KPC on the spot over Sh18 billion compensation claim

The Kenya Pipeline Company (KPC) is on the spot for awarding a company that provided advice on the Mombasa-Nairobi oil pipeline a tender to evaluate compensation claims by a Lebanese firm that is seeking Sh18 billion ($189,290,731) for delayed works.

A special audit report shows that the KPC picked Nyara Consult, a company that had earlier been providing professional services on the Sh48 billion oil pipeline project, to review the claims as an expert scheduler.

Nyara Consult assessed that the amount payable to Zakhem International Construction Limited for the extension of time (EOT) to be Sh4.4 billion ($44,019,024), down from Sh18.9 billion.

“At the time of Request for Proposals (ERP), Nyara Consult had a few months earlier been providing professional services to KPC, on Line 1 pipeline replacement project, in relation to professional opinion on interpretation and application of bills of quantity work descriptions and rates in excavation and earthworks.

“Question is, is it that right from the onset, it was determined that this consultant would be awarded the contract?" Auditor-General Edward Ouko says in a special audit on the Mombasa-Nairobi pipeline (Line 5) that was sanctioned by the Public Investments Committee (PIC).

Mr Ouko says there was no negotiation with Nyara Consult with the aim of reducing the contract price. Nyara Consult quoted Sh30,998,981 and was awarded the contract at the same price. Mr Ouko said the KPC used restricted tendering to source for the expert scheduler.

“According to KPC management, participants were sought and obtained from the Chartered Institute of Arbitrators. However, no evidence in the form of a letter by management making the request and response by the Institute providing the list of registered arbitrators was provided,” he says.

Further, Mr Ouko says although the management indicated that the list of 12 arbitrators was obtained from the Institute’s website, no such list has been on the website.

He also questions the time provided for bidders to submit proposals. “Time within which proposals were to be submitted was unreasonably short and some of the prospective bidders requested for extension of time but their request was not granted,” he says.

Out of the 12 FRPs issued, only three responded out of which one was non-responsive and the other was evaluated as having no technical competence leaving only one bidder to proceed to financial evaluation.