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‘Cash cow’ that cost State Sh10m

By Alex Ndegwa | May 26th 2014

The Government took over an NGO-funded project in Turkana whose cost doubled and had set taxpayers back Sh10 million by 2005, The Standard can report.

Parliament’s Public Accounts Committee (PAC) report for the year 2004-2005 detailed how the construction of a sub-district hospital in Turkana that began in 1989 became a cash cow.

At the time the project (with an initial contract sum of Sh5.5 million) stalled, the Government had paid Sh4.6 million to the contractor, leaving a balance of slightly more than Sh800,000.

“For unclear reasons the Ministry failed to pay the balance of Sh843,151.25, so the matter was referred to an arbitration process in June 2000. The arbitrator ruled in favour of the contractor and gave him an award of Sh843,151.25 together with accrued interest of Sh639,389.70 effectively pushing the total award to Sh1,482,540.95,” the PAC report reads in part.

Revised upwards

 But before the ministry could settle the arbitration amount, the contractor successfully sought an amendment of the award in court which revised it upwards from Sh1,482,540.95 to Sh8,696,010.50, and then to Sh10,625,146.10 as of June 2004 due to accumulated interest on delayed payment.

 “The Ministry does not appear to have been represented,” PAC concluded.  On March 29, 2005, the ministry paid the contractor Sh3,504,291.00 out of the total claim of Sh10,625,146.10, leaving a balance of  Sh7,120,855.10 outstanding and accumulating interest. 

PAC says poor handling by ministy led to State incurring avoidable expenditure in excess of Sh9.7 million as at 2005.

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