In the latest auditor general’s report, the Social Health Authority (SHA) has come under sharp scrutiny after the government embarked on an ambitious plan to sink Ksh104.8 billion into a system it neither owns nor has the right to tweak.
“Ownership of the system, system components and all intellectual property rights shall remain in the ownership of the consortium except for the infrastructure which is to be transferred to the procurement,” a section of the agreement with the government states.
In the report, Auditor General Nancy Gathungu revealed that the government flouted several laws in procuring the multi-billion system to run the Social Health Authority (SHA) where value for money could not be confirmed.
“The system was procured at a cost Ksh104,808,136,478 through Specially Permitted Procurement Procedure but was not included in the procurement plan nor the medium-term budgetary expenditure framework,” Gathungu said, noting that this was in breach of Section 53 (7) of the Public Procurement and Asset Disposal Act, 2015 which states that, ‘multi-year procurement plans may be prepared in a format set out in the Regulations and shall be consistent with the medium-term budgetary expenditure framework for projects or contracts that go beyond one year.’
Uncompetitive procurement
Similarly, the system was acquired through an uncompetitive procurement procedure which single-sourced the service provider contrary to section 114 of the Public Procurement and Asset Disposal Act.
Also in the auditor general’s report, the procurement agreement determined that the system would be installed in various health institutions without quantifying the number of health institutions targeted. The Ministry of Health equally stated that Ksh7 billion would be used in training, support and customer education on the system without stating how many health workers would be trained.
Gathungu equally flagged the funding model of the SHA system, which was projected to come from 2.5 per cent of the member contributions, 5 per cent from health institutions’ claims and 1.5 per cent from track and trace service charges.
The auditor general remarks that while the funding of the system involves levying fees from the public, it was not supported by evidence of public participation as required by law.
“This is a material fact which entails levying fees from the public but was not supported by evidence of public participation contrary to the principles of public finance as outlined under Article 201(a) of the Constitution of Kenya 2010 which requires openness and accountability including public participation in financial matters,” Gathungu noted.
Unfavourable contract clauses
She further revealed that the project portended many risks as a result of the flouted procurement procedures including several unfavourable contract clauses which prevent the state from modifying the system to meet evolving technological needs, prevent the government from owning the system or even solving disputes arising from the contract in a court in the country.
“In addition, Clause 39.1 of the contract agreement requires any dispute arising from the contract be settled by arbitration under the rules of London Court of International Arbitration. However, the procurement was conducted based on the provisions of the Public Procurement and Asset Disposal Act, 2015 and any dispute should be referred to the Public Procurement Administrative Review Board as per Section 28(1) of the Public Procurement and Asset Disposal Act 2015,” Gathungu remarked.
