City Hall eyes leasing in cost cutting plans

What you need to know:

The proposal is contained in the recently released County Integrated Development Plan, and if implemented it will see City Hall join the National Police Service and the Health ministry which have floated tenders for leasing of vehicles and medical equipment respectively.

Nairobi has joined the list of government entities that are leasing equipment to cut costs in a bid to free up funds for projects. In a new development plan, the county has proposed to lease ambulances, fire fighting engines and motor vehicles.

The proposal is contained in the recently released County Integrated Development Plan, and if implemented it will see City Hall join the National Police Service and the Health ministry which have floated tenders for leasing of vehicles and medical equipment respectively.

“Through lease financing, the county government will acquire equipment at a cheaper cost than purchasing it,” says the plan that has been forwarded to the County Assembly for scrutiny and approval. “The county government’s cash flow will improve when the leased equipment is utilised. Leasing is an effective credit tool as it ensures that the funds provided are used solely for the intended purpose.”

This year, City Hall allocated Sh500 billion for the purchase and maintenance of ambulances, fire engines and other vehicles. This, however, left out key departments like Inspectorate which has dilapidated vehicles operated by county askaris.

The success of the leasing model is yet to be established with the police service, which is expected to lease 2,700 utility and saloon cars for Sh6 billion, preparing to issue the contracts.

Another such project that is expected to see the Health ministry lease equipment for two hospitals in each county at a cost of Sh34 billion has run into procurement headwinds.

READ: MPs freeze medical kit leasing plan for counties

Leasing allows a client to use a vehicle or equipment for a fixed period while paying monthly fees as the provider takes care of maintenance. This helps clients avoid huge capital expenditure they would otherwise incur if they opted to buy.

In the new plan, City Hall has lined up thousands of projects to be implemented by 2017 but expects that revenues will only grow marginally from Sh26.3 billion this year to Sh33.3 billion in 2017.