A decision by Mr Justin Muturi to back a contractor's proposal for variation of costs, during his tenure as Attorney-General, is at the centre of a Sh1.2 billion tender fight.
Price variation for the tender on the removal of asbestos roofing from the Kenya Ports Authority (KPA) premises is the subject of a court battle between KPA and the contractor, Wilfak Engineering Limited.
According to court papers, Mr Muturi in a letter dated July 13, 2023, advised that the variation of the contract to reflect the prevailing market price was legal and allowable.
The contractor and KPA are embroiled in a legal dispute at the Court of Appeal in Nairobi over the amendment of the contract terms as recommended by Mr Muturi in the legal advisory.
KPA is adamant that adopting the AG's recommendation would lead to loss of money. However the contractor counters that disallowing the advisory would expose it to a financial loss due to increased cost of materials and labour.
While the KPA argues the contractor has breached the contract by failing to remove the hazardous roofing material, the company says failure by KPA to allow price variations —as advised by the then Attorney-General- has made it difficult for the firm to meet its obligation under the contract.
"From section 139 of the Public Procurement and Asset Disposal Act (PPAD), it is legally allowed to make variations to an already existing contract if the conditions have been satisfied. In particular, the Act allows for price variations on the basis of the prevailing consumer price Index obtained from the Kenya National Bureau of Statistics or the monthly inflation rate issued by the Central Bank of Kenya. As such, the proposed variations are within the confines of section 139 of the PPAD Act and thus allowable," advised Mr Muturi.
The letter was addressed to KPA Managing Director William Ruto following his request for an advisory on how to handle the proposed price variations. The tender was for the removal of asbestos, reroofing, demolitions, rainwater harvesting and solar backup systems at the port of Mombasa.
Kenya Ports Authority Managing Director William Ruto.
Photo credit: Dennis Onsongo | Nation Media Group
Wilfak Engineering Limited was awarded the three-year contract in October 2019 but the commencement of the works was delayed to September 2022 due to financial challenges on the part of KPA.
The contractor sued over the delay, seeking compensation of Sh900 million for loss of profits and payments of the idle land it had secured for disposal of the waste, and hiring of machinery and experts.
However, it dropped the claim after the parties reached an out-of-court agreement, paving the way for the execution of the contract.
Captain Ruto sought the AG's legal advice after the company's lawyers asked for an amendment of the court agreement to reflect that "prices and rates will be amended to meet the current market values, considering that the rates in the contract were 2019 rates".
The lawyers had also proposed that the commencement date of the contract be October 2023 and the completion date be indicated as September 2025.
Captain Ruto expressed his concerns to the AG, stating that the work of removing asbestos roofs was still needed since the materials had been declared hazardous by the government.
In his advice, the AG recommended that it was necessary for the terms of the court agreement to be reviewed as proposed by the contractor, adding that the court's Civil Procedure Rules allowed for review of court orders, including a consent order.
"Consequently, it is our advice that the parties ought to review the filed consent as proposed, renegotiate the existing contract and sign an addendum to the main contract incorporating the variations upon them being processed as per section 139 of the PPAD Act," said the former AG in the letter copied to Solicitor-General Shadrack Mose.
The dispute escalated to the Court of Appeal after High Court Judge Francis Gikonyo dismissed the company's application for setting aside of the initial court agreement and adopt the one with the amendments involving price variations.
High Court Judge Francis Gikonyo,
Photo credit: File | Nation Media Group
Through lawyer Kibe Mungai, the company wants the appellate court to reverse the High Court's ruling dated March 6, allow the variations and bar KPA from terminating the contract.
"The judge disregarded the fact that the KPA solicited the advisory of the AG in order to effectuate the intention for the parties to rewrite the contract embodied in the court consent order dated September 9, 2022," says Mr Mungai in the papers.
He adds that judge Gikonyo failed to consider the import of public interest in removal of the hazardous materials in the KPA premises in determining the prudence of settling the dispute in the manner proposed in the Advisory of the Attorney General.
"The judge erred in finding that a review of the consent order was an invitation for the court to re-write the contract for the parties," says Mr Mungai.
Asking for the case to be certified urgent, he says the company is apprehensive that the contract is set to lapse in September 2025 and since there has been a stoppage of work, there is likelihood that KPA may terminate the contract. The case is pending determination at the Court of Appeal Nairobi.
The dispute comes in the wake of Cabinet resolution and order for the nationwide removal of asbestos from all government and private buildings to mitigate health risks.
