Wednesday, July 23, 2008



July 23, 2008
Daily Nation

IT WAS PRIME MINISTER RAILA Odinga who popularised the phrase ‘‘cowboy contractors’’ in reference to a group well-connected contractors who had at that time come up with clever schemes of making money from the Government without doing any work for it.

This happened especially towards the end of former President Moi’s rule.

They would clog the Government payment systems with fake pending bills. That is how we got to a point where the Government was spending more money paying court awards, pending bills and on incomplete road projects than on the construction of new roads.

The business of chasing pending bills had become a business unto itself – a secondary market complete with well-connected brokers whose jobs was to chase these payments on behalf of the cowboys.

If, as a permanent secretary, you resisted paying these cowboys, they would sue you in the High Court, and invariably, they would win.

There were many cases where judgment was entered against the Government because the State did not a file a defence.

At the end of the day, all the payments demanded from the Government would be “legal”. It did not matter that the public was not getting any service.

We need to add to this breed a category known as cowboy architects and quantity surveyors.

This is how this lot schemes the deals. A chief executive of a public corporation looking for a project from which to create kick-back opportunities comes up with some lofty project – a plan to build a staff training institution, for example.

The project would hurriedly be taken to the board for approval where it would be justified on very lofty grounds with uplifting arguments.

Within weeks, a board approval will have been received and the chief executive given the go-ahead to contract an architect and quantity surveyor.

It did matter whether there was money to fund the project or not because the aim was to get kickbacks from the cowboy architect and surveyor.

In a matter of months, the chief executive will have appointed an architect and other consultants to design the building.

Today, there are several cases where public corporations have paid hundreds of millions of shillings to quantity surveyors and architects for projects which did not see the light of day.

I have recounted the scheme in detail as an entry point to a discussion of a case I recently came across.

Away from the limelight, a key public institution is currently fighting having to pay a group of consultants a pending bill amounting to Sh390 million.

THE BACKGROUND TO THE SAGA IS as follows. Some time in 2002, the chief executive of this corporation sought and received board approval to construct a modern training school for its staff.

When approval for the project was sought from the Treasury as dictated by the State Corporations Act, former Permanent Secretary Mwaghazi Mwachofi wrote back informing the organisation that it did not need to invest in a training school. He had seen the project for what it was.

What happened thereafter is not clear. But the parastatal went ahead and contracted architects and consultants who proceeded to design the buildings and deliver all the drawings.

Unfortunately for the CEO, he was removed from office by the administration of President Kibaki in early 2003.

Last year, the cowboys slapped the parastatal with a Sh700 million bill. At the end of it all, the parties ended up before an arbitrator who made a ruling in favour of the consultants but reduced the pending bill to Sh390 million.

The upshot is that the board and management of the parastatal have gone to court to challenge the verdict.

But the Office of the Attorney-General has advised that the payment is valid and that challenging the arbitrator’s decision in the High Court was ill-advised. Right now, the cowboys are lobbying intensely to have the payment released.

On paper, everything here is legal. These were professional services rendered and one cannot accuse the cowboys of engaging in corruption.

But is it really fair to force a parastatal to spend hundreds of millions of shillings in public resources for a project that was, in the first place, clearly started for the wrong reasons?

In economics, the term opportunity cost is used to define the alternative which you forgo when you spend time and money on one thing and defer spending it on another.

The parastatal I mention is an institution involved in providing very critical services to the ordinary man and woman. Clearly, this institution can only pay these cowboys at a huge opportunity cost.

I know of another parastatal that paid hundreds of millions of shillings to a cowboy architect in 1997 to design a hotel near the airport. To date, that hotel is yet to see the light of day. It is all perfectly legal. You can’t beat these guys.