• State corporations put on the spot for subjecting Kenyans to extra expenses on projects.
• PIC wants boards and managers of entities to only plan projects with budgets.
Image: EZEKIEL AMING'A
Interest payments for project delays and late payment of claims are bleeding taxpayers of billions of shillings, a parliamentary report shows.
The National Assembly Public Investments Committee has raised concerns over huge nugatory payments made by state corporations in the form of interest on delayed payments due to contractors.
The committee chaired by Mvita MP Abdulswamad Nassir wants action taken to avert the delays attributable to late Exchequer releases and court cases.
The lawmakers say that to instil discipline, accounting officers or board members that unreasonably delay payments occasioning accrual of interest should be held responsible for the loss of public money.
It cited claims with respect to works at the Hazina Trade Centre, an NSSF project; the New Mitihani House; Communications Authority of Kenya; KenInvest; and collections that KRA cannot pursue.
For Hazina, the contractor in July 2019 claimed Sh234 million interest on delayed payments, a figure that continues to rise as it remained unpaid by end of June.
The contractor had also raised a claim of Sh6.88 billion, which was reduced to Sh871 million following an assessment by the Department of Public Works.
More alarming is that the contract prescribes that delay in settlement of claims will earn interest at three per cent above the average CBK rate.
The National Social Security Fund anticipates that the project will be completed by December, four years after its last marked date of completion.
Mitihani House, on the other hand, has suffered inadequate budgetary allocations, delays that have caused the project’s cost to increase to Sh1.9 billion from Sh248 million when it was initiated in 1986.
“The delay in the project completion resulted in an escalation of costs in addition to amounts of money that continue to be paid out as rent for the offices currently occupied,” the PIC report reads.
“This has resulted in the loss of public funds due to escalation of costs and payment of interests on delayed payments. Under such circumstance, the realisation of value for money was doubtful.”
It also highlighted Sh2.7 billion tax arrears, which KRA has not recovered from Karuturi because of a pending case filed in 2013.
The Communications Authority is struggling with a Sh1,277,961 claim being interest on a delayed settlement for a contractor who supplied and installed carpets and window blinds.
The authority awarded the tender on a sub-contract agreement for Sh12.6 million. Although the project was supposed to be completed on July 14, 2003, it was completed one year later on June 23, 2004.
CA management explained that the delay was occasioned by a dispute over the material used by the contractor, which differed from those specified in the bills of quantities.
The Kenya Investment Authority ended up paying Sh10.6 million for a Sh217,152 contract owing to delayed payments.
“The variation in amount was caused by a clause in the contract for the services which provided for a simple interest of three per cent per day on delayed payments,” PIC observed.
The committee has thus recommended that then-CEO Susan Kikwai — now Kericho deputy governor — be surcharged. Nassir restated that accounting officers and boards of state corporations must strive to honour their contractual obligations and settle claims as and when they fall due.
The committee asked the National Treasury to release funds meant for claim settlement to avoid nugatory expenditures in the form of interest payments.
Edited by F'Orieny