NSSF loses Sh500m to Chinese firm in inflated house costs

 

NSSF managing trustee Richard Langat responds to questions when he appeared before the National Assembly’s Public Investment Committee on Thursday. Photo/Anne Kamoni 

By EDWIN MUTAI, emutai@ke.nationmedia.com

In Summary

• Parliament finds that China Jiangxi varied bid prices by Sh100m in five multi-billion shilling tenders.
• MPs said the relationship between NSSF and China Jiangxi was suspect because documents before the committee showed that the Chinese firm rarely quoted the lowest prices in bid documents but had won 90 per cent of the contracts. 

Public pension provider, the National Social Security Fund (NSSF), lost more than Sh500 million through variation of bid prices in multi-billion-shilling contracts awarded to a Chinese firm in the past five years, Parliament was told on Thursday.

The National Assembly’s Public Investment Committee (PIC) found that each of the five real estate development contracts awarded to China Jiangxi International was varied by about Sh100 million from the original bid prices.

The NSSF argued that the contracts “were corrected” to take on board costs of plumbing and electrical works, pushing up costs from what was stated in bid documents.

NSSF managing trustee Richard Langat told the PIC that “arithmetic error correction” explained the cost variations.

Committee members, however, demanded that the NSSF management explain why firms owned by Africans were awarded contracts based on the figures quoted in the bid documents while the Chinese firms secured projects at inflated costs.

The MPs said the relationship between NSSF and China Jiangxi was suspect because documents before the committee showed that the Chinese firm rarely quoted the lowest prices in bid documents but had won 90 per cent of the contracts.

“In each of the cases before us, they have quoted figures that leave room for arithmetic corrections to win the tenders. We need to be told what these errors are,” said Mohamed Noor, the Mandera South MP.

Mr Langat tabled documents showing that China Jiangxi was awarded Phases III, IV and VI of the Nyayo Estate-Embakasi estate in Nairobi involving development of a total of 1810 housing units. The cost of construction work for each phase rose by Sh100 million.

The NSSF awarded the Chinese firm the sixth phase of the project at a price of Sh2.15 billion or Sh150 million more than the Sh2 billion the company had quoted in the bid document.

The provident fund lost an additional Sh87.8 million in Phase IV of the project involving construction of 798 units.

The tender had been awarded to China Jiangxi at a price of Sh2.69 billion but this was later revised to Sh2.78 billion ostensibly to include plumbing and electrical works.

Similar cost inflation occurred in Phase III of the project where 688 housing units were constructed and sold. China Jiangxi won the contract at a price of Sh1.9 billion but was awarded the tender at a contract sum of Sh2 billion, including plumbing and electrical works — taking Sh100 million.

The NSSF earned a total of Sh3.7 billion from the sale of Phase III houses, making a profit of Sh1.7 billion.

More recently, China Jiangxi placed a Sh6.59 billion bid for construction of additional 36 floors at Hazina Trade Centre in Nairobi but was awarded the contract at Sh6.71 billion or Sh110 million more in changes that were attributed to “arithmetic error correction.”