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Economy

Gilgil Barracks houses cost up 176pc on poor planning

The taxpayer will part with Sh957 million or nearly three times the original budget for construction of 144 apartments in Gilgil Barracks as a result of poor planning, audit report shows.

Auditor General Edward Ouko says the cost of the decade-old project has increased from the initial budget of Sh346 million.

Mr Ouko has detailed how the project delays by the original contractor and payment for works yet to be done combined to leave taxpayers facing a 176 per cent surge in costs.

“It is evident that there was poor financial planning that has increased the project’s original cost of Sh346.6 million to a combined cost of subsequent contracts awarded totalling Sh957.3 million,” Mr Ouko said in a qualified opinion on the Defence ministry’s financial report for the year ended June 2015.

“In this circumstance, therefore, it is not possible to confirm that the value for money would be obtained in the total expenditure of Sh957,354,059.75 as required by section 68 (1) (b) of Public Finance Management Act, 2012.”

The project for the three-bedroom units to be built in 24 blocks was awarded to Capital Construction Company at a cost of Sh346 million and started in October 2005.

Contract terminated

The works were to take 100 weeks and end in September 2007 but due to slow progress, the contractor was granted an 88 week extension.
By June 2009 when the works were supposed to be done, the units were still incomplete and the contract was terminated.

“By the time the contract was terminated, only 61 per cent of the work had been completed,” Mr Ouko said.

“However, the contractor had been paid Sh297.3 million representing 86 per cent of the contract sum of Sh346.6 indicating an apparent overpayment of Sh85.8 million.”

Among the reasons that were given for the delay included the 2008 post-election violence, a change of specifications and introduction of new taxes such as VAT on imported materials, which led to a rise in construction costs.

The contract for completion of the project was awarded to another contractor in three phases for Sh660 million. The audit report did not indicate when the tender was awarded.

A schedule shows that payment of Sh169 million for phase one was made in May 2014. Payment of Sh221 million for phase two was made in August last year while the final phase which will cost Sh270 million is in progress.

The cumulative cost means that each unit will on average cost Sh6.6 million. This is comparable to apartments sold by developers in major Kenyan cities and towns where they also factor in the cost of land and a mark-up.

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