5 ways govt broke the law when setting up social health scheme

The office of the Auditor General has highlighted five ways the government contravened the law when setting up the Social Health Authority system.

This is according to a report filed by the Auditor General Nancy Gathungu, on state organs for the year 2023-2024.

In her report, Gathungu has listed unbudgeted and non-competitive procurement, undefined scope of works, lack of agreements on payments, and unfavorable contract clauses as some of the shortcomings of SHA.

“The State Department procured the Healthcare Information Technology Digitization system of Sh104 billion.

However, a review of tender documents, contract agreement, and financial proposal indicated the following unsatisfactory matters,” Gathungu’s report reads in part.

The Auditor General’s report has raised concern after it established that the government invested Sh104.9 billion into a system without interrogating some of the clauses in the contract.

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For instance, the contract says the government cannot access or control the system.

'The procuring entity shall ensure neither the procuring entity nor the government health agencies nor the procuring entity authorized users shall access all or any part of the system to build a product or service which competes with the system or undertake similar functionalities to the system or attempt to do so' the auditor general quotes a snippet of a clause of the contract.

Gathungu has also faulted the state officers for giving up ownership of the system and all its intellectual property rights to a private entity.

The contract states that any dispute is to be settled under the rules of the London Court of International Arbitration.

However, the Auditor General says since the procurement was done under the Public Procurement and Asset Disposal Act of 2015, disputes should be referred to the Public Procurement Administrative Review Board. This, she says, is as per the law.

The  Auditor General’s report has also revealed that in the period between 2023 and 2024, the State Department of Medical Services in the Ministry of Health procured a digital system for health records worth Sh104 billion.

However, the purchase was not included in the procurement plan nor the medium-term budgetary expenditure framework.

“This was contrary to Section 53 (7) of the Public Procurement and Asset Disposal Act, 2015 which states that, 'multi-year procurement plans may be prepared in a format set out in the Regulations and shall be consistent with the medium- term budgetary expenditure framework for projects or contracts that go beyond one year'” Gathungu said in the report.

During the procurement process, the State Department did not conduct a competitive process when procuring the system.

Instead, the parties involved in the procurement process directly sourced for a partner, contrary to the law.

“This process was contrary to Article 227(1) of the Kenya Constitution 2010 which requires a fair, equitable, transparent, competitive and cost-effective way of acquiring goods and services,”

Setting up SHA involved installing the system in all public health facilities as well as training healthcare workers at a cost of Sh7 billion.

After reviewing the documents, the auditor General says state officers in charge neither specified the number of health workers nor health facilities involved.

“In addition, the contract price includes training, support, and customer education costs of Kshs.7,023,810,224 but the number of healthcare workers to be trained on the system and the mode of training to arrive at the costs was not disclosed in the contract agreement.

This was contrary to Section 150(1) of the Public Procurement and Asset Disposal Act, 2015 which states that an Accounting. Officer or his or her appointed representative shall be responsible for ensuring that the goods, works and services are of the right quality and quantity,” the report states.

Before charging fees for member contributions to SHA, there was no evidence of public participation.

“These funds according to Clause 12.4 of the general conditions of the contract are to be transferred to an Escrow account daily or at a frequency of not less than one week.

This substantially means membership contributions to Social Health Authority and claims from health facilities have expressly guaranteed the repayment of the project,”.

According to Health PS Harry Kimtai, as of February 2025, about 18 million Kenyans had registered on SHA, but only 4 million were making contributions.

SHA officially began operations across the country in October 2024 but has faced nationwide criticism from Kenyans, healthcare facilities, and workers.