How Cartels Disrupt Mega Projects to Make a Killing

Rogue contractors are conniving with corrupt government officials to device schemes where companies make more money by delaying projects than when they complete them as scheduled.

In a practice that is rife in many government parastatals, public officials hire a contractor to undertake a project – in a deal that allows the contractor to ask for compensation in case of delays originating from the government.

Once the deal is sealed, the officials work hard to ensure that the timelines are breached – whether by withholding funding for the project, politicising land compensation processes, or by obtaining injunctions – in a well-coordinated operation that sees contractors winning hefty compensation for idling.

Early this year, for example, sleuths from the DCI initiated investigations into the operations of the Kenya Electricity Transmission Company (Ketraco) after it emerged that the company paid nearly a billion shillings to a contractor for idling and overheads.

The company is said to have paid Kalpataru Power Transmission a total of Sh964.5 million after the Mombasa-Nairobi power line project was delayed by four years. The contractor had asked for Sh3.8 billion.

“The total claim per month for idling and overhead is much higher than what the contractor would be paid in a month (labour costs) working at full potential (100 per cent) and exceeds the 0.5 per cent per week liquidated damages the employer can charge due to delays.

“The rate is therefore punitive to the employer and encourages the contractors to delay works as they would benefit more from the delays,” reads an audit report on the company.

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Auditors criticised Ketraco for admitting the claims that were exaggerated and required the company’s management to explain why the contractor had to retain its idling workforce for 21 months and get paid Sh108 million every month.

Ketraco is not the only State firm that has made the headlines for delayed projects. The Kenya Urban Roads Authority (Kura), and the Kenya National Highways Authority (KeNHA), among many other parastatals have also been in the same predicament, mostly due to land compensation conflicts.

These squabbles, which are said to be designed long before a project gets underway, have over the past years resulted in a huge backlog of infrastructure ventures – and hefty compensation bill to foot.

“Unless this fraudulent activity is checked, we will continue throwing our taxpayer money into a bottomless pit,” a government official told CK in an interview.

Some of the key projects that have experienced lengthy delays include the Eldoret bypass, Turkana-Suswa power transmission line, Dongo Kundu bypass, and High Grand Falls Dam, among many others.

Construction of the Nairobi-Naivasha standard gauge railway has also faced some delays due to land compensation disagreements but the government has been taking quick measures to forestall the derailment of the project.

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