Economy

Gov’t moves to amend Contracts Act

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public officials empowered to negotiate interest due state

By Eugene Davis

A proposed bill, the Contracts (Amendment)Bill, 2022 which seeks to regulate the discretional powers of Ministers and other persons authorized by law to enter into contract on behalf of the State by limiting them to a standardized mode with respect to payment of interest is before parliament.

The bill which is heading for the third reading in parliament is likely to be adopted and approved before the House adjourns on August 3, 2023.

The object of the Bill is to amend the Contracts Act, 1960 (Act 25) to provide for the type of interest to be paid on a sum of money due to a party of a contract or transaction entered into on behalf of government.

It is also meant to provide for persons authorized to enter into contract or transaction on behalf of State.

A Deputy Attorney-General, Diana Asonaba Dapaah indicated that a need has arisen to have consistency in all state contracts with respect to payment of any interest due parties in the contract or transaction.

The policy rationale is to regulate the discretional powers of Ministers and other persons authorized by law to enter into contract on behalf of the State by limiting them to a standardized mode with respect to payment of interest.

The lack of restrictions on persons qualified to enter into contract has the tendency to allow any persons in Authority to enter into contract without the knowledge or authorization of the sector Ministers who are vested with the overall responsibility and executive mandate over the administration of their sector.

The liberalization regarding mode of calculation of interest due parties in government contracts also have the tendency for abuse of discretional powers by persons who enter into contract on behalf of the state.

The bill, therefore makes explicit provisions for persons who are authorized to enter into a contract or transaction on behalf of the government.

The bill further provides for the payment of interest on any sum of money due under a contract or a transaction entered into on behalf of the government to be calculated at simple interest

The overarching policy intention is to protect the interest of the state with regard to interest payment and effectively reduce the cost of engaging in a contract or transaction by the State.

The Committee noted that the proposed amendment is seeking to authorize only Ministers of State or persons authorized by Ministers to enter into contract on behalf of the State.

The mischief the amendment is trying to cure, according to the Deputy Attorney-General, is to avoid a situation where it may be possible for persons in authority to enter into a contract on behalf of the State without knowledge or authorization of the sector minister who is vested with the overall responsibility over the administration of the sector by the president.

The Committee however observed that the proposed amendment appears to be applicable only to the Executive Arm of Government to the exclusion of the other two organs of government.

 The Legislature and Judiciary arms of government are not headed by Ministers and are allowed by law to enter into contract.

Accordingly, further amendment has been proffered to allow other persons authorized by law to enter into contracts on behalf of the state.

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