The Officially Sanctioned Procurement Fraud in Kenya

by Dennis Mbae and Michael Onsando

Kenyans are incurring medical expenses which are 30-300% higher than market prices due to the government’s skewed procurement mechanism. The mechanism, known as the Market Price Index model, is not informed by market prices. This has facilitated regular leakage of funds through purchases made at significantly inflated prices.

As a result, there have been exorbitant regional price discrepancies for medical equipment and drugs in Nairobi, Kisumu and Mombasa.

For instance, a delivery bed costs KES 39,357 in Nairobi, KES 49,000 in Mombasa, and KES 114,500 in Kisumu. Dental extraction forceps are listed at KES 925 in Nairobi and KES 1,750 in Kisumu, almost twice as much. A surgical diathermy used in neurosurgery and eye surgery, costs KES 34,333 in Nairobi and KES 352,000 in Mombasa. Interestingly, even equipment imported through Mombasa sometimes costs more there than in other places.

“The pricing variations appear to have been negotiated, and do not conform to any known pattern,” reads a recent policy brief compiled by the Society for International Development, Transparency International-Kenya, and the Kenya Ethical and Legal Issues Network.

MPI 1

The policy brief, Sealing the Loopholes for Corruption in the Kenyan Health Sector, states that the Kenyan government pays on average 11.8 times the international price if it makes purchase based on the current Market Price Index (MPI). This trounces the Kenya Essential Drugs List which underscores the importance of ensuring essential medicines are set at the lowest price to ensure universal access as much as possible.

MPI 2

Further, a World Health Organisation report on medicine prices in Kenya shows that the country’s medicine prices are between 3 and 13 times more expensive than international reference prices.

MPI 3

Procurement in all state organs and public entities is governed by the Public Procurement and Asset Disposal Act 2015. Section 54(2) of the Act provides that “standard goods, services and works with known market prices shall be procured at the prevailing market price.” Further, the Act in Section 53(3) requires the Public Procurement Oversight Authority (PPOA) to “issue a quarterly market price index as reference guide to assist accounting officers make informed price decisions.”

Despite the legal requirement, PPOA has not updated the MPI for the last three quarters namely September 2015, December 2015, and March 2016. The last available MPI is dated June 2015.

Ironically, PPOA states on its website that the “Public Procurement System in Kenya has evolved from a crude system with no regulations to an orderly legally regulated procurement system.”

Additionally, PPOA has defied a presidential directive banning the procurement of goods and supplies at prices above the prevailing market prices by any public entity at the national and county level.

Kenya’s President Uhuru Kenyatta issued the directive in State House on November 23, 2015 in a national call to action against corruption.

“The Public Procurement Oversight Authority shall henceforth widely publish its periodical price reference list for goods and services. I am also directing the PPOA to forward to my office a compliance report on this directive, once every quarter, for action in accordance with article 226(5) of the Constitution,” he stated.

Curiously, the authors of the MPI are anonymous. PPOA only states that the MPI was developed by renowned researchers who it engaged. This infringes the public right to know and deviates from the principles of open governance and transparency as contained in the Kenyan Constitution, states the policy brief.

The existence of the Kenya Medical Supplies Agency (KEMSA) has not simplified matters one bit. This is largely due to its incapacity to achieve full operational success owing to insufficient and unpredictable funding, and denial of a major portion of the procurement of medical supplies by the Ministry of Health.

According to a report on Assessment of Kenya Medical Supplies, the Ministry of Health continues to maintain control of a large portion of the annual medical supplies procurement contracts, notwithstanding earlier agreements to have all medical commodities procurement activities and funding transferred to KEMSA.

With a bloated MPI that facilitates significant leakage of funds on a week-by-week basis, it is unsurprising that endemic corruption exists across major sectors in Kenya.

The National Ethics and Corruption Survey 2015 report designated the Ministry of Health as the second most corrupt at 14.3% after the Ministry of Interior and Coordination which had 40.3%.

 

Source: National Ethics and Corruption Survey 2015 report

Source: National Ethics and Corruption Survey 2015 report

At the County government level, the Department of Health led in corruption at 29.1% followed by Land and Physical Planning at 14.3%. The Public Service Board came third at 13.5%.

Source: National Ethics and Corruption Survey 2015 report

Source: National Ethics and Corruption Survey 2015 report

At the same time, the Ministry of Health was the most frequented by respondents at 38.4%, followed by the Ministry of Lands at 25.1%, and Ministry of Interior and Coordination at 16.5%.

Source: National Ethics and Corruption Survey 2015 report

Source: National Ethics and Corruption Survey 2015 report

The cumulative picture weighed by number of interactions and prevalence of corruption makes the Ministry of Health the most corrupt institution in Kenya.

Recommendations

Among the recommendations of the policy brief include:

The Office of the Auditor General to scrutinize the loophole created by the MPI for fraud, theft, and financial improprieties.

The Public Procurement Oversight Authority to disclose the authors of MPI and publish its response to the policy brief’s findings.

The Ethics and Anti-Corruption Commission, the Directorate of Criminal Investigations and the Asset Recovery Agency to institute proceeding to review the loophole created by the MPI and if necessary recover monies from companies that supplied above price reference lists.

Let the world know:
  • Noel O Otieno

    Ok , this is a good start , but barely scratches the surface. there is such a huge scandal going on in government when it comes to availability of drugs. you will seek medical services from government hospitals, if you are lucky enough to see a doctor, have some money for tests and diagnosis, in the end, the doctor prescribes drugs that they know are not stocked by the government hospital pharmacy. they even casually tell you where they are sold in private pharmacies, of course at much higher prices. how came these drugs can be obtained by private pharmacies but not by government? Government that recently raised NHIF rates by huge percentages? isn’t it in the best interest of the government to at least make it a priority to have in stock drugs and medical supplies in stock for the benefit of the people whom they tax to death? all the while, the people who are responsible to have a working system in place are covered by premium private medical schemes. we need to expose the people responsible for this negligence the same way Kanjo kingdom did. I have been on prescription drugs for the last 13 years . only once did I ever get 30 percent of the drugs that were prescribed by the gov. hospital and the price difference was huge. 400 kshs against 2600 kshs. every month whenever I go for a re-fill, I am reminded of this scandal.