Cancellation of JKIA terminal contract haunts State 5 years on

The government’s cancellation of a Sh60 billion contract for construction of a passenger terminal at the Jomo Kenyatta International Airport (JKIA) five years ago continues to hang over the country’s head as the contractor pursues the State for compensation.

Kenya Airports Authority (KAA) now says as long as the matter remains outstanding, it cannot carry out major infrastructure developments to increase passenger handling capacity at the airport without the jilted firm stopping it through court.

The authority yesterday told the National Assembly’s Public Investments Committee that it had set up a team to negotiate with China National Aero-Technology International Engineering Corporation (Catic), which slapped KAA with a Sh17.6 billion bill for breach of contract.

The hefty penalty is despite the company not having done any construction.

KAA managing director Alex Gitari said the team comprised of negotiators drawn from the authority, the Attorney General’s office and the Transport ministry.

“That project was terminated and the contractor is asking for that very huge amount,” he told the committee.

“As the airports’ operator and in consultation with the board and the parent ministry, we are eager to resolve the dispute with the contractor…not to say we are eager to pay but to resolve the dispute.”

He said the team had already had many meetings to prepare for “good-faith” negotiations and they were not negotiating to pay.

“We are driven by the desire to protect the public interest in this matter,” Mr Gitari said.

The committee, however, said it was not clear what KAA was aiming at in opening negotiations with Catic, asking what would become of the Sh4.2 billion advance payment to the contractor and yet no work had been done other than a ground-breaking ceremony in 2013.

Committee chair and Mvita MP Abdullswamad Nassir tried to get clarity on the expected outcome of the negotiations.

“When you say you will be negotiating in ‘good faith’, it could mean many things,” he said.

“When you reached out to them (contractor) and told them to prepare for negotiations, what did you tell them would be the basis of the negotiations?” Mr Nassir also offered that the authority could speak to the committee ‘in camera’ but KAA declined, arguing there was a need to keep the details confidential until it met with the contractor.

The Greenfield terminal was expected to incrementally add JKIA’s handling capacity by 18.5 million passengers per year by 2030.

The argument that led to the cancellation of the contract then was that JKIA still had ample passenger-handling capacity, which was at the time boosted by the refurbishment of the existing terminals as well as the construction of Terminal 1A that increased its capacity by 2.5 million passengers.

Gitari said yesterday while JKIA had met the country’s aviation needs, its capacity had been outstripped by steady growth in the number of people coming to Kenya and that the country should consider making investments in infrastructure to handle the traffic.

However, such a venture would be impossible as long as issues surrounding the termination of the Greenfield terminal‘s contract remained outstanding, he said.

“It is critical to resolve that dispute because if we tried to advertise for a terminal building today, the contractors would rush to court and try to block it.”

Gitari said retaining JKIA’s status as the regional aviation hub for East and Central Africa requires making investments to expand the airport.

“Competitors to JKIA, the likes of Rwanda, Ethiopia, Tanzania and Uganda, have all invested significantly in their terminal capacity. We have not done that for JKIA,” he said. In 2019, JKIA served over eight million people against its capacity of 7.5 million, though travel was later affected by the Covid-19 pandemic.

“Were it not for Covid-19, which slowed down air travel significantly, we would currently be in a crisis of sorts today,” the MD said.

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