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The controversy over Kenya’s second railway tender is expected to escalate following fresh revelations that the State Law Office had raised a stink over what it terms exaggerated construction costs.
The red flag, according to documents seen by The Standard on Saturday, was raised long before the construction was commissioned by President Uhuru Kenyatta in November last year.
The new revelations may come as a slap
in the face of the President and his deputy, William Ruto, who during their recent tour of Rift Valley berated Nandi Hills MP Alfred Keter for allegedly raising the issue at the behest of opponents of the Jubilee.
In a comparative analysis of the cost of the railways Kenya and Ethiopia are building, the Attorney General Githu Muigai raised serious integrity questions about how the total cost rose from the initial Sh220, 921,502, 221.08 quoted by China Road and Bridge Corporation in its acceptance of the tender award letter dated July 2012 to the current Sh1.3 trillion.
The variations are shaping the railway project into the country’s biggest financial scandal, beating the Goldenberg, Anglo-leasing and Triton frauds.
The tendering concerns are informed by a comparative analysis of the railway projects being undertaken by Kenya and Ethiopia. While the Kenyan one is of inferior technology and covering half the distance Ethiopia is constructing, it was expected to cost the government $3.804 billion (Sh334.8 billion) compared with $3.9 billion (Sh343.2 billion) used by Ethiopia.
The documents further show the locomotives and rolling stocks that include 56 diesel locomotives, 1,620 freight wagons, 40 passenger coaches and one simulator would have cost $1.147 billion (Sh100.936 billion).
The Ethiopian locomotives and rolling stocks consisting 35 electric locomotives, six diesel shunting locomotives, 1,100 freight wagons, 30 passenger coaches and one simulator will cost $230 million (Sh20.24 billion). Construction of the 485km Kenyan railway will require $2.657 billion (Sh233.816 billion) compared with Ethiopia’s budget of $3.67 billion (Sh322.96 billion) to build 756km from Addis Ababa to Djibouti port on the Red Sea coast.
The review upwards of the railway budget elicited questions from managing director of the Public Procurement Oversight Authority MJO Juma, who since March this year has unsuccessfully sought answers from the ministry over the discrepancies in the tender and raised the matter of the variations in tendering with the AG.
The railway project scandal is a continuation of a “tradition” that began in 1992 which demonstrates that every time a new regime ascends to power its first mega financial undertaking is a rip-off of the Exchequer.
In a letter dated March 7, 2013, Mr Juma wrote: “We have not had sight of the resultant contract signed between Kenya Railways and M/s China Road and Bridge Corporation following the negotiations of the grant between the two governments. In the absence of the contract, we are unable to discern the negotiations and contractual terms agreed between yourselves and the contractor to enable us to determine the applicability of or otherwise of not only Section 6 (1) of the (Public Procurement and Disposal) Act.”
In his reply, Prof Muigai termed the process as inconsistent with the law.
“I must record that it is worrying that a procuring entity can pick and choose to alternate procurement methodologies as alleged over the same subject matter and both of which alternatives require external endorsement because neither alternatives admits open competition,” he says.
The chief government legal advisor goes on to debunk the explanation given by Transport Secretary Michael Kamau that deal was government-to-government agreement. He argues that the idea should have been sealed through a treaty.
“Are G-to-G a method of procurement or would such agreements merely form the basis of future traditional procurement under various areas of cooperation documented under the G-to-G? More worrying is the increasing phenomenon of government agreements employing G-to-G tool to circumvent the requirements of the…(law),” he explains.
Annulled and varied
It is against this backdrop the State Law Office has done a comparative analysis of the Kenya and Ethiopian railway projects.
The two have argued that tendering process was irregular, although in documents seen by The Standard on Saturday, the former Kenya Railways Corporation Managing director Nduva Muli explained the variation of the procurement procedures as informed by the fact the project is government-to-government deal.
In his response to a request for advice sought by the PPOA boss, Prof Muigai describes as irregular the G-to-G procurement process, saying it was not a treaty between the Government of Kenya and China.
In a letter acknowledgement of the contract award, China Road and Bridge Corporation (Kenya) General Manager Li Qiang, says: “We hereby give a formal unconditional acceptance of the award of the project…exclusive of all taxes, duties and other levies such as value added tax, customs duties withholding tax, etc.” the letter puts the total cost of the railway project at Sh220 billion.
According to the November edition of Fortune magazine, the Ethiopian project was to cost $2 billion (Sh176 billion) to link Djibouti to the Ethiopian capital, which includes additional works.
Despite the questions being raised in Parliament how the figure jumped from Sh220 to Sh334.8 billion then Sh1.3 trillion, the Jubilee government maintains the deal was above board.
The initial contract was annulled and later varied by former Transport Minister Chirau Ali Mwakwere. Mwakwere, following investigations by Inspectorate of State Corporations is remembered for similarly varying a tender for supply of two ferries for which the state paid Sh1.2 billion instead the initial Sh800 million.
The project was given the nod despite Prof Muigai and Mr Juma’s, queries about the mode of tendering, which they adjudged as irregular as it failed to meet laid down regulations.
In their correspondence with managing director of Kenya Railways Corporation Nduva Muli (who incidentally is Transport principal secretary), Prof Muigai and Mr Juma query how and when the cost of the railway was varied from the initial Sh220 billion.
The same queries were raised by Mr Ruto, despite attending the ground-breaking ceremony of the project expected to conclude in 2017.
The latest queries come on the back damning accusations and counter-accusations of corruption between Jubilee coalition partners over the tender.
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