Who is benefiting from the millions paid for Lamu Port corridor project?

Even before any ground is broken for the proposed Lamu Port corridor, the project is turning out to be yet another scheme to bilk taxpayers billions of shillings in over-priced feasibility studies and inflated salaries.

And although the government made Japan Port Consultants renegotiate the price of their consultancy in March, Kenya is still obliged to pay a whopping Sh1.98 billion for a nine-month job, most of it involving desk studies.

According to documents seen by the Sunday Nation, in a project analysis last year the Treasury concluded that the service to be provided by the contractors was worth only Sh587 million.

In fact, the feasibility study on the projected Lamu Port corridor — that is said to include a second port on Lamu island, an airport, a railway link to Ethiopia, an oil pipeline to Sudan and resort cities — is turning out to be the most expensive ever carried out in Kenya.

According to the documents, the country was about to pay a much higher price had the Treasury not balked and Transport minister Amos Kimunya not questioned the price tag.

According to the proposed personnel cost schedule, drivers, a site secretary, clerk, typists and other unnamed staff were to receive a total of Sh300,000 a week, or Sh1.2 million a month, while a janitor and guards would together earn Sh1 million a month.

The list of professionals and experts to be contracted was also padded to create more staff than required for a nine-month exercise.

In a May 13, 2009 agreement signed by Transport Permanent Secretary Cyrus Njiru and Tatsuo Wako, the president of Japan Port Consultants, Kenya committed to pay a whopping Sh3.04 billion for the study.

And even though JPC agreed to negotiate the price downwards by 35 per cent, that has only fueled suspicions that the project had been deliberately padded to allow the Japanese firm and their local partners and agents to earn billions of shillings in economic rent.

Even more puzzling is the fact that JPC readily agreed to grant the government a major discount without demanding that the scope of the project be scaled down.

When contacted by the Sunday Nation, Dr Njiru defended the costing, saying the price was a reflection of the complexity of the assignment and the fact that it involved multiple projects.

He said all the issues raised earlier about the manner in which the project had been procured had been addressed.

He said the project involved much more than desk studies since surveys had to be carried out over the long distance between Lamu and Lokichoggio in Turkana district, the path that an oil pipeline would ostensibly follow.

In addition, he said, the consultant was to produce detailed designs for three shipping berths in Manda Bay on Manda island. The entire grandly conceived corridor project is expected to cost Sh22 billion.

Handsome profit

Perhaps the most telling sign that the project was grossly over-priced is the fact that even with the 35 per cent discount the Japanese firm is still calculating that it will be able to make a handsome profit and at the same time pay sub-contractors engaged earlier at prices negotiated long before JPC would be forced to lower the price.

Kohei Nagai, the Nairobi-based representative of Japan Port Consultants, declined to comment, citing confidentiality. The JPC website www.jportc.co.jp, make no mention of the Lamu Port corridor feasibility study contract.

A set of questions from the Sunday Nation elicited a letter from their lawyer threatening legal action if this newspaper publishes a story that portrays their client in bad light.