Bidders challenge award of Sh43bn fuel pipeline deal to Lebanese firm

The planned construction of a new Mombasa-Nairobi oil pipeline is the latest government contract to run into tendering headwinds after some losing bidders challenged the award of the Sh43 billion deal to Lebanese firm Zakhem International.

The losing bidders have lodged an appeal with the review board of the Public Procurement Oversight Authority (PPOA) seeking to bar Kenya Pipeline Company (KPC) from signing a contract with Zakhem, citing irregularities.

The tendering row looks set to delay the construction of the 450km pipeline which will replace the existing one which has outlived its 30-year lifespan and is prone to leaks.

Construction of the line, which is designed to meet petroleum products demand for the eastern Africa region up to the year 2044, was set to start next month and end by September 2016.

“There is an appeal submitted to the review board to have the award of the contract re-looked into. The appeal was filed on May 30 and a decision will be made once the review process is over,” PPOA spokesperson Dido Guyatu confirmed.

Zakhem emerged top in the evaluation of bids with a score of 95.5 per cent, according to the KPC tender team, beating six competitors.

Other firms eyeing the contract were China Petroleum Engineering and Construction Corporation, Denis NV, PunjLoyd, Sinopec International Petroleum Service, Saipem Business Unit Engineering Construction and China Wu Yi Company Limited.

Price under-cutting

Sources at PPOA said the complaint filed against Zakhem mainly centered on its financial bid, with some of its rivals claiming that the Lebanese firm may have engaged in ‘‘price under-cutting’’ to lock them out of the job.

Zakhem placed a financial bid of Sh43 billion which was Sh7 billion less than the amount KPC had projected to spend on the project.

Evaluation of financial bids has also been questioned with some losing bidders saying it happened in a record 10 hours. The new pipeline will complement and eventually replace the existing one.

Many of the fuel products imported via Mombasa port have to be transported to neighbouring land-locked countries using trucks, which are slow and unreliable due to breakdowns and damaged roads.

The new pipeline is expected to ease these burdens, including cutting expenses for the consumer.

It will also end the vicious fight for space on the constrained pipeline among oil marketers looking for cheaper and reliable transport to capture a larger share of the fuel market.

KPC’s existing pipeline runs from Mombasa to Nairobi, and onwards to Nakuru and then branches to Eldoret and Kisumu. Its planned construction has been dogged by similar tendering woes before.

If blocked, the pipeline tender will add to a growing list of government contracts which have recently been thrown out over suspected irregularities.

Only last week, the PPOA review board blocked the award of a second restaurant tender at the Jomo Kenyatta International Airport (JKIA).

The watchdog barred Kenya Airports Authority (KAA) from awarding Hoggers Limited a tender to run a fast-food restaurant within the airport’s newly built terminal 4.

READ: Procurement watchdog blocks second JKIA fast-food tender

Earlier, the board had barred Hurlingham-based Slims Restaurant, a catering unit, from operating at the terminal.

Construction of the first phase of 609km of the railway from Mombasa to Nairobi, at Sh447.5 billion, was also the subject of investigations by two parliamentary committees over claims that it was overpriced.

Parliament later cleared the project and paved way for signing of financing deals with China in April.

The Public Procurement Administrative Review Board (PPARB) also cancelled the Sh24.5 billion school laptops tender after American firm Hewlett Packard (HP) and Haier Group of China said it was offered irregularly to Olive Telecommunications PVT of India.

The row over the procurement of 1.28 million laptops for Class One pupils is currently in court.