By ALLAN OLINGO
In Summary
- Reports implicate management and staff in procurement scandals, corruption and theft of fuel.
- Kenya Pipeline Company, which is tasked with providing efficient, reliable and cost-effective means of transporting petroleum products from Mombasa to the hinterland, has been upgrading its pipeline, building new lines, and streamlining its senior management.
The Kenya Pipeline Company (KPC) is on the spot over
decisions made by its board and senior management that have resulted in
the loss of more than $10 million of public funds.
The agency, which is tasked with providing efficient, reliable
and cost-effective means of transporting petroleum products from Mombasa
to the hinterland, has been upgrading its pipeline, building new
lines, and streamlining its senior management.
However, documents seen by The EastAfrican show that there has been corruption, manipulation of costs, theft and wanton wastage of public funds at the company.
One of the controversial projects is the Line 1 replacement,
whose tender was awarded to Zakhem at a cost of $4.8 million in 2014.
The project, which was to upgrade the old pipeline, was to be finished
in under a year, but to date is yet to be completed, with the contractor
having already asked for two extensions.
“The first tender scope was changed from just constructing a
16-inch pipeline as per the KPC strategic plan, which was to cost up to
$180 million, to a 20-inch one, which now required pumps, electrical and
control equipment, pushing the cost to $480 million,” The EastAfrican was told.
The KPC managing director Joe Sang did not take our calls to explain the huge price difference in this and other projects.
Board chairman John Ngumi said the project
had undergone challenges as the contractor and the lead consultant
had been engaged in bitter disputes.
“I honestly cannot speak about the design and finer details of
the original tender because I wasn’t in office at that time. We are
currently pushing the contractor to complete the works after they asked
for two extensions, which we granted. Our main focus is for this project
to come to fruition,” Mr Ngumi told The EastAfrican.
He added that the board’s audit committee was holding bi-weekly meetings to follow up on the progress.
140 board meetings in a year
The documents also point an accusing finger at Mr Ngumi and the
board for drawing about $150,000 in allowances in just one year.
According to a source at the company, board members met
about 140 times in the past 12 months, yet they are not executive
members. On average, they are said to have met three times in a week,
with each member drawing a sitting allowance of $200 per sitting.
Mr Ngumi attributed the meetings to the board interviewing
candidates for the posts of general managers, and pushing for the
completion of the new line.
“We were hiring new general managers and the board’s human
resources committee had to sit through the process of elimination,
shortlisting and subsequent interviews of eighteen candidates. Also, in
November last year, we decided to get involved as a board on the Line 5
works since the contractor had failed to meet the deadlines,” Mr Ngumi
said.
“I don’t think we have anything to hide about these sittings,
and the allowances drawn are available for anyone to scrutinise,” he
added.
The KPC management has also been accused of losing $5 million in
tax payers’ funds through entering into an agreement with Aero
dispensers Valves Ltd for the supply of hydrant pit valves for the JKIA
airport at a cost of $6.4 million. KPC paid 40 per cent upfront before
delivery of items was done, against the procurement regulation.
This was seen as an attempt by executives to finance the supplier to meet their own contractual obligations.
'Paid for air'
A week after receiving the downpayment from KPC, Aero Dynamics
withdrew $2.35 million from a local bank, leaving a balance of $20,000
in its account.
“From the above, it is clear that no funds were wired to the pit
valves manufacturer and this is a clear case of collusion between KPC
management and the supplier to defraud the company as money was
withdrawn by individuals, part of who were KPC staff,” a report prepared
for the Parliamentary Investment Committee states.
In early July, the firm delivered the valves with no
documentation showing a pre-shipment order or bill of lading. KPC
rejected the valves.
According to our sources, valves take up to six months to be
manufactured due to casting process. This means that if the order was
placed by Aero Dispensers in mid-March last year, the earliest the
valves would be ready would have been towards the end of July.
Pre-shipment inspections take up to three weeks, thus the earliest the
shipment process would have started was August 2015.
The source questioned how the firm got the valves manufactured and shipped in a record four months.
Mr Ngumi said he was aware that, indeed, the previous management had paid 40 per cent upfront to the firm.
“This basically means we paid for air. We also have 60 valves
sitting in our yard, which we can’t take possession of because this has
been subjected to a court process as the prices are said to have been
inflated. As a board, we decided that as long as we don’t have any
directions from either the Ethics and Anti-Corruption Commission or the
courts, we will not touch those valves. The pressure to pay these funds
has been immense, but I don’t think we will budge.”
He said the challenge has been that the manufacturer has refused
to divulge how much the valves were sold to Aero Dynamics at, citing
client confidentiality. This makes it difficult to know how much KPC
lost.
Documents seen by The EastAfrican show theft of fuel at
the firm of more than $1 million as late as June this year, in a racket
involving several oil companies. Statements from the accounts
department captured the loss in their reports.
“The theft of oil has been happening in the company with the
bulk of it at the Nairobi depot. This has been a systemic issue, which
we have now brought under control. We have added specific details on the
meter capturing, which is now tamper proof. By the end of the first
quarter next year, this theft should be a thing of the past,” Mr Ngumi
said.
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