Don’t arbitrate, Geothermal told, as it could cost taxpayers Sh1bn
Geothermal firm terminated a contract with a clearing and forwarding company, which invoiced it Sh1 billion for loss of revenue when the tender was stopped
Legislators yesterday warned the Geothermal Development Company against accepting arbitration with a contractor, saying the outcome could cost taxpayers Sh1 billion.
The Public Investment Committee told GDC management that arbitrating with Bonfide Clearing and Forwarding Company Limited over termination of a Sh1.7 billion tender was not a viable option.
The corporation offered Bonfide a contract in 2012 to move geothermal rigs and other equipment in 40 lots, each costing Sh42 million.
The rigs were to be moved within as distance of 11km, bringing the total cost to a Sh1.7 billion.
Yesterday, GDC managing director Johnson ole Nchoe told the watchdog committee he company, which was awarded the contract, has invoiced GDC for Sh1 billion in lost revenue.
GDC had decided to terminate the contract on September 13, but Bonfide contested the decision and demanded payment for the work done by the date the contract was terminated.
Nchoe said GDC’s position was that there were no outstanding payments owed to the contractor following the termination of the tender. However, Bonfide submitted two invoices for pending payments, citing mobilisation and demobilisation costs.
The initial invoice, he said, was Sh13.4 million, while the second one was Sh1 billion — a computation for loss of revenue for the remaining 24 moves.
In seeking to get ‘irregular’ payments, the contractor has gone ahead to have the matter referred to a single arbitrator. MPs warned this could be a scheme in which taxpayers would lose a lot of money.
“The contract had no provision for mobilisation or demobilisation as invoiced by the contractor. Payment was provided for a complete move,” Nchoe said. “The computation of loss of revenue cannot be supported as the contractor did not provide the services and GDC had the right to terminate the contract.”
GDC said it has invited the company for discussion in an attempt to resolve the dispute amicably. It said it feared protracted and costly court battles.
“We have said we don’t accept any liability, but we have called the meeting in good faith because we don’t want to go the court route and then the contractor turns around saying, ‘I was not given a fair hearing,” Nchoe said.
Kikuyu MP Kimani Ichung’wa, Limuru MP John Kiragu and Geothermal Development Company CEO Johnson ole Nchoe at Parliament Buildings yesterday /