Corporates Government News

Kenya Pipeline Company facing a suit of Ksh. 12.26 billion by Zakhem International construction

Abdallah S. Zakhem, president of Zakhem International since 1982

Abdalla Zakhem, through his construction firm, Zakhem International construction is seeking prompt payment of $128.8 million.

Zakhem International Construction is suing the state agency for a breach in contract. KPC failed to pay the contractor after State House froze payment to the construction firm over cost escalation in the building of the 459 km pipeline.

In the suit lodged at the High Court, the construction firm is demanding: $67 million (Ksh. 6.9 Billion) for unpaid works; $59.2 million (Ksh. 6 Billion) for delays; $2.6 million (Ksh. 267 million) as interest for the delayed payment.

The plaintiff stated that the defendant’s conduct to willful refuse paying the sum owing and due to it was high handed and capricious as no reason backed up by law was given by them for the refusal to perform part of the contract.

It is alleged that State House blocked KPC from making further payments to Zakhem amid claims that the cost of building the pipeline had been inflated way above the agreed Ksh. 48 Billion ($480 million). This revelation had been hinted by Petroleum Cabinet Secreatry John Munyes during a meeting with the Parliamentary Public Investments Commitee (PIC) in July this year.

The order from State House came as KPC was preparing to pay Zakhem International KSh. 4.4 Billion to cover the four year delay of the project. KPC had already paid the Lebanese firm Ksh. 48.7 Billion.

The Lebanese firm won the contract to build the pipeline in 2014 and promised to complete the work in 18 months. However, due to bad blood between the contractor and the consultant, the project that was expected to be completed by September 30, 2016 was extended to February 9, 2017 and further to April 28, 2017. Because of failure to achieve the targets over delays in procurement and legal battles in court, the project was commission last year. A demand for additional billions by the firm to KPC due to contract delays triggered an independent review of the pipeline construction costs and an intervention by state house.


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