How Covid-19 curbs will alter mega State contracts in Kenya

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How Covid-19 curbs will alter mega State contracts in Kenya


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Summary

  • Delays in release of the contract funds, inadequate machinery, bureaucracy, lack of technical skills, and poor communication contribute to the list.
  • Covid-19 has thrown individuals and the government into confusion, hurting some layers of compliance.
  • The objective of effective contract management is to ensure that goods, services and works are delivered on time, at the agreed cost and according to specifications.

Government transactions the world over are conducted through contracts. Contract management during emergencies can be full of uncertainties. Natural phenomena such as earthquakes, floods, and disease outbreaks pose a threat to effective contract management.

Delays in release of the contract funds, inadequate machinery, bureaucracy, lack of technical skills, and poor communication contribute to the list.

Covid-19 has thrown individuals and the government into confusion, hurting some layers of compliance.

The objective of effective contract management is to ensure that goods, services and works are delivered on time, at the agreed cost and according to specifications.

The government’s Covid-19 containment efforts led to the suspension of many business operations that implied that companies could be struggling literally to meet their contractual obligations. This could lead to a high volume of insurance claims, contract breach litigations and premature contract terminations.

Covid -19 has put most contracting parties in unprecedented situations. Immobility of labour and supply chain disruptions could cause most public contracts to be delayed or be reviewed.

With the rising public debt concerns, the Treasury recently indicated plans to cancel about 157 dormant projects to save about Sh150 billion probably to channel funds to the most pressing sectors such as health, education, agriculture, housing and manufacturing. This will obviously put the government in endless legal battles for breach.

Contracting parties may wish to terminate but it’s advisable that they understand the commercial implications of doing so. Contracting parties may need to review the terms to understand on what basis the contract was cancelled and its ramifications to both the organisation and suppliers.

Ongoing mega projects such as the Konza city, the Lapsset, the SGR, the Nairobi- Mombasa highway expansion, and the Mombasa port expansion may need to be reviewed against the backdrop of lockdowns, curfews and travel restrictions.

Perhaps it’s time contract administration embraced digital technology to conduct some activities, including contract negotiations, through digital platforms.

The virus containment measures saw the world go digital at a faster pace.

MITIGATION STEPS

Tele-working, remote learning, teleconferencing, webinars, online health services, e-commerce and digital payments are thriving.

Organisations may seek to review agreements with suppliers to consider how they may be affected by emergencies such Covid-19.

Force majeure clauses may need to be assessed to identify whether contractual obligations can be suspended, terminated, or reduced.

Sub-contracting agreements should also be reviewed to understand supplier risks throughout the chain and how these may impact delivery.

It is prudent for organisations to understand contractual risk and exposure in contracts to help determine the steps required to mitigate them.

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