NHIF may lose Sh4b over Karen land dispute
National Hospital Insurance Fund is at risk of paying Sh4 billion for a project that never kicked off.
The national insurer is contemplating entering into negotiations with a consortium that was tasked to work on the venture in the upmarket Karen in Nairobi.
The bone of contention is that the land the project was to be set on is claimed by two other entities.
Documents seen by People Daily indicate NHIF has hit a dead end and is planning to call a board meeting this week to have the matter resolved out of court.
While there exists the land dispute, a consortium that was awarded a tender to do the feasibility and design works is demanding billions for the works.
A firm known as Cirtex Ltd has been claiming ownership of the said property. The Directorate of Criminal Investigations has since ruled that the 23 acres of land belongs to the firm further complicating the matter.
NHIF board is, therefore, seeking to have the matter negotiated out of court and have the consultants reduce their demand fees.
Documents in our possession show that the board, during the Sixth Special Board Meeting held on January 16, 2002 approved the establishment of a Training/Recreational facility for the national insurer.
Board approved Sh95 million for purchase of land for the Training/Recreational facility and made provision for Sh85 million for the Resource Centre.
“The fund called for valuation of the property on January 22, 2002. The Chief Valuer, Ministry of Lands and Settlement then valued the property for Sh100.5 million,” reads a brief by the chief executive Peter Kamunyu to the board.
The land L.R.209/24968/2 was acquired from M/S Kaskazi Traders Ltd for the sum of Sh93.7 million.
Project was commissioned by the then CEO Richard Kerich, who went ahead to engage consultants without the board’s approval and the ministries of Health and Finance as required.
Consultants were to conduct the feasibility and design works.
The following Consultants were commissioned, Project Architects - Baseline Architects, Interior Designer - Two Design Architects, Project Quantity Surveyors, Ujenzi Consultants.
Others were Quantity Surveyors (Interior (Works)- Costwise Associates, Mechanical/Civil Engineers - Professional Consultants, Project Electrical Engineers - Kaigutha & Partners and Project Manager - Friscan Construction Management.
However, impediments to the project started after the Ministry of Health raised issues with the proposed project.
Health Permanent Secretary then wrote a letter to the National Treasury, saying there was no justification for the project, and therefore, did not grant the approval.
This did not go well with the consultants, who had already commenced work and promptly sent NHIF their demand fees.
The CEO had no option but to send the consultants fees demand to the board for directions, as he had no authority to pay in the absence of Minutes approving the project.
“Board observed that the records indicate that it did not approve the Commissioning of Consultants on the Project. It also took note of the fact that the board, ministries of Health and Finance did not authorise the project as required,” reads the confidential report to the current board last month.
Following the stalemate, the consultants then commenced arbitration proceedings against NHIF for the demand for fees.
“The Consulting Architects and Quantity Surveyors did the work as commissioned and submitted their report together with their fee notes for Sh734.5 million. Arbitrator, after reviewing the matter, reduced the claim to Sh352 million.
However, following the decision of the Arbitrator and claimants’ filing of documents to enforce the award, NHIF lawyers gave their opinion that the award be challenged at the High Court.
Fund disputed the award and proceeded to the High Court to seek redress.
The management later sought the Attorney General’s opinion on the matter, who advised that the award may not be successfully challenged in court on the basis that the procurement procedures were not followed.
However, for purposes of trying an out-of-court-settlement, management was tasked to pursue without prejudice negotiations with the consultants on the award based on the figure of Sh1.25 billion, which was quoted in the CEO’s commissioning letter to the Project Manager.
NHIF Board was also to engage the same consultants on another project to set up a cancer centre on the same disputed piece of land.