How crooked officials and contractors fleece state of billions

Jomo Kenyatta International Airport in Nairobi. The Green Field terminal was terminated in 2016 demanded Sh22 billion with all indications that it will be paid. FILE PHOTO | NMG

What you need to know:

  • A look at a dozen government projects flagged for various irregularities in the recent past show a trend where contracts are skilfully planned and designed with the sole intention of siphoning millions from the taxpayer without any plan to implement the high-capital projects.

  • The schemes, once drawn, are pushed through, regardless of opposition or lack of approvals sometimes prompting political operatives to intervene.

  • The construction contracts, which are sometimes terminated midway, also spark legal battles that further drain funds in the corrupt schemes.

Water Cabinet Secretary Simon Chelugui’s revelations that Kenya stands to lose Sh11 billion should the broke Italian firm at the centre of the Arror and Kimwarer dams scandal be kicked out of the deal came as a shocker.

That the Itare dam is stalled, the firm is broke and unresponsive to communications from the state officials yet terminating the contract is still a loss is the anatomy of major scandals in Kenya.

HEAVY IDLING

Top on the list of these crafty schemes is to have the firms engage in the Engineering, Procurement, Construction and Finance (EPCF) contract model where they get funding, design the work, procure all major materials and equipment and double up as the general contractor.

Tweak the contract a bit then prescribe some advance payments including insurance and sometimes mobilise financing from the government after which a little movement is made on the ground before works stop.

The construction contracts, which are sometimes terminated midway, also spark legal battles that further drain funds in the corrupt schemes.

From contract terminations to sweet variation clauses and heavy idling compensations when works stop, the lopsided contracts work well in favour of the contractors in cahoots with state officials who pocket millions in kickbacks.

A look at a dozen government projects flagged for various irregularities in the recent past show a trend where contracts are skilfully planned and designed with the sole intention of siphoning millions from the taxpayer without any plan to implement the high-capital projects.

The schemes, once drawn, are pushed through, regardless of opposition or lack of approvals sometimes prompting political operatives to intervene.

Only last month, the Chinese contractor whose deal to build the Jomo Kenyatta International Airport Green Field terminal was terminated in 2016 demanded Sh22 billion with all indications that it will be paid.

SUSPEND WORKS

Trouble started after the Kenya Airports Authority awarded the Sh64 billion contract to the contractor, CATIC, in December 2011, a month after the Office of the Prime Minister wrote to freeze the process and seek cabinet approval. Tussles followed with dissenting opinions with the Public Procurement Review Board and the PM's office on one side pushing for the tender termination and the management and the attorney general's office on other side pushing in the opposite direction.

After months of power plays, the Chinese company got a relief through the board’s ruling that directed KAA to sign the contract within 28 days, forcing the Cabinet to again approve the project on September 13, 2012. The contract was signed two days later. KAA's corporation secretary Joy Nyaga refused to sign protesting review of contract with the exclusion of her department.

CATIC then moved to site without even securing a financing agreement which was a condition in the tendering, gobbling the Sh4.2 billion from KAA's coffers to excavate the site and prepare for the start the project. The consultant had also pocketed Sh210 million.

Everything stalled thereafter and the contractor gave notice in March 2016 to suspend works. The two years idling would be a pain for the taxpayer to bear. Before the month ended, KAA board again decided to terminate the contract. Months later, CATIC was yet to vacate the construction site forcing KAA to issue a seven days’ ultimatum to the contractor.

To cap the taxpayers' pain in the project that never was, there will be interest demands on the Sh22 billion the contractor expects to earn without building the terminal and KAA engaged a consultancy law firm to advise it on the conflict where another Sh90 million has already been spent.

PUNITIVE MEASURES

Similar idling clauses were flagged when the Kenya Electricity Transmission Company (KETRACO) constructed the Mombasa-Nairobi power lines. The firm signed an overly generous contract that paid the contractor more when works stopped than when the project was ongoing.

The clauses flagged by an internal audit even proposed punitive measures to be taken against officials involved in overseeing such loopholes that also led to loss of millions.

The contractor, Kalpataru Power Transmission Ltd, had submitted claims amounting to Sh3.8 billion out of which almost Sh1 billion had been paid when the auditors found the idling and overheads claim for the project that had overrun by 54 months extremely generous.

The audit also found that some official of the contractor and KETRACO were involved in causing the delays to beef up the claims. During the stoppage, the contractor comfortably kept the full workforce and equipment idle for 21 months earning Sh108 million per month.

In the Loyangalani -Suswa line, Spanish firm ISOLUX Ltd delayed the project for months before filing for bankruptcy. The result was a Sh5.7 billion bill paid to the Lake Turkana Wind Power project for delaying to evacuate the energy for the entire period of delay.

At Kenya Pipeline, the upgrade the old 16-inch pipe from Mombasa to Nairobi was thwarted even after some Sh4 billion had been spent to buy pumps to boost flow rate on the old line.