Sh40bn Kipevu tender given to blacklisted firm

A Chinese firm awarded a Sh40 billion tender to construct the Kipevu Oil Terminal in Mombasa that is now under investigation had been blacklisted by the World Bank at the time Kenya Ports Authority (KPA) invited bids for the project.

The unusual awarding of the contract is part of investigations by the Ethics and Anti-Corruption Commission (EACC) into the matter, in addition to allegations that the cost of the project was inflated from Sh15 billion to Sh25 billion, and then to Sh40 billion.

KPA floated the tender on March 23, 2016 and 31 bidders from at least 15 countries showed interest. According to a press release issued by KPA during the prequalification stage, which was done in May 2016, tenders for construction were supposed to be issued in July 2016 and construction to commence at the beginning of 2017.

But it wasn’t until June 30 last year that China Communications Construction Company (CCCC) was awarded the lucrative tender after close to two years of waiting. KPA delayed making the announcement until September for unknown reasons.

Interestingly, CCCC’s parent company, China Road and Bridge Corporation (CRBC), had been blacklisted by the World Bank in 2009 for an eight-year period until January 12, 2017, after an investigation discovered that CRBC had “engaged in collusive practices in World Bank-funded projects in the Philippines”.

The information, which is available on the World Bank’s debarred list, also said that CRBC had colluded with Philippines’ state officials to enter “non-competitive, artificially high bid prices”.

In 2011, the World Bank decided to apply CRBC’s debarment to CCCC. Blacklisted firms cannot tender for World Bank-funded programmes, but countries are free to seek alternative financiers.

It is, however, expected that countries will refer to the World Bank sanctions list in order to make contractual decisions since all the blacklisted companies have been found to be corrupt.

A whistle-blower wrote to the Public Procurement Regulatory Authority (PPRA) and EACC asking for the cancellation of the tender in August last year. CCCC, copied in the letter, responded by saying being blacklisted by the World Bank did not prevent it from bidding for contracts.

“CCCC was, and has, not from any point been debarred by the World Bank from participating or bidding for port projects. The debarment, which is irrelevant for the present purposes, only applied to World Bank-funded projects related to roads and bridges,” the company wrote to EACC in a letter signed by Li Qiang on September 3, last year.

Also under investigation is a decision to include a Liquefied Petroleum Gas (LPG) component to the terminal, which was not in the original design but would definitely make the construction cost go up.

Correspondence between KPA and oil marketers shows that there is a plan to construct two LPG lines. One line will be operated by the State while the second one will be handed to private operators. This means the State, which has plans to introduce a single gas tender — commonly referred to as the open tender system — and prompt a shift to control of gas prices, will be in direct competition with powerful gas players.

The EACC is currently in the process of questioning several past and current port managers over the tender, issued last October.

Among those who have recorded statements so far is former KPA managing director Catherine Mturi-Wairi.

All members of KPA’s tendering and evaluation committee, led by its chairman Rashid Salim, have also recorded statements.

The others are Adza Zengo, Geoffrey Kavate, Edward Kamau, William Ruto, Dan Amadi, Margaret Shayo, Beatrice Ratemo, Geoffrey Namadao, Raymond Warr, Miguel Pires and William Tenayi.

At conceptualisation, the project was supposed to supplement the two existing facilities at Shimanzi and the old Kipevu terminal through the construction of an offshore jetty near Dongo Kundu.

The new facility will have undersea and on-land pipelines that will connect it to storage facilities in Kipevu.

When complete, it will have four berths capable of importation and exportation of crude oil, heavy fuel oil, aviation fuel, diesel and petrol. It will have a capacity of up to four vessels with a Dead Weight Tonnage (DWT) of 200,000.

This will enable bigger volumes of fuel products to move in and out of Kenya as the existing terminal — which handles at least 90 per cent of petroleum products into Kenya and in transit to neighbouring nations — can only manage 35,000 tonnes of cargo at a time.