Taxpayers lost Sh330.57 million ($3.8 million) to two foreign contractors hired to build five stadia for the aborted 2018 African Nations Championship (Chan).
M/s Auditel Engineering and Services, which has since gone bankrupt, and M/s Gregory International secured the payments upfront being 20 per cent of the contract sum.
Kenya may not recover the Sh330.57 million given that the contract for the design, supply, testing, commissioning and supervision of security, access control, communications, audiovisual and pitch lighting systems has lapsed.
The State Department for Sports on September 14, 2017 awarded a contract to M/s Auditel Engineering and Services at a contract sum of Sh1,609,037,145 ($15,892,980). M/s Gregory International was contracted at the same time to do associated works.
The works were to be completed within a period of four months and involved remodeling of five stadiums which included Jomo Kenyatta Stadium in Machakos, Moi Kinoru Stadium in Meru, Kipchoge Keino Stadium in Eldoret, Nyayo Stadium and Kasarani Stadium in Nairobi, and ten training pitches that were earmarked for use during the Chan 2018 Championships.
The National Assembly’s Public Accounts Committee (PAC) put then Principal Secretary for Sports Kirimi Kaberia on the spot to explain why the two contractors were paid despite the firms providing a security guarantee issued from a bank in Spain instead of a lender in Kenya.
The contract stipulated that the contractors will be paid 20 per cent of the contract sum upfront subject to the firms putting in an advanced valid security guarantee issued by a local bank.
Security guarantee lapse
PAC chaired by Ugunja MP Opiyo Wandayi heard that the advance payment was based on a security guarantee issued by a bank in Madrid, Spain dated October 30, 2017, and had since lapsed.
“In view of the foregoing, there is a risk of not recovering advanced amount of Sh330,537,997 as the security guarantee had expired and had not been replaced,” the Auditor-General told PAC.
“We have not interrogated M/s Auditel Engineering and Services after we received information that it went under or became bankrupt but we have taken evidence from M/s Gregory International,” Mr Wandayi said.
Mr Kaberia, who is the current Principal Secretary in the State Department for Mining, told the committee the advance security guarantee was informed by contract documents signed between Chan, the Local Organising Committee (LOC) and M/s Gregory International.
He said the Confederation of African Football (CAF) endorsed M/s Gregory International and instructed LOC to cooperate as it was impractical to engage in procurement of contractors given the tight timelines for the Chan events.
“The contract stipulated that the contractor be paid 20 per cent of the contract sum subject to provision of a performance guarantee from reputable bank in Kenya.
“We are reassessing works done by the two firms to ascertain responsibility of loss of funds if any and you will be advised once the Ministry of Public Works complete the assessment,” Mr Kaberia, who was accompanied by current PS Joseph Okudo, said.
Mr Kaberia said delay in completion of works arose from the decision to strip Kenya rights to host the Chan Championship due to accumulated delays in preparations.
At the time, only Kasarani Stadium had been completed while works on the remainder were ongoing.
“CAF expressed security concerns following the presidential campaigns that dragged on in 2017,” Mr Kaberia said.
He said the ministry has sought an advisory opinion from the office of the Attorney General on the legality of the contract.