NSSF sweats on Sh1.9bn Chinese firm demands
People walk past NSSF's Hazina Trade Centre in Nairobi on April 1,2018. A chinese contractor is demanding compensation from NSSF for work interruption. PHOTO | EVANS HABIL | NATION MEDIA GROUP
What you need to know:
- Company claiming the amount for almost three-year period the construction stopped as NSSF fought a court case brought against it by Nakumatt Holdings Ltd.
- NSSF says Nakumatt should be the one to bear the costs because the delay was due to the case filed by the struggling retail chain.
- However, with Nakumatt on its deathbed, the chances of the supermarket settling the cost are remote.
The National Social Security Fund is sweating over Sh1.9 billion being claimed by the contractor for the Hazina Trade Centre building in the city centre.
China Jiangxi International Kenya is claiming the amount for almost three-year period the construction stopped as the pensions fund fought a court case brought against it by its former tenant, Nakumatt Holdings Ltd.
NSSF acting Managing Trustee Anthony Omerikwa says Nakumatt should be the one to bear the costs because the delay was due to the case filed by the struggling retail chain.
CASE DISMISSED
However, with Nakumatt on its deathbed, the chances of the supermarket settling the cost are remote even if the fund took the bill to Nakumatt’s court-appointed administrator.
“Should NSSF and the contractor fail to agree, the claim will be subjected to a judicial process, including arbitration as provided for in the contract,” Dr Omerikwa said.
Nakumatt Holdings went to court in June 2014 to stop NSSF from building the tower, claiming the works were scaring its customers.
In February 2014, the High Court dismissed the application.
And in December last year, the pension fund ejected Nakumatt Holdings from the building.
TERMINATE LEASE
NSSF said the retailer had accumulated Sh73 million in unpaid rent and breached the tenancy agreement “by unjustly denying the fund access to the building to complete the construction”.
“The breaches were sufficient grounds for the fund to terminate the lease. Nakumatt has been unfair to NSSF contributors,” Dr Omerikwa said.
Construction of Hazina Trade Centre has been steeped in controversy following questionable advance payments to China Jiangxi, the decision to scale down the project from the initial plan of 36 floors to 15 and questions on whether the fund should have terminated the contract and retendered it following the delays.
They are the same questions the National Assembly’s Public Investments Committee is looking into. The NSSF leadership is expected to appear before the committee next week.
36 FLOORS
With 36 floors, the project would have cost Sh6.7 billion.
However, with the scaling down, NSSF says the cost has gone down to Sh4 billion.
“Due to some significant fixed costs, some of which have already been incurred, reduction is unlikely to be directly proportional to the number of floors omitted,” Dr Omerikwa said, adding that any more delays would continue to attract claims from the Chinese contractor.
The managing trustee also said had the fund terminated and retendered the the contract, it would have triggered litigation and additional penalties.
NEW CONSULTANTS
“Should the fund terminate the contract and tender afresh, the new tender will be based on current pricing and will be higher than the prices in measured bill of quantities,” he said.
Other costs that would accrue if the contract was terminated, Dr Omerikwa added, would involve commissioning new consultants to remeasure the current works, documenting the outstanding scope and supervising the work.
“The time delay would mean that the Fund would forego the expected return from the building for the duration of the delay which could easily get to 12 months,” the NSSF boss said.
Auditor-General Robert Ouko also raised a red flag over the manner NSSF made advance payments to the contractor without approval from the board. The payments in question were made when Mr Richard Langat was the managing trustee.
CONTRACT FEE
The Auditor General identified that as a weakness which could be exploited to pay the contractor even more for work not yet done.
To date, China Jiangxi has been paid Sh2.4 billion of the initial contract sum of Sh6.7 billion.
However, with the scale down of the project which has brought down the revised cost to Sh4 billion, the outstanding contract fee is Sh1.6 billion.
