Economy
How KeNHA, Kura inflated prices for 26 road projects
Monday September 04 2023
A section of the Outering road on July 19, 2023. PHOTO | SILA KIPLAGAT | NMG
Kenya’s road agencies, including the Kenya National Highways Authority (KeNHA), are on the spot for supervising cost overruns for at least 26 road projects and overshooting their budgets by more than Sh20 billion, leading to a spike in pending bills.
An analysis of official data from the Transport Ministry by the Business Daily has revealed that between 2007 and 2017 at least 26 infrastructure projects had cost overruns.
Though the law allows for some price variations, the fact that a significant number of the projects overshot their budgets raises questions on the quality of budgeting that has seen them fail the requirement that projects should be completed within time, budget and scope.
These cost overruns have culminated into a build-up of pending bills, currently estimated at Sh145 billion for the road projects alone. This is a quarter of the government’s total pending bills by the end of June.
Read: Rethink budget cuts for the road projects
In the initial designs, the total costs of these projects were estimated at Sh682.67 billion, an analysis of the data from the Transport Ministry, which has been uploaded on the Treasury’s website, shows.
However, by the time the projects were being completed, the total cost had ballooned to Sh703.19 billion, an inflation of the budget by Sh21 billion.
Inflation of the projects has been blamed on the sudden high cost of acquiring land, change in the scope of the project, and inflation when the project takes long to complete.
Save for the standard gauge railway (SGR), the country’s most expensive project, and a bridge, all the other public projects evaluated are roads.
Most of these projects were procured by the KeNHA, the Stage agency whose main responsibility is the management, development, rehabilitation, and maintenance of Class S, A and B roads.
The other major procurement agency was the Kenya Urban Roads Authority (Kura) whose Outer Ring featured in the list of contracts that had their budget exceed their initial estimated cost by Sh3.64 billion.
Initially, Kura had put the estimated total cost of the road at Sh9.89 billion. However, by the end of June last year, the road’s budget had swelled to Sh13.53 billion.
“During the implementation of the project there was an increase in the project cost due to relocation of services and land compensation costs which were part of the estimated overall project cost during the conceptualisation and funding formulation,” said Kura.
The additional cost, Kura noted, would be drawn from the government’s revenue as “the Government of Kenya is obligated to provide the construction corridor free of encumbrances.”
Close to 90 percent financing of the project was provided by the African Development Bank.
“The Donor Facility was exhausted during the period ended June 30, 2021 leaving a balance of Sh187,343,” added Kura.
KeNHA was responsible for the rehabilitation of Kakamega-Webuye Road whose initial total cost was estimated at Sh2.5 billion. This increased to Sh3.83 billion by June, overshooting the budget by Sh1.3 billion.
Construction of the six-lane Mwatate-Taveta Road, which was commissioned by then-president Uhuru Kenyatta in 2017, was initially estimated to cost Sh9.55 billion.
But the report shows that the project ended up costing Sh10.5 billion by the time it was being completed.
The government had estimated that the construction of the 40km Kakamega-Webuye Road would take up close to Sh5.65 billion only for taxpayers to cough up an additional Sh783 million by the time it was completed.
Cost overruns featured in the construction of the SGR, both from Mombasa to Nairobi and Nairobi to Naivasha.
The line from Mombasa to Nairobi had initially been estimated at Sh400.7 billion, but the final spending amounted to Sh404.3 billion.
KeNHA declined to respond to this story. However, a source at the agency, who refused to be quoted as they are not permitted to speak to the press, said that cost overruns for projects, though not ideal, are expected due to such factors as inflation, the cost of land or changes in the scope of the works.
“However, the variation must not exceed a certain percentage,” said the source.
Mr Kenyatta borrowed trillions to build roads across the country, saying that they would open up the country and help the economy to grow.
However, the cost of these mega projects would be inflated, leading the government to come up with the Public Finance Management (Public Investment Management) Regulations, 2022 aimed at ensuring that taxpayers get value for money spent on projects.
“Before a project is included in the budget, the relevant accounting officer shall—ensure that all conditions precedent are fulfilled, including land acquisition, compensation, stakeholder management and development partners’ requirements have been met,” say the PIM regulations.
The regulations also require detailed designs to have been completed and relevant approvals obtained where applicable.
The analysis found that in cases where the funds came from both the government and external development partners, it was the government component that tended to increase.
Read: Limuru, UN Avenue road expansion ends Oct 2024
Government funds are mostly used for land acquisition, pointing to the high cost of acquiring wayleaves for public projects that have pushed up the cost of projects.
Besides increasing the cost of the projects, contractors have also been known to omit certain infrastructure without reducing the cost.
A probe by Auditor-General Nancy Gathungu found that the Chinese contractor who built the Sh21.5 billion Nairobi Western Bypass omitted six interchanges and other critical infrastructure that were approved in the initial road design, denying taxpayers value for money.
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