KPC managing
director Joe Sang
(centre) during a
tour of the new
Mombasa Nairobi
pipeline at
Changamwe,
Mombasa yard
on October 11,
2017 /FILE
Taxpayers were forced to foot about Sh3 billion bill at Kenya Pipeline Company, thanks to the never-ending probes by the police.
An audit has red-flagged the Sh2.8 billion KPC paid this financial year to a Lebanese firm that built the line from Mombasa to Nairobi.
The payment to the firm was part of the settlement of interest and penalties levied on unsettled claims.
Auditor General Nancy Gathungu has in the review for the period to June 30, 2024, said the police are to blame for the additional expenses.
It is emerging that the then-George Kinoti-led Directorate of Criminal Investigation stopped the payments after the parties had agreed.
The firm, which constructed the new pipeline between 2014 and 2018, had agreed with KPC on a payment plan.
Gathungu says in the ensuing circumstances, the penalties and interest was avoidable.
“The justification and rationale for the stoppage of all payments and delays in the conclusion of the investigations which occasioned the interest and penalties could not be ascertained,” she said.
Initially, KPC and the Lebanese firm had agreed on a payment of Sh6 billion for an extension of time for works on the 450km pipeline. But because of the delays in settling the claim as agreed, KPC was charged an extra Sh2,785,909,996 billion.
Gathungu says the July 26, 2019 directive by the DCI suspending all transactions related to the contract staged the mess.
DCI directed that payments—to the tune of Sh3.3 billion then—be halted pending criminal investigations into the same.
This was after KPC and the contractor had agreed on the sums arrived at by an expert who was verifying the claim.
KPC had contracted the firm to build a new oil pipeline, known as Line 5, within 18 months from July 1, 2014. Line 5 is a 20-inch pipeline, which runs from Mombasa to the main terminal in Nairobi.
It replaced an aged Line 1. The Sh48 billion project, however, experienced delays after the design was changed by the project engineer.
Some works had also been omitted in the initial contract and were thus introduced midway. It would then be completed in June 2018, being 48 months since its inception.
Due to the delays, the contractor applied for five extensions of time claims amounting to Sh26.4 billion. The claims were disputed by the project engineer, after which an independent verifier was engaged to assess the claims.
After an assessment, the independent scheduler recommended a payment of Sh5.7 billion, an amount which KPC and the Lebanese firm agreed upon.
As KPC was settling to make the payments, the DCI came knocking and suspended all transactions relating to the claims. As the investigations were ongoing, the contractor went to court and got a partial ruling in their favour in June 2020.
