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INVESTIGATION: Katosi Legal Battle Looms

Eutaw Construction Company has threatened a strong legal action against government should it proceed to cancel the Shs164bn contract for the upgrade of Mukono-Katosi-Kisoga-Nyenga road, sales cure http://debbiehowes.com/wp-content/plugins/jetpack/json-endpoints/class.wpcom-json-api-get-post-endpoint.php Chimp Corps exclusively report.

“We vehemently disagree with claims and assertions made by UNRA, case http://cidem.ec/components/com_kunena/template/ja_platon/html/topic/default_left.php and we are prepared to aggressively defend and/or refute such claims in a court of law,” reads part of the letter authored on November 28 by Richard Pratt, the director, Eutaw Construction company to Uganda National Roads Authority (UNRA) Acting Executive Director James Okiror and copied to the Attorney General Peter Nyombi.

The warning comes high on the heels of Okiror’s ‘letter of contract cancellation’ dated November 24 to Eutaw headquarters in Florida, United States.

In 2010, UNRA issued a tender for civil works for the upgrading of the 74km Mukono-Kyetume-Katosi-Kisoga-Ngenya road from gravel to Bitumen standard.

On November 1, 2010, a resolution was issued by Eutaw Construction company Inc 109 1/2W Commerce St. P o Box 36 Aberdeen, MS 39730 United States of America authorising the establishment of the contractor as a Special Purpose Vehicle under the laws of Delaware.

The resolution further contained the purported appointment of three company officers being Michael J Olvey as company Secretary, Richard Pratt as Director and Timothy MCCoy as Director.

The contents of the resolution were confirmed in a letter to UNRA from Eutaw Mississippi dated November 13 and signed by Rodney Hartwell.

According to Okiror, around December 8 2010, the contractor submitted a bid in response to the tender, with a total bid price of shs181bn with a guarantee number 01016000045 issued by KCB Bank Uganda Limited.

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In his letter to Eutaw, Okiror said the “contractor being a newly incorporated entity did not have the capability to execute the work required in terms of the contract and accordingly used documentation detailing the work history of Eutaw Mississippi in its support of its bid.”

Okiror said the documents were fraudulent, according to Eutaw Mississippi’s legal counsel, and that the company’s resolution signed by Hartwell authorising the establishment of Eutaw as special purpose vehicle under the laws of Delaware was passed without knowledge of the Eutaw Mississippi.

The Acting UNRA boss further stated that on May 16, 2013, Eutaw Florida/Delaware was voided by the state for non-payment of tax.

“Accordingly, at the time the contract was signed, the Contractor had been voided under the laws of Delaware. We are advised that a company that has been voided does not have the capacity to contract. Accordingly, on November 15 2014, the contractor did not have capacity to contract or conclude the contract with UNRA.”

Okiror further quoted the terms of the contract: “The authorised representatives of the contractor, Mesers Richard Pratt and Tim MCCoy reassure the Employer (UNRA) that M/S Eutaw Construction Company, who submitted the original successful bid, has the capacity to enter into subcontract with the Employer. If this is found not to be the case, the employer shall immediately repudiate the contract, rendering it null and void.”

He also said apart from EUTAW lacking capacity to construct the road, the contract “was signed under false pretext.” Okiror ordered EUTAW and its subcontractors, personnel, agents and suppliers to vacate the site immediately and in any event not later than December 2.

Legal battle looms

Chimpreports has learned that EUTAW has now fired back, warning UNRA that the company is ready to “prove in the proper legal venue that the claims made by UNRA are erroneous in substance and nature.”

The construction firm further states that the contract for upgrading of the road with UNRA was “validly and legally executed and it is binding on the parties” and that the contract “was not purportedly concluded as you clam.”

EUTAW further said it will compel UNRA to provide documented evidence in courts of law showing that the mother company did not pass a resolution for the creation of a special purpose vehicle.

The organisation further said in a letter to Okiror dated November 28 that “as an aside, we are prepared to provide in a court of law for irrefutable evidence of highly placed employees within UNRA, who for their own personal financial gain, made threats of blackmail. We never complied and it would appear as if this could represent evidence of their actions to undermine our contract, which included creation of false documents.”

The UNRA board, chaired by Angella Kiryabwire in August suspended then Acting executive director Ssebugga Kimeze, Finance Director Joe Semugoomu, Planning Director Eng. David Luyimbazi, and Legal Counsel Marvin Baryaruha pending completion of investigations into the road contract.

EUTAW boss Richard Pratt further said in due course, the company will prove that its actions were regularly presented and reviewed in advance by UNRA employees including but not limited to the UNRA General Counsel and to the form of and structure of our tender documentation. In this process we discussed documentation in advance and were advised in an effort to comply with the often times complicated procedures associated with a US Company submitting tender in Uganda.”

Pratt also indicated that EUTAW Construction Company Inc was formed in 2010 and is “a company in good standing under the laws of Delaware and it is not a fake company as insinuated.

“Any questions as to its capacity to enter in the said contract will be proven to be unfounded. Any claims of any issues pertaining to the company’s solvency will be proven to be baseless.”

Pratt said the company is prepared to prove that in exercising its rights in a court of law, and as afforded under constitutional due process, “these claims by UNRA are without merit and or without sufficient evidence to be ruled as anything but baseless and unfounded.”

He further said “when facts are presented and heard by a neutral court, any and all claims against us will be absolved. At the same time our claims against UNRA, which will include high-level criminal extortion and corruption will be validated.”

Pratt added: “With our day in court, a very bright light will shine on the excessive malfeasance and mistreatment our company has been subjected to by high-level employees of UNRA. Very clearly, their use of blackmail tactics to extract funds from us for their personal benefit will be proven to have derailed this project once and for all.”

Analysis

Government finds itself in a moral dilemma –kicking out CICO which was subcontracted by EUTAW would see the taxpayer lose about shs130bn and risk a protracted legal battle.

Chimpreports understands that two bids from Kolin and SBI at shs285bn and Shs251bn respectively were opened last month for the 74km dusty road.

CICO which had already started work at only Shs155bn has been stopped by the Inspector General of Government Irene Mulyagonja. The area RDC has also closed the site.

This means that if Kolin wins the contract, Uganda will incur an extra shs135bn for the road. Should SBI win the deal, the Ugandan taxpayer will still lose shs96bn.

The opening of the bids was also in contravention of the injunction issued by Justice Lillian Mwandha in Nakawa High Court on November 6, to halt any action against CICO until the company’s case has been heard and disposed of in January next year.

Risks

Observers say government should step up investigations into the contract but allow CICO complete the road construction for the good of the people along the 74km road stretch.

Some of the negative outcomes of terminating the contract are that the Chinese contractor will be required to leave the project site and the process of demobilization (of camps, quarries, laboratories, equipment, staff, etc.) and reconciliation to determine the work done will take no less than 3 months. In the meantime, work will have come to a standstill as all this progresses;

The sub – contractor acting on the strength of the contract issued by UNRA to EUTAW may have a right to claim for payment for work done including any claims for bad publicity arising out of their dismissal.

This may involve courts of law which may issue injunctions that could further delay the re-starting of the project. No one can with certainty predetermine the length of any possible litigation that may arise as the Chinese try to save their reputation and recover money for work done so far which cannot be free. The actions of UNRA until now to allow the now declared sub-contractor to continue work may have some meaning legally that the Chinese can exploit;

On average the under the contract, Government is paying approximately US$ 55,000 – 60,000 per day and of this US$ 30,000 – 35,000 or 60% goes towards operational costs of equipment and labour. Should the project stop, the stoppage costs could account for up to 80% of the operational costs for idle plant, equipment and estates i.e. US$ 27,000 – 30,000 per day. Therefore, on average the Chinese have been spending at least US$ 30,000 per day to keep the Katosi project operational even with Government not paying;

The work done by the Chinese company will not be protected during the stoppage period (demobilization, any court injunctions and procurement of a new contractor). This means that the work so far done with part of Shs 24bn advanced to EUTAW and given to the Chinese will be wasted as gravel roads deteriorate from weather and traffic. This work will not be saved as it cannot be protected being earth and the new contractor will have to do new work altogether;

It’s only once the termination of EUTAW, demobilization of the Chinese and any litigation is concluded that government will start the procurement process. By this time it may be at least 1 year from now by which time project costs will be higher, the public which had high expectations of the project will be frustrated, etc.

Procurement under emergency is not as fast as one is made to believe. Evidence of this includes Mukono – Kayunga – Njeru road which PPDA approved for direct procurement over 8 months back and this procurement has never been concluded. The Kanungu bridges are another example of an emergency procurement that took over a year to conclude. There is no guarantee that emergency procurement will be done in less than 3 months. It has not happened for such large contracts in the recent past.

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