Thousands lose NHIF life cover in tender feud - Daily Nation

Civil servants left without life cover in tender feud

Sunday February 11 2018

NHIF headquarters in Nairobi.

NHIF Building. The Public Procurement Administrative Review Board has cancelled insurance cover affecting more than 400,000 workers. PHOTO | FILE 

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At least 400,000 civil servants, police and prison officers are without life insurance cover following the cancellation of a Sh836 million scheme procured for them last year.

The Public Procurement Administrative Review Board (PPARB), a quasi-judicial body, cancelled the cover last week citing irregularities in the awarding of the tender by the National Hospital Insurance Fund (NHIF) to two local insurance companies.

This is the second NHIF tender that the procurement board is cancelling in a span of less than two months, putting the spotlight on the Fund’s CEO Geoffrey Mwangi after his organisation’s fidelity to the law was questioned.

Outgoing Public Service Commission chairperson Margaret Kobia — who has been nominated Cabinet Secretary for Public Service, Youth and Gender Affairs—  puts the number of civil servants, excluding teachers and employees from parastatals and commissions, at about 250,000. The number of police officers is also estimated to be over 150,000 after President Kenyatta embarked on an ambitious programme to increase recruitment since 2013. We could not independently ascertain the number of officers in the Prisons Service affected.


Last December, Britam Life Assurance Company (K) Ltd and Pioneer Assurance Company Ltd beat nine other bidders for the lucrative tender to provide group life and last expense cover for the civil servants, police and prison staff for the financial year 2017/2018.

Group life insurance is one of the most highly valued employee benefits. If an employee were to die unexpectedly, the life cover ensures his or her family copes financially by providing some income. The last expense cover caters for funeral costs when a member dies, such as mortuary fees, coffin, and even food that is consumed during the event.

However, CIC Life Assurance Limited, which lost out, appealed to PPARB claiming that the process of awarding the tender was not done according to procurement and insurance regulatory rules, leading to the recent decision by the quasi-judicial board

“The award of the said tender to Britam Life Assurance Company (K) Ltd and Pioneer Assurance Company Limited as contained in the letters of award dated December 19, 2017 together with the agreement entered into by the parties on January 8, 2018, be and are hereby annulled,” said PPARB in their ruling.


Although NHIF and the two winning bidders, Britam and Pioneer, signed the contract letter on January 8, the PPARB ruled that this had been done prematurely and was, therefore, invalid.

Documents filed with the board show that NHIF paid the first instalment of Sh418 million to the two firms on January 22 yet the appeal was already active. This payment defied a PPARB warning, according to filings seen by the Nation.

“Under Section 168 of the Public Procurement and Asset, Disposal Act 2015, no contract shall be signed between the Procuring entity and the tenderer awarded the contract unless the appeal has been finalised,” said Mr HK Kirungu, PPARB’s secretary in letter to NHIF boss dated January 15.

But in an interesting ruling, the PPARB further ordered that the contract be awarded to one of the losers, UAP Life Assurance, whose bid of Sh797, 623,500 was the lowest but which was not considered.

“Owing to the urgency involved in this matter, the Procuring Entity (NHIF) is directed to award the tender to the lowest evaluated bidder M/s UAP Life Assurance Limited at its tender sum…within a period of seven  days from today’s date,” the board further said.


This deadline to implement this order expired on Thursday midnight without NHIF awarding UAP the contract, leaving the civil servants, police and prison officers and their dependents without access to the cover.

Yesterday, the NHIF CEO did not immediately respond to our enquiries on the decision, its implications on thousands of Kenyans and failure to implement the board’s order.

Mr Jerry ole Kina, the acting secretary general of the Union of Kenya Civil Servants said that the ordinary medical cover for their members has not been affected by PPARB’s action. “The medical cover is directly negotiated between the government and NHIF.  However, the Fund opted to outsource the group life and last expense cover for our members. We do not know the details of this since we are not directly involved in the negotiations.  But we are on the lookout if any of our members is affected in any way,” he said.

In its ruling, the board argues that its decision will save taxpayers some Sh40 million. The ruling was made by five members of PPARB’s members, Paul Gicheru (chairman), Nelson Orgut, Peter Ondieki, Rosemary Gituma and Hussein Were.

In its appeal application before the review board, CIC argued that NHIF is not in a position to legally procure insurance for the three independent government entities — namely the civil servants, the National Police Service and the Kenya Prisons.


“The Accounting Officer of NHIF breached the requirements of Section 96 (1) of the Public Procurement and Asset Disposal, 2015 (the act) to advertise the tender for provision of insurance service… yet he is not the accounting officer of these procuring entities,” said Mr Ezekiel Owuor, CIC’s managing director.

UAP joined the appeal as an interested party and claimed that it ought to be awarded the contract since it was the lowest bidder. It also accused NHIF of acting unprofessionally by concealing information from certain bidders.

“The evaluation and award criteria used by the procuring entity is contrary to the criteria set out in the tender document and contravenes provisions of the Act,” said Mwanzo Moseti, UAP’s principal officer, in a letter dated January 29,2018 to PPARB.

Both CIC and UAP also claimed that NHIF informed them of their failed bids long after it awarded the tender to the two successful bidders, which is a violation of procurement rules which require all bidders to be informed of the outcome of their bids at the same time.

In response, Mr Mwangi, the NHIF’s boss, accused CIC of illegally obtaining the Fund’s confidential letter which it used to lodge its appeal with the PPARB. 

“The said letter was not copied to the applicant who is a bidder in the subject tender and the applicant did not disclose to the honourable board from where and how it obtained the copy,” said Mr Mwangi in his sworn statement submitted before the review board.


He further accused UAP of not filing a review soon after it was notified of its failed bid. “They are seeking orders from the board outside the statutory time limit of 14 days at a time when the contract has already been signed by the respondent and the successful bidder,” he said.

But it also emerged that NHIF disregarded a warning by the Insurance Regulatory Authority (IRA) that the Fund was not in a legal position to procure for the cover, just a week after it placed newspaper advertisements inviting bids.

“The National Hospital Insurance Fund is not registered under the Insurance Act and as such is not authorised to carry on insurance business,” wrote Mr Godfrey Kiptum, IRA’s CEO, to his NHIF counterpart Mr Mwangi in a letter dated October 17, 2017.

“The Authority’s position is that a progression of the tender in issue by NHIF will amount to a contravention of the Insurance Act, Cap 487 Laws of Kenya. In this case you are required to cease and desist from carrying out insurance business,” wrote Mr Kiptum.

PPARB further faulted NHIF for granting the award to Britam and Pioneer as a consortium at Sh836, 946,330 shared on a 52 per cent and 48 per cent basis yet the two companies had made their applications separately.


“No consortium or a joint venture agreement was included in that separate bids submitted by the so-called successful bidders,” said PPARB. “The procuring entity could not therefore split one tender and award it to two bidders on a 52 per cent and 48 per cent using the price submitted by one bidder.”

Geminia Insurance Company’s bid of Sh491,190,400 was the lowest but was disqualified on other technicalities. The other bids were as follows: UAP (Sh797,623,500), Britam (Sh836,946,330), Pioneer (Sh852,284,830) and CIC (Sh974, 992,830). 

“To allow a tender to be awarded to bidders whose price is higher by a sum of Sh40 million would contravene the Constitution and the act would certainly not be in public interest,” said PPARB.

In his submission, Mr Mwangi said that while UAP’s bid passed the preliminary, mandatory and technical stages, it failed the financial stage “as their financial bid was compounded using the wrong sum assured as they submitted the bid calculating the sum assured for group life and omitting the sum assured for last expense as required…and were therefore disqualified.”

However, the PPARB also accused NHIF tender evaluation committee of belatedly developing a “strange” criteria which it used to deny UAP the tender. “The position taken by the procuring entity was therefore clearly unlawful and cannot therefore stand,” said the board in their ruling.


Although the NHIF, Britam and Pioneer requested PPARB to uphold the contract despite the irregularities citing public interest, they were denied the request. 

“The board is, however, not persuaded by the said arguments for the reason that where any stage of a procurement process is found to have been illegal the board cannot that part it (sic) on the basis of public interest,” it said.

The review board ordered NHIF to refund whatever successful claim that might have been made on the two successful bidders so far. It also ruled that parties bear their own costs of the appeal.

This is the second time in a space of less than two months that the procurement review board is cancelling an NHIF tender because of irregularities, especially the variation of tender requirements to suit certain bidders.


On December 28, last year, the board ruled that NHIF had acted illegally by varying requirements for a tender to provide emergency air rescue for civil servants, National Police Service and enhanced benefits scheme which Amref Flying Doctors had applied for.

In this case, NHIF cancelled the first tender in November last year after Amref emerged as the sole bidder. The hospital Fund claimed that Amref had not met mandatory requirements.

However, Amref appealed the decision at PPARB saying the cancellation was done irregularly and that NHIF had significantly changed the requirements in the re-advertised tender with the sole aim of locking them out of the bid.

The review board agreed with Amref. “There is also a growing number of complaints that tender documents are prepared in the direction of a particular bidder,” said PPARB in their ruling.