Bechtel Mombasa-Nairobi Expressway project background

Ambassador McCarter has been engaging with Kenyans on Twitter following an Embassy media release on US support for the proposed Mombassa-Nairobi expressway.

For background:

U.S. withholds funding for Sh. 300 billion Mombasa-Nairobi expressway. This was the news on May 27, 2019, as reported from A1Autoservice,Ltd.com:

Nairobi-Mombasa expressway funds stalled 

The US Government has temporarily shelved funding for the proposed Sh. 300 billion Nairobi-Mombasa expressway over cost implications. The construction of the 485-kilometre road to ease perennial traffic snarl-ups was to be done by American engineering firm Bechtel after Kenya and US struck a deal during last year’s meeting between Presidents Donald Trump and Uhuru Kenyatta at the White House. The US ambassador Kyle McCarter, said the US was scrutinising the proposal to establish whether Kenyans would get value for their money. He said the cost was in question at a time when the country is struggling with piling debt. 

Responding to queries whether Bechtel had lost the contract to China, McCarter said: “Bechtel did not lose the deal, we are still working on the finance. Kenya has a challenge of debt and we are wary of burdening Kenyans”. “We did not want to sign onto a project whose cost would turn out to be three to four times higher than the actual. We want to ensure there is an honest return on investment for Kenyans before we break ground.” 

In 2015, PriceWaterhouseCoopers (PwC) — in a feasibility report — indicated that the costly project was viable.McCarter said US zero tolerance for corruption forced them back to the drawing board and would only embark on the project once they are satisfied it guarantees value for money for Kenyans and will not sink the country deeper into debt. 

The envoy affirmed US support for the war against corruption and termed the plunder of public coffers an act of outright thievery. “Calling it corruption makes it mystical, like those behind it share the proceeds with the nation. But the truth is that it is simply taking what is not yours and that is thievery,” he said. 

The proposed road will be a dual-carriage motorway with four lanes to ease congestion and cut travel time between the two cities from the current 10 to about four hours.It will run parallel to the current Nairobi-Mombasa highway and will help promote trade and movement in Kenya and the neighbouring countries of Uganda, Rwanda, Burundi, DRC and South Sudan. 

Working documents on the project show that it is expected to start any time after the June budget release.Bechtel estimates that construction of the expressway will create 500 jobs and involve local businesses supplying up to 100,000 tonnes of cement and 40,000 tonnes of steel.

Here is a digest of stories on the project from July 2017 to July 2018:

The battle for road tenders hots up as U.S. giant opens Nairobi office, Construction Kenya, July 11, 2017:

. . .

As a starting point, the US construction giant has already expressed its interest in the forthcoming expansion of the 485-kilometre Mombasa-Nairobi highway into a six-lane dual carriageway.

The US Export Import Bank is strongly pushing Bechtel to secure the contract in an arrangement similar to that of the China Export Import Bank where the Asian bank funds projects contracted to Chinese firms.

“With the support of the US government agencies such as Overseas Private Investment Corporation (OPIC) and the Export-Import Bank, we can provide solutions to move this critical project forward quickly with a high standard of quality,” Mr Patterson added.

The entry of Bechtel – along with its financial backing by the US Exim Bank – will complicate matters for Chinese multinationals who have been winning all tenders for projects financed by the China Exim Bank. . . .

U.S. firm wins deal to build Kenya’s first high speed highway, Construction Kenya, Aug 17, 2017:

US-based engineering firm Bechtel International Inc. has signed a Sh230 billion commercial agreement with the Kenya National Highways Authority (KeNHA) for construction of a 473-kilometre Nairobi-Mombasa high-speed expressway.

KeNHA director general Peter Mundinia said the signing of the deal has paved the way for the next stage of mobilisation of financing from export credit agencies in the United States of America.

. . .

It is expected that agencies such as the US Export-Import Bank and the Overseas Private Investment Corporation (OPIC) will finance the project.

“It is projected under the proposed commercial contract that the 473km highway will be completed in ten sections within the next six years,” Mr Mundinia said.

The first section, from the junction with Namanga Road near Kitengela will have an interchange near Konza ICT City and a spur road to Kyumvi (Machakos Turnoff) on Mombasa Road. This section is anticipated to open to traffic in October 2019. . . .

U.S. rejects Kenyan press criticism of $3B Bechtel roads deal, Global Construction Review, Sept. 25, 2017:

The US embassy in Kenya has rejected a newspaper’s criticism over a $3bn road contract awarded to Bechtel without competitive bidding.

The embassy said the Nairobi-to-Mombasa expressway had been under discussion for two years, and had been evaluated to ensure Kenyans receive value for their money. 

It also rejected press claims that the award was a “thank you” to the US for its political support of the Uhuru Kenyatta government. 

On 13 September, the day after the article appeared, the embassy tweeted: “US private firms (bound by US anti-corruption laws) investing in Kenya’s future bring jobs, tech transfer and development. This expressway has been under development for two years to bring best value. The US embassy does not and will not give political favours for commercial deals. On Kenyan election 2017, we’ve been and will continue to be strictly neutral.”

Kenyan government officials also defended the Bechtel deal. Peter Mundinia, director general of the Kenya National Highways Authority (KeNHA), said on 18 September that Bechtel was selected because of its experience of handling large infrastructure projects “over 119 years”.

He added that the Kenyan government had entered into an agreement with the US government in July 2015 whereby US companies would develop key infrastructure projects with US funding.

The US and Kenyan authorities were responding to an article in Kenya’s Financial Standard newspaper that questioned the way the project was announced and quoted from a Ministry of Transport briefing, carried out before the contract award, which argued the project should be put out to tender as a public–private partnership (PPP).

The Standard highlighted the fact that contract for the 473km A8 expressway between Mombasa and Nairobi was announced three days before the 8 August general election, and broke with established practice by being made without a Ministry of Transport press conference or an announcement from the president’s office. 

Instead, the announcement was made on a Saturday afternoon when government departments are usually closed, and made no mention of the project’s estimated price. 

The newspaper drew a comparison with the way the government had awarded the country’s standard gauge railway (SGR) scheme to Chinese contractors before the 2013 general election. In both cases the winner was appointed without putting the work out to competitive tender. 

In the SGR case, the choice was determined by the fact that China was making the funding available for the line; in the case of the motorway, the motive was to thank America for an “unspecified service” that the US had done for Kenya, according to unnamed “government insiders” quoted by the Standard.

According to the Standard there are now concerns within the Kenyan government over the amount of debt the country is taking on. The combined cost of the rail and road link between the country’s main port and the capital is likely to be at least $6.7bn, or almost 10% of the country’s GDP.

The controversy comes at a sensitive time in Kenya after the results of the 8 August election, which recorded a victory for the country’s incumbent president Uhuru Kenyatta, were annulled by Kenya’s Supreme Court on 1 September. 

The court cited irregularities and illegalities in the transmission of results and ordered the election to be held again within 60 days. It is due to take place on 26 October. Kenya has a history of serious post-election violence.

Nairobi-Mombasa expressway project dogged by serious concerns, Construction Kenya, July 4, 2018

Almost a year after Kenya signed a deal with US engineering firm Bechtel for construction of a Sh300 billion high-speed expressway between Nairobi and Mombasa, the two parties are yet to agree on how to finance the project despite a series of extremely high-level talks.

On the one hand, the Kenyan government wants the 473-kilometre Nairobi-Mombasa expressway to be completed through the Public Private Partnership (PPP) model where private investors will build and operate the facility for up to 25 years – charging toll fees – to recoup their investments and margins.

On the other hand, Bechtel International is opposed to the PPP model which it says will cost the Kenyan taxpayer Sh540 billion over next 25 years.

The company has therefore urged Kenya to undertake the project under an engineering, procurement, construction and commissioning (EPCC) contract.

Under the EPCC model, a contractor is obliged to deliver a complete facility to a developer who needs only to turn a key to start operating the facility; hence such deals are sometimes referred to as turnkey construction contracts.

But the government, which is concerned about the fast rising public debt, has made its stand clear. . . .

“We will commence detailed discussion on how the financing approach will be undertaken under that project. We will be discussing modalities, financing structuring and the details for us to be clear on how to undertake this project,” Treasury secretary Henry Rotich said on Tuesday.

Ken

Took leave from corporate career as American lawyer to “assist” democracy in East Africa. After stolen '07 election in Kenya and violent aftermath I have tried to bring out truth of events for those who care in hope we can learn and do better.

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