Public procurement in Kenya

Last updated

Public procurement in Kenya is governed by the Public Procurement and Asset Disposal Act 2015, whose full title is "An Act of Parliament to give effect to Article 227 of the Constitution; to provide procedures for efficient public procurement and for assets disposal by public entities; and for connected purposes". This legislation came into effect on 7 January 2016, repealing the previous Public Procurement and Disposal Act of 2005, [1] and all state organs and public entities within Kenya are required to comply with this law in regard to planning and undertaking procurement, inventory management, asset disposal and contract management, except where the provisions of the Public Private Partnership Act, 2013 already apply to procurement and disposal of assets, or where procurement and disposal of assets takes place under bilateral or multilateral agreements between the Government of Kenya and any other foreign government or multilateral agency. [2]

Contents

The law provides for the National Treasury to be responsible for public procurement and asset disposal policy formulation. [3]

History

Public procurement in Kenya is a newer market compared to other Western countries. Since Kenya was a colonial entity of the United Kingdom until the middle of the 20th century, there was no Kenyan government to conduct public procurement. In the early days of the country there was no regulation of the public procurement market. Thus, the laws and traditions regarding public procurement are mostly from the 21st century. Until the establishment of the Public Procurement Oversight Authority in 2005, regulation of public procurement in Kenya was largely done by treasury circulars. [4]

Article 227 of the 2010 Constitution of Kenya provided for new standards for public procurement. This article requires public procurement to be set up in a manner that is fair, equitable, transparent, competitive, and cost effective. It also set requirements for the Kenyan parliament to pass procurement regulations that would provide for preferential allotment of contracts and protection for disadvantaged groups. It will also have to pass regulations that would provide for sanctions for non-performing contractors and those found guilty of corruption, tax violations, or labor law violations. [4]

Government authorities

Public procurement in Kenya is overseen by the Public Procurement Oversight Authority (PPOA). The Public Procurement Oversight Authority was established by the Public Procurement and Disposal Act of 2005. [5]

The Public Procurement and Disposal Act of 2005 also established the Public Procurement Advisory Board (PPAB), the continuance of the Public Procurement Complaints, Review and Appeals Board as the Public Procurement Administrative Review Board (PPARB).

Access to government procurement opportunities

The Access to Government Procurement Opportunities (AGPO) law, [6] originally introduced in 2012, set aside 10% of government contracts to be awarded to disadvantaged groups (i.e. enterprises owned by young people, women or persons with a disability) without competition from established firms. This percentage was increased to 30% in 2013. The AGPO policy also covers micro and small enterprises, local and citizen contractors and citizen contractors in joint ventures with foreign suppliers. [7]

Problems with public procurement in Kenya

The Public Procurement Oversight Authority (PPOA) estimated in 2007 that procuring entities in Kenya were paying around 60% more than prevailing market prices. [4] This signals that there is an noncompetitive procurement market in Kenya. It is estimated that 25% of public expenditure can be saved by proper implementation of public procurement laws and regulations in Kenya. [4]

According to the OECD, the legal and regulatory framework set up for public procurement in the last decade have strengthened the system, weaknesses still exist. There are significant challenges to applying the newly set framework and enforcing the laws. [8] Other issues are the disproportionate reliance on quotations for procurement, as well as significant differences in procurement methods between public entities. [8]

Chinese influence

Public procurement in Kenya has close relations with Chinese investments. The Chinese government has invested heavily in building infrastructure in the region, including providing debt for the Kenyan government to hire Chinese firms to build infrastructure projects.[ citation needed ] A major example of this is the pipeline connecting Nairobi to Mombasa.[ citation needed ]

Opposition figures[ who? ] have criticized the use of public funds to award contracts to Chinese firms, as these contractors often bring in workers from China, which reduces job opportunities for native Kenyans.[ citation needed ]

Related Research Articles

Office of Foreign Assets Control Agency of the United States Department of the Treasury

The Office of Foreign Assets Control (OFAC) is a financial intelligence and enforcement agency of the U.S. Treasury Department. It administers and enforces economic and trade sanctions in support of U.S. national security and foreign policy objectives. Under Presidential national emergency powers, OFAC carries out its activities against foreign states as well as a variety of other organizations and individuals, like terrorist groups, deemed to be a threat to U.S. national security.

In taxation and accounting, transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Because of the potential for cross-border controlled transactions to distort taxable income, tax authorities in many countries can adjust intragroup transfer prices that differ from what would have been charged by unrelated enterprises dealing at arm’s length. The OECD and World Bank recommend intragroup pricing rules based on the arm’s-length principle, and 19 of the 20 members of the G20 have adopted similar measures through bilateral treaties and domestic legislation, regulations, or administrative practice. Countries with transfer pricing legislation generally follow the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations in most respects, although their rules can differ on some important details.

Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.

Bank regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom they conduct business, among other things. As regulation focusing on key actors in the financial markets, it forms one of the three components of financial law, the other two being case law and self-regulating market practices.

Property management is the operation, control, maintenance, and oversight of real estate and physical property. This can include residential, commercial, and land real estate. Management indicates the need of real estate to be cared for and monitored, with accountability for and attention its useful life and condition considered. This is much akin to the role of management in any business.

Bid rigging is a fraudulent scheme in procurement auctions resulting in non-competitive bids and can be performed by corrupt officials, by firms in an orchestrated act of collusion, or between officials and firms. This form of collusion is illegal in most countries. It is a form of price fixing and market allocation, often practiced where contracts are determined by a call for bids, for example in the case of government construction contracts. The typical objective of bid rigging is to enable the "winning" party to obtain contracts at uncompetitive prices. The other parties are compensated in various ways, for example, by cash payments, or by being designated to be the "winning" bidder on other contracts, or by an arrangement where some parts of the successful bidder's contract will be subcontracted to them. In this way, they "share the spoils" among themselves. Bid rigging almost always results in economic harm to the agency which is seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers.

The Federal Acquisition Regulations (FAR) cover many of the contracts issued by the US Military and NASA.

Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as 'sponsors', and a 'syndicate' of banks or other lending institutions that provide loans to the operation. They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling; see Project finance model. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.

The processes of government procurement in the United States enable federal, state and local government bodies in the United States to acquire goods, services, and interests in real property.

Government procurement or public procurement is undertaken by the public authorities of the European Union (EU) and its member states in order to award contracts for public works and for the purchase of goods and services in accordance with the principles underlying the Treaties of the European Union. Public procurement represents 13.5% of EU GDP as of 2007, and has been the subject of increasing European regulation since the 1970s because of its importance to the European single market.

Government procurement Purchases made by the government

Government procurement or public procurement is the procurement of goods, services and works on behalf of a public authority, such as a government agency. With 12 percent of global GDP in 2018, government procurement accounts for a substantial part of the global economy.

The United States Government sets aside contract benefits for companies considered to be "Service-Disabled Veteran-Owned Small Business" (SDVOSB). The most notable of these contracts are the Veterans Government-wide Acquisition Contracts issued in accordance with Executive Order 13360, which is designed to strengthen federal contracting opportunities for SDVO firms. The current VETS contract runs from 23 February 2018 to 22 February 2028. This program has a ceiling of $5 billion. While this money is set aside by the Office of Federal Procurement it is up to the government agencies to provide the contracts, mainly the United States Department of Defense (DoD).

In the United States, the Financial Industry Regulatory Authority, Inc. (FINRA) is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD) and the member regulation, enforcement, and arbitration operations of the New York Stock Exchange. It is a non-governmental organization that regulates member brokerage firms and exchange markets. The government agency which acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission.

The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President George W. Bush on October 3, 2008. It was a component of the government's measures in 2008 to address the subprime mortgage crisis.

Ministry of Finance, Planning and Economic Development (Uganda) cabinet-level government ministry of Uganda

The Ministry of Finance, Planning and Economic Development (MoFPED) is a cabinet-level government ministry of Uganda. Its mandate is to formulate sound economic and fiscal policies, mobilize resources for the implementation of government programmes, disburse public resources as appropriated by Parliament, and account for their use in accordance with national laws and international best practices. The cabinet minister of finance is Matia Kasaija. MoFPED was created by the 1995 Constitution of Uganda and derives its power from the Constitution and related acts of parliament, including the 2001 Budget Act and the 2003 Public Finance and Accountability Act.

A systemically important financial institution (SIFI) or systemically important bank (SIB) is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. They are colloquially referred to as "too big to fail".

The Capital Markets Authority of Kenya, also Capital Markets Authority (CMA), is an independent government financial regulatory agency responsible for supervising, licensing and monitoring the activities of market intermediaries, including the stock exchange, and the central depository and settlement system and all the other persons licensed under the Capital Markets Act of Kenya.

National Land Commission Kenyan government agency

The National Land Commission of Kenya is an independent government commission whose establishment was provided for by the Constitution of Kenya to, amongst other things, manage public land on behalf of the national and county governments, initiate investigations into present or historical land injustices and recommend appropriate redress, and monitor and have oversight responsibilities over land use planning throughout the country. NLC was officially established under The National Land Commission Act of 2012.

The Rivers State Bureau on Public Procurement (RSBOPP) is a regulatory agency within the Government of Rivers State that regulates, monitors and oversees public procurement, ensuring that its conduct in the state follows laid down rules, is accountable, transparent and delivers value for money. It was created by the Rivers State Public Procurement Law no. 4 of 2008.

Infrastructure Concession Regulatory Commission (ICRC)

The Infrastructure Concession Regulatory Commission (ICRC) is an agency of the Federal Government of Nigeria responsible for the development and implementation of Public Private Partnership (PPP) framework for the provision of infrastructure services.

References

  1. ↑ Daly and Inamdar, Public Procurement and Asset Disposal Act, 2015, accessed 24 February 2016
  2. ↑ Public Procurement and Asset Disposal Act 2015, Section 4.2(e),(f)
  3. ↑ Public Procurement and Asset Disposal Act 2015, Section 7.1
  4. 1 2 3 4 "Public Procurement in Kenya" (PDF).
  5. ↑ "General Information". www.ppoa.go.ke. Retrieved 2018-05-02.
  6. ↑ Access to Government Procurement Opportunities
  7. ↑ Churchill, F., "Officials who pay late face the sack, Kenyan president says", Supply Management 4 October 2016
  8. 1 2 "Assessment of the Procurement System in Kenya" (PDF). oecd.org.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.