CS summoned over illegal Sh4.9bn contract

In Summary

• The office of the Attorney-General was not consulted and its legal advice to all government ministries, agencies and departments was disregarded.
• The lawmakers summoned Ms Kariuki Friday morning, a day after she was expected before the Senate ad hoc committee on Medical Equipment Service (MES), of which HCIT is a component.
• Solicitor-General Ken Ogeto, who appeared before the ad hoc committee on Thursday, said it was only on September 21, 2018, almost a year after the contract had been signed, that the AG received a copy.
• Mr Ogeto further told the committee that upon reviewing the contract and the tender documents, the AG advised the ministry to cancel it as there was no value for money.

Senators have summoned outgoing Health Cabinet Secretary Sicily Kariuki after it emerged that the ministry illegally and irregularly signed a contract for provision of Sh4.9 billion Health Care Information Technology (HCIT).

The Office of the Attorney-General was not consulted and its legal advice to all government ministries, agencies and departments was disregarded.

The lawmakers summoned Ms Kariuki Friday morning, a day after she was expected before the Senate ad hoc committee on Medical Equipment Service (MES), of which HCIT is a component.

She failed to appear before the committee on Thursday and said she was in a Cabinet sub-committee meeting.

After the ministry realised it had blundered by failing to involve the AG in negotiating and drafting the contract, and that the HCIT tender posed a high financial liability, it hurriedly cancelled it in July 2019.

The latest revelations cast doubts on the validity of the other five MES contracts the ministry signed with foreign companies.

The MES contracts are all valued at about Sh62 billion.

VIOLATIONS

Solicitor-General Ken Ogeto, who appeared before the ad hoc committee on Thursday, said it was only on September 21, 2018, almost a year after the contract had been signed, that the AG received a copy.

Mr Ogeto further told the committee, chaired by Isiolo Senator Fatuma Dullo, that the contract violated the Public Finance Management (PFM) Act and the Public Procurement and Asset Disposal Act of 2015.

Circulars the AG's office issues government agencies on the need to consult his office before entering contracts were also ignored.

The ministry also failed to undertake due diligence on the contractor before committing the government.

“The Office of the Attorney-General was not involved in negotiating, drafting, vetting, clearance and approval of the contract prior to the signature as is required by law and the various circulars issued to government accounting officers,” Mr Ogeto, the principal assistant to the AG, told the committee.

The HCIT contract was signed and executed by the Ministry of Health and Seven Seas Technologies on October 2, 2017, for development of health ICT infrastructure connecting all public hospitals to a central database.

Mr Ogeto said the AG became aware of the existence of the contract through a December 14, 2017 letter from the National Treasury, which sought legal clearance for issuance of a Government Letter of Support.

He said a copy of the contract was not provided.

CRIMINAL ACT

Mr Ogeto noted that failure to observe applicable laws constituted a criminal act punishable by a fine not exceeding Sh4 million, a jail term not exceeding 10 years, or both.

Section 135 (2) of the Public Procurement and Asset Disposal Act requires an accounting officer to enter a written contract with the successful bidder based on tender documents.

“There is a problem and serious culpability on this. These things don’t just happen because of lack advice from the Attorney-General but because our advice is ignored,” Mr Ogeto said after Bungoma Senator Moses Wetang’ula sought to know whether there was dereliction of duty on the ministry's part.

“When the matter gets to court, you will be the one carrying the skunk,” Mr Wetang’ula said.

"ILLEGAL" CLAUSES

Mr Ogeto further told the committee that upon reviewing the contract and the tender documents, the AG advised the ministry to cancel it as there was no value for money.

This was based on “illegal” clauses such as paying Seven Seas fees for services already undertaken at the time of termination and an additional amount equivalent to 80 per cent of the outstanding contractor’s fees.

There was also the original copy of the Government Support Letter and the funder’s agreement.

Mr Ogeto said, however, that because of the legal clauses, the government will not lose money in breach of the agreement in case the matter heads to court.

Contrary to the procurement law, Mr Ogeto further noted that no due diligence was carried out on the bidder as there was no report showing that visits to at least three sites to establish completion of similar works by the bidder were undertaken.

BUDGET

Ms Dullo questioned a claim by the ministry that the HCIT did not have a budgetary allocation prior to contract execution.

“They claim they do not have the budget yet they deduct Sh200 million every year from each of the 47 county governments, at source, for the MES,” Ms Dullo said. 

On May 3, 2010, the AG issued a circular requiring involvement of his office in the process of negotiating and drafting contracts.

Another circular of March 1, 2018 requires ministries, departments and other government agencies to submit contracts and agreements to the AG’s office for review prior to signing.

The Health ministry did not comply with these requirements.

It claimed it cancelled the contract because the contractor abandoned the site for 16 months and that commencement service delayed for 10 months.

The ministry also said the works the contractor was supposed to undertake were incomplete.