Uganda to Lose Shs130bn in Katosi Road Deal

The Ugandan government has gone ahead to expedite the retendering of the Mukono-Katosi road contract against a court order, side effects more about putting the taxpayer at the risk of losing over shs135bn in a new deal not to mention the possibility of a protracted legal battle.

Chimpreports understands that two bids from Kolin and SBI at shs285bn and Shs251bn respectively were opened on Monday for the 74km dusty road.

Yet CICO, which was subcontracted by EUTAW to do the job at only Shs155bn, has been stopped by the Inspector General of Government Irene Mulyagonja.

This means that if Kolin wins the contract, Uganda will incur an extra shs135bn for the road. Should SBI win the deal, the Ugandan taxpayer will still lose shs96bn.

Observers say the actions of the IGG could also expose Uganda to a huge court battle with CICO.

The opening of the bids was in contravention of the injunction was issued by Justice Lillian Mwandha in Nakawa High Court on November 6, to halt any action against CICO until the company’s case has been heard and disposed of in January next year.

“It is hereby ordered that an interim order be issued restraining UNRA or their agents from implementing the IGG’s orders excluding the applicant from participating in the emergency procurement of construction works of the road pending the determination of the main application on January 8, 2015, or until further orders,” the High Court injunction reads in part.

However, Mulyagonja insisted that UNRA must open fresh procurement of new contractors, excluding the Chinese company CICO, which had already commenced works on the road.

The IGG’s move has since been met with mixed feelings.

While she took credit for busting the graft in the road deal, some sections including the Attorney General claim the lengthy process could stall the road project and cost a fortune to the county.

Residents of Buikwe who are affected by the bad state of the 74km road have also been piling pressure on government to expedite its completion.


Experts maintain the immediate risks of not regularizing the Chinese sub – contract notwithstanding the inevitable or required termination of the EUTAW contract and starting a new procurement will be costly for government.

The Chinese contractor will be required to leave the project site as a result of the termination of the EUTAW contract.

The process of demobilization (of camps, quarries, laboratories, equipment, staff, etc.) and reconciliation to determine the work done will take no less than 3 months. In the meantime, work will have come to a standstill as all this progresses.

Officials say the sub – contractor acting on the strength of the contract issued by UNRA to EUTAW may have a right to claim for payment for work done including any claims for bad publicity arising out of their dismissal.

This may involve courts of law which may issue injunctions that could further delay the re-starting of the project.

No one can with certainty predetermine the length of any possible litigation that may arise as the Chinese try to save their reputation and recover money for work done so far which cannot be free.

The actions of UNRA until now to allow the now declared sub-contractor to continue work may have some meaning legally that the Chinese can exploit.

On average under the contract, Government is paying approximately US$ 55,000 – 60,000 per day and of this US$ 30,000 – 35,000 or 60 percent goes towards operational costs of equipment and labour.

Should the project stop, the stoppage costs could account for up to 80 percent of the operational costs for idle plant, equipment and estates i.e. US$ 27,000 – 30,000 per day.

Therefore, on average the Chinese have been spending at least US$ 30,000 per day to keep the Katosi project operational even with Government not paying;

The work done by the Chinese company will not be protected during the stoppage period (demobilization, any court injunctions and procurement of a new contractor). This means that the work so far done with part of Shs 24 Bn advanced to EUTAW and given to the Chinese will be wasted as gravel roads deteriorate from weather and traffic.

This work will not be saved as it cannot be protected being earth and the new contractor will have to do new work altogether.

It’s only once the termination of EUTAW, demobilization of the Chinese and any litigation is concluded that Uganda will start the procurement process.

By this time it may be at least 1 year from now by which time project costs will be higher, the public which had high expectations of the project will be frustrated, etc.

Procurement under emergency is not as fast as one is made to believe. Evidence of this include Mukono – Kayunga – Njeru road which PPDA approved for direct procurement over 8 months back and this procurement has never been concluded.


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