[kictanet] HP says laptop bid price changed to favour rival Olive

Adam Nelson adam at varud.com
Wed Feb 19 15:08:54 EAT 2014 

It's called mercantilism (http://en.wikipedia.org/wiki/Mercantilism) and it
can actually work as pointed out with certain industries.  I won't claim to
be an economist but if a country wants to be more mercantilist, it needs to
meet a few basic requirements:

1. Very smart technocrat class making smart decisions about what industries
to nurture.
2. Consistency over time (i.e. 10-15 years).
3. Limited focus (i.e. pick 3-4 industries, not 20).

I just hope that Kenya doesn't choose to put its chips into a 20 year old
industry that doesn't even exist here and has already plateaued globally,
i.e. laptop assembly.


--
Kili - Cloud for Africa: kili.io
Musings: twitter.com/varud <https://twitter.com/varud>
More Musings: varud.com
About Adam: www.linkedin.com/in/adamcnelson


On Wed, Feb 19, 2014 at 3:00 PM, Ali Hussein <ali at hussein.me.ke> wrote:

> Kivuva
>
> Good point on the motor industry.
>
> In  my previous life :) I used to work in the motor industry at Lonrho
> Motors as a Market Analyst.
>
> The government then had a % (can't remember the act percentage) local
> content mandatory rule for commercial vehicles. As a result there emerged a
> local content industry that exists to date that did body work, upholstery,
> shocks, nuts and bolts etc..The beginnings of what is know as OEM (Original
> Equipment Manufacturers). A lot of that is now lost because of ill-informed
> blanket free market reforms driven by the IMF. (trust me when I say that no
> western or eastern country has blanket free market economies except
> Africa!). This thinking in the motor industry is what informed the growth
> of the  Japanese Motor Industry through deliberate policy moves by their
> MITI (Ministry of international Trade & Industry).
>
> We in Africa have the opportunity to not allow ourselves to be encumbered
> by legacy thinking of old school economic theories of comparative advantage
> etc. We can learn and discard and ensure we get the best of both worlds.
>
> Ali Hussein
>
> +254 0770 906375 / 0713 601113
>
> "I fear the day technology will surpass human interaction. The world will
> have a generation of idiots".  ~ Albert Einstein
>
> Sent from my iPad
>
> On Feb 19, 2014, at 12:52 PM, Kivuva <Kivuva at transworldafrica.com> wrote:
>
> Thank you Machuhi, Lucy, Muraya and Ali for supporting that line of
> thought.
>
> Adam, take time I walk you round our shopping centres around the country.
> You will find thousands of educated youths hanging around with nothing
> todo. They would appreciate working in some plant than wasting their years.
>
> And knowledge economy is good, but before we reach there what shall we be
> doing?
>
> Lets take a model African country doing manufacturing. Many of the major
> multinational firms use South Africa to source components and assemble
> vehicles for the local and international markets. The sector is one of
> South Africa's most important, contributing at least 6% to the country's
> GDP and accounting for almost 12% of South Africa's manufacturing exports,
> making it a crucial cog in the economy. In 2010, 271 000 vehicles were
> exported. More than 28 000 people are directly employed in automotive
> manufacturing, with 65 000 employed in the component manufacturing
> industry. About 200 000 are employed in retail and aftermarket activities,
> with 6 600 employed in the tyre manufacturing industry. Read more:
> http://www.southafrica.info/business/economy/sectors/automotive-overview.htm#.UwR7b_m9m7I#ixzz2tl8lPOrm
>
>
> Nobody should tell us we can only be mass consumer, we too, can add value
> to the chain, and decide our own destiny.
>
> ______________________
> Mwendwa Kivuva, Nairobi, Kenya.
> twitter.com/lordmwesh
> google ID | Skype ID: lordmwesh
>
>
> On 19 February 2014 00:02, Lucy Kimani <lkimani at yahoo.com> wrote:
>
>> Murigi,
>>
>> I am with you on this one, I seem to recall the University of Nairobi
>> being challenged engage in capacity building, but if the go.ke does not
>> provide an enabling environment then that will be for null.  The more
>> things change in Kenya the more they remain the same, the go.ke should
>> be using all their bags of tricks to level the playing field, and create
>> new jobs for the youth.   I see this as a lost opportunity at building
>> capacity and investing in an industrial manufacturing foundation be it for
>> laptops or even tablets as has been stated severally.  The most developed
>> of countries aka USA still has young people working on assembly lines,
>> this would definitely be preferable to being unemployed, ask the youth who
>> cant find a job anywhere these days.
>>
>> Very disappointed in The Ministry of Information and Communication who
>> are MIA in this very important discussion, and many others as I have
>> pointed out previously leaving a void  as representatives of the digital
>> go.ke your silence on this very important issue is deafening.  I thought
>> your mission was to and I quote "To develop Kenya as a globally
>> competitive and prosperous nation by creating an enabling environment that
>> encourages and enhances the development, expansion and use of Information
>> Communications Technologies (ICTs)."
>>
>>   On Wednesday, February 19, 2014 9:44 AM, S.M. Muraya <
>> murigi.muraya at gmail.com> wrote:
>>  If Asians listened to Western doubts about their prospects and
>> potential, they would not have the manufacturing capabilities they do today.
>> China imports raw materials from Africa, and like them, we should not
>> give our children a chance to learn to transform these into other products?
>> First we build labs (mini factories) then...
>>  On Feb 19, 2014 9:00 AM, "Adam Nelson" <adam at varud.com> wrote:
>>
>> Keep in mind though that supporting industry and helping kids with a
>> final product are two independent things.  The more money that goes into
>> spinning up a manufacturing capacity, the less money that goes into getting
>> the technology to the kids.  Kenya can't magically produce laptops cheaper
>> than China can.
>>
>> Kenya has no chance of having a meaningful laptop assembly capacity
>> because it doesn't have the economies of scale that South East Asia has.
>>  Europe and the US are giving lots of technology to their children and none
>> of that stuff is produced in-country because manufacturing plants can't
>> exist in isolation.
>>
>> A laptop assembly plant is just one of dozens of plants (chemical
>> manufacturing, plastic-shaping, aluminum foundries, LED, etc...) needed in
>> close proximity to eachother just to create the first laptop.  Having a
>> laptop assembly plant in Kenya and all the preceding plants stay in China
>> isn't economically viable.  And also, if the plant is only creating a few
>> million laptops, it's doubly not viable.  It has to produce more like
>> 10M/year and in order to do that and so the plants would need to export
>> those laptops.  Where are these laptops going to be exported to and how?
>>  Is a typical Rwandan going to buy a Kenyan laptop over a Chinese one?
>>  Maybe, just maybe, with a solid $5-$10B of pure investment Kenya could get
>> a real industry going but then to what end?  Computer manufacturing has
>> already plateaued (currently one computer produced for every 20 people each
>> year) and it's agreed that future growth will happen in tablets and mobiles
>> where most of the value is in commodities and intellectual property, not
>> assembly line labor.  Tablet sales are already 60% of computer sales and
>> the industry is seeing 50% YoY growth.
>>
>> Kenya has all the raw ingredients to leapfrog manufacturing and go
>> straight to a knowledge economy - it just needs to invest deeply in its
>> children through strong, universal education.  Having young people working
>> on assembly lines is not a way to empower youth.
>>
>>
>>
>> --
>> Kili - Cloud for Africa: kili.io
>> Musings: twitter.com/varud <https://twitter.com/varud>
>> More Musings: varud.com
>> About Adam: www.linkedin.com/in/adamcnelson
>>
>>
>> On Tue, Feb 18, 2014 at 10:12 PM, S.M. Muraya <murigi.muraya at gmail.com>wrote:
>>
>> They are taking electricity to thousands of schools to make this project
>> work.
>>
>>
>> http://mobile.nation.co.ke/News/Electricity+and+stores+pledge+in+laptops+plan/-/1950946/1978754/-/format/xhtml/-/adm3ge/-/index.html
>>
>> Have noted in the past, the ecosystem effects are significant, even if
>> the laptops fail to increase interactive learning.
>>
>> The power of Go.Ke to demand electronic assembling plants has also
>> significantly increased.
>>
>> Regards
>>
>> Murigi / Stanley Muraya
>>
>> *"Better a patient person than a warrior, one with self-control than one
>> who takes a city." Prov 16:32*
>>
>>
>> On Tue, Feb 18, 2014 at 8:24 PM, Sean Moroney <seanm at aitecafrica.com>wrote:
>>
>>  Here, here, Adam.
>>
>> The entire project is garbage, from beginning to end, but unfortunately
>> rational thought and action are not given priority in politics.
>>
>> Imagine what could have been achieved if the laptop budget had been
>> allocated to capacity building for teachers, and developing secure
>> solar-powered computer labs for all school years to use.
>>
>> Sean Moroney
>> *Chairman*
>> *AITEC Africa*
>>
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>>
>>  *From:* kictanet [mailto:kictanet-bounces+seanm=
>> aitecafrica.com at lists.kictanet.or.ke] *On Behalf Of *Adam Nelson
>> *Sent:* 18 February 2014 15:00
>> *To:* Sean Moroney
>> *Cc:* KICTAnet ICT Policy Discussions
>> *Subject:* Re: [kictanet] HP says laptop bid price changed to favour
>> rival Olive
>>
>>  We're ignoring the elephant in the room.  Both vendor's laptops are
>> going to be garbage.
>>
>>  With that kind of budget, tablets are the only way to go.   Anyway,
>> tablets are so much more sensible from a pedagogical point of view as well
>> as a battery life (10 hours vs 1) and durability standpoint (you can drop a
>> tablet on a cement floor from 2 feet and the screen might crack but it can
>> be taped up and works fine).
>>
>>  Even Apple iPads are only $300 retail nowadays and surely the
>> government could get them for $200 or even $150 since Apple's CSR team
>> would be all over themselves to make the sale.  No ICT support would be
>> required and everything would 'just work' as long as the theft and breakage
>> rate is kept reasonable.
>>
>>  If anybody in the government could do anything innovative with this
>> thing, it would catapult their career to the national and international
>> stage.
>>
>>    --
>>  Kili - Cloud for Africa: kili.io
>>  Musings: twitter.com/varud <https://twitter.com/varud>
>>  More Musings: varud.com
>>  About Adam: www.linkedin.com/in/adamcnelson
>>
>>  On Tue, Feb 18, 2014 at 5:36 PM, Ngigi Waithaka <ngigi at at.co.ke> wrote:
>>   If this line is true,
>>
>> "*...The technology firm further says it was invited through a letter
>> dated December 6, but which was delivered on the morning of negotiations,
>> allowing them no time to prepare...*."
>>
>> Then you know HP is being played for sucker, and I think they are....
>>  The only option on the table, prepare themselves for a Judicial Review
>> (Takes about a year to conclude), PPARB decisions IMO are not based on
>> substance, and if they are, its of a different kind!
>>  Waithaka Ngigi
>>
>>   On Tue, Feb 18, 2014 at 5:21 PM, S.M. Muraya <murigi.muraya at gmail.com>
>> wrote:
>>
>>  What did Olive Telcom offer in terms of local assembly/support,
>> maintenance and connectivity?
>>
>> http://www.businessdailyafrica.com/HP-says-tender-team-rigged-pricing-of-laptops-for-rival/-/539546/2210772/-/view/printVersion/-/4t0eatz/-/index.html
>> HP says laptop bid price changed to favour rival Olive
>> IN SUMMARY
>>   * HP says Olive Telecommunications had on December 13 quoted a price of
>> Sh23.1 billion as its final offer.
>>   * Computer maker also claims Olive and Haier are associates that should
>> not have been allowed to place separate bids.
>>   * The allegations add to the controversy that has stalked procurement
>> of laptops for primary schools.
>> Senior government officials colluded with executives of an Indian company
>> to inflate prices for the controversial laptops tender by as much as Sh1.4
>> billion after the final bids were made, it has emerged.
>> American computer maker Hewlett Packard (HP) says Olive
>> Telecommunications -- the Indian company that won the tender to supply the
>> laptops -- had on December 13 quoted a price of Sh23.1 billion ($268,899,
>> 669) as its final offer.
>> But Education secretary Jacob Kaimenyi later announced that Olive
>> Telecommunications had won the tender to supply the laptops at a price of
>> 24.5 billion ($284,814,957) without reference to the alterations.
>> "It is clear from the foregoing that the procuring entity amended the
>> total price quoted by the successful bidder and which was read out at the
>> opening of BAFO (Best and Final Offer) and awarded it (Olive) the sum of
>> $15,914,288 (Sh1.4 billion) more than it had actually quoted," says HP in
>> documents filed Thursday before the Public Procurement Administrative
>> Review Board (PPARB).
>> HP also alleges that Olive and rival bidder Haier, which was among the
>> three shortlisted bidders for the supply of 1.3 million laptops, are
>> related companies that should never have been allowed to submit competing
>> bids meant to lock out rivals.
>> According to HP, the tender committee should have disqualified Olive and
>> Haier Group's applications on grounds that the two companies are related
>> and could not place separate bids.
>> "To the procuring entity's knowledge the said two companies had
>> previously entered into a joint venture to form Haier Telkom (India), a
>> company that is still active," says HP.
>> The allegations add to the controversy that has stalked procurement of
>> laptops for primary schools.
>> HP accuses the tender committee of colluding with Olive Communications to
>> undermine rival bidders.
>> The American firm claims that Ministry of Education officials allowed
>> Olive to submit an incomplete price list that left room for price
>> manipulation and enabled the Indian firm to overtake it [HP] as the lowest
>> bidder.
>> In an application filed through Nairobi law firm Iseme Kamau and Maema
>> Advocates, HP says procurement of the laptops has been shrouded in secrecy
>> that has irredeemably compromised the award.
>> HP accuses the tender evaluation committee of disclosing the price quoted
>> by the bidders and in effect allowing price comparison and undercutting -- a
>> claim that if proved will cast doubt on the entire process.
>> The American company says it was the lowest bidder when the financial
>> offers were opened on December 6, having offered to supply the 1.28 million
>> laptops for Sh25 billion compared to Haier Electrical's Sh27.2 billion and
>> Olive Communications' Sh27.2 billion.
>> All prices were subject to further negotiations.
>> HP claims that the tender committee used every opportunity to release
>> confidential information in the bid documents to competing firms it says
>> were sister companies used to undercut its offer.
>> "Release of the said information created the very mischief sought to be
>> prevented by Section 44 of the (Public Procurement and disposal) Act," HP
>> says, adding that rival bidders used the unit prices to undercut the
>> applicant.
>> Meyrin Branch, who oversees HP's corporate accounts, says in an affidavit
>> that only his company's application should have been subjected to further
>> evaluation, including price negotiations, and that the tender committee
>> should only have engaged rival bidders in the event that the talks
>> collapsed.
>> Instead, the tender committee invited all bidders to price negotiations
>> on December 10 at Windsor Golf Club against HP's expectation.
>> The technology firm further says it was invited through a letter dated
>> December 6, but which was delivered on the morning of negotiations,
>> allowing them no time to prepare.
>> Each firm held separate negotiations with the tender committee during
>> which they were asked to reveal their BAFO.
>> "The mode of negotiation adopted made it very possible for information of
>> a particular bidder to be disclosed to others with the aim of sabotaging
>> certain bidders," says HP.
>> Ministry of Education officials are alleged to have failed to define the
>> scope of negotiations to participating bidders and instead confronted them
>> with questions at the meeting.
>> The tender committee is also accused of refusing to supply HP with the
>> minutes of the negotiations or even a summary of what transpired.
>> The information was needed for purposes of filing the appeal.
>> HP later learnt on December 13 that following the price negotiations,
>> Olive had dislodged it from top position with an offer of Sh23.1 billion, a
>> reduction of Sh4.1 billion from its initial offer of Sh27.2 billion.
>> The American computer maker was then left in the second lowest bidder's
>> position with a price of Sh24.8 billion while Haier was last with a final
>> offer of Sh25 billion.
>> "It was therefore surprising when on February 7, 2014... Prof Jacob
>> Kaimenyi announced that Olive Telecommunication had been awarded the tender
>> at Sh24.6 billion," says HP.
>> HP also claims that the committee declined to consider its offer to
>> provide value-added services to the tune of Sh4.4 billion free of charge.
>> It says the tender committee should have disqualified Olive and Haier
>> Group's application on grounds that the two companies are related and
>> should not have placed separate bids.
>> The details emerged even as the parliamentary committee investigating the
>> laptops for schools tender called on the government to suspend signing of
>> the contract.
>> The MPs argued that Olive is a small company that partnered with another
>> firm called CMC to tender for the laptop and that it is not an original
>> equipment manufacturer (OEM).
>> The MPs' claims give credence to HP's argument that the committee
>> breached one of the requirements that limited bidding to OEMs.
>> The parliamentary committee has accused Prof Kaimenyi of awarding the
>> tender even before the due diligence report on the winning company is
>> scrutinised.
>> MPs are expected to independently investigate the matter and produce a
>> report.
>> Ministry of Education officials are also accused of rejecting HP's bid
>> for the supply of projectors on grounds that it is not an OEM for
>> projectors even as it accepted Olive's bid for laptops.
>> "Since the requirement that bidders must be OEMs was specifically set out
>> in the tender documents, HP accepted the decision (to reject its bid for
>> projectors) and reasonably expected that similar criteria would be used in
>> respect of other bidders," HP says.
>> The government in October re-advertised for the supply of laptops,
>> printers and projectors to public schools in fulfilment of Jubilee
>> alliance's campaign manifesto.
>>
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>> --
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>>
>>  *Wait**haka Ngigi*
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>
> KICTANetiquette : Adhere to the same standards of acceptable behaviors
> online that you follow in real life: respect people's times and bandwidth,
> share knowledge, don't flame or abuse or personalize, respect privacy, do
> not spam, do not market your wares or qualifications.
>
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