24 March 2014

Tanzania: Tanroads Demands Sh22 Billion Compensation From Insurance, Construction Firms

TANZANIA National Roads Agency (Tanroads) has filed a suit against Golden Crescent Assurance Company Limited and Takopa Construction Company Limited, demanding over 14bn/- and 5,252,525 US dollars (over 8bn/-) for breach of Bagamoyo-Makofia-Msata road construction contract.

The road agency demands 8,297,427,924/- from the defendants as encashment of performance bond together with 6,114,359,865.53 and 5,252,525 US dollars being advance payment bond for the construction works.

The suit before High Court Judge Salvatory Bongole has been set for mention on May 13.

It is alleged that in July 2008, Tanroads through advertisements in newspapers, invited interested eligible Civil Engineering Contractors to bid for a tender to upgrade the 64-kilometre Bagamoyo-Makofi-Msata road to bitumen standard.

Takopa Construction Company Limited, being incorporated and registered in Tanzania as the general civil work contractor, was among the bidders.

Upon evaluation, the firm was declared to be the lowest bidder and was awarded the contract through a letter of acceptance of November 11, 2008.

Following such development, on November 13, 2008, Takopa entered into a written contract with Tanroads for the construction works with a completion period of 24 months.

"It was contractual requirement under the contract that prior to the execution of the contract, the contractor provides performance bond in a format acceptable by the plaintiff (Tanroads) within 28 days after the date of the letter of acceptance," reads part of the plaint of the suit.

According to the plaint, Takopa was also required to provide advance payment bonds for guaranteeing the advance payment for local and foreign portions in formats acceptable by Tanroads.

In compliance with the contractual requirements, Takopa furnished to Tanroads performance band dated December 17, 2008 in which the insurance company, Golden Crescent, guaranteed and made it clear that in the event Takopa failure to perform the works, the company shall pay 8,297,427,924/-.

Takopa further issued two advance payment bonds dated January 14, 2009 for 6,114,359,865.53 and 5,252,525 US dollars in which Golden Crescent also allegedly guaranteed the advance payment made to Takopa by Tanroads for purposes of mobilisation and promised to repay in case of default.

As a result, Tanroads issued commencement letter and subsequently advanced to the contractor the said 6,114,359,865.53 and 5,252,525 US dollars as advance payments.

"It was a clear contractual requirement under the performance bond that in case the contractor (Takopa) fails to perform the contract, the first defendant (insurance company), shall itself perform the contracts obligation under the contract as an alternative to the calling of the performance bond.

Takopa failed to carry out obligations under the contract as demonstrated in various correspondences, hence, Tanroads was obliged to terminate the contract. Tanroads notified Golden Crescent of the situation, but the latter took no step to ensure the contract is performed.

"As a result of the contractor failure to perform his obligations and repay the advance payment under the contract as well as failure of first defendant to perform the contractor's obligations as stipulated in the performance bond, the plaintiff suffered enormous damages," the plaint of the suit further states.


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