Sh5m fine for failing to settle bills too harsh, governors say

Governors have opposed a bill that imposes a Sh5 million fine or five years jail term for public officers who fails to pay contractors and suppliers on time.

The Council of Governors (CoG) said the penalties prescribed in the Prompt Payments Bill, 2022 is punitive.

The Bill by Nominated Senator Mariam Sheikh Omar (UDA) seeks to put in place a legal framework to facilitate prompt payment for supply of goods, works and services procured by government entities at the national and county levels.

The Bill is intended to tame the rise in pending bills that has sent contractors and small businesses into cash flow woes, forcing some to close down or declare redundancies to remain afloat.

“An accounting officer who, without reasonable cause or negligently fails to pay the amount due commits an offence and shall be liable to pay a fine not exceeding five million shillings or to imprisonment for a term not exceeding five years or to both fine and imprisonment,” reads part of the Bill.

According to Omar, the Bill applies to all procurement transactions by national and county governments.

Very punitive

CoG, however, argues that it is wrong to punish procurement or finance officers in the counties with exorbitant fines yet some of the challenges that may lead to the delays may not be their making.

“The proposal to impose a Sh5 million fine or five years imprisonment to officers who fail to pay suppliers or contractors on time in our view is very punitive,” Fernandes Barasa, the Kakamega Governor told Senators.

Omar’s proposal states that where a supplier has delivered an invoice to the procuring entity and the accounting officer of the procuring entity negligently, maliciously or without reasonable cause fails to return the invoice as provided, commits an offence and is be liable, on conviction, to a fine not exceeding Sh5 million or to imprisonment for a term not exceeding five years or to both.

Appearing before the Senate committee on Finance and Budget chaired by Mandera Senator Ali Roba, Kisii Governor Simba Arati said delays in settling supplier or contractor bills can arise from errors, lack of proper documentation and delays Treasury disbursements.

“You cannot jail an accounting officer earning less than Sh300,000 monthly with a Sh5 million fine or five years in prison,” said Arati.

“Even jails are not meant to punish but it’s a corrective measure. The penalty should not be too punitive but it should be a deterrent for non-payment. Sh500,000 sounds a good penalty,” he said.

The Finance and Budget Committee said the measures are meant to deter public officers from failing to settle  bills.

“This punishment will introduce good manners. This puts an absolute condition on public officers who are involved in procurement mischief and fail to pay contractors,” said Migori Senator Eddy Oketch.

The Bill further proposes that a person who wishes to enter into a contract for the supply of goods, works or services with a national or county government entity shall make a declaration to the accounting officer of the entity on any pending payments owed to a small or micro enterprise.

“A supplier and a procuring entity shall, at all times, deal with each other fairly and lawfully,” the Bill reads in part.

Small enterprises

The National Assembly made changes to the Prompt Payments Bill that recommended payment to suppliers and contractors within 90 days.

Its Finance Committee reduced the payment period in line with the two months prescribed in the Public Procurement and Asset Disposal Regulations, 2020.

“The committee has proposed that payment be made within 60 days. This will ensure suppliers of goods and services to ministries, departments and agencies are paid in time, hence increasing liquidity of such businesses, leading to growth of small and medium enterprises and creating employment opportunities,” the committee said in a report on the scrutiny of the Bill.

The Controller of Budget (CoB) Margaret Nyakang’o told Senators to amend the Bill further to ensure vendor segmentation where payments to small and medium enterprises are made within 30 day and 90 days for large contractors.

The Senate Finance committee is currently collecting views from stakeholders before submitting the document to the House for debate.