Economy

How Uhuru bus order cost KAA Sh158m

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President Uhuru Kenyatta. FILE PHOTO | NMG

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Summary

  • The sole arbitrator, Mr Allen Gichuhi, awarded the compensation to Relief & Mission Logistics on grounds that the KAA failed to show how public interest prompted the cancellation of the bus deal.
  • Relief & Mission Logistics won the contract to ferry passengers on the airside at the Jomo Kenyatta International Airport (JKIA) in 2014 for a period of eight years.

The Kenya Airports Authority (KAA) has been ordered to pay Sh158 million to a company whose airport shuttle buses contract was terminated six years ago following questions from President Uhuru Kenyatta.

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

Relief & Mission Logistics won the contract to ferry passengers on the airside at the Jomo Kenyatta International Airport (JKIA) in 2014 for a period of eight years.

The contract was, however, terminated after President Kenyatta visited the airport in May 2015 on a different mission and questioned how the KAA could pay Sh11 million every month for five buses, prompting a legal dispute.

While terminating the contract, the State-run KAA said the cancellation was of necessity, convenience and in public interest.

“From the preponderance of evidence, the inescapable conclusion is that the respondent had no lawful basis for termination of the agreement summarily and hide behind the cloak of convenience, necessity and public interest,” Mr Gichuhi ruled.

The company argued that the termination of the bus deal caused it financial losses and damaged its reputation.

At some point, the KAA wanted to settle the matter and pay the company but the parties failed to reach an agreement.

The KAA later challenged the powers of the arbitrator to hear the dispute but Mr Gichuhi dismissed the application.

The company beat 16 other companies for the passenger transfer 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’s 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.

It was noted that since the introduction to the apron service on November 28, 2014, the airlines had been getting the service for free.

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

After winning the tender, the company imported five apron buses and started operations that were stopped seven months later after President Kenyatta’s visit. The agreement was terminated on June 5, 2015.

Directors of the company maintained that they had not received a penny despite investing Sh245 million in the project.

Relief & Mission Logistics said it spent Sh200 million to buy the five apron buses and paid Sh45 million in taxes to the Kenya Revenue Authority.

At the hearing, the KAA argued that the contract was terminated to forestall loss of public funds but the contractor said it was cleared by the Ethics and Anti-Corruption Commission (EACC).

It further said the procurement and agreement were not contrary to public interest, wasteful of public resources and in contravention of the Constitution as alleged.

In his ruling, the arbitrator said no evidence was produced to prove concerns about cost-effectiveness or potential loss of public funds if the contract was executed by an internal KAA probe.

He said the tender was open and complied with all the provisions of the Public Procurement and Assets Disposal Act.

“I find and hold that the tender process was lawfully carried and was not contrary to the Constitution with regard to the utilisation of public funds,” he said.

Mr Gichuhi, however, rejected a bid by the company to be paid for alleged damage of its reputation.

He also rejected the company’s bid for loss of profits for the unexpired period, saying there was no basis for the claim.

The controversial deal saw the sacking of KAA managing director Lucy Mbugua, chief finance officer John Thumbi and airport engineer Christopher Warutere.