Outgoing Health Cabinet Secretary Sicily Kariuki has defended the ministry's decision to cancel a Sh4.9 billion contract as it was illegal, despite fears of legal damages.
The Healthcare Information Technology (HCIT) is a component of the Sh62 billion MES project by the government in realisation of President Uhuru Kenyatta's Universal Health Coverage (UHC) plan.
The project was awarded to Seven Seas Technologies Limited, a local company, on October 2, 2017, but it was cancelled on November 18, 2019 without notice or show-cause.
It was meant to connect all public hospitals from the remotest part of the country to a central database.
Ms Kariuki on Monday appeared before the Senate's ad hoc committee on Managed Equipment Service (MES), chaired by Isiolo Senator Fatuma Dulo, following summons last week.
She explained that the illegality of the contract is predicated on strange clauses contrary to contents of tender documents, according to a letter that PS Susan Mochache wrote to Attorney-General Kihara Kariuki, requesting its cancellation.
She singled out the Government Letter of Support and the direct funders agreement as clauses that were "illegally" inserted into the contract.
The fact that the government was required to pay not only for services already undertaken at the time of termination but also an additional 80 per cent of the remaining contractor's fees was another reason.
"The executed contract between Seven Seas Technologies and the Ministry of Health does not provide any requirement for a letter of support," Ms Kariuki told the committee.
Before the committee last Friday, Seven Seas' Chief Executive Officer Michael Macharia said the letter of support and the funders agreement were requirements in the tender documents.
"This contract is a copy and paste of the contract documents. I don't know what the ministry means when it says it is not," Mr Macharia, who has hinted at going to court to seek compensation, told the committee.
The tripartite funders agreement was signed by Mr Macharia, then Health Principal Secretary Peter Tum and Mr George Mutiga from Kenya Commercial Bank (KCB).
The admission by the CS cast doubts on the legality of other components of MES contracts the government has signed with the other foreign companies.
The CS was at pains to convince the committee following questions by Bungoma Senator Moses Wetang'ula.
Mr Wetang'ula wondered why it easy for her to dismiss the contract as an illegality without producing original copies of tender documents to support her arguments.
Further, she did not explain why it took her ministry two years to realise that the contract was illegal.
"You have nothing to disapprove the material before us, signed by your principal secretary," Mr Wetang'ula said.
Ms Dullo and Wetang'ula dismissed a claim by Ms Mochache that there was no budgetary allocation for the project, which Solicitor-General Ken Ogeto said was the basis for the cancellation.
"The fact that 47 county governments are deducted Sh200 million at source yearly means what the PS claimed is not true," Ms Dulo said.
Claims there was no due diligence before the contract was signed were also rebuffed by Kitui Senator Enoch Wambua.
At the time the contract was signed, Cleopa Mailu was Health minister and Julius Korir the PS.
Interestingly, the contract document Ms Kariuki presented to the committee shows the requirement of the letter of support and the funders agreement.
Although the HCIT contract was identical to the other MES contracts, except on the financing issue, the government was eager to provide the letter of support to foreign companies such as General Electric and Philips, but not the local company.
Mr Ogeto told the committee last week that the multinationals received the Government Letter of Support between six and 9 months of contract signing.
Mr Macharia revealed that about 12 per cent of the work had been done and relevant certificates issued at the time of termination of the deal, but that the government was yet to make payments.