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0 PROJECT DETAILED INFORMATION Project Name : Garissa Sewerage Project Contract No : NWSB/T/002/2008/2009 Employer : Northern Water Services Board Project Manager/Engineer: Technical Manager - Northern Water Services Board Consulting Engineers: Wanjohi Consulting Engineers / Shora Consult. Contractor : A. A. Bayusuf & Sons Ltd/Arab-Korean Enterprises Contract Value : Kshs.711,782,486.76 Date of Contract Award: 23rd March 2009 Contract Period : 24 Months Commencement Date : 12th June, 2009 Completion Date :11th June, 2011

Extension of Time Granted: 270 days Expected Completion Time: 11th March, 2012 2.0 Scope of the works The scope of works comprises the construction of primary sewers, complete sewage treatment works with oxidation ponds of various sizes, inlet/outlet structure and buildings for management of the treatment establishment. A fence of chain link on precast concrete posts to enclose the whole of the treatment area covering approximately 100 hectares. It also involves erecting offices for the Engineers Representatives offices and provision of associated services. 3.0 Project History. M/S A. A Bayusuf/Arab Korean Enterprises among other Contractors responded to the Clients request for bids for the execution of the above project and submitted their bid according to the instructions to the Bidders. On evaluation of the submitted bids, M/S A. A. Bayusuf /Arab Korean Enterprises bid was found to be the most responsive and the Client invited the Contractor for contract negotiations. These negotiations took some time and finally concluded sometime in March 2009. The major argument of the Client was the level of available funds which were not sufficient and hence the scaling down of the works to match available funds with a proviso that if funds became available the Contractor would be instructed to execute the total scope of the bid. On conclusion of the contract negotiations, the Employer issued a letter of Award of the contract setting off the process of sealing a contract agreement between the Contractor and the Client. After satisfying all the requirements of the contract, the Contractor was issued with the letter of commencement of the contract vide the Engineers letter ref no. NWSB/WP/7.VOL.III/(75) of 12th May, 2009. At the expiry of the time allowed for in the contract, the Contractor was given possession of site in accordance to the provision of sub clause 42.1 of the conditions of contract.
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The Contractor mobilized and by mid July 2009, the Contractor moved to the site and started the works in compliance with the program of the works as forwarded to the Engineer for approval. The program was finally approved by the Engineer on the 3rd September 2009. However, the Contractor started experiencing challenges as enumerated in section below leading to low productivity and at times to complete standstill on all operations on site. The major causes of delays were as detailed in section 4 herebelow. The contractor, based on the delays enumerated below, vide his letter GSP/SA/31/5/2011 of 31st May, 2011 applied for an extension of time of 12 months and after consideration by the Engineer, the client granted 270 days extension of time vide his letter NWSB/WP/7 Vol.III/(65) of 10th June, 2011. The contractor continued to execute the works albeit continuations of the same delay factors. 4.0 Delay Factors The Contractor experienced a lot of challenges thus; Delayed Payments; Advance and Interim Payments, Grant of Way Leaves, Court Injunction, Tax Exemption, Security and Hostility from the Community during the course of execution of the works thus adversely affecting project output. Some of the challenges have since been resolved while others continue and thus continue affecting contract execution leading to low output reflecting slow progress. The causes of these delays and the effect on the project progress are enumerated in the sections below. 4.1 Advance Payment. After award of contract, and the Contractor after fulfilling all the required contractual obligations applied for advance payment as provided for in the contract for the sum of Kshs 142,356,496, and was subsequently approved by the Client and forwarded to the Permanent Secretary, Ministry of Water and Irrigation for processing and payment vide their letter NWSB/WP/7 VOL.III/ (88) of 24/6/2009. The advance payment was to facilitate mobilization of equipment to site and procurement of additional equipment and project materials. The advance payment was delayed and the Client started payment in installments contrary to the provisions of the contract. The first such installment was received by the Contractor on 11th August 2009, and the last of four installments was received on 8th September 2009. Consequently the Contractors mobilization and procurement of project inputs plans were adversely affected by this delayed payment of advance. 4.2 Wayleaves The Contractor was given possession of site in accordance to the provisions of subclause 42.1 of the conditions of the contract, started works according to the submitted program of works albeit with difficulties as a result delayed payments of advance. Furthermore, it became apparent that the Client had not procured the wayleaves for the entire area covered by the site as defined in the conditions of contract. This was particularly along all the area traversed by the sewer lines. Notwithstanding the above,
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the Contractor continued to execute the works falling under the area defined as the treatment works area. It was not until April 12, 2010 that the Client was finally granted the wayleave for line C vide the Town Clerks letter to the Client Ref No. PW.8/16/1/14 of even date. The matter of the other sewer lines was not addressed in the letter despite the fact that the Resident Engineer in his letter RE/GSP/WP/040 of 18th March 2010 had informed the Employer to secure wayleaves and permits from the Town Council and other relevant departments for all the sections affected by the sewer lines. It is therefore evident that the Contractor did not have possession of significant portions of the site for the entire period from commencement of contract to the 12 th March 2010. It is, however, important to note that the matter of wayleaves is still outstanding and only recently on the 8th February, 2012, the contractor was instructed to stop all works on sewer line A along classified road E861 Garissa- Lamu road. This was as a result of a complaint lodged by the Kenya Rural Roads Authority for use of its road reserve without their authority. This matter has remained unresolved and the contractor has had to send permanent staff on leave for lack of work areas. Furthermore, on sewer line E, the contractor was obstructed from executing his work by a private landowner claiming that the sewer line was encroaching on his property without any notification or compensation contrary to the provisions of the Land Act. This is a clear manifestation of the fact that since commencement of the contract to date, the contractor has never had possession of site free of any incuberances as provided for under sub-clause 42.1 of the Conditions of Contract. This is further evidenced by the current position with the Court Injunction and its reinstatement thereof affecting most of the ponds area and the whole of the outfall sewer line AO. The contractor is therefore entitled to an Extension of time for lack of provision of possession of site under sub-clause 42.3 of the conditions of contract. 4.3 Court injunction The Contractors challenges were further compounded by a court injunction issued by the Mombasa High Court instructing the Employer to stop all the activities in the area designated as the treatment works. This was conveyed to the Contractor vide the Resident Engineers letter RE/GSP/INS/031of 27th January 2010. The Contractor was advised to reschedule his resources and work in other areas while the Resident Engineer was well aware that the wayleaves for the sewer lines had not been secured. The matter was temporally amicably resolved and the Contractor was advised to resume works in the treatment area vide the Resident Engineers letter RE/GSP/INS/041 of 3rd March 2010. By the time work resumption at the treatment works, the Contractor had already lost 50 working days and this is a matter which has been brought up in a claim for reimbursement of costs and extension of time submitted to the Engineer in December 2010 and has been a subject of discussion by the two parties. The decision is still outstanding from the Engineer.

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It may be necessary at this point to mention that the temporary amicable resolution of the court injunction was recently revoked by litigants failure to agree on the out of court agreement and the High Court of Mombasa reinstated this case and the Contractor was once again stopped from carrying any activities in areas affected by the court injunction as at 21st April 2011 vide the Resident Engineers letter RE/GSP/INS/071 of even date. This matter has remained unresolved to date despite assurances from the client that the matter will soon be resolved.

4.4 Delayed payments of Contractors interim payment certificates. The Contractor has suffered excessive delays in payment of his Interim Payment Certificates starting from advance payment. Subsequent IPCs were also excessively delayed before payment. Delayed Contractors Interim Payment Certificates have had devastating effects on the Contractors progress of work. The Contractor has therefore had to operate below capacity leading to slow progress and inefficient use of equipment and labour resources. This default on the part of the client in payment of contractors interim payment certificates contrary to the provisions of sub-clause 60.8 of conditions of particular application (COPA) forced the contractor to scale down work activities to avoid further financial losses. This was communicated to the Engineer vide the Site Agents letter GSP/SA/9/9/2011 of 9th September, 2011. The letter also notified the Engineer that unless payment is received the contractor will be left with no option but invoke the provisions of sub-clause 69.4 of COPA and suspend works. In a letter to the client ref. GSP/SA/28/9/2011 of 28th September, 2011 from the contractor, the contractor reiterated the position taken by the Site Agent vide his letter of 9th September, 2011 and further notified the client of the excessive delays in resolving various issues raised by the contractor which bear financial implications remained unattended and must be addressed and resolved. Whereas some payments were made by the Client all other issues bearing financial implications remain unresolved to date and subsequent IPCs raised are yet again in default. Consequently, the contractors notice of scaling down works with the option of suspending remains un-retracted. The contractor is therefore entitled to an extension of time as a result of the clients default in payment of interim payment certificates in accordance to the provisions of sub-clause 60.8 of COPA. The provisions of this sub-clause are without prejudice to the contractors entitlement under clause 69 of the conditions of contract.

4.5 Tax exemption delays The Contractor also experienced delays with granting of exemption of taxes and duties from the Government but may not be easily quantified.

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4.6 Security and Hostility from the Community The Contractor has had to contend with hostility from the local community ranging from demands of employment for the youths to deliberate blocking of the Contractor to access work sites. These have degenerated at times to actual physical attack causing bodily harm to Contractors supervisors and the matter referred to the police. These and many other incidents caused the Contractor to lose several working days and indeed caused the Contractors workers to be demoralized and insecure leading to poor output. It is, however gratifying that this has improved greatly and no further incidents of any significance have been experienced on site. 4.7 Procurement of large size sewer pipes In spite of having received quotations for sewer pipes size dia 900mm and dia 760mm from reputable companies which manufacture concrete products, it became evident that the suppliers had neither experience nor the moulds for producing these sizes. Indeed no manufacturer in the country had these moulds and the Contractor had to make emergency arrangements and assist the manufacturer procure moulds and pallets for the production of these pipes from out of the country. This process took considerable time before arrival and thereby delaying commencement of production of these pre-cast units. Furthermore, the Contractor after paying the supplier for production and supply of these units including rubber rings, it again emerged that the supplier did not have the rubber rings and none were available in the country. The Contractor was to intervene and procure these items from the United Kingdom. This involved a Contractors representative travelling to the UK to facilitate procurement and shipment of the rubber rings. This unexpected situation caused delay in commencement of sewer lines A, E and the outfall. The first delivery of these pipes arrived on site in mid-December 2010. Due to the size of pipes the Contractor could only transport a maximum of 19 pieces of diameter 900mm on a 40 foot trailer and 23 pieces for the diameter 760mm. A feat that has necessitated the Contractor to assign 4No dedicated 40 trailers towards this exercise. At the time of delivery of the first batch of these units in December 2010, the Contractor had lost considerable time on the revised programme of works. This delay situation could not have been anticipated by the Contractor at the time of tendering given that the Contractor had received quotations from reputable suppliers in the country. 4.8 Analysis and approval of Contractors claims The contractor has experienced a lot of difficulties in having contractual claims analyzed and approved for payment. The case of VOP, Court Injunction and Lines B and C remain unresolved in spite of having had several management meetings. This delay in resolving issues bearing financial implication has denied the contractor necessary cashflow to finance the project. The matter is further aggravated by the inordinately long
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time the Resident Engineer takes to certify contractors interim payment certificates. These have all been raised with the Client but it seems no solution is forthcoming. 4.9 Flood damage to the ponds The flooding experienced in April 2010 and in November 2011 caused damage to the ponds already completed and will require additional time to clear the flooded ponds and mitigate the damages caused. The extent of damage inflicted can only be established after the ponds are emptied of the flood water. Unfortunately the area is covered under the court injunction. It may also be mentioned that the ponds area need to be protected from future flooding by instituting appropriate measures to avoid recurrence of these floods. The contractor is therefore entitled for extension of time for this unforeseen natural occurrence and for the inadequacy in the design by omitting flood mitigating measures while well aware that the ponds area was located on the flood path of the river Tana. The actual required extension of time can only be established once the extent of the damage is established. However, a speculative extension of 6 months may be sufficient if the court injunction is lifted and works restarted. 5.0 Extension of time due to delays. In submission of the first request for extension of time, the Contractor had cited the delays suffered as enumerated in section 4 above and clearly articulated the effects of the delays to the delivery of the project. It is regrettable that the same delays continue to be experienced. Consequently, the contractor has no alternative but to request for additional extension of time on the same basis. Furthermore, it should be noted that the contractor in his submission had requested for an extension of time of 12 months and was only granted 270 days (9 months) with no explanation tendered to the contractor. However, the contractor acknowledged the time extension granted hoping that the situation will improve and indeed the client also was under the impression that the solution to the above delay factors would be resolved during the time granted. This has not been the case and unfortunately other cases of wayleave procurement have since cropped up which have impacted negatively on the project execution. Under the prevailing conditions of uncertainty as to when the wayleaves problem would be resolved, the contractor can only speculate on when the works can be delivered. However, the contractor will still request for 3 months, not granted in the first extension of time. Depending on when the wayleaves issues are resolved, the contractor will require an additional 9 months to execute works in areas affected. The overall extension of time due to the Contractor is therefore 12 calendar months. 6.0 Submission The Contractor, having considered that the issues raised in the first application for extension of time have not been resolved, applies for 12 months extension of time with a proviso that the client will resolve issues raised under section 4 above otherwise this application will not be realized.
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After approval of an appropriate time extension acceptable to both the parties and confirmation on the part of the client that the issues raised will be resolved, the contractor will then submit an appropriate program of works for completion of the project and prepare a combined extension of time claim. However, a tentative programme of works is enclosed for your information. It is however, worthwhile to mention that the completion of the works in the extended time will also depend on the new developments with respect to the reinstatement of the court injunction and the matter of the road reserve on the E861 raised by Kenya Rural Roads Authority; and non-recurrence of the delay factors enumerated above.

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