Auditor questions variation of JKIA contract by Sh3bn

Kenya Airports Authority (KAA) is on the spot for varying the construction of a new terminal at the Jomo Kenyatta International Airport in Nairobi by Sh3 billion in cost changes that went beyond the limit allowed by law.

The authority spent Sh7.22 billion on the building of terminal 1 (previously terminal 4), parking garage and other works for contract that had been set at Sh4.147 billion, a 74 per cent variation.

This is in breach of the public procurement laws that allow for contracts involving State agencies to be varied by a maximum of 25 per cent.

The Public Investment Committee (PIC) has started investigations on the JKIA constructions as the Auditor General warned that there is no evidence to show that the authority’s tender committee approved the contract variation.

The new Terminal 1 is an extension of the existing airport and is expected to handle 2.5 million passengers that will ease congestion at the East Africa’s main air travel hub.

“No evidence show that the extension of contract period and variation of the contract sum were approved by the tender committee of the authority was availed for audit review,” Auditor-General Edward Ouko told Parliament last week.

“The original contract sum was revised from Sh4.147 billion to Sh6.197 billion and latter to Sh7.223 billion resulting in a variation of Sh3.075 billion representing 74 per cent of the original contract sum.”

The Auditor-General has expressed a qualified opinion on KAAs financial statements for the year to June 2013, an auditing term that means that there were information gaps in the authority’s financial statements.

Adan Keynan, the PIC chairman took KAA managing director Lucy Mbugua, general manager Philemon Chemwada and acting corporation’s secretary Victor Arika to task over the huge variations.

“The law is very clear on variations of contracts. The Public Procurement and Disposal Act 2005 clearly stipulate that a contract can be varied to a maximum of 15 per cent. Under what law did you rely on to vary the contract sum by 74 per cent?” he asked.

Treasury secretary Henry Rotich amended the regulations and raised the maximum limit for contract variation from 15 per cent to 25 per cent of the original contract value.

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The MPs rejected explanations by Ms Mbugua that the World Bank, which funded the project, did not object to the variations.

“The variation does not contravene World Bank guidelines which have no limit to the extent of variation,” said Ms Mbugua.

“The variation has come about as result of changes in the project scope in constructing the terminal from domestic to international terminal.”

The authority reckoned that the variation was the product of a rise in commodity prices, which led to an increase of Sh670 million, time extension (Sh239.16 million) and Sh1.49 billion for conversion of the terminal to an international unit.

“The total changes awaiting approval for variations is Sh2.4 billion covering the above…which were submitted to WB in October 2013 and no objection of the bank was awaited before submission to tender committee for approval,” she said. The no objection was granted on May 30, 2014.

PIC directed Ms Mbugua to provide the committee with bid documents, tender evaluation reports, contract variation, loan agreements as well as World Bank and tender committee approvals tomorrow (Tuesday).

The new terminal will be fully operational before December. The JKIA was built in the 1970s to handle 2.5 million passengers annually and has been struggling to handle more than six million people a year as its regional importance grew.