Taxpayers lose Shs12.8b in failed Entebbe airport works

Taxpayers will incur an extra Shs12.8b ($3.5m) on a component of the Entebbe airport expansion after a Chinese company contracted to do the work failed to deliver, according to a report seen by Monitor.

Instead of sanctioning the company and compelling it to either undertake the works “at no extra costs” per the contract, investigators in the classified report say Uganda Civil Aviation Authority (UCAA) instead contracted another company to undertake the work at an extra cost to the tax payer.

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Investigators, in their report, note that the contract specified a scope of fuel hydrants on new apron extension (item 5.4), of which $3.5m is allocated to be done by the contractor, China Communications Construction Company (CCCC). 

This scope was, however, transferred to TRISTAR, a different contractor. These funds are now reallocated to the changes in the cargo centre, which by contract should be done by the contractor, CCCC, at no extra cost.
The works are part of a $200m (Shs731b) loan that the government acquired from the EXIM Bank of China to undertake the upgrade and expansion of Entebbe International Airport. The five-year project executed by CCCC commenced in 2015 and was to be completed in May 2021. 

Undone work
UCAA, through the Chinese contractor, was to provide and upgrade infrastructure and facilities to modern systems, provide relaxing utilities to passengers and attract revenue for Entebbe International Airport.

This publication has variously reported on the abuse and mismanagement of components of the loan, which is now subject to a parliamentary inquiry.

On Tuesday, top officials from UCAA were kicked out of the House Committee on National Economy after they failed to provide proper accountability for the loan.

UCAA led by its director general, Mr Fred Bamwesigye, could not explain to MPs the amount spent on different infrastructure and the specific works accomplished with the aid of the loan.
They, for instance, reported to have accomplished 96.4 percent of a new cargo building, but could not explain what exactly was accomplished and the amount spent.

“What you are telling us is not what we want. We want to know how much was spent on the construction; if the building is complete, are you using it?” Dr Abed Bwanika (Kimanya-Kabonera MP), asked during the meeting last Tuesday.

“When the loan was passed, it had different components, we want to know what you achieved on each component and the expenditure,” Mr Wilson Kajwengye (Nyabushozi), told the UCAA managers.

The committee vice chairperson, Mr Robert Migadde, questioned the competence of UCAA given the failure to provide proper accountability.

“You were given this loan because everyone thought you were fit to handle it, we, MPs, cannot be the ones to tell you the nitty gritty of the report, that put this here and there,” Mr Migadde stated.

Mr Miggade reiterated that the committee, in its invitation to UCAA, clearly stated that the authority was required to provide both financial and physical performance of the loan, including pictorial evidence.

“The government is bound to make heavy losses resulting from substandard work being delivered by the contractor,” the investigators in the report seen by Monitor, conclude.

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In what they theme as “Poor standard of work at the cargo centre,” which is part of the scope of the design and build project that has been undertaken by the contractor, CCCC, the investigators say the project was rejected by cargo operators at Entebbe airport (DAS Handling Limited and the National Aviation Services (NAS), formerly ENHAS.

The two entities were asked by airport authorities to shift the operations to the new facility. However, on its inspection, they found that the substandard work could not support their operations.  Separate sources at the two operators confirmed the findings to Monitor.

“The building could not facilitate them to package the cargo as expected to be received by the cargo aircraft.

The existing cargo infrastructure designed in 1997 was far better and compliant to the cargo standards than this new design of 2014. 

The facilities were insufficient – the cold rooms for handling fresh produce were insufficient and not positioned as expected by the standards and regulations,” the report notes.

Investigators argue that these were purely omissions done during the design and construction of the building, the risk of which should be borne by the contractor, CCCC, in accordance with the “FIDIC contract”.

On January 10, Sunday Monitor presented excerpts of the report to Mr Joseph Zheng Biao, the CCCC country director. He promised to respond after consulting with management. Mr Biao kept asking for more time to address the issue and subsequently stopped responding to our request for a comment.

The actual construction of the cargo building was started in the fourth quarter of 2017, and completed in the fourth quarter of 2019.  A source privy to the report told Sunday Monitor that UCCA officials have fiddled with numbers to protect what they say is CCCC incompetence 

“UCAA team will argue that the contract sum was not changed ---- but note that there was a scope change in which works that were supposed to be done for fuel hydrants at apron 1 were removed from the CCCC and given to TRISTAR,” the source, who asked not to be named, said.

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The source added: “The biggest issue is that the person in charge is the director, project manager and at the same time the contracts committee chairperson. This change and decision taken should be accounted for,” the report reads.

“In any case,” the report further observes “according to FIDIC design and build contract, clause 5.8 design error, the contractor has a responsibility to provide fit-for-purpose design. Therefore, the contractor should have been held responsible for this, and government should not have been exposed to this loss. There is probably collusion with those involved to benefit from this shielding of the contractor,” the report notes.

On the issue of the design errors/omissions for the constructed cargo centre, the investigators propose that “the contractor, CCCC, should be held responsible. They have the design mandate, as well as construction mandate.

The FIDIC contract (yellow book) under which the project is being implemented holds the contractor responsible per clauses 7.3, 7.5 and 10.

“The failure of UCAA team to exercise the above clauses and instead are covering up for the contractor is an indication of collusion to benefit from this for their own individual interest”.

The issue of the 12.8b was briefly interrogated by the parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) during an interface with UCAA officials in February last year.

The director for Navigation at UCAA, Mr Ayub Soma, told legislators on that committee that the variation arose after an inspection and validation exercise was done by officials from the European Union, a key destination for flights out of Uganda.

“It was realised that there were new requirements, which Entebbe airport had to fulfil and these touched on safety and handling procedures for cargo and mail,” Mr Soma said. 

“It included the modification of processes and there was a change in some kind of infrastructure to fit the EU market. This resulted in the change of scope, which we had to take.”

The Cosase committee recommended a forensic audit into the matter. Information available to Sunday Monitor indicates that the forensic audit is yet to be undertaken one year later.

“Interestingly, the EU regulations being referred to have nothing to do with impact on the infrastructure and moreover, they came into effect on June 1, 2017 – (the contractor had sufficient time to take these into consideration if they had any effect on the infrastructure). Since the construction started in Q4 [quarter four] 2017 and was completed in Q4 2019. Moreover, one will note that the approval for this was secured even later,” the investigators note.

The report recommends that questions be raised on the reallocation as far as how possible it was that the changes in the cargo were a perfect fit for the funds of the skipped scope.

Further that the EU regulations that are “being used as the excuse” be studied to determine their effect, and when they came into effect.

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That the original design of the cargo building and the design with the changes should be studied as well to determine the linkage of the changes to the EU regulations.

A contracts expert on design and build contracts be engaged to determine who is responsible for the changes.

UCAA dodgy

On January 13, we presented the details of the report to the Uganda Civil Aviation Authority (UCAA) spokesperson, Mr Vianney Luggya, with specific reference to the areas queried in the report.

In response, Mr Luggya said the issues are many but that “the bulk of them are old allegations that have been explained before [and] are just being regurgitated”.  He asked for more time to respond.

On further inquiry, he again asked for more time.
“I kindly request for another day or two…,” he said on January 17. 
He did not respond to subsequent reminders.