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Cost Overruns in the Construction of Thika Superhighway

 The rising exchange rate of the dollar that elevated its rate to the all-time high of KSh. 107 per USD sometime last year was said to have been one of the reasons that increased the cost of constructing the Nairobi-Thika superhighway. According to the Kenya National Highway Authority (KENHA) the dollar that has continued to appreciate against the local currency since the project was commenced a few years ago has largely varied the construction cost which was originally budgeted at Ksh. 27 billion.

 A part from the exchange rate, increased fuel prices and inflation has altered the earmarked cost of the project. However, this according to Kindenda, Managing Director of KENHA, this will be determined in its entirety when the project is finally over. “The construction cost for the road is being affected by a number of factors including the exchange rate of the dollar given that it is an international project which has most of the payments paid in dollars,” he said.

 A contractor usually provides the contractors with a 15 per cent ceiling to vary construction prices. Another very important factor that has led to the cost overruns in the construction of the 10-lane superhighway is the time overrun. The completion of the project has been delayed a great deal and has had its completion date postponed three times. The project that was first slated for completion at the end of the year 2011 is due for completion and commissioning by President Kibaki in November 2012. The project is late by over one year.

 According to KENHA, there are external factors also contributing to the increased costs of the project. “The causes are external as well as internal, the contractor is responsible to a certain extent but external factors such as changes in weather have also played a significant role,” said Kidenda adding that when the 50 Km superhighway construction started, the dollar exchange rate was at Ksh. 70 as compared to the current Ksh. 86.

 It should be however noted that the final cost of the road will be known when the construction of the road is completed in light of the current externally driven price variations.

 The African Development Bank has been financing the first two phases of the road from the Nairobi CBD to Kenyatta University at a cost of Ksh. 14 billion. The contribution of the Kenyan government to this whole project is Ksh. 3 billion. The third phase of this project which takes up from Kenyatta University to Thika town is fully financed by the Chinese government. 

 The contracts for the works were awarded as follows:

 

Lot No.

(Km)

Contractor

Contract Sum (Kshs.)

LOT 1: City Arterial Connectors

12.4

M/S China Wu Yi Company Ltd.

8,030,386,596.64

LOT 2: Muthaiga - Kenyatta University

14.1

M/S Synohydro Corporation Ltd.

8,690,568,489.73

LOT 3: Kenyatta University - Thika

23.9

M/S Shengli Engineering Construction Group Co. Ltd.

9,441,732,008.29

 

 

 

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