7 April 2010

Uganda: Secret ID Deal Leaks

The failure or refusal by the government to involve the Public Procurement and Disposal of Public Assets Authority (PPDA) in the recently awarded national ID deal might have cost the taxpayer billions of shillings, The Observer has learnt.

Leaked details of the agreement signed by the government with German firm, Muhlbauer High Tech International, show that the taxpayer will fork out Shs181 billion for the project.

However, sources familiar with the project have told us that the Shs 181 billion (64 million Euro) cost is "highly inflated" when compared to what neighbouring countries, some with bigger populations, are spending on similar projects.

For example, Kenya, with a population of 40 million, will before the end of this year launch a new and more sophisticated National ID card at a cost of KShs 2 billion (about Shs 53 billion), according to a report in the Sunday Nation of March 16, 2008.

Tanzania, which has a population of 43 million, and is in the process of implementing a similar project, has budgeted for $20 million (about Shs 41 billion). The first botched project by Face Technologies was supposed to have cost Shs 93.4 billion, according to someone knowledgeable about the matter.

The source, who preferred anonymity, however, admitted that due to changed circumstances, the figure could have gone up.

According to our sources, the project could have been executed at a cost of not more than Shs 80 billion had some items not been over-priced.

He pointed at the Shs 97 million for some of the equipment manuals to be translated from German to English and the Shs 6.3 billion on local onsite field support staff for 45 days--an average of Shs 147 million per day, as examples.

After previous attempts to develop a similar scheme ended in controversy, an executive decision was taken by President Museveni to contract the German firm on grounds that the project is "urgent and a security issue."

This explains why, our sources said, procurement procedures were side-stepped and instead, Gen. Salim Saleh, the President's younger brother, took charge to ensure that the deal was sealed in good time.

Edgar Agaba, the Executive Director of the Public Procurement and Disposal of Public Assets Authority (PPDA), said that he was not privy to the matter because he is on leave. He referred The Observer to Ms. Cornelius Sabiiti, the acting Executive Director of PPDA, who told us that the matter was handled by the board of directors.

But James Kahooza, the board chairman of PPDA, told us this week that his board was kept in the dark about the project.

"The board never handled the procurement of the National ID Project; we did not. You should ask the Ministry of Internal Affairs," he said.

Asked whether this was proper, Kahooza replied that PPDA has no authority to force anybody to procure through it. Partly due to this lack of scrutiny, the German firm appears to have gotten more favourable terms, as has been the case with many agreements the government has entered with foreign suppliers in the past.


The voluminous contract, a copy of which The Observer has seen, was signed on March 19, 2010.

The Permanent Secretary, Ministry of Internal Affairs, Dr. Stephen Kagoda, signed on behalf of the Uganda Government, while Mr. Gerhard Maurer signed on behalf of Muhlbauer.

According to the contract titled simply "Agreement," the project is due to commence this month and besides production of the IDs, it will also lead to the establishment of the national security information system and the national population databank.

It is expected to be completed in June 2012, when it will be handed over to the Government of Uganda for maintenance and support. The German firm-- which has also been tasked with cleaning the national voters' register-- will by December 2010 be expected to deliver 3.5 million identification cards for unregistered voters and by the end of the project the total figure shall rise to at least 21 million cards, according to the contract.

The total cost, according to the agreement, does not include the installation of local networks and infrastructure, logistics and other services, an extra cost that shall have to be met by the taxpayer.

"Please note that Muhlbauer is willing to provide additional services and consulting to the Government of Uganda for implementation activities...these additional services and consulting have to be discussed between the two parties first and will be offered separately," reads part of the contract.

By mid last month, according to the agreement, Uganda was supposed to have paid Muhlbauer a down payment of Shs 64 billion (23 million), which is 36% of the total project cost. While this is not unusual, our sources told us that the first down payment, as per the usual international practice, should range between 10-15% of the total cost.

It is interesting but not surprising that the government has also undertaken to waive some taxes, according to the agreement.

"The user [government] shall bear and promptly pay all customs clearance costs or other indirect taxes imposed by law ...on the goods supplied under the contract," notes section 14 of the agreement.

The German firm also makes it clear that it does not want to incur any withholding tax or other local taxes in the delivery of goods and services.

"In the event that any such local taxes are applicable, the relevant amount shall be invoiced by the seller [firm] and paid by the buyer [government] additionally to the total agreed contract price," part of the agreement notes.

Under the agreement, the contractor shall provide government with written bi-weekly and monthly progress reports. The reports shall detail problems encountered or foreseen and quality assurance reports. The contractor is also expected to train local staff on how to use and maintain the system.

The system shall be maintained by the National Information Technology Authority (NITA), a statutory body currently under formation to monitor the IT sector. Government is expected to make available to the contractor information, documents and data that is relevant to the successful execution of the project.

The contract can be terminated by government if the contractor becomes bankrupt or insolvent, if the contractor violates the provisions of the contract or if the firm is found to have engaged in corrupt or fraudulent practices.

Any termination of the contract, however, means that government shall have to pay heavily, according to the agreement.

Reads part of the agreement: "In the event of termination of the contract under the GCC, the user [government] shall pay the contractor the following amounts: the contract price and other costs reasonably incurred by the contractor."

According to Muhlbauer High Tech International's website (www.muehlbauer.de), it was founded in 1981 and is a leader in innovative systems and software solutions for the production and personalisation of cards, and passports. It has branches in the United States of America, Slovakia and Malaysia.


The national identity card, which shall be of polycarbonate (plastic) material, shall have special features intended to make it forge and tamper proof. Individuals shall have to first fill forms detailing their biographical information, including their tribe, clan and village of birth.

Typically, the ID's front features shall include the national flag, a laser engraved photograph, water marks, plus information like name, date of birth, sex, card number and the holder's signature.

At the back, the card shall have a barcode to capture all the biographicaldata as well as ultraviolet ink and other features which are only visible under UV light.

Government says this security enhanced ID shall also reduce duplication or fraud on the civil service payroll, UPE registers, National Social Security Fund (NSSF), Police and Army payrolls, and harmonise identification of Ugandan citizens within the East African Community.

A similar national population databank and identification system project hit a snag in 2005 after the government cancelled the contract it had awarded to the South African firm, Face Technologies. There was also a conflict between Finance and Internal Affairs ministries over who should run the project.

The award of the contract was contested by one of the losing bidders, Contec Global, who complained that they had been unfairly treated in the evaluation of the bids. Three firms were pre-qualified out of 21. Face Technologies won the bid, followed by Contec Global and Supercom, an Israeli firm.

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