Subcontractors deny role in $100 million oil pipeline cost jump (Kenya)

By Mugambi mutegi | Business Daily, Kenya December 21, 2016

Subcontractors working on the new Mombasa-Nairobi oil pipeline have distanced themselves from a Sh10 billion extra claim that the main contractor is demanding from the Kenya Pipeline Company (KPC).

Five sub-contractors told Parliament yesterday that they had not asked for any variation or extension of the period for completion of the Sh48 billion project.

Quality Inspectors Limited, Dynamic Green Technology Limited and Stracom Engineering Limited attributed delays of the project to the main contractor and KPC.

Directors of the main Lebanese contractor Zakhem International Contractors, subcontractors Zakhem Entity and another Chinese firm, however, did not attend yesterday’s sittings.

The three firms that appeared before senators said Zakhem International had gone ahead to sub-contract other firms to do the works without the approval of the extension of their contract by KPC and they were likely to invoice the KPC.

Chege Kiragu, the Quality Inspectors Limited director, told the Senate Standing Committee on Energy that the request for variation was made by the main contractor.

“The main contract is between the KPC and Zakhem International. Any questions on variations of the scope of the contract, costs and the period are best answered by Zakhem. Our contracts with the main contractor are pegged at 0.9 per cent of the total cost of the project,” Mr Kiragu told the Gideon Moi-led committee.

The director, whose company was formed to solely carry out non-distractive testing, said the firm had so far completed inspecting 88 per cent of the pipeline.

“Non-distractive testing of the pipeline involves testing of components without breaking down the elements. We do radiography and magnetic testing on the welded pipeline on behalf of Zakhem. We have been working in the region since 1994,” he said.

The committee had summoned firms that won sub-tenders from Zakhem to ascertain whether they were behind the escalation of costs.

“We have concerns over the projects and we called you to understand why the project is late by a year from completion.

“We want to know why there is a demand for Sh10 billion from Zakhem and whether sub-contractors are being paid on time or you are faced with any challenges that is hindering you from completing the project when it fell due in February last year,” Mr Moi said.

KPC managing director Joe Sang told senators last week that the corporation had been slapped with a Sh10 billion bill by Zakhem. He said the firm demanded the money on grounds that the KPC delayed in handing over site drawings, giving it access to the site resulting in other overheads for the period.

Mr Sang said no money had so far been paid to Zakhem for the new claims and they had put in place a team to assess the merits of the same.

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