Geothermal agency slapped with Sh1bn claim over rigs deal

What you need to know:

The GDC signed a contract with Bonfide Clearing and Forwarding Limited in 2012 to move geothermal rigs and other equipment in 40 lots.
Mr Ouko said the contractor had threatened GDC with litigation following its decision to stop the contract when the Ethics and Anti-Corruption Commission (EACC) launched investigations into its procurement.
GDC’s woes appear to be compounded further by the corporation’s failure to remit taxes amounting to Sh1.7 billion to the taxman in the year to June 2016.

A contractor who was hired to move drilling rigs for the Geothermal Development Corporation (GDC) has slapped the State-owned agency with a Sh1 billion claim following cancellation of the contract.

Auditor-General Edward Ouko’s latest report indicates that the contractor, Bonfide Clearing and Forwarding Limited, is demanding Sh13.4 million for works done and a further Sh1,025.904,000 for loss of revenue on the remaining movement of 24 rigs — which the GDC management has disputed.

The GDC signed a contract with Bonfide Clearing and Forwarding Limited in 2012 to move geothermal rigs and other equipment in 40 lots, with each costing Sh42 million within a distance of 11 kilometres — bringing the worth of the entire deal to Sh1.7 billion.

Mr Ouko said the contractor had threatened GDC with litigation following its decision to stop the contract when the Ethics and Anti-Corruption Commission (EACC) launched investigations into its procurement.

The EACC probe resulted in the dismissal of seven top GDC bosses including managing director Silas Simuyu. EACC sued the former officials over the issue.

“At the time of concluding this audit, GDC issued notice to terminate the contract pursuant to contractual provisions Clause 19 vide letter dated September 13, 2016. Upon receipt of the termination notice, the contractor issued an invoice for Sh13,350,000 and a claim for Sh1,025,904,000 on account of loss of revenue on the remaining 24 rig moves for which management has disputed,” Mr Ouko said in an audit tabled in the National Assembly last evening.

He said pursuant to the dispute resolution mechanism in the contract, the GDC management convened a meeting with the contractor aimed at reaching an amicable solution.

The auditor said he was unable to ascertain the extent of the liability that may arise from the contractor’s claim on termination of the contract.

GDC’s woes appear to be compounded further by the corporation’s failure to remit taxes amounting to Sh1.7 billion to the taxman in the year to June 2016 leading to punitive penalties.

Mr Ouko said failure by GDC to remit corporate income tax to the Kenya Revenue Authority (KRA) had led to a Sh405.6 million charge in penalties.

“GDC being a State corporation is required to comply with tax laws and other related regulations. Amongst others, it should remit taxes to KRA as per the prescribed due dates,” Mr Ouko said while drawing the GDC management to significant matters arising from the audit for the year to June 2016.

The auditor said GDC’s books of accounts reflect tax liabilities amounting to 1,656,555,000 as at June 2016. Mr Ouko said the corporation had a tax liability of Sh724,236,000 in the year to June 2015.

He said the amount of Sh1.7 billion includes a balance of Sh1.4 billion on account of unpaid corporate income tax for the year to June 2015.