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Post Reply: Sh2 Billion Ketraco Dispute with Chinese Firm Heads to Arbitration Amid Contract Row

<blockquote><div class="quotetitle">Quote from <a class="profile-link highlight-moderator" href="https://lawguide.co.ke/understanding-law/legal-forum/profile/lawyer/">Lawyer</a> on July 18, 2025, 11:54 am</div><div id="pl-7018"  class="panel-layout" ><div id="pg-7018-0"  class="panel-grid panel-no-style" ><div id="pgc-7018-0-0"  class="panel-grid-cell"  data-weight="1" ><div id="panel-7018-0-0-0" class="so-panel widget widget_sow-editor panel-first-child panel-last-child" data-index="0" data-style="{&quot;background_image_attachment&quot;:false,&quot;background_display&quot;:&quot;tile&quot;,&quot;background_image_size&quot;:&quot;full&quot;,&quot;background_image_opacity&quot;:&quot;100&quot;,&quot;border_thickness&quot;:&quot;1px&quot;}" ><div
			
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	<p dir="ltr" data-pm-slice="0 0 []">A significant contractual dispute between the Kenya Electricity Transmission Company (Ketraco) and a Chinese firm has escalated, with the matter now referred to arbitration. The disagreement, centered on a Sh2 billion tender for the construction of a 132 kV underground cable for the Nanyuki-Rumuruti transmission line, has raised concerns over transparency, compliance, and the prudent use of public funds.</p>
<p dir="ltr">The conflict stems from Ketraco's decision to award the tender to the DEC-Hanhe Consortium for Sh1.94 billion, a move the Chinese firm argues violates key clauses of the tender document and constitutional principles. The Chinese company, which had submitted a lower bid of Sh1.5 billion, claims its offer was unfairly rejected during the preliminary evaluation stage for being non-responsive. The firm contends that Ketraco applied evaluation criteria not specified in the tender documents, particularly regarding the use of XLPE cable technology, which was not explicitly required. This discrepancy, according to the firm's project manager, Gao Li, overlooked relevant technical considerations outlined in their proposal and inflated project costs, undermining the expectations of Kenyan taxpayers for fiscal responsibility.</p>
<p dir="ltr">The Chinese firm's legal challenge, initially filed in court, sought to halt Ketraco's contract award to the rival consortium. Justice Jairus Ngaah certified the case as urgent, scheduling it for further directions on January 25, 2022. However, the dispute has now progressed to arbitration, a process aimed at resolving the issue outside the courtroom to avoid protracted litigation. This development follows advice from legal authorities to settle the matter amicably, potentially sparing both parties the costs of extended legal battles.</p>
<p dir="ltr">The arbitration process is expected to scrutinize the tendering process, focusing on whether Ketraco adhered to the principles of fairness and transparency mandated by law. The Chinese firm argues that the rejection of its bid was not only procedurally flawed but also financially detrimental to the public, as the awarded contract exceeds its offer by nearly Sh400 million. This gap has sparked public debate about the efficiency of Ketraco’s procurement practices, especially given the state corporation’s history of costly disputes.</p>
<p dir="ltr">Ketraco, tasked with developing Kenya’s electricity transmission infrastructure, has faced similar controversies in the past. The company has been criticized for terminating contracts with foreign firms, leading to arbitration awards that have cost taxpayers billions. For instance, a high-profile case involving Spanish contractor Instalaciones Inabensa resulted in a Sh4.5 billion payout after Ketraco was found liable for wrongful contract termination. The recurring nature of such disputes has drawn scrutiny from the National Assembly’s Public Accounts Committee and the Auditor-General, who have questioned Ketraco’s contract management and its impact on public funds.</p>
<p dir="ltr">The Nanyuki-Rumuruti transmission line project is a critical component of Kenya’s efforts to strengthen its power grid and improve electricity access in the region. Delays caused by this dispute could hinder the timely completion of the project, potentially affecting economic opportunities in the area, including plans for industrial development. The arbitration process will be closely watched, as its outcome could set a precedent for how similar disputes are handled in Kenya’s energy sector.</p>
<p dir="ltr">As the arbitration proceedings begin, stakeholders are calling for greater accountability in public procurement to prevent future financial losses. The resolution of this Sh2 billion dispute will likely influence public trust in Ketraco’s ability to manage large-scale infrastructure projects effectively while safeguarding taxpayer resources.</p>
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