Kenya risks Sh22b loss in Chinese airport deal : The Standard


Aviation, Airport, JKIA Artistic impression of the greenfield terminal

Poor planning by Government officials may cost the taxpayer billions of shillings in yet another deal gone bad involving a Chinese contractor.

Fresh details have emerged on how infighting and mistrust among Government officials led the country to commit to a hurriedly crafted deal, with Kenya getting the short end of the stick.
Sunday Standard can now reveal how a series of blunders led to the collapse of the botched construction of the Greenfield Terminal at the Jomo Kenyatta International Airport (JKIA), leaving the country exposed to possibility of paying a Chinese contractor Sh22 billion for no work done.
Documents tabled before a parliamentary watchdog committee this week gives a glimpse into a project conceived under great suspicion and grandstanding that characterised the grand-coalition government of former President Mwai Kibaki and former Prime Minister Raila Odinga.

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The documents show that the half-baked project, whose financing was highly questioned by Raila’s office, was pushed by Kibaki henchmen and forced down the throats of the Kenya Airways Authority (KAA) board that had also expressed reservations.
And when the Jubilee administration took over in 2013, President Uhuru Kenyatta was roped in and even presided over a ground-breaking ceremony where KAA books of account, copies of which are in our posession, show that in excess of Sh75 million was spent.
The figure is currently an audit query before the committee.
A look at a flurry of letters exchanged between competing interests in the grand coalition government, memos and minutes of meetings that preceded the signing of the contract between KAA and China’s An Hui Construction Engineering Group Limited reveal a project that from the start failed to inspire confidence even among those in Cabinet.
The Public Investment Committee of the National Assembly chaired by Mvita MP Abdullswamad Nassir now says the inception of the project could have been a conspiracy to swindle the public.
Documents in the hands of PIC show that from inception, the KAA board — then chaired by Embu Governor Martin Wambora — had opposed the process of picking the Chinese company that was to do a joint venture with China Aero-Technology International Engineering Corporation (CATIC).
Consequently, after a special board meeting held on July 26, 2012 the board directed the then acting Managing Director Stephen Gichuki to immediately communicate to the Chinese companies of their decision to annul the procurement process for the contract.
Flawed process
Wambora, backed by Corporate Secretary Joy Nyaga and a majority of board members, were of the opinion that the process of picking contractors was flawed and required strict adherence to procurement laws.

President Uhuru Kenyatta unveils a commemorative plaque at JKIA Greenfield terminal. Looking on his wife Margaret (right), former Prime Minister Raila Odinga (second right),Najib Balala [Courtesy ]

Gichuki is seen as opposed to the cancellation, saying they first needed to seek a legal opinion from the Attorney General, given that a notification had been made to the successful bidders and an acceptance of the award had been done.
But only a day after this meeting, then acting Head of Public Service and Secretary to the Cabinet Francis Kimemia did a “secret” letter to Attorney General Githu Muigai castigating the board for their directions, terming it disrespectful to the Cabinet, which was already seized of the matter.
“In my opinion, it is in bad taste and disrespectful to Cabinet to attempt to compel the managing director to undertake such action behind a Cabinet committee and the Cabinet itself,” Kimemia stated in his terse letter.
By this time, Raila’s office — through PS Mohamed Isahakia –had also protested that one part of the government (read Kibaki’s wing) was pushing through the Greenfield Terminal deal before it had been approved at the Cabinet.
As early as November 14, 2011 Raila had complained about the manner the Transport ministry was rushing to implement the project. In a letter marked “very urgent”, Dr Isahakia wrote to Transport PS Dr Cyrus Njiru asking that the procurement process be immediately stopped until it received a Cabinet approval “to protect public interest”.
“It is the view of this office that the ongoing procurement process may not achieve the desired results without going through a Cabinet approval as required under the new Constitution,” stated Isahakia to Njiru in a letter that was copied to then Head of Public Service and Secretary to Cabinet Francis Muthaura, Finance PS Joseph Kinyua and Gichuki.
Through Isahakia, Raila sought the intervention of Prof Muigai for the halting of the project implementation, since even the Ethics and Anti-Corruption Commission (EACC) had been invited to probe the procurement process.
But on April 16, 2012 Muigai wrote back to Isahakia, saying the project should be implemented just as it had been tendered.
“In view of the fact that the investigations conducted by the EACC did not disclose any irregularity in the instant procurement process so as to warrant a delay in implementing the project, we are of the opinion that the project should be implemented as tendered,” Muigai responded.
Earlier that year on February 22, he had — through a legal opinion requested by Gichuki — warned KAA against terminating the procurement process, arguing that the authority had already bound themselves by notifying the contractors of the award and the companies giving their acceptance.
“By seeking to terminate the procurement process, the authority will not only be contravening the provisions of Requests for Proposals, but will also be acting in bad fait,h thereby undermining the integrity and fairness of the procurement process,” argued the AG.
On April 16, 2012 following another protest letter from Isahakia, Githu defended the implementation of the project.
“Such termination will prompt the successful bidder to enforce its rights under the contract in the form of claims for damages and specific performance,” he said, dashing the last attempt by Raila and his office to stop the project.
But realities of the rush with which the contract was signed came to fore on May 7, 2014 when the KAA board noted some “inconsistencies” on the contract as the element of a 16 per cent Value Added Tax had been “sneaked” in to be borne by them, a move that would have raised the contractual figure by an extra Sh10 billion.
KAA argues that this was inconsistent with the clause in their tender documents that had placed the contractual figure as inclusive of the VAT.
It was then that KAA went into dispute with the contractor, accusing the Chinese company of changing the elements of the contract mid-way, thus pushing to invalidate the contract.
Plea for refund
But their position appears to have come after the contractor wrote to KAA on March 3, 2016 demanding Sh4.4 billion as payments for work already done.
In their letter to then acting KAA Managing Director Yatich Kangogo, the contractor said the work they had done amounted to Sh8.7 billion, yet they had only been paid Sh4.3 billion in advance. It demanded the balance.
The KAA board, then chaired by David Kimaiyo, had by now called for due diligence on the contract, and on March 28 resolved to invalidate the contract “for public good” on account of inconsistencies in the contract and tender documents.
In his letter to the contractor, Kangogo under the instruction of the board, said the inconsistencies noted were beyond what was permissible under the procurement laws and thus declared the contract as void, to be treated as being invalid from the onset.
This decision, notably also backed by Muigai in his opinion, has now placed KAA at loggerheads with the Chinese companies, who have meanwhile demanded Sh17.5 billion in claims, up and above the Sh 4.4 billion they had demanded for works done.
On the other hand, current KAA Managing Director has demanded a refund of the Sh4.3 billion paid as advance payment to the contractor, riding on the strength of the opinion from the Auditor General that the contract had been invalidated.

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Chinese contractorJKIAKenya Airways AuthorityCorruptionGreenfield Terminal


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