The Contract (Amendment) Bill of 2022 has been successfully passed by the parliament and enacted into law.
This move aims to enhance the efficiency of public sector contracts and alleviate the burden of unnecessary interest payments that have been a strain on state finances.
Before its amendment, the Contracts Act of 1960 (Act 25) lacked specific provisions outlining the individuals authorized to engage in contracts on behalf of the government. Likewise, it lacked a standardized method for calculating interest payments applicable to government contracts.
The report from the Committee on Constitutional, Legal, and Parliamentary Affairs underscored that this absence of restrictions on who could enter into contracts on behalf of the government allowed individuals in positions of authority to do so without the knowledge or approval of the sector ministers who held the overarching responsibility and executive authority for sector administration.
Furthermore, the report highlighted that the flexibility in determining the mode of interest calculation in government contracts could potentially lead to misuse of discretionary powers by those involved in contract negotiations on behalf of the state.
The amendment, which was concluded by parliament prior to its recess, was crafted to eliminate ambiguities in the legislation.
It achieved this by precisely defining the individuals qualified to enter into contracts on behalf of the government. Additionally, the amendment introduced a standardized formula for computing interest payments for parties involved in state contracts.
“The bill, then, establishes clear provisions for those who are permitted to engage in business on the government’s behalf. The measure also stipulates that interest payments on any sums owed under contracts or transactions executed on behalf of the government will be computed at simple interest, according to a portion of the committee’s report.
The committee’s chair and Member of Parliament for the Asante-Akim Central constituency, Kwame Anyimadu-Atwi, has outlined a new approach aimed at safeguarding the state’s interests concerning interest payments and, in effect, reducing the financial burden associated with state contracts or transactions.
In presenting the reasons for the suggested revisions to the committee, Deputy Attorney General Diana Asonaba Dapaah stressed the importance of uniformity in interest payment across all state contracts.
However, the committee, in its report, raised reservations about the proposed changes, asserting that they may infringe upon the principle of freedom of contract. This principle allows all parties in a contract to negotiate and establish terms without external interventions, such as state-imposed regulations.
This perspective was countered by the Deputy Attorney General, who maintained that the amendments are aimed at establishing a parallel condition as outlined in Article 181 of the 1992 constitution. This constitutional provision mandates parliamentary approval for all international transactions conducted by the government on behalf of the state.
Additionally, the Deputy Attorney General underscored that the proposed amendments serve as guidance for state authorities and other contracting parties involved in government contracts, specifically concerning decisions pertaining to potential state-funded interest payments.
Persons authorised to enter into contracts
The committee highlighted that the intended revisions are designed to grant authorization exclusively to state ministers or individuals expressly empowered by ministers to engage in contracts on the state’s behalf.
The underlying issue that the amendment aims to address, as articulated by the Deputy Attorney General, is the prevention of scenarios where individuals in positions of authority can form contracts on behalf of the state without the awareness or consent of the sector minister responsible for overseeing the sector’s administration, a role designated by the President.
Nonetheless, the committee observed that the proposed modification exclusively pertained to the executive branch of government and did not encompass the other two branches: the legislative and judicial arms. Unlike the executive arm, these branches are not led by ministers and are legally permitted to form contracts.
As a result, an additional amendment has been proposed to accommodate other individuals who possess legal authorization to enter into contracts on behalf of the state.
“A person who wilfully enters into a contract contrary to this section commits an offence and is liable on summary conviction to a fine of not less than 5000 penalty units and not more than 10,000 penalty units or to a term of imprisonment of not less than 10 years and not more than 15 years or to both,” the proposed amendment states.
“The committee after extensive deliberations on the bill was of the view that the introduction of controls into government contracts with respect to persons authorised to enter into a contract on behalf of the state as well as mode of calculating interest payments due other parties in the contract is a right approach,” the report said.