Disgruntled firm to sue over Sh4.9bn health tender

Wednesday March 18 2020

Seven Seas Ltd CEO Michael Macharia appears before a senate committee investigating the cancelled Health Cover Information Technology contract, at Parliament Buildings on November 18, 2019. PHOTO | FILE | NATION MEDIA GROUP


The risk of taxpayers losing over Sh3.92 billion in legal penalties has become real after the contractor in the Health Cover Information Technology (HCIT) contract cancelled by the Health ministry said it will move to court if the decision is not rescinded.

The HCIT project worth Sh4.9 billion, under the Managed Equipment Service (MES) programme, was awarded to Seven Seas Technologies Limited on October 2, 2017.

“It is not our motivation to sue the government and get compensated but to deliver this project. But if push comes to shove, we will seek redress in courts because we feel our rights have been violated,” the company’s chief executive Michael Macharia said when he appeared before the Senate ad hoc committee on MES on Friday.

Health Cabinet Secretary Sicily Kariuki is expected before the committee Monday after failing to appear on Friday last week.

Mr Macharia said that the actions of CS Kariuki, Principal Secretary Susan Mochache and officers from the Attorney-General’s office clearly showed that the project was earmarked for a foreign company.



He noted that no cause letter or prior notification was made by the ministry before the contract was cancelled on November 18, 2019.

The termination procedure, according to Mr Macharia, was also faulty as the matter was never a subject of arbitration as stipulated in the contract.

During the session, Mr Macharia revealed that about 12 per cent of the work had already been done at the time of termination and certificates of completion for the milestones issued, but the government was yet to pay.

On Thursday last week, Solicitor-General Ken Ogeto told the committee that the cancellation was based on the advice of Attorney-General Kihara Kariuki.

By virtue of his office, Mr Ogeto is the principal assistant to the Attorney-General.

In a presentation to the committee, Mr Kihara claimed that the Seven Seas contract was illegal as it contained clauses that were not part of the tender document.


He singled out the Government Letter of Support and the funders direct agreement as clauses that were “illegally” inserted in the contract.

“The ministry did not conduct due diligence on the bidder before the contract was awarded, as there was no report showing that visits to at least three sites to establish completion of similar works by the bidder was done,” Mr Kariuki said.

However, Mr Macharia notes that the failure of the project is predicated on the letter of support, whose purpose was not to act as a guarantee but to show that the government will allocate money to the project every year, and the funders agreement, adding that the two documents were part of the tender documents.

He also noted that the contract is a copy paste of the tender documents and that if it is faulty, then the other contracts awarded to the multinational companies undertaking various projects under MES could also be faulty.

Although Seven Seas was denied the letter of support, the same letter was issued to the other multinationals within six to nine months of their contract signing.

Bungoma Senator Moses Wetang’ula, who is a member of the committee, wondered how this could happen.


Mr Macharia further noted that Ms Mochache deliberately refused to give him audience and that she has never “got out of her office” to check progress of the project.

“I believe that this contract was earmarked for someone else because of where we are,” Mr Macharia told the senators.

"We wrote to the PS even before this project was cancelled on the need to have our goods, which had overstayed at the Port of Mombasa for 18 months, cleared but we got no reply,” he said.

Although AG Kihara noted that he was required to clear the contract before it was awarded, Mr Macharia said that the Public Procurement and Asset Disposal Act does not allow him to do so, especially on contracts below Sh5 billion.

On December 13, 2019, through his lawyers, Mr Macharia sent a letter to the AG with relevant excerpts of the tender documents and sought to have the matter settled through arbitration but this was ignored.