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Health ministry in a spot over Sh40b pending bills

NATIONAL
By Grace Ng’ang’a | November 3rd 2021

Ministry of Health, Afya House in Nairobi [Boniface Okendo, Standard]

A House committee is investigating a report by the Auditor General that revealed how three contracts that were canceled by the Ministry of Health more than 25 years ago left the Government with Sh40.7 billion in pending bills.

The suppliers who were owed only Sh57 million then will now be billionaires should the payments be done. This is after the courts awarded pending bills interest up to 200 per cent.

The Public Accounts Committee (PAC) chaired by Ugunja MP Opiyo Wandayi wondered why the courts awarded the huge interest to the pending bills.

Mr Wandayi said it was time to investigate how the courts commute the awards saying “they are mind-blowing I never knew anything like this could ever happen, how is it even possible.”

“It will be interesting to know the kind of arguments that the courts were advancing to award such monies. This trend of rushing to negotiate this money to be available to pay these bills needs to stop because the Government will be busy collecting taxes to pay court awards which cannot contribute to the Gross Domestic Product,” the MP said.

Wandayi sought to know whether the decision on the “outrageous” award was delivered by one court or different courts.

“The issue that I have which is very fundamental in my view is that running across the contracts is the exorbitant awards that are being issued to these suppliers. Is it one court doing all this or different courts I would really like to know,” he said

Garissa Township MP Aden Duale said the companies will soon be summoned by the committee to address the matter.

“We need to have the court judgment so that we have a better understanding of what is going on here. This is not a small amount,” he said.

The ministry said the ruling was made by different courts and different judges 

It was yesterday revealed that Vulcan Limited was awarded a contract worth Sh57.3 million which has since ballooned to Sh3.1 billion.  The other company only identified as Equip supplied insecticides, malaria control equipment, drugs and protective clothing was awarded a contract of Sh1.16 billion. The contract was to be implemented from July 14, 1996 to June 30, 1997.

However, the ministry failed to pay the supplier, who sued for breach of contract. The court awarded the supplier Sh1.86 billion-plus compounded interest at 18 per cent per annum from March 1, 1999 to January 31, 2020 amounting to Sh80.52 billion.

The ministry entered into the third contract with United Medical for supply of haemoglobin scale books and throat swabs, insulin, surgical dressing and sutures, Darrow’s solution and disposable needles at a cost of Sh196.88 million in the financial year 1992/93.

The agreement provided that payment was to be made strictly within 30 days from the date of the invoice or delivery of the goods and any delay in payment would attract interest at 1.5 per cent or two per cent per month on outstanding amount. The amount has since skyrocketed to 17.8 billion 

“However, upon negotiations out of court, the award was revised to Sh15.25 billion resulting to an escalation of Sh13.38 billion from the initial award of Sh1.86 billion,” the Auditor General said.

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