Currency printing tender: the facts

Over the last few weeks, there has been a lot of speculation regarding the floatation of an international tender for the manufacture, design, printing and supply of new generation banknotes as well as a recent award of a one year contract to currency printing company De La Rue.

The Bank would like to provide the public a full background of the process that has led to the floatation of an international currency printing tender, hoping that, as the process ensues, any enquiries thereof, or comments, will be made from a thoroughly informed position.

From 1966 to 1986, Kenya currency banknotes were printed by Bradbury & Wilkinson of the United Kingdom.

However, in 1986, Bradbury & Wilkinson was acquired by Thomas De La Rue & Co Ltd. which took over the task.

From 1986 to-date, our currency banknotes have been printed by De La Rue. On October 8, 1991, an agreement was signed with the Central Bank appointing De La Rue as the sole and exclusive supplier of banknotes. This followed a decision by De La Rue to put up a printing factory in Kenya.

The agreement

The agreement provided, inter alia, that:

On February 20, 1996, the contract was amended to allow for price renegotiations every two years, based on world banknote prices and technological improvements in production. The amended contract provided the expiry date as January 1, 2003, and also allowed the extension of the contract prior to expiry.

On December 5, 2002, CBK signed a 10-year agreement for the printing of banknotes with De La Rue. The agreement was to be effective from January 1, 2003 to January 1, 2013, with a provision for renewal before the expiry of the 10-year contract period.

On March 14, 2003, the Government directed the Bank to terminate the 10-year contract signed on December 5, 2002, on the following grounds:

The contract became effective on January 1, 2003, when Narc Government was in power and it should, therefore, have been consulted. There was therefore no reason for the former Government to award the contract as early as they did unless there was something fishy.

The Government also directed that the procurement be through competitive bidding. Consequently, CBK cancelled the 10-year contract with De La Rue on March 17, 2003.

To ensure there was adequate supply of banknotes while the identification of a new banknote printer was going on, the Bank entered into a new contract with De La Rue from March 21, 2003 up to December 31, 2004. Some of the orders placed under this contract continue to be received.

To implement the Government's instruction for competitive bidding, the Central Bank Board of Directors asked the management to identify companies with appropriate competence that could be invited to tender for the contract.

The following 10 companies were initially identified as major world players in the commercial printing of banknotes:

Following evaluation of the 10 companies, six were invited to make presentations to the Bank on banknote features and printing.

The purpose of this presentation was to give Board members and senior management staff a broad picture of the banknote printing process and covered, among other things, the main advantages of the two materials (substrates) used in note production, that is, paper and polymer, types and different levels of security features, banknote sizes and denomination mix, as well as the advantages and disadvantages of multiple sourcing of banknotes.

The CBK Board considered the advantages and disadvantages of polymer and cotton substrate banknotes and decided that Kenya banknotes should continue to be printed on paper made from cotton substrate.

Invitation to tender

Consequently, the companies which, during their presentation, were found to be strong in production of cotton substrate banknotes, were identified for invitation to tender.

In compliance with the Exchequer and Audit (Public Procurement) Regulations 2001, authority was obtained from the Minister for Finance to allow the tender to be restricted. Following are the companies short-listed:

The tender opening date is scheduled for August 29 this year. This will be done by a special Tender Opening Committee appointed by the Governor.

Evaluation will be conducted soon after for a period of one and a half months. Should all factors remain constant, the international tender for the manufacture, design, printing and supply of new generation banknotes will be awarded by the end of October this year.

The winning bidder will be expected to deliver the first consignment of banknotes by January, 2007.

However, circulation of the new currency will commence not earlier than April 2007 to allow for building of enough stocks to circulate side by side with the old currency, until the new currency successfully rolls out.