How Roads Ministry lost Sh16m in terminated legal consultancy

Kenya: A report of the Auditor General for the year 2011/2012 details the case of a contested legal consultancy contract that cost taxpayers’ Sh16 million.

The claimed cost was pushed up by accumulated interest that auditors termed as wasteful.

The contractor had instituted legal proceedings against the Ministry of Roads through the Attorney General in April 2009, claiming general and exemplary damages for the unlawful termination of a consultancy contract valued at Sh12.87 million.

The contract agreement was for 60 months but the Ministry terminated the contract after 24 months.

By consent order recorded in court in July 2010, the plaintiff and the Attorney General appointed a sole arbitrator.

The arbitrator awarded the plaintiff (consultant) in June 2011, the Sh12.87 million being the contract sum payable with accrued simple interest at the rate of 12 per cent per annum from February 16, 2009 until the day payment is made in full.

Treasury granted the ministry the authority to pay Sh16.99 million to the plaintiff on November 16, 2011.

In December 2011, the ministry paid Sh9 million leaving an outstanding balance of Sh7.99 million as at June 30, 2012.

The balance comprised that of the principal sum of Sh3.9 million and interest of Sh4.1 million.

“The amount of Sh4.1 million represents a nugatory expenditure payable, which the ministry would have avoided had the claim of Sh12.87 million been settled in time,” the PAC report states.