NAIROBI, Kenya – The Public Procurement Regulatory Authority (PPRA) informed the Senate that the Kenya Pipeline Company’s (KPC) $587 million Mombasa–Nairobi Pipeline project (Line 5) complied with procurement guidelines, yet was marred by documentation gaps and unexpected cost hikes.
The PPRA flagged missing reports and approvals that prevented it from fully verifying adherence to legal requirements during the project’s implementation.
PPRA Director General Patrick Wanjuki, appearing before the Senate Energy Committee led by Nyeri Senator Wahome Wamatinga, stated that KPC signed the Line 5 contract with Zakhem International Construction Limited in July 2014.
Though initially awarded at $484.5 million (inclusive of VAT), the pipeline’s costs ballooned due to multiple contract adjustments and delays, resulting in additional claims worth $204.5 million.
Auditor General Nancy Gathungu attributed the delays to altered design specifications and work omissions from the original contract.
Initially slated for an 18-month completion, the pipeline stretched to a full 54 months, reaching completion in June 2018.
The cost adjustments led Zakhem to file five extension claims under international contracting terms, though these claims were disputed by the project engineer, prompting KPC to appoint an independent expert to assess their validity.
In 2020, a High Court ruling declared the project complete, resolving Zakhem’s ongoing legal challenges with KPC and recommending third-party reconciliation to settle account discrepancies.
KPC’s Managing Director Joe Sang reported that Line 5 has since provided substantial benefits to Kenya’s energy sector, with the pipeline replacing 22,100 trucks monthly along the Mombasa–Nairobi corridor, extending further to Nakuru, Eldoret, and Kisumu.
“The environmental impact and cost-effectiveness of Line 5 surpass those of road transport, contributing significantly to the sector,” Sang told the Senate, highlighting KPC’s tax contributions totaling KSh 45 billion between 2019 and 2024, including Sh10.1 billion in pre-tax profit for the 2023-24 fiscal year.
The company’s dividend policy mandates a 30 percent payout from post-tax profits, but KPC has consistently surpassed this, meeting its financial and regulatory commitments, Sang added.
However, the Senate expressed concerns over contractor practices that inflate public project costs.
Turkana Senator James Lomenen argued that contractors often manipulate delays and contract variations to escalate expenses, invoking interest claims on late payments or citing insecurity to justify cost increases.
Auditor General Gathungu echoed these concerns, noting that such contract terms often favor contractors at the expense of public funds.
Elgeyo Marakwet Senator William Kisang voiced frustration over contractors’ strategies to exploit project delays, leading to inflated costs that often triple initial estimates.
He emphasized the need for stringent contract clauses that protect public funds against such tactics.
The PPRA flagged missing reports and approvals that prevented it from fully verifying adherence to legal requirements during the project’s implementation.
PPRA Director General Patrick Wanjuki, appearing before the Senate Energy Committee led by Nyeri Senator Wahome Wamatinga, stated that KPC signed the Line 5 contract with Zakhem International Construction Limited in July 2014.
Though initially awarded at $484.5 million (inclusive of VAT), the pipeline’s costs ballooned due to multiple contract adjustments and delays, resulting in additional claims worth $204.5 million.
Auditor General Nancy Gathungu attributed the delays to altered design specifications and work omissions from the original contract.
Initially slated for an 18-month completion, the pipeline stretched to a full 54 months, reaching completion in June 2018.
The cost adjustments led Zakhem to file five extension claims under international contracting terms, though these claims were disputed by the project engineer, prompting KPC to appoint an independent expert to assess their validity.
In 2020, a High Court ruling declared the project complete, resolving Zakhem’s ongoing legal challenges with KPC and recommending third-party reconciliation to settle account discrepancies.
KPC’s Managing Director Joe Sang reported that Line 5 has since provided substantial benefits to Kenya’s energy sector, with the pipeline replacing 22,100 trucks monthly along the Mombasa–Nairobi corridor, extending further to Nakuru, Eldoret, and Kisumu.
“The environmental impact and cost-effectiveness of Line 5 surpass those of road transport, contributing significantly to the sector,” Sang told the Senate, highlighting KPC’s tax contributions totaling KSh 45 billion between 2019 and 2024, including Sh10.1 billion in pre-tax profit for the 2023-24 fiscal year.
The company’s dividend policy mandates a 30 percent payout from post-tax profits, but KPC has consistently surpassed this, meeting its financial and regulatory commitments, Sang added.
However, the Senate expressed concerns over contractor practices that inflate public project costs.
Turkana Senator James Lomenen argued that contractors often manipulate delays and contract variations to escalate expenses, invoking interest claims on late payments or citing insecurity to justify cost increases.
Auditor General Gathungu echoed these concerns, noting that such contract terms often favor contractors at the expense of public funds.
Elgeyo Marakwet Senator William Kisang voiced frustration over contractors’ strategies to exploit project delays, leading to inflated costs that often triple initial estimates.
He emphasized the need for stringent contract clauses that protect public funds against such tactics.
