By David Ohito

Just as it was smarting from the unresolved Sh7.6billion Triton saga Kenya Pipeline Corporation has again been hit by a multi-billion-shilling scandal.

Details of a massive fraud involving the corporation and contracted suppliers have emerged and the shocker is that you the taxpayer will pay an extra Sh6 billion sunk into a project that remains incomplete. It is the familiar story of cost variations for which our state corporations, especially the cash cows such as those in the energy sector, are legendary.

"Unjustified scope changes were deemed to have been as a result of either incompetence or deliberate intention to defraud," the KPC board concedes in its minutes of a May 10th meeting.

This is the project launched by the president and prime minister last year, only for Kenyans to learn the two had been duped. The launch ceremony for the project took place before KPC could attain the increased capacity they had greatly publicised.

One of the audit reports was by Public Procurement Oversight Authority dated April, while the other was KPC’s internal self-examination.

In all cases, employees of KPC who traditionally would speak to the Press refused on this one, conceding it was "very sensitive’’ and was about the ‘top’.

A blow-by-blow account of a secret audit report shows how the project could have been turned into a cash cow through fraudulent contracts as management flouted rules of procurement resulting in huge losses.

The reports come against the backdrop of the Triton oil scam whose dust is yet to settle with several suits awaiting KPC in court.

In shocking details, the report says, "recommendations on officers implicated in both the PriceWaterhouseCoopers (PWC) report and the KPC Line 1 capacity enhancement project were too lenient."

Audit experts estimate that KPC may lose up to Sh5 billion in the Line 1 capacity enhancement-pumping project, which has seen several top managers, fired.

Pump capacity

The project’s task was simple — to increase the oil pumping capacity between Mombasa and Nairobi depots at a cost of Sh2.6 billion. But what followed is all too familiar to Kenyans because of cost variations the project has gobbled up Sh8.1bilion. Worse still, it is incomplete, and so still ‘thirsts’ for more money.

Energy Minister Kiraitu Murungi, who when the Triton saga broke out said he too was in the dark, also says he has not seen the report on KPC’s fresh scandal.

Reached for comment, Kiraitu who fought off claims of corruption in his ministry as sleuths hunted for Triton director Yagnesh Devani said he had not seen the report.

When Kiraitu, a lawyer by profession, left Kenya Anti-Corruption Commission’s offices after the Triton Affair was busted, he told journalists: "I was not involved in the scandal in any manner and I am here as a complainant."

He was then under pressure, as he may this week, to explain at what stage he came to know of the scandal and what action he took.

However, independent sources confirmed Kiraitu is expected to table a report of investigation from different audit bodies to the Parliamentary Energy committee this week.

Curiously, even as the minister kept quiet, the chairman of the Parliamentary Energy Committee, Mr James Rege, revealed: "We had a long meeting with Kiraitu and (Energy PS) Patrick Nyoike and they admitted it was a big problem. The minister is expected to give us a report by Wednesday."

He added: "Kiraitu said the report was ready. We are waiting for the report so that we can scrutinise it."

Several procurement issues have emerged ranging from flawed procurement to single sourcing.

A board meeting on May 14 resolved to ease out officers indicted in the fraud investigation, and a subsequent meeting on June 2 ratified the decision that sent home several senior managers.

Principal audit findings pointed at how the original project entailed the purchase of two 880 metres cubed/per hour pumps. However, with the approval of the ministries of Finance and Energy, the pipes were increased to three but of a lower capacity — 440 meters cubed per hour pumps. This way the firm expected to reduce the overall cost but that was not to be — the cost simply went up.

"For unexplained reasons, only two 440 metres cubed per hour pumps were purchased and the overall cost went up by over Sh419 million,’’ the audit report says.

In yet another scam, the cost of site camps were omitted from the main contract and KPC is likely to spend Sh106.5 million more than the quoted Sh297 million.

The KPC board says it will lose at least Sh846 million from contractor claims. The board’s minutes project another Sh531 million will be lost through unjustified payments.

The audit findings also point at fraudulent contract management singling out how the contracts for Plant Area Civil Works and KPLC sub-stations were changed to make them open-ended with the possibility of drawing payments indefinitely.

The report says: "Lapses were noted in project monitoring and controlling processes. The internal audit department raised red flags during the pre-audit of progress payments and project reviews but they were ignored."

The board paper says the tender oversight committee breached procurement law and ratified contract variations while not being recognised under public procurement law.

The board also owned up to illegal approvals and ratifications. Solicitor General Wanjuki Muchemi said the report revealed possible criminal negligence and complicity.