Public Procurement Regulatory Authority (PPRA) has informed the Senate that the $587 million construction of the Mombasa–Nairobi Pipeline (Line 5) by Kenya Pipeline Company (KPC) followed procurement guidelines.
It, however, had one exception: The lack of an Annual Procurement and Asset Disposal Plan that included the project.
However, due to the absence of crucial documentation such as Contract Implementation Progress Reports, contract variations, corresponding approvals, and Inspection and Acceptance Committee reports, PPRA could not fully verify if KPC adhered to all legal requirements during contract implementation.
Patrick Wanjuki, PPRA Director General told the Senate Energy Committee, chaired by Nyeri Senator Wahome Wamatinga, that KPC signed a contract with Zakhem International Construction Limited on July 1, 2014.
KPC’s Managing Director and Zakhem’s Vice President officially signed the contract, with the tender committee awarding the bid at $484,508,886.40, VAT inclusive.
According to Wanjuki, payment records show that KPC has paid Zakhem International Construction Limited $466,731,078.49 across various dates for certificates, equipment, and retention.
Auditor General Nancy Gathungu reported that the Line 5 project, initially scheduled for completion within 18 months from July 2014, was delayed significantly, reaching completion after 54 months on June 30, 2018. The delays were attributed to changes in design specifications and omitted work from the initial contract. As a result, the contractor filed five extension claims totalling $204,511,827.11 under Clause 44 of the International Federation of Consulting Engineers conditions, although these claims were disputed by the project engineer.
Consequently, KPC appointed an expert to assess the claims and recommend a payable amount.
Further complicating matters, Gathungu informed the Senate that the Directorate of Criminal Investigations (DCI) initiated a formal investigation into possible fraud, malpractices, and attempted theft of public funds related to the contractor’s claims for Line 5 construction.
While investigations were underway, Zakhem sought legal intervention, resulting in a High Court ruling on June 16, 2020. The court determined that the project was complete, handed over to KPC, and operational. It suggested that parties engage a third party to reconcile accounts and resolve the outstanding disputes.
Kenya Pipeline Company Managing Director Joe Sang said Line 5’s significant benefits to the energy sector are big, emphasizing its environmental impact and cost-effectiveness compared to road transport.
He noted that the pipeline eliminates about 22,100 trucks from the Mombasa–Nairobi route each month, extending to Nakuru, Eldoret, and Kisumu.
Between 2019 and 2024, KPC contributed Sh45 billion in tax dividends, with Sh10.1 billion in profit before tax for 2023-2024. KPC’s dividend policy mandates a payout of 30 per cent of its post-tax profit, but it has consistently exceeded this target while meeting financial obligations and maintaining regulatory compliance.
Sang assured the committee that all court cases with Zakhem are now closed, and all debts have been settled. “We have learned hard lessons from this project,” he noted.
Turkana Senator James Lomenen raised concerns about contractors exploiting project delays and contract variations to inflate costs, often claiming interest for delayed payments and citing insecurity as an excuse to justify additional charges.
“These clauses are typically against the public interest. Contractors know how to protect themselves with such terms, but we must include clauses that safeguard public funds,” said Gathungu.
Elgeyo Marakwet Senator William Kisang expressed frustration over the inflated costs of public projects, pointing out that payments often triple the initial estimate due to contractors’ underhanded tactics and idle equipment claims.
