Taxpayers are losing billions of shillings through a rogue contracting practice said to be rife in government parastatals where companies earn more for delaying projects than when they complete them on time.
The allure of fat compensation for idling is one of the reasons projects go through costly delays borne by the taxpayer who at times take too long to gain from the developments or derive no benefit at all in the long run.
Last week, detectives from the Directorate of Criminal Investigations trained its guns on the Kenya Electricity Transmission Company (Ketraco) over land compensation irregularities, with similar delays having been flagged out by an internal audit report last year.
Ketraco is said to have paid Kalpataru Power Transmission Ltd some Sh964.5 million after the firm claimed Sh3.8 billion for idling and overheads.
The amounts were paid out after the Mombasa-Nairobi power line was delayed for four and half years.
The auditors were particularly concerned that officials of the power firm had agreed to some unrealistic claim rates in the contract that made it more lucrative for the contractor to stop working than be done with it.
“The total claim per month for idling and overhead is much higher than what the contractor would be paid in a month (labour costs) working at full potential (100 per cent) and exceeds the 0.5 per cent per week liquidated damages the employer can charge due to delays.
“The rate is therefore punitive to the employer and encourages the contractors to delay works as they would benefit more from the delays,” the auditors wrote.
Ketraco was also faulted for easily admitting the claims although they were exaggerated and required the firm’s bosses to justify why the contractor had to retain its full workforce and equipment idle for 21 months and get paid Sh108 million every month.
Such delays are said to be designed long before the contract begins with equipment mobilised on the ground even before wayleave acquisition has been completed.
Sunday Nation could not get comments from Ketraco over the compensations as the firm had not responded to queries.
The management, however, told the auditors in their response that the compensations had been budgeted for in this year’s (2018/19) budget and that they were within the contracts.
The managers insisted the contractor was advised by the firm’s managing director Fernandes Barasa to keep the equipment and staff on the ground as the wayleave dispute was being settled, resulting in the heavy compensation bill.
“The keeping of teams is based on a request by Ketraco MD as the wayleave issue was being pursued by both the management and the ministry of Energy and Petroleum,” reads the management response.
There were also allegations that the contractor incited the locals whose lands were acquired to put up the power line to disrupt the construction and trigger the plum paybacks.
In the compensation claims, the contractor demanded Sh44 million just for keeping its head office running during the 21 months that the project had stalled.
The auditors found no justification on how this cost was incurred.
Such delays were also blamed for the heightened compensation made to landowners affected by the project as they claimed appreciation, compared their deals with other people in different locations and raised land values through putting up of structures.
Others simply subdivided the plots into multiple pieces, with the Kisii-Awendo line said to have suffered heaviest from this scheme.
The land acquired for the project miraculously multiplied to 699 more parcels, driving up the cost to Sh347.4 million from Sh128.8 million earlier envisioned.
In the wayleave cartel game plan, people affected by the projects would go to court where they would get Ketraco compelled to deposit an amount of money with an appointed advocate pending final determination of the case.
It remains unclear how the same people were again paid full notwithstanding the earlier deposits.
“In a similar situation against Christopher Mbaka Oisebe & Phyllis Nyanchama Mbaka (Kisii — Awendo line), Ketraco deposited Sh1.8 million into the account of Ms Wairegi Getetua & Associates and later failed to offset the same, and instead made the full payment of Sh8.9 million agreed upon with the project Affected Persons (PAP) resulting into an overpayment of Sh1.8 million which should be recovered from the PAP or advocate.
“This recovery has been outstanding since October 2016,” the auditors noted.
A road contractor who did not wish to be quoted for fear of industry victimisation said such project delay tactics were common in huge infrastructure projects.