BREACH OF TENDER

MES: Attorney General says Sh4.9bn IT tender illegal

AG says clause Seven Seas is seeking to invoke in the demand is not admissible

In Summary

• AG holds that the ministry defied provisions of the law which spells requirements to be met before a project agreement is signed

• Concerns are that the clause Seven Seas is using in its bid for payment for termination was not in the original tender.

President Uhuru Kenyatta and Deputy President William Ruto inspect medical equipment procured through the Managed Equipment Services (MES) Project at State House, Nairobi on February 6, 2015. /PSCU
President Uhuru Kenyatta and Deputy President William Ruto inspect medical equipment procured through the Managed Equipment Services (MES) Project at State House, Nairobi on February 6, 2015. /PSCU

A Sh4.9 billion ICT tender was irregularly awarded to Seven Seas Technologies under the Sh63 billion leased medical equipment scheme, Attorney General Kihara Kariuki has said. 

The IT firm was to procure software and hardware interfaces, provide training, and maintenance of tech solutions to the 98 hospitals that got the equipment.

 

However, the contract was terminated on grounds Seven Seas abandoned the site, delayed works for 10 months hence failed its obligations.

Following the November 2019 decision, Seven Seas could demand payment of Sh3.9 billion from the Ministry of Health – being 80 per cent of the project cost.

The Health ministry’s other reasons for terminating the contract were that no services are being provided owing to the incomplete works and that there was no budgetary provision for HCIT this year.

But the AG says the ministry ignored the law spelling requirements to be met before a project agreement is signed.

Through Solicitor General Kennedy Ogeto, the AG told Senators at the ad hoc committee probing the MES that the contractor has no basis to lay any claim.

Isiolo’s Fatuma Dulo (chairperson), Moses Wetang’ula (Bungoma), Mary Seneta (Nominated), and Andrew Langat (Bomet) were present.

Health CS Sicily Kariuki did not turn up for the meeting as invited. She is expected to face the lawmakers Friday – failure which Dulo says she will be summoned.

 

Ogeto said that on review, they noted that there was no due diligence done on the tender as required by the Public Procurement and Asset Disposal Act (PPADA).

The AG further said that no report was issued on the due diligence, adding that there was no evidence the ministry visited three sites where Seven Seas has worked to ascertain its capacity.

Ogeto further raised concerns that the clause Seven Seas is using in its bid for payment for termination was not in the original tender.

The revision was introduced midway during a meeting between the contractor and some ministry officials at a Naivasha resort.

“It is an offence to disregard the contents of the tender documents. Section 177 of the PPADA sets a Sh4 million fine or 10 years in jail for this,” Ogeto said.

He raised concerns that despite the tender providing for termination on convenience – by notice anytime without attracting costs, the introduced clause was skewed in favour of the contractor.

“The introduction of the prejudicial clauses poses the risk of exposing the government to huge liabilities and would add to pending bills from court judgements - now at Sh168 billion.”

The AG also says that there was no value for money declaration signed by the accounting officers of the Health ministry as spelt in its circular to ministries.

“Due diligence and value-for-money are mandatory conditions before the signing of a contract under the PPADA. This was a mandatory condition,” Ogeto said.

Office of the AG requires all accounting officers sign value for money declaration but none was submitted in the Seven Seas case.

“No due diligence report was prepared and none is before the AG. There is no evidence of visits to three sites to establish successful works by the bidder.”

The procurement process involved open national tender floated on July 4, 2017 of which five of the six bidders failed at the technical evaluation stage.

The question senators want answered is how Seven Seas passed the financial evaluation stage despite findings that third party financiers were later involved.

The AG holds that it was prudent for the procuring entity to independently check value for money other than relying on the cost quoted by the bidder.

“Our considered view is that the procurement fell short of the requirements of the law and was skewed against the government which is now exposed,” the AG says. 

The AG also reprimanded the ministry for entering into a tripartite agreement with Seven Seas and a bank outside the tender provisions.

The third-party component was introduced in the Naivasha meeting, a funder’s agreement that the AG says exposed the government to risk of liabilities.

Senators have sought a report from the AG analysing the five MES contracts.