Standoff at Balala’s ministry over Sh630m project

Business

By David Ohito

A standoff between Tourism Minister Najib Balala and a state parastatal eager to move to a new palatial home could soon cost you Sh106 million in penalties and advance payments alone.

Catering and Tourism Development Levy Trustees’ new office project worth Sh630 million has stalled for the last 10 months — and the contractor has already been paid Sh26 million. The project at Nairobi’s high-cost Upper Hill area, which is somewhat the seat of Government from colonial times, kicked off under former Tourism Minister Morris Dzorro. But Balala who took over after 2007 General Election sees it as grandiose and unaffordable — and says even if the money was there it would be prudent for the state corporation to put up a second training institute after Utalii College.

Balala argues the ministry lacked justification, and adequate funding to pull it through completion.

Accruing interest

According to the contractual agreement, the consultants have been paid Sh26 million and Sh56 million fee note, which continues to attract interest.

The plot for the proposed Catering Tourism Development Levy Trustee headquarters along Valley road in Nairobi. A 14-floor office block worth Sh633 million was supposed to be built at the site.

The fate of the proposed 14-floor ultra-modern building now hangs in the balance because Balala insists it cannot go ahead because there was no competitive bidding, it had not been approved by the ministry, and it does not fall within the core business of the parastatal. The minister spoke from Milan, Italy.

But the consultants, too, insist they have a valid and legally binding contract with the client and have already moved to site.

It argues in the event the contract is terminated prematurely, the Government would pay the contractor damages to the tune of Sh80m over and above any payments already made.

The controversy surrounding the project came in the open when one consultant, Engineer Evans Goro asked Balala, during Architectural Association of Kenya workshop in Mombasa, to state why the Government was delaying the project.

"The project is behind schedule by 10 months and taxpayers will pay the price of delay. We have not been paid our fee note of Sh56 million for what we have done.

We plead with the minister to give us a go-ahead to carry out the work and save losses," said Goro.

Make way

The office block and headquarters is to be built along Valley Road on a plot currently occupied by CTDLT offices. An existing structure was to be pulled down to pave way for the construction of the new offices.

Documents in our possession show a demand for professional fees by Architects Otieno and Kungu Associates. The Documents also show the professional fee for consultants was 15 per cent of the estimated cost of the project.

In total, the consultants are demanding Sh56.5 million for them proceed to the next stage of work programme, but even then Balala will have to first change his mind.

Yesterday, Mr Balala confirmed the issue had been brought before him at the AAK conference, but said he would meet the CTDLT board before making a final decision on tomorrow.

So far, there is no scandal because the project has not even started but questions are emerging whether it is the core business of CTDLT to build office blocks, he said.

The institution pays Sh4.2 million as rent annually. With a new office block they will make only Sh20 million over the same period, Balala said.

"I am not opposed to the project but let them prove they have enough money to see it through successfully. I do not want to be associated with failed projects during my tenure," the minister said.

Fixed account

He argued CTDLT had Sh200 million for the project in their fixed deposit account, while an estimated Sh700 was required.

Because of the delay, rising cost of construction materials could also mean the project would gulp down many more millions.

A clause in the contract relating to payments says that, "unless agreed between the client and the consulting engineer from time to time, the sum payable to the consulting engineer be paid by the client to the consulting engineer’s most recent estimates."

According to the contract, "all sums due from the client to the consulting engineer shall be paid within 40 days of the submission by the consulting engineer of his accounts to the client."

It goes on: "Any sums remaining unpaid at the expiry of such period of 40 days shall bear interest thereafter to accrue from day to day at the rate of two per cent per annum above the current bank base rate charged by consulting engineer’s bank.’’

A source at CTDLT head office said the corporation had enough resources and plan to raise funds, which had been approved by Treasury and Ministry of Tourism, had now been blocked.

The official, who refused to be named for fear of reprisal from the parent ministry, said all technical details and approvals were with the minister.

Attempts to reach the CTDLT chief executive Allan Chenane were fruitless as he was reported to be in meetings. Balala said he would fly back today to shed more light on the project.

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