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AWARD FOR PROJECT DELAY

Blow to KPC as court awards Lebanese firm Sh4.6 billion

KPC accused of causing delays leading to huge costs to firm doing project

In Summary

• Awarded Sh4.6 billion cost will cover the four years delay of 450km Mombasa-Nairobi oil pipeline project.

• Firm filed the case demanding Sh6.9 billion for unpaid works, Sh267 million as interest for delayed payment and Sh6 billion for delay mounting to Sh13.6 billion

Gavel
Gavel
Image: FILE

The commercial court has ordered Kenya Pipeline Company to pay a Lebanese firm Sh4.6 billion for delay in construction of the 450km Mombasa-Nairobi oil pipeline.

Justice Grace Nzioka said the money should be paid to Zakhem International within 30 days as the claims by the firm were not in dispute. The awarded cost will cover the four-year delay.

Nzioka said parties should consider a third-party intervention to reconcile the accounts and settle the dispute as there are other claims that are yet to be resolved.

 

“In the event parties do not agree on a mediated solution, the matter proceeds to full hearing,” she said.

The firm filed the case in court demanding Sh6.9 billion for unpaid works, Sh267 million as interest for delayed payment and Sh6 billion for delay amounting to Sh13.6 billion. The project was completed over four years ago.  

Court papers say on or about January 2013, Kenya Pipeline floated an international tender inviting bidders for procurement, construction, testing and commissioning of line 1 replacement project of the Mombasa-Nairobi petroleum pipeline.

Zakhem submitted a bid for the project. Kenya Pipeline then awarded the company the tender at $484,502,886 inclusive of taxes. Parties entered into a formal contract on July 1, 2014.

In the meantime, Kenya Pipeline entered into a separate and independent agreement with Shengli Engineering and consulting company limited/Kurret Technologies limited for the engineering and design services of the project.

However, Zakhem said that at various times, they pointed out to Kenya Pipeline that the engineering design submitted by Shengli was flawed and required urgent and imperative remedial action, but Kenya Pipeline failed or neglected to install recommended material to maintain safe operation.

As a result of design error, anomalies and technical shortcomings attributable to the design provided by Shengli, coupled with the laxity on the part of the Kenya Pipeline, the procurement and construction activities undertaken by Zakhem suffered extensive delays and huge escalation in costs were incurred.  

 

The contract period for the works was 18 months effective August, 11, 2014 to February 9, 2016. The site was handed over to Zakhem on January 6, 2015, after Zakhem was unable to complete the work as scheduled due to numerous delays on the part of the Kenya Pipeline, the court was told.

Despite the delays, Zakhem successfully completed the project. “However, the Kenya Pipeline failed to settle the payments through bureaucratic bottlenecks and the snowball effect of the delays has caused Zakhem great financial hardship.”

Edited by R.Wamochie