Controversy continues to rock the Sh63 billion Managed Equipment Services (MES) project after the government resolved to terminate the eight-year agreement.
In 2015, the Ministry of Health signed a deal with five firms to lease equipment such as dialysis machines and MRI scanners, on behalf of 47 counties.
The planned pullout by the governors comes days after the National Treasury Cabinet Secretary Njuguna Ndung'u allocated more than Sh9 billion for the project in the 2023/24 Budget.
Out of the allocation, each county is supposed to receive Sh200 million annually for the leased equipment.
CoG Health Committee chairperson and Tharaka Nithi Governor Muthomi Njuki said MES was shrouded in controversy and lauded the move to scrap the project which will now be referred to as National Equipment Support to Counties (NESC), and will be undertaken by the national government
"We are happy to announce the death of MES which for a long time was shrouded in mystery right from inception and we are ready for change," said Mr Njuki.
The MES project ended after governors and the Ministry of Health agreed on a new model following a two-day consultative meeting in Naivasha last week.
Health Cabinet Secretary Susan Nakhumicha thanked the county chiefs for giving the ministry the mandate to execute MES through Intergovernmental Participation Agreements (IPAs).
Ms Nakhumicha said the ministry was keen to roll out the universal health coverage, which was part of promises by President William Ruto.
"After so much noise, we have agreed with the governors on the Managed Equipment Service scheme and we thank them for giving us the opportunity to provide the services.
"We are a responsible ministry, we have done rapid assessment and we are going to advertise for those services so that we can get bidders and the best bidder will be given the opportunity to continue servicing and providing MES," she said.
But sources told The Standard that negotiations for the new arrangement are yet to start, and that talks will be guided by the need to have value for money.
The negotiations will include an audit of equipment in county hospitals and a list of which ones need to be serviced. This is to ensure procurement of any medical equipment is on a needs basis.
"This thing (medical equipment) is very political. The intergovernmental agreement was to address the issue of whether counties would require procurement," the source said.
The MES project, which was launched by former President Uhuru Kenyatta, has been marred by controversy. It was awarded five slots for theatre equipment, theatre instruments and a central sterile services department, renal equipment, radiology equipment and ICU equipment.
Billing before delivery
Notably, although counties had money debited from their accounts annually, most of the equipment was not delivered. This raised the question why billing was happening before delivery of the equipment.
Initially, the deal was for Sh38 billion but it was later pushed to the current Sh63 billion. Ministry of Health officials told senators that they had intended to equip an additional 21 hospitals.
The original scheme would have seen each county pay Sh665 million at the end of leasing period. But the varied figure will see them pay Sh1.3 billion at the end of seven years.
The Cabinet secretary also attributed this variance to the fluctuating performance of the dollar against the shilling.
Nine years later, it has also emerged that there are counties which have been consistently billed by the national government yet no medical equipment has been delivered to date.
In 2015, the counties had estimated that if they were to do an outright purchase of all the equipment leased, it would cost each county Sh181.6 million at prevailing market rates for two hospitals. They argued that a six year 7.5 per cent value service contract would total Sh41.3 million each, bringing the overall cost of the equipment to Sh223 million over the seven years.
Among those who got the lucrative deals include Shenzen Midray Bio-Electronics Company of China, which supplied theatre equipment to 96 hospitals at a cost of Sh47 billion. Esteem Industries of India was awarded a Sh9 billion contract to supply surgical and sterilising instruments to 96 hospitals.
Bello SRL of Italy got a contract of Sh2.4 billion to supply renal and dialysis machines to the 47 counties and two national referral hospitals, while Philips Medical Systems of Netherlands secured a Sh3.7 billion deal to supply ICU equipment to 11 hospitals.
American firm General Electric won a Sh25.5 billion contract to supply radiology and other imaging equipment to 98 hospitals.
Hospitals in Kacheliba in West Pokot, Kabarnet in Baringo, Baragoi in Samburu and Garbatula in Marsabit had equipment delivered but they never worked.
A Senate report released in September 2020 termed the MES project "a criminal enterprise shrouded in opaque procurement processes."
According to the report, the Ministry of Health relied on a faulty tool (public sector comparator) to justify a predetermined outcome in relation to award of tenders that likely resulted in imprudent use of public finances.
Challenges encountered during the implementation of the project launched in 2015 included lack of a project sustainability strategy beyond the seven-year contract period, lack of specialized personnel, and lack of infrastructure to absorb the equipment in some counties.
Also, value for money could not be guaranteed given the inefficiencies of the procurement processes.
The Senate asked the Directorate of Criminal Investigation and Ethics and Anti-Corruption Commission to investigate the scandals, but no action has been taken, even as the programme moves to its second phase with counties forced to remit Sh200 million lease fees.
In the financial year 2021/22, the National Treasury allocated Sh7.2 billion for the MES project.
In the initial three years of the MES project, that is, from the FY 2015/2016 to FY 2017/2018 counties paid Sh95 million each, an amount that increased to Sh200 million in the financial year 2018/19, and would be further varied to Sh131 million, in 2019/20.
The MES project was signed on February 5, 2015, by the Ministry of Health and respective MES service providers.
A spot check by The Standard in several hospitals across the country revealed that some of the equipment supplied has been put to use, while others gather dust in hospital stores due to lack of trained health professionals to operate them.
For example, theatre equipment assigned to Ziwa County Referral Hospital in Uasin Gishu County was reallocated to Moi Teaching and Referral Hospital by the ministry despite there being a viable alternative health facility in the county. Meru County has also been paying Sh200 million annually for the past five years, yet the theatre equipment is still in the Netherlands.
In a previous interview, Kisumu Governor Anyang' Nyong'o said though the MES project has impacted the healthcare system, there are grey areas like dispatching equipment to counties without establishing their requirements, that should be addressed in the second phase.
"Payment of MES programme should be as per the use, and if not in use, they can be taken back to the manufacturers in certain terms," said Prof Nyong'o.
Leasing of the equipment was done during the tenure of former Health CS Cleopa Mailu.