Taxpayers may have lost nearly Sh2 billion in a botched construction of a data disaster recovery centre in Naivasha.
A review by Auditor General Nancy Gathungu established that the
project being implemented by the
National Treasury remains unutilised
despite the significant expenditure
on it.
Treasury entered into a contract
for the data centre to create a critical
backup of financial data and other
critical information in the event of a
disaster.
The project was awarded to
Misort Africa Ltd in 2009 and was
to be executed within 96 weeks at
Sh782 million.
However, the scope was later increased and the project divided into
three phases of implementation.
Phase one of Sh899 million and
phase two of Sh205 million were
completed and paid for the project
which is 68 per cent complete.
A row over payments in the third
phase of the project stalled the venture and now taxpayers have been
slapped with hefty fines.
The dispute arose after Treasury
failed to honour a claim of Sh193
million, which was to compensate
for idle resources and expenses after
the project stalled.
The contractor filed an arbitration
case following the delayed payments
and was awarded Sh4 billion for “loss of profits and other associated costs”.
Gathungu says that as of June 30,
2024, the outstanding amount had
risen to Sh5.5 billion due to accrued
interest.
In the case, Treasury had argued
that phase three was an entirely different tender and required the contractor to bid afresh.
Treasury argued that the contract
was split into three and that Misort
Africa Ltd was required to bid afresh
to be awarded the contract for the final phase.
The auditor general has put
the National Treasury on the spot,
saying the arbitral award was avoidable had officials acted promptly.
“The expenditure would have been
avoided had management managed
the contract in accordance with the
applicable laws and regulations,”
Gathungu said.
She is also expressed concern that
the “project remains unutilised despite the significant expenditure”,
exposing the wastage in government
projects.
“In the circumstances, the value for money from the payment of
Sh1,987,278,191 could not be confirmed,” the auditor general said.
She added that the “full payment of
the amount will adversely affect the
budgetary allocation for the ministry
and is not in public interest.”
It is emerging that Treasury ignored
an advisory by the Attorney General
to negotiate with the contractor.
The AG gave the advisory after
analysing the case and concluding that the government had no fighting
chance had it launched an appeal.
The arbitration decision was adopted by the High Court and the AG
indicated there were slim chances for
the state to succeed in the case.
“No evidence of the negotiations
having taken place was provided for
audit review,” Gathungu said.
Treasury paid Sh882 million
during the year under review, as part
of payment of the sums awarded by
the High Court.
MPs have been on Treasury’s case
to allocate funds to complete and
make operational the data recovery
centre.
A site visit by a House team
established that equipment worth
more than Sh100 million has been
stolen and vandalised.
The centre was transferred to the
Information ministry, and is expected
to help with the government’s digitisation plan.
