PUBLISHED ON October 13th, 2014

Museveni launches SGR, but snags abound

Despite a high profile launch this week by the leaders of Rwanda, Uganda and South Sudan, Uganda’s $7 billion Standard Gauge Railway project is still haunted by procurement snags.

The leaders launched the project in Kampala on October 7, as Uganda scrambled to kick-start it with a tentative completion date of March 2018.

As government officials put on a show, questions were still being asked not only over how the procurement of the contractor had been handled but also over the basis upon which the contract price of $7.9 billion had been arrived at.

The EastAfrican has now learnt that the contracts committee of the Ministry of Works has thrown a spanner in the works, refusing to award a contract to civil contractor China Harbour and Engineering Works (CHEC), citing non-compliance with procurement regulations.

In the letter dated October 7, the committee members say they were asked to approve the contract with CHEC because the deal had already been approved under bilateral procedures. The contract committee however pointed out that it had not seen any evidence to corroborate this.

This is to inform you that at its 623rd meeting, the contracts committee considered the submission forwarded under your internal memo of 7th October 2014 and noted that the contracts committee did not approve this procurement as per Section 28 of the PPDA Act. However you have given an explanation that the procurement follows bilateral procedures and conditions for which you have not availed the documents in support of the bilateral procedure. The contracts committee is therefore unable to award the contract,” reads the memo signed by committee secretary Kivumbi David.

Documents further show that while the government was proposing to pay CHEC $7.9 billion for the 513 kilometre railway line, no detailed technical designs were made available to justify the price.

The proposed price, almost equivalent to what Uganda will spend on the 600 Megawatts Karuma hydropower project and transmission lines, is at least $2 billion higher than what rival China Civil Engineering Construction Corporation (CCECC), whose memorandum of understanding for the project was unilaterally terminated by the ministry, had quoted.

No contract yet

President Yoweri Museveni, who launched the railway along with his counterparts Paul Kagame of Rwanda and Salva Kiir of South Sudan on October 8, appeared oblivious to the raging controversy.

Speaking at the launch, Museveni said Uganda had chosen and would sign a contract with CHEC to construct the SGR and funding for the project would be sourced after the signing of the contract.

“We have linked up with CHEC which has good experience in constructing railways, bridges and harbours and it will be their job to source for the money, a loan which we shall pay back,” he said.

President Museveni expects CHEC to work with the army but added that the contract had not been signed because some details had to be ironed out first. The details that have to be worked on now appear to include coming up with a technical design that has a contract price that makes business sense.

Ministry of Finance officials also appear jittery about the $8 billion cost of the project. To ensure that the price is right, the officials want CHEC to go through procurement procedures before the government can commit to have the company construct the SGR.

Patrick Ocailap, the deputy secretary to the Treasury says that the money for the SGR can only be approved after CHEC has gone through procurement procedures and its technical designs approved.

“We shall do due diligence on the contract price after this and then decide on who will fund the project which might include China Exim Bank or any other financier we deem appropriate,” he said.

On President Museveni’s pronouncements about the financing procedures, Mr Ocailap says this was a strategic directive that can be reviewed by the Finance ministry as long as it is within reason.

We still have the mandate to look for the money to finance government programs just like we have done for other infrastructure projects like roads, so we will accomplish this even for the SGR,” he says.

Mr Ocailap says that his ministry along with the Africa50 infrastructure initiative will study the proposals from the Ministry of Works and Transport, before coming up with a bankable document so that Uganda can source for funding. This includes determining whether the price quoted by both the contractor and Ministry of Works and Transport is economically viable.

There have been complaints that Kenya’s contract with Chinese Roads and Bridges Company was overpriced although President Uhuru Kenyatta went ahead and launched the project. Similar concerns are now being raised in Uganda. Kenya will pay $7.7 million for every kilometre of railway constructed against an international average of less than $5 million per kilometre.

Kabiito Karamagi, the legal representative of China Civil Engineering Construction Corporation (CCECC) which has been fighting with CHEC over the SGR contract, also points out that the price being quoted by the latter is high.

Mr Karamagi says that CCECC, which did a feasibility study for the Kampala-Malaba section of the SGR and submitted detailed engineering designs for the same, was offering Uganda a better price than CHEC.

It is understood that CCECC had quoted $4.2 billion for the same job earlier, a figure that was revised upwards to $5 billion to cater for price changes since the studies were concluded more than a year ago.

Karamagi argues that since CCECC was edged out of the deal, the price of the SGR moved to $8 billion from the $7 billion that was quoted earlier.

Source:: The East African

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