The National Health Insurance Fund (NHIF) is on the spot over paying Sh336 million to a law firm that had not been pre-qualified to bid for tenders with health providers.
According to Auditor-General reports, the law firm was not in the prequalified list of suppliers in contravention of Section 93(1) of the Public Procurement and Assets Disposal Act, 2015.
“The Public Procurement and Assets Disposal Act, 2015 states that an accounting officer of a procuring entity, where applicable, may conduct a prequalification procedure as a basic procedure prior to adopting an alternative procurement method other than open tender for the purpose of identifying the best few qualified firms for the subject procurement,” states the Act.
No money had been allocated to pay for legal services, making it go against the Public Finance Management Act.
In her report, Nancy Gathungu said the fund was in breach of the law and the propriety of legal fee of Sh336,339,000 paid to the law firm could not be confirmed.
The statement of comprehensive income and expenditure reflected an expenditure of Sh37,716,058,407 under National Health Scheme (NHS) benefits expenses which includes legal fees of Sh336,339,000 paid to a law firm in respect of drawing 6,700 with health providers at a negotiated total instruction fees of Sh432,800,000.
The law firm was to further charge an amount of Sh43,260,000 being cost for company search, printing, binding, travel costs and stamp duty and distribution of the contracts.
On November 5, 2018, the firm reviewed the terms of engagement and added 309 contracts for drafting, with an additional cost of Sh26,749,302 as legal fees. There was no consent from NHIF for the variation.
Further, the legal service was not in the approved procurement plan for 2018/2019 financial year which is contrary to Section 45(3)(a) of the Public Procurement and Assets Disposal Act, 2015 which states that all procurement process shall be within the approved budget of the procuring entity and shall be planned by the procuring entity concerned through the Annual Procurement Plan.
“Under the circumstances, NHIF was in breach of the law and the propriety of the legal fee paid to the law firm could not be confirmed,” the audit report states.