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Why Tracking Contract Uganda Signed with Russian Company Could be Challenged

Samantha Mwesigye, a procurement lawyer and lecturer at Law Development Center, Makerere says the Public Procurement and Disposal of Public Assets Authority regulations don’t allow Procuring and Disposal Entities (PDEs) to enter contracts with bank, companies or those facing bankruptcy.
26 Jul 2021 16:55
Officials of the Russian company during contract signing on Friday last week


The 10-year contract government of Uganda signed with Russian company Joint Stock Company Global Security to install digital monitoring systems in all motorcycles and vehicles in Uganda could be challenged as the company is facing bankruptcy litigation in Moscow. 

Samantha Mwesigye, a procurement lawyer and lecturer at Law Development Center, Makerere says the Public Procurement and Disposal of Public Assets Authority regulations don’t allow Procuring and Disposal Entities -PDEs to enter contracts with bank, companies or those facing bankruptcy. 

“PPDA standard bidding document indicate that the parties to a contract should not be bankrupt (technical requirements),” she says. “This however is purely a contractual issue and a company facing bankruptcy does not have the capacity to do business.” 

This is what the PPDA standard bidding document says:  “PDEs require all bidders participating in public procurement or disposal to meet the qualification criteria set out in the bidding documents, which in all cases shall include the following basic qualifications: that the bidder has the legal capacity to enter into the contract; that the bidder is not: (1) insolvent; in receivership; bankrupt; or being wound up,” Public Procurement and Disposal of Public Assets Authority guidelines for participation in procurement process reads. 

The guidelines further say “that the bidder’s business activities have not been suspended; that the bidder is not the subject of legal proceedings for any of the circumstances mentioned in bullet point two, above; and that the bidder has fulfilled his or her obligations to pay taxes and social security contributions.” 

Joint Stock Company Global Security which was awarded a 10-year contract on Friday last week is facing bankruptcy litigations in Russia and more than a dozen other debt related limitations. These cases were filed between 2019 and July 2021 in Russia according to data URN obtained from Honest Business website, which curates information about businesses and companies in Russia.

Joint Stock Company Global Security was sued by LLC “Rus Prom-Technologies” another Russian company that wants it declared bankrupt. The case was filed in the Arbitration Court of the City of Moscow on September 17th 2020 and accepted on October 20th 2020.  

Though the case was accepted for hearing, the hearing sessions have been postponed several times as Global Security fights to pay the debt it owes Rus-Prom-Technology.

In another case filed in March 2019, Rus-Prom-Technology had sued Global Security for failure to pay 16.6 million rubles (Russia currency) - about $220,000, Rus-Prom-Technology won the case.  Global Security is facing other debt litigations in Russia. Stok-Trading LLC sued it for a debt of 1.2 million rubles which is about $16,260; Jsc Royal Silk Factory sued the company for a debt of 19.9 million rubles ($270,000); Turday GS sro Slovak Republic sued the company for a debt of 6.1 million rubles ($82,655); JSC ZVI sued the company thrice - first for a debt of 23 million rubles (about $300,000) then a debt of 10 million rubles (about $135,500) and 4.6 million rubles (about $62,330). 

Global Security has also been sued by Limited Liability Partnership "Orken Alem" for a debt of 8.5 million rubles (about $ 115,175) and Gu Main Department of the Pension Fund of the Russian Federation for failure to pay 10,000 rubles (about $135) and 455,00 rubles (about $600). All these cases were filed between 2019 and July 2021. 

Another crucial factor that determines the procurement method used when negotiating a contract, Samantha says, is the contract sum. However, the government did not say the sum involved in the contract. Security Minister Jim Muhwezi during contract signing said its vehicle and motorcycle owners will pay for tracking devices installed in their cars or motorcycles.

The contract raises questions such as whether the government of Uganda did adequate due diligence before engaging Global Security and whether the company has capacity to deliver. 

Though Ministry of Works permanent secretary Bageya Waiswa told URN that information about the company facing bankruptcy litigation in Russia is news to him, he said due diligence was done. “We don’t just sign a contract with somebody we have not checked," Waiswa said. "But if there is a new development, you can’t rule it out.”

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