President William Ruto’s administration plans to revive the Sh56 billion airport tender cancelled eight years ago, reversing another major infrastructure decision by former President Uhuru Kenyatta.
Roads, Transport and Public Works Cabinet Secretary nominee Kipchumba Murkomen told Parliament that if appointed, he would reopen talks with a Chinese firm that had won the contract to build the second terminal at Jomo Kenyatta International Airport (JKIA) as a greenfield terminal.
The tender was cancelled in March 2016 after Sh4.2 billion had been paid to the contractor in advance and Sh75 million spent on a groundbreaking ceremony that was presided over by Mr Kenyatta on May 23, 2014.
Chinese firms Anhui Civil Engineering Group (ACEG) and China Aero Technology Engineering International Corporation (Catic) had been selected to build the Sh56 billion terminal, which was expected to handle 20 million passengers a year.
The Chinese firm, ACEG-CATIC JV, has since slapped the Kenya Airports Authority (KAA) with a Sh17.6 billion bill for an airport project that never took off.
“If approved, my priority will be to relook at the Greenfield terminal tender which was cancelled in 2016 after the contractor had been paid Sh4.2 billion,” Mr Murkomen said.
He said the Chinese contractor has moved to the International Court of Arbitration seeking Sh17.6 billion for breach of contract by the KAA.
“I will use my legal background and other available resources to take this case out of court, renegotiate the contract and possibly rebuild the greenfield terminal,” Mr Murkomen told MPs who vetted him.
“It was to cost Sh56 billion but it may go up because we need to get new contractors to set up the Green Field terminal. We need to build a second runway.”
This will be the second major decision taken by the new administration, reversing policies of Mr Kenyatta touching on infrastructure projects after the standard gauge railway.
Transport Principal Secretary (PS) Solomon Kitungu last year told MPs that a negotiations and strategy committee was set up in April 2021 to reclaim an advance payment of Sh4.2 billion and not to pay more money to the Chinese firm.
The government has since 2016, when the JKIA contract was cancelled, argued that no work was done at the airport despite Catic receiving money from the State.
The Chinese contractor was said to have dug the project foundation and mobilised 90 percent of the required equipment.
The tender was cancelled after some Sh129.9 million was paid to a consultant, Louise Berger, while PricewaterHouseCoopers got Sh7 million for its role in securing the financier of the project.
Documents tabled before the parliamentary Public Investments Committee (PIC) show that Catic wants the KAA to pay Sh2 billion for the preparation of bill of quantities (BOQ), Sh2.4 billion in extra costs and Sh708.2 million being 16 percent value added tax (VAT).
The Chinese contractor has slapped the KAA with a Sh500 million claim in interest and penalties for delayed payment of VAT charged by the Kenya Revenue Authority (KRA).
It is seeking a further Sh5.6 billion, comprising balance of the contract for BOQ, extra cost claim, VAT and interest and penalties, bringing the total claim to Sh17.6 billion.
The KAA said the construction contract excludes 16 percent VAT from the contract price, contrary to the requirement of the request for proposal (RFP).
It argued that the construction contract referred to two foreign currencies and a foreign-local split contrary to the requirement of the RFP.
The authority also argued that the contractor commenced works under the construction contract before a financing agreement had been secured.
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Despite the then Attorney-General Githu Muigai clearing the signing of the contract “because notification and acceptance of award had been made,” he sided with the decision of the KAA to terminate the same for non-compliance with the law.
Mr Murkomen said there is a need to expand the capacity of JKIA, which receives 7.5 million passengers compared to Ethiopia’s 15 million passengers a year.
“Rwanda is expanding its airport to receive 10 million passengers from the current 2.5 million. Ethiopia targets 100 million passengers by next year. Meanwhile, we have tents at JKIA yet we pride ourselves as a regional transport hub,” Mr Murkomen said.
He said if approved, the KAA will progressively construct airstrips in all the 47 counties to complement the 13 fairly functional airstrips to cater to emergency, security and transport services.