BAM is building a new 60,000-sq-m main terminal building and associated infrastructure (BAM International)

Tanzania orders probe into “inflated costs” of BAM’s airport expansion

14 February 2017 | By GCR Staff 1 Comment

Alleging inflated costs, the President of Tanzania, John Magufuli, has ordered an investigation into a major airport expansion being carried out by Dutch contractor BAM International in Dar es Salaam.

“We can’t pay for all this cost without value for money”– John Magufuli, President of Tanzania

The Terminal Three project at Julius Nyerere International Airport sees BAM building, over two phases, a new 60,000-sq-m main terminal building and associated facilities intended to ramp up annual passenger handling capacity to 6 million a year.

BAM won phase 1 of the project in 2013 and announced the award of phase 2 on 30 October 2015, six days before Magufuli assumed office as newly elected president of the east African country.

But after inspecting construction work last week on 8 February Magufuli complained about the price tag, which he said was 560 billion shillings ($250m).

“Why did government experts approve such a huge cost ... is this terminal really worth the 560 billion shillings?” Magufuli said, according to news agency Reuters.

The president, who was Tanzania’s Minister of Works for five years before being elected president, did not say why he thought the price was inflated, or offer what he thought would be a more reasonable cost for the new terminal.

The price of $250m is comparable to the combined contract values for phases 1 and 2 announced by BAM in October 2015: “more than” €130m for phase 1 and “over” €100m for phase 2, BAM said at the time.

The president also suspended senior Finance Ministry official Florence Mwanri for approving the start of phase 2 before completion and appraisal of phase 1, Reuters reported.

It is not clear why President Magufuli decided to take issue with the project more that a year after assuming office, but Reuters reports that the target phase 2 completion date of December 2017 has been pushed back due to delays in payments to BAM.

Magufuli appeared to signal an intention to use arrears owed to BAM as a bargaining chip for a reduction of the construction bill.

“The government will pay the arrears to the contractor ... but these costs have to be lowered, we can’t pay for all this cost without value for money,” the president said in a statement.

BAM declined to comment.

Its client, the Tanzania Airports Authority, did not immediately respond to requests for comment.

With a reputation as a forceful driver of projects gained while works minister, Magufuli promised in his presidential campaign to cut red tape and corruption.

He has already made his mark by cancelling multi-billion-dollar railway contracts awarded before he was president to Chinese firms, and by courting Turkey instead for loans and contracting muscle for the railways.

Images: The Terminal Three project at Julius Nyerere International Airport sees BAM building a new 60,000-sq-m main terminal building and associated infrastructure (BAM International)