Kampala — A copy of the letter written by the VP Bukenya

THE Government has gone for arbitration over the botched supply of the luxury cars used during the 2007 Commonwealth Heads of Government Meeting (CHOGM).

The Government might have lost billions in the procurement of 30 BMW vehicles and the lease of another 114 BMW cars from Motorcare/Intercar.

The dispute between the Government and the suppliers followed queries by the Auditor General that some of the vehicles brought in under the sh9.3b deal had different specifications from those agreed in the contract.

Scrutiny of the chassis numbers showed that all 30 saloon cars sold to the Government were manufactured in November 2005, not 2007, and that the engines were changed from diesel to petrol in one of the supplier's workshops.

The audit also found that of the 52 vehicles leased to the Government, 12 were manufactured in November 2005 while the remaining 40 were manufactured in September 2006. Of the 62 station wagons leased, 41 were manufactured in July 2004. The permanent secretary in the works ministry, Charles Muganzi, on January 10, 2009, wrote to the Solicitor General asking for a legal opinion on how to recover part of the sh9.3b. It is not clear how much money the Government wants refunded.

In his letter, Muganzi explained that he accepted the cars because he had no choice. "It was too late to reject the vehicles or enter into wrangles as that would have jeopardised the whole CHOGM," he wrote.

The Solicitor General, Billy Kainamura, said on Wednesday that both parties had agreed on renowned city lawyer Andrew Kasirye as arbitrator in the dispute.

"Normally, the parties agree on an individual they believe is neutral to do the arbitration and this time they chose Mr. Kasirye," he said.

Kainamura confirmed that the company flouted the agreed specifications and brought in old instead of new vehicles.

Arbitration is an out-of-court settlement that helps parties in dispute avoid costly litigation. However, if it fails, the dissatisfied party can still proceed with the court process.

When contacted, Motorcare said they could not comment on a court issue.

"As this matter is still in court, Motorcare would not be able to make any comment until the court matter is concluded," the general manager, Laurence Sparagano, said yesterday.

Motorcare teamed up with Europcar, later renamed Intercar, to win the multi-billion shillings deal to supply the CHOGM cars.

Europcar was incorporated in Uganda in 2005, its directors being Robert Kabonero, a Kampala businessman, Albert Gatare, a Congolese national, Eugene Nyangahane, a Rwandese, and SECI, a company owned by foreign affairs minister Sam Kutesa (94%) and his family (6%).

The incorporation of Europcar was done by Capital Law Partners, Kutesa's law firm. The signatories to both the shilling and dollar account of Europcar were Kabonero and Elizabeth Kyomugisha, Kutesa's daughter.

In August 2005, however, SECI sold its shares to Kabonero and resigned as director of Europcar.

Motorcare/Intercar won the CHOGM deal through direct purchase after two earlier competitive bidding processes had been halted. The decision to go for the BMW deal was communicated by the Vice-President after the second process had been halted.

In a letter on May 28, 2007 to the executive director of the CHOGM secretariat, Bukenya wrote: "At a meeting of the CHOGM sub-committee on transport, held today Monday May 28, I directed that there will be no outright purchase of vehicles for CHOGM. All vehicles will be leased, except 30 that will be purchased outright."

Two days later, on May 30, he directed the transport committee to go ahead and initiate negotiations with the representatives of BMW in Uganda.

However, the Auditor General said no clearance was received from the public procurement agency, PPDA, for this method of procurement.

In fact, responding to an earlier request for direct purchase of the CHOGM cars, the PPDA director on January 5 wrote to the works ministry that he could only approve restricted bidding, with at least three companies being invited to bid.