This report shows how hurried public contracts have left taxpayers exposed to huge losses across ministries, agencies and State corporations.
From mineral mapping to airports, housing, roads and power deals, the pattern is the same: projects are signed, delayed, altered or abandoned, then followed by compensation claims, legal disputes or payments for work that was never completed.
Petroleum and Mining Cabinet Secretary John Munyes told Parliament that the government would have to pay a Chinese firm Sh2 billion after changing course on who should carry out the mineral mapping survey. “At the time Geti was put on hold, we already had a running contract with them. A contract is binding and, therefore, we have to pay at the end of the day,” said Mr Munyes.
The firm involved was Geological Exploration Technology Institute (Geti), which had signed a commercial contract with Kenya on 19 May 2014. The survey was meant to establish the location, type and estimated value of minerals in the country, but the process stalled over concerns tied to the safety and integrity of the report.
Public policy and economic analyst Robert Shaw said the problem begins long before projects collapse. He argued that government lacks a strong legal team to support tendering, while private firms often exploit weak contracts and unclear terms.
At Jomo Kenyatta International Airport, the cancelled Greenfield Terminal left Kenya Airports Authority with another expensive lesson. Anhui Construction Engineering Group Ltd, working with China Aero-Technology International Engineering Corporation, was paid Sh4.3 billion even though no work had been done. An additional Sh413.5 million went to consultants and law firms before the project was terminated as void from the start.
The National Social Security Fund (NSSF) is also facing heavy claims. China Jiangxi International wants Sh6.9 billion over the stalled Hazina Trade Centre in Nairobi, a figure above the original contract price of Sh6.7 billion. The same contractor is also seeking Sh2.1 billion for the stalled phase six of the Nyayo Estate Embakasi project.
It was alleged that NSSF’s board signed the deal without the required approvals from City Hall, which helped derail the project. Public Investments Committee chair Abdulswamad Nassir told the fund in May: “You jumped the gun. You engaged a contractor without securing change of user. We want proper and detailed submissions on this project.”
In the same month, three road contractors, including two Chinese firms, demanded Sh6 billion from Kenya National Highways Authority (KeNHA). The bill arose from contract variations and delayed payments by the Treasury.
In July, a standoff in Turkana halted an oil evacuation exercise and triggered Sh1 billion in compensation to the companies involved. Local residents stopped the early oil export programme, demanding security, jobs and tenders.
The losses were not limited to 2018. Last year, Lake Turkana Wind Power hit the Treasury with a Sh14.6 billion bill after failing to complete the transmission line from its Marsabit wind farm to Suswa. Treasury had already paid Sh5.7 billion, with Sh9.36 billion scheduled for payment over six years.
In September, Treasury said the country lacked methodological guidance for efficient public investment, making consistent project appraisal difficult. It warned that the absence of a public investment management framework had opened the door to stalled projects, bloated portfolios and inflated costs.
“The result is a bloated project portfolio, unpredictable funding, stalled projects, and inflated costs contributing to the under-execution of budgets and delayed translation of the investment in projected economic growth,” Treasury noted.
Treasury Cabinet Secretary Rotich later pushed for tighter checks before State contracts are signed, especially where external financing is involved. In a memo, he said mandatory requirements were needed to reduce exposure to commitment fees and other charges caused by delays in starting projects.
Kenya Revenue Authority is also trapped in a Sh17 billion excise tax stamps supply agreement with a Swiss firm. Parliament said in October that the 2015 contract was skewed because reimbursement obligations applied to KRA but not to the company if the deal was partly or fully terminated.
Public Investments Committee chairman Abdulswamad Nassir said the Swiss company had told him the contract protected its position. “I raised this matter when I was in Switzerland recently and the Swiss company said the contract is watertight on their part. They are convinced that even if MPs amended the law to exclude some excisable items, they are home and dry,” he said in Parliament.
Shaw said the State must strengthen its tendering teams or continue losing at the negotiation table. He also said corruption and deliberate omissions in government agreements often create openings for costly claims.
The energy sector has similar problems. Despite promises of cheaper power, Kenya remains tied to expensive power purchase agreements signed in the past, many of them without a favourable exit clause.
In May, Energy CS Charles Keter said some thermal power plant PPAs carried financial and legal consequences and could only be ended when they reached the end of their terms. Izael Da Silva, who chaired the task force formed in 2016 to review the agreements, delivered a blunt assessment in August 2018.
“We are proposing termination of only those thermal power plants whose cost of termination is less than maintaining them until the end of their agreements,” said Mr Izael.
Some of those contracts are long-running. The earliest thermal electricity agreements to expire are those of Tsavo Power and Rabai Power in 2023, while Gulf Power, Triumph Power and Ibera Africa have contracts running beyond 2031.
Shaw warned that counties could become the next target for firms looking to profit from weak public systems, saying devolved units are likely to face similar losses if procurement discipline does not improve.
