Economy

Defence Ministry on spot as decades Sh73mn bill balloons to Sh1.4bn

OPIYO

PAC chair Opiyo Wandayi. FILE PHOTO | NMG

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Summary

  • The bill, which has remained unpaid for the past 30 years, arose from failure by the Department of Defence (DoD) to pay Kay Construction Limited Sh73 million for works completed in 1990s.
  • DoD hired the firm to pave and renovate 4.48 kilometres of Laikipia Air Base runway that is used by the Kenya Air force jet fighters at a contract sum of Sh229 million.

The Ministry of Defence is on the spot over delay in settling a bill that has increased 20 times to Sh1.4 billion.

The bill, which has remained unpaid for the past 30 years, arose from failure by the Department of Defence (DoD) to pay Kay Construction Limited Sh73 million for works completed in 1990s.

DoD hired the firm to pave and renovate 4.48 kilometres of Laikipia Air Base runway that is used by the Kenya Air force jet fighters at a contract sum of Sh229 million.

DoD told the National Assembly’s Public Accounts Committee (PAC) that the contractor concluded the works in 1994 and handed over to the department. At the time of handover, DoD owed the contractor a balance of Sh73 million.

“In 1998, issues arose about payment. The matter went to arbitration and is now back in court. The amount has risen to Sh1.4 billion on account of accrued interest,” Ibrahim Mohamed, the Defence Principal Secretary told PAC headed by Mr Opiyo Wandayi yesterday.

Auditor-General Nancy Gathungu flagged the bill in an audit of the department’s books of accounts for the year to June 2019.

She said the firm went to court in February 2005 and submitted a claim of Sh1.06 billion to the ministry.

The claim included Sh73 million as principal amount and Sh992.3 million in accrued interest.

The bill was forwarded to a committee at the Treasury that was veryfying pending bills where it emerged that the contractor owed the government Sh18 million while the State owed the firm Sh364.6 million.

Garissa Township MP Aden Duale demanded to know how the contractor was paid Sh350 in 2020 if there is no settlement agreement capping the payments.

Dr Mohamed said the payments to Kay Construction were based on historical negotiations that had capped the amount at Sh700 million.

“We asked the Treasury to pay but they didn’t avail the money hence accrued interest amount of Sh1.4 billion,” he said.

Mr Wandayi put DoD officers who accompanied the PS to task to explain why the Sh73 million was never settled. “What was the original cost of this project and how did it evolve to Sh1.4 billion? Mr Wandayi asked.