer hardware market to grow at a compound annual growth rate (CAGR) of 19% over BMI's forecast period from an estimated KES28.997bn in 2012 to KES69.218bn in 2017, partly driven by the project and other e-government initiatives. We will monitor steps by the government to resolve the deadlock, but caution that a downgrade to our IT market growth outlook for 2014 is almost inevitable.

This article is tagged to:
Sector: Consumer Electronics
Geography: Kenya

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