Treasury’s Naivasha data centre remains unutilised after Sh2 billion spent on project

Taxpayers may have lost nearly Sh2 billion in a failed attempt to set up a data disaster recovery centre in Naivasha.

Despite years of spending, the project remains unutilised, with mounting costs raising concerns over financial mismanagement.

A report by Auditor-General Nancy Gathungu reveals that the National Treasury initiated the project in 2009 to create a critical backup for financial and government data.

The contract was awarded to a company for Sh782 million, with an initial timeline of 96 weeks. However, the project's scope was later expanded and split into three phases.

The first phase cost Sh899 million, while the second phase amounted to Sh205 million. Both were completed and paid for, bringing the project to 68 per cent completion.

However, a dispute over payments in the third phase stalled the project, leading to additional financial losses.

The disagreement arose after the Treasury failed to settle a Sh193 million claim meant to compensate for idle resources and expenses due to the delays.

The contractor took the matter to arbitration and was awarded Sh4 billion for "loss of profits and other associated costs."

As of June 30, 2024, the outstanding amount had grown to Sh5.5 billion due to accrued interest.

Third phase

The Treasury argued that the third phase was a separate tender that required a new bidding process.

However, the Auditor-General has blamed Treasury officials for mishandling the contract, stating that the financial burden could have been avoided with proper management.

"The expenditure would have been avoided had management handled the contract in accordance with the applicable laws and regulations," Gathungu said.

She also pointed out that the facility remains unused despite the massive expenditure, raising questions about wastage in government projects.

"In the circumstances, the value for money from the payment of Sh1,987,278,191 could not be confirmed. The full payment of the amount will adversely affect the budgetary allocation for the ministry and is not in public interest," she stated

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• data security
• Naivasha
• Data Disaster Recovery Centre
• Treasury’s Naivasha data centre remains unutilised after Sh2 billion spent on project
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The report further reveals that the Treasury ignored legal advice from the Attorney General, who had recommended negotiating with the contractor to avoid a costly legal battle. The AG, after reviewing the case, warned that the government had little chance of winning an appeal. Despite this, the Treasury failed to initiate negotiations.

"No evidence of the negotiations having taken place was provided for audit review," Gathungu noted.

To date, the Treasury has paid Sh882 million as part of the court-awarded settlement. Lawmakers have pressured the Treasury to allocate funds to complete and operationalise the centre. A parliamentary team that visited the site found that equipment worth over Sh100 million had been stolen or vandalised.

The stalled project has since been transferred to the Ministry of Information and is expected to play a role in the government's digital transformation agenda.