Economy

Airport buses dealer seeks Sh934m after Uhuru order

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Terminal 1A at Jomo Kenyatta International Airport. FILE PHOTO | NMG

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Summary

  • The company said it spent Sh250 million to buy the five apron buses and paid Sh45 million in taxes to the Kenya Revenue Authority.

  • For eight years, Relief & Mission Logistics was to earn Sh1 billion in fees.

  • The sole arbitrator, Allen Gichuhi, awarded the compensation to the firm on grounds that the KAA failed to show how public interest prompted the cancellation of the bus deal.

A company that procured the controversial airport passenger buses has now slapped the Kenya Airports Authority (KAA) with a higher Sh934 million claim for unpaid fees and damages, records show.

Relief and Mission Logistics won an arbitration award for concession fees and damages after the KAA terminated its eight-year contract in 2015.

The company had only operated for seven months when the KAA terminated its Sh13.18million ($120,000) a month contract after President Uhuru Kenyatta demanded a probe into the purchase of the five buses.

The President questioned how the KAA could pay Sh11 million every month for five buses.

While terminating the contract, the State agency said the cancellation was of necessity, convenience, and in the public interest, prompting a legal dispute.

Directors of Relief and Mission Logistics told a parliamentary inquiry that they had not received a penny despite investing Sh300 million in the project.

The company said it spent Sh250 million to buy the five apron buses and paid Sh45 million in taxes to the Kenya Revenue Authority. For eight years, Relief & Mission Logistics was to earn Sh1 billion in fees.

The sole arbitrator, Allen Gichuhi, awarded the compensation to the firm on grounds that the KAA failed to show how public interest prompted the cancellation of the bus deal.

The arbitrator awarded the company $74,400 (Sh8.1 million), $72,000 (Sh7.8 million) and $284,800 (Sh31 million) as well as interest thereon at three percent per year until payment is made in full for December 2014, January 2015 and May 2015 respectively.

The firm also won $4,309,474 (Sh469.7 million) being loss of earnings and profits in the event of a rise in the number of buses performing the concession agreement to seven for the eight-year term together with interest at the prevailing commercial rates until payment in full, in the alternative.

The arbitrator also awarded the apron buses firm $3,830,550 (Sh417.5 million) being a loss of earnings and profits in the event the number of buses performing the concession agreement remained at five over the eight-year term together with interest at the prevailing commercial rates until payment is paid in full.

Alex Gitari, the KAA managing director, told the National Assembly’s Public Investment Committee (PIC) that the agency had appealed the arbitration award in court.

He said the KAA had moved to the High Court after the Attorney-General advised that it has a high chance of setting aside the award on compound interest.

Solicitor-General Kennedy Ogeto in an advisory urged the KAA management to challenge the arbitrator’s decision to award Relief and Mission Logistics compounded interest, claiming it violated public interest.

“In view of the foregoing, we advise the KAA to file an application in the High Court to challenge the award of compound interest and to seek setting aside of the same as advised above. That application should be filed urgently considering the Arbitration Act provides a timeline of three months from the date the award is released to the parties,” Mr Ogeto said in the advisory dated May 3, 2021.

The company beat 16 other companies for the passenger bus services at JKIA.

In the deal, the KAA was meant to recover the cost of operating the buses from the 48 airlines operating at Kenya’s main airport.

Notes prepared by an internal auditor in the wake of President Kenyatta raising concerns showed that the cost charged by the bidder was to be recovered from the airlines since the apron buses service was not meant to be free.