The government is considering hiring a new sub-contractor to take up the works of the stalled Sh30 billion Itare Dam.
Water Cabinet Secretary Simon Chelugui Thursday said the new contractor would be seconded by the main contractor CMC di Ravenna.
The move follows fears taxpayers risk losing Sh11 billion already spent on the project should the contract with the Italian firm be cancelled, Chelugui said.
He said CMC gave assurance that they were committed to completing the project and gave three options the government would work with.
Among the options was to wait for CMC to deal with its financial woes after which it would embark on the works, a suggestion the government rejected.
The other option was for Kenya to engage another contractor to continue from where CMC had reached.
"On engaging the financier, BNP Paribas and Intesa San Paolo, the arrangement was not acceptable because it changes the eligibility of the export credit from Italy to another person say Chinese or locally,” Chelugui said.
As such, the government requested the financier to nominate a sub-contractor and retain the position of the main contractor.
“We asked that the sub-contractor be allowed to assign the works to other entities but have the proceeds deposited in an escrow account to protect the proposed sub-contractors from loss of money.”
He said a document on the proposal is before the Cabinet awaiting consideration and subsequent approval before the works pick up.
“We are limited in taking adverse action against the contractor because of the implications of such an action. If we don’t notify the financier, they may decide to declare the country as being in default of its obligations,” the CS said.
Chelugui said the consequences of termination would be dire because the contractor was already blaming the investigation and a case by elders as having taken their time.
“The issue of termination may subject us to lose the payments we have made and there will be an impact on other financial arrangements with Italy,” he said.
Termination would also be costly because the Sh3.8 billion performance bond cannot help recover the money already spent on the project.
Chelugui spoke when he appeared before the National Assembly’s Environment Committee chaired by Maara MP Kareke Mbiuki.
The lawmaker sought for termination, citing the ongoing investigations into CMC’s involvement in the Arror and Kimwarer dam scandals.
Former Treasury CS Henry Rotich and PS Kamau Thugge have been charged with corruption-related offences involving the dams.
“There is more than meets the eye. Itare Dam project is clinically dead. The contract agreement has clarified what needs to be done should one party violate the deal,” Mbiuki said.
The MPs were adamant the works will proceed saying the ministry should just declare the project a collapsed venture.
“You cannot tell us we're negotiating with CMC yet the mistake was on their side. Why can’t we apply the clause that applies to the case of a contractor who has delayed works?” Mwingi North MP Paul Nzengu said.
Njoro's Charity Chepkwony and Kasipul's Ong’ondo Were supported termination.
The lawmakers castigated the ministry for giving the financer more say on the project’s management, including dictating procurement.
But Chelugui said the performance bond and contract performance guarantee are valid until April 2022 and that termination would only apply when all options are exhausted.
“Recently, we asked the procuring entity to reconfirm with the guarantors that the documents were valid,” he said, adding that whatever the Rift Valley Water Services Board does must be in concurrence with the National Treasury and the financer.
Last year, CMC applied for bankruptcy proceedings in Italy, barely months after it signed three multi-billion shilling contracts with the government.
Following CMC’s financial challenges, the Itare Dam project stalled leaving the government in a tight spot on a way forward.
On the application of its bankruptcy case, CMC was granted orders and declared the creditors who have been engaged at Itare and other sites including banks, financiers and suppliers.
Edited by R.Wamochie
