Zakhem argues that although the contract period was extended several times because of implementation delays, the project rates and quality requirements remained unchanged.

The contractor attributes the delays to KPC’s alleged failure to comply with National Construction Authority (NCA) requirements, delayed approvals and procurement of major plant and equipment, late issuance of construction drawings and details, and external obstructions.

“From the outset and throughout the project, we diligently performed our contractual obligations. However, the progress and completion of the works were materially affected by numerous acts, omissions, defaults and breaches attributable to the defendant,” the firm’s chairman Ibrahim Zakhem says in a petition filed at the High Court.

KPC floated the Sh48 billion tender for the replacement of Line 1, the Mombasa–Nairobi petroleum products pipeline.

Zakhem says KPC was contractually obligated to pay the agreed contract price and any extra sums due for completed works and defect rectification.

According to court documents, the contractor took possession of the site on January 6, 2015, and began construction as scheduled. However, it claims progress was hampered by KPC’s actions and omissions.

The company accuses KPC of introducing major design changes during implementation, failing to provide uninterrupted access to sections of the pipeline corridor, issuing numerous variation orders and additional work orders, and causing work suspensions.

Zakhem further alleges that KPC failed to address physical obstructions, third-party interference, community disruptions and encroachments along the pipeline route within a reasonable time despite its contractual obligations.

The contractor says it commissioned an independent consultant whose March 2018 report concluded that the project had been delayed beyond the original completion period.

According to Zakhem, the delays resulted in substantial additional costs and necessitated extensions of the completion period. The company maintains that it is entitled to extensions of time, reimbursement of prolongation and disruption costs, and adjustments to the contract price.

Court records show that Zakhem submitted five Extension of Time (EOT) claims between 2016 and 2018, seeking $41.4 million under EOT 1, $65.1 million under EOT 2, $44.8 million under EOT 3, $34.6 million under EOT 4 and $15.2 million under EOT 5.

The contractor argues that the contract entitles it to extensions where project completion is delayed by the employer’s actions or omissions and allows corresponding adjustments to the contract price.

Separately, Zakhem, earlier this year, sued KPC seeking $6 million arising from the same contract.

That claim stems from a partial High Court decree issued on June 16, 2020, ordering KPC to pay the contractor $44 million (then about Sh5.72 billion).

Zakhem says about Sh4 billion of the decretal sum was remitted to the Kenya Revenue Authority (KRA) to settle tax obligations. KPC subsequently paid Sh3.099 billion on October 22, 2020, and Sh915 million on January 8, 2021.

The contractor argues that discrepancies arose because the decree was denominated in US dollars while payments to KRA were made in shillings, without properly accounting for exchange rate fluctuations.

Using an exchange rate of Sh108 to the dollar, Zakhem calculates that KPC paid a total of $36.86 million, leaving an outstanding balance of $7.1 million as at January 31, 2021.

The company says a further Sh485 million recovered through a court order in June last year—equivalent to $3.75 million at an exchange rate of Sh129—reduced the balance to $3.4 million.

“From the $7,157,824 being the balance from the partial decree, the company is yet to remit the sum of $3,406,434,” the demand letter states.

Zakhem says the unpaid amount accrued interest of $2.62 million at 14 per cent per year between June 16, 2020, and December 31, 2022, bringing the total claim to $6.03 million (about Sh781 million).

In June last year, the contractor obtained a court order allowing it to recover Sh485 million from KPC bank accounts.

KPC has disputed the claim, arguing that all outstanding payments were settled under a consent agreement reached on September 25, 2023.

The state corporation said the suit is an attempt to reopen a matter that was conclusively resolved and maintains that exchange rates and final payable amounts were fully discussed and agreed during negotiations.

However, the High Court rejected KPC’s argument and ruled that the amount remained outstanding.

Earlier, Zakhem had sought $126 million (about Sh16.38 billion) in a broader claim, but the High Court awarded $44 million in a partial judgment.

KPC appealed the decision and, while the appeal was pending, the parties entered negotiations that led to the 2023 settlement.

The corporation has also argued that there is no enforceable decree arising from a case that has since been withdrawn.