Treasury calls for amicable resolution of contract rows

Treasury Cabinet Secretary Ukur Yatani. FILE PHOTO | NMG

By PATRICK ALUSHULA
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The Treasury has urged State agencies and ministries to adopt amicable forms of dispute resolution amid rising contract breaches that have exposed taxpayers to more than Sh1.2 trillion in compensation claims.

Treasury Cabinet Secretary Ukur Yatani said the Office of the Attorney-General continues to receive colossal claims for compensation mainly due to poor management and illegal cancellation of contracts by public officers.

“This exposes the government to huge financial risk due to the nature of huge financial risks due to the nature of the colossal claims and non-payment of legal fees and costs by client ministries,” he said in a new circular to ministries and State corporations.

Mr Yatani now wants ministries, departments, and agencies (MDAs) to consider other options of handling contractual disputes and only cancel contracts as the last option.

“The policies and procedures regarding dispute resolution should be detailed in the contract and agreed to by both parties,” he said.

“The resolution options should be listed in order preference starting with the least severe method moving towards more severe methods.”

The Treasury says the following of due process in the management of contracts with contractors and service providers will help mitigate future risks to international arbitrations.

Claims from ongoing litigation in local and international courts increased 48.2 percent from Sh809 billion in March last year to Sh1.2 trillion in March 2021.

The exposure adds to the Sh150 billion that had already been awarded against the government but is yet to be paid out.

The Treasury now wants MDAs to be considering extending contracts' performance period as opposed to arbitrary terminations.

State officials will have to review the reasons for delays in contracts to be sure that they have not significantly contributed to the problem.

These range from awards to victims of torture as well as business litigations against the State, highlighting the heavy price of unlawful decisions by government officials.

Awards against the government are a cost to taxpayers since ministries and state agencies are forced to redirect money that would have otherwise been used to provide services.