LEGAL AND REGULATORY FRAMEWORKS
Legal and regulatory frameworks.
i. The Constitution of Kenya 2010.
Article 227 of the Kenya Constitution requires public procurement systems to be fair, equitable, transparent, competitive and cost effective. It also requires Parliament to pass procurement regulations that will provide for preferential allotment of contracts, protection of disadvantaged categories of persons and sanctions against nonperforming contractors, as well as those guilty of corrupt practices, tax violations and labour laws.
Article 10 of the Kenyan Constitution captures national values and principles of governance which include: –
a. patriotism, national unity, sharing and devolution of power, the rule of law, democracy and participation of the people
b. human dignity, equity, social justice, inclusiveness, equality
c. human rights, non-discrimination and protection of the marginalised
d. good governance, integrity, transparency and accountability
e. sustainable development
Article 232 of the Kenyan Constitution outlines the values and principles of public service which include:
a. high standards of professional ethics
b. efficient, effective and economic use of resources
c. responsive, prompt, effective, impartial and equitable provision of services
d. involvement of the people in the process of policy making
e. accountability for administrative acts
f. transparency and provision to the public of timely, accurate information
g. representation of Kenya’s diverse communities
h. affording adequate and equal opportunities for appointment, training and advancement, at all levels of the public service, of
• men and women
• the members of all ethnic groups
• persons with disabilities.
i. fair competition and merit as the basis of appointments and promotions;
ii. Public Procurement Policy, Public Procurement and Asset Disposal Act 2015 and Regulations 2020.
Public Procurement Policy
It is government policy that ensures funds budgeted and approved by parliament for the purpose of procurement are spent on the intended purposes. This applies both to development and recurrent expenditures. It is also government policy to allow open competition for procurement without discrimination in a transparent, fair and accountable manner to ensure achievement of value for money in all procurement. Government also expects public procurement to contribute to the national economic growth and poverty reduction in line with the national development goals.
Public procurement plays an important role in the Kenyan economy. Government policy, among other things, seeks to achieve economic growth and poverty reduction and also show tangible improvements in the delivery of services to the people of Kenya.
The mechanism by which the government delivers services to the public is by way of procurement. The success in the delivery of services is predicated on the efficient allocation of resources and the timely delivery of such services.
Procurement also provides important linkages to the Private Sector. It can promote expansion of the private sector by the way of expanding commercial opportunities and emphasis on fair competition.
Public Procurement and Asset Disposal Act, 2015
A new law governing procurement and assets disposal by public entities in Kenya known as the Public Procurement and Asset Disposal Act force on 7th January, 2016. Below is a highlight of the provisions of the new Act:
a) Objective of the Act
The Act gives effect to Article 227 of the Constitution which provides for a system that is fair, equitable, transparent, competitive and cost-effective. The Act also provides for procurement by the county governments and makes provisions for e-procurement.
The Act will apply to all public entities including state organs, departments, state corporations, county governments, companies owned by public entities and bodies in which the national or county government has a controlling interest, among others.
Noteworthy is that the Act will not apply to:
• Procurement and disposal of assets under Public Private Partnership Act, 2013
• Procurement and disposal of assets under bilateral or multilateral agreements between the Government of Kenya and any other foreign government, agency, entity or multilateral agency unless otherwise prescribed in the Regulations.
d) Repealed law
The Act repeals the Public Procurement and Disposal Act, 2005 which was one of the laws governing public procurement in Kenya but provides that procurements which commenced before 7th January 2016 shall be continued in accordance with the law applicable at the time, among other reservations.
e) Procurement at the Counties
The County Treasury will be responsible for the implementation of the Act at the county level.
f) Tender Security
While the repealed Act was silent on the value of the tender security, the new Act now specifies that tender security in any tender shall not exceed 2% of the tender as valued by the procuring entity.
g) Citizen Contractors and County Reservations
20% of procurement at the County level will be reserved for County residents. Kenyan citizens (or entities in which Kenyan citizens own at least 51% shares) will automatically be entitled to an additional 20% of their total score in certain situations.
h) Use of ICT in procurement
In line with GoK’s electronic procurement system, Information and Communication Technologies (ICT) may be used in procurement proceedings as will be prescribed in the Regulations.
i) New procurement methods
In addition to retaining the procurement methods under the repealed Act (i.e., Open Tendering, Restricted Tendering, Direct Procurement, Request for Proposals, Request for Quotations and Low Value Procurement) the new entrants under the new Act include:
• two-stage tendering;
• design competition;
• electronic reverse auction;
• force account;
• competitive negotiations; and
• Framework agreements.
j) Definition of a successful tenderer
Under the Act, the successful tender shall be the one which meets any of the following requirements as will be specified in the tender documents:
• the tender with the lowest evaluated price;
• RFP- the responsive proposal with the highest score determined by the procuring entity by combining, the scores assigned to the technical and financial proposals;
• the tender with the lowest evaluated total cost of ownership;
• the tender with the highest technical score, where a tender is to be evaluated based on procedures regulated by an Act of Parliament which provides guidelines for arriving at applicable professional charges
k) Changes with regard to the evaluation process
• Post qualification / due diligence: Under the new Act, the tender evaluation committee, may, after tender evaluation, but prior to the award of the tender, conduct due diligence to confirm and verify the qualifications of the tenderer who submitted the lowest evaluated responsive tender to be awarded the contract.
• Professional Opinion: Under the new Act, all procurement function in Kenya will be handled by qualified procurement professionals who will be required to give an opinion.
l) Approval of procurements contracts by the AG
All contracts of a value exceeding five (5) billion shillings will require to be cleared by the Attorney-General before they are signed.
m) Liquidated damages and interest
Under the new Act, and unless otherwise provided in the particular contract, public entities will be required to pay interest on any overdue amounts while the contractor will be liable to liquidated damages for delayed performance.
n) Regulating bodies
• The National Treasury will be responsible for public procurement and asset disposal policy formulation.
• The Public Procurement Oversight Authority (PPOA) has been replaced by the Public Procurement Regulatory Authority (PPRA) which will play an oversight role with regard to all public procurement in Kenya.
• The Public Procurement Administrative Review Board which reviews and determines tendering and asset disposal disputes has been retained under the new Act
Public Procurement and Asset Disposal Act Regulations 2020
a) Procurements undertaken pursuant to bilateral/multilateral agreements
It provides that procurements and disposal of assets under bilateral or multilateral agreements between the Government of Kenya and any other foreign government, agency, entity or multilateral agency are not procurements or asset disposals with respect to which the Act applies. E.g., the SGR which was financed through a concessional loan from without any visibility around what sort of value for money assessment was carried out on the total cost of the project.
b) Debarment proceedings
Under the provisions of the Act, a tenderer who is found to have breached the provisions of the Act may be blacklisted and debarred from participating in procurements for a period of not less than 3 years.
The New Regulations operationalize this by introducing procedures for the hearing and determination of debarment proceedings by the Public Procurement Administrative Rreview Board. We note that a tenderer who is the subject of the proceedings can now contest the accusations and will be allowed to respond and submit evidence in its defense.
In a bid to encourage the adoption of information technology and efficiency in procurement, the New Regulations provide guidance and elaborate procedures for the establishment and use of e-procurement systems and a central online portal to be developed by the Public Procurement Regulatory Authority.
If successfully implemented, e-procurement systems could potentially save costs, eliminate paperwork and improve transparency and efficiency in procurement processes.
d) Preferences and Reservations
Section 155 of the Act provides for preferences and reservations to be applied by procuring entities. Preference should be given to:
• supplies wholly mined and produced in Kenya;
• supplies partially mined or produced in Kenya or assembled in Kenya;
• firms with 51% Kenyan shareholding.
The New Regulations now further provide that the tender documents must as a mandatory requirement specify that the successful bidder shall:
• transfer technology, skills and knowledge through training, mentoring and participation of Kenyan citizens;
• reserve at least 75% employment opportunities for Kenyan citizens for works, consultancy services and non-consultancy services, of which not less than 20% shall be reserved for Kenyan professionals at management level;
• Include in its tender a local content plan specifying:
-positions reserved for employment of local citizens;
-capacity building and competence development programmes for local citizens;
-timeframes within which to provide employment opportunities;
-demonstrable efforts for accelerated capacity building of Kenyan citizens;
-succession planning and management; and
-a plan demonstrating linkages with local industries which ensures at least 40% inputs are sourced from locally manufactured articles, materials and supplies partially mined or produced in Kenya, or where applicable have been assembled in Kenya.
e) Clarity in relation to ‘Specifically Permitted Procurements’ under Section 114A of the Act
In 2017, the Act was amended to include procurement though a procurement method specifically permitted by the National Treasury. The New Regulations limit the use of ‘Specifically Permitted Procurements’ to instances where such procedure is in “…the public interest or interest of national security”. These terms are however not defined.
f) Amendment and variation of Contracts
The New Regulations now distinguish between a variation and amendment of a contract entered into following a tender award.
An amendment is defined as a change to the terms and conditions of an awarded contract and contract while a variation refers to a change to the price, completion date or statement of requirements of a contract.
Parties therefore have greater flexibility when making amendments to contracts but variations may only be considered 12 months after the date of signing the contract and only where the proposed variation meets the conditions specified in Section 139 (4) of the Act.
iii. Public Finance Management Act 2012.
It sets out to provide for the effective management of public finances by the national and county governments; the oversight responsibility of parliament and county assemblies; the different responsibilities of government entities and other bodies, and for connected purposes. It establishes the National Treasury and County Treasury which play a crucial role in formulating public procurement policy.
It also talks of annual budgeting which links with annual procurement planning by providing the funds for procurement. Procurement in turn affects the budget preparation process. Without proper procurement plans budget preparation with a bottom-up approach is unachievable. It affects Cash Management which is based on proforma cash flows for effective commitment control which in turn should properly be based upon the approved procurement plans.
It also talks of auditing which interlinks with procurement audits. Traditionally the internal audit function has been weak and ineffective and merely served as a basis for unnecessary delays and other unethical practices.
iv. Supply Practitioners Management Act, 2007 and Regulations 2015.
It is an act of Parliament to make provision for the training, registration and licensing of supplies practitioners; to regulate their practice and for connected purposes.
The Supplies Practitioners Management Act 2007, enables the institute (KISM) to fully pursue its mandate of capacity building and professionalizing procurement and supply chain management practice in Kenya through:
1. Putting in place the proper governance structures established in the Act.
The institute has been governed by an interim Council since commencement of the Act in October 2007 in line with transitional provisions in the second schedule of the Act. The regulations will facilitate installation and operation of the Council as envisioned in the Act.
2. Putting in place the Registration and Disciplinary Committees established in the Act. In the absence of regulations, the interim Council continues to register members under transitional provisions in the second schedule of the Act. The regulations define a framework for registration and allows installation of the Registration and Disciplinary Committees which will respectively take over the functions for registration and enforcement of codes of ethics and professional conduct.
3. Putting in place the Examinations Board established in the Act.
The institute has partnered with KASNEB to develop and launch (in April 2015) a National Professional Examination for the procurement and supply chain management profession in Kenya. The regulations will allow proper establishment of the examinations board (KISEB) and position it to take over administration of the said examinations from KASNEB.
The Supply Practitioners Management Regulations 2015.
They enable the institute to fully pursue its mandate of capacity building and professionalizing procurement and supply chain management practice in Kenya through:
1. Putting in place the proper governance structures established in the Act. The regulations facilitate installation and operation of the Council as envisioned in the Act.
2. Putting in place the Registration and Disciplinary Committees established in the Act. The regulations define a framework for registration and allows installation of the Registration and Disciplinary Committees which will respectively take over the functions for registration and enforcement of codes of ethics and professional conduct.
3. Putting in place the Examinations Board established in the Act. The regulations allow proper establishment of the examinations board (KISEB) to offer National Professional Examination for the procurement and supply chain management profession in Kenya and position it to take over administration of the said examinations from KASNEB.
Objectives of public procurement regulatory frameworks.
Public procurement and asset disposal by State organs and public entities shall be guided by the following values and principles of the Constitution and relevant legislation –
a. the national values and principles
b. the equality and freedom from discrimination
c. affirmative action programs
d. Principles of integrity under the Leadership and Integrity Act.
e. The principles of public finance.
f. The values and principles of public service.
g. principles governing the procurement profession, international norms;
h. maximization of value for money;
i. promotion of local industry, sustainable development and protection of the environment.
j. promotion of citizen contractors
Types of public sector organisations.
i. Central government.
Central government is divided into central government departments (e.g., a foreign office, a defence department, a health service, etc.)
These departments are led by a cabinet secretary from the governing political party. This is important in democratic countries because the policies adopted by these departments affect many people and it is important that they are subject to political change if the electorate changes a government at an election (this being a part of the social contract between the government and the governed).
National government policy is configured and coordinated centrally to ensure that strategic policies are pursued and that departments work together to ensure this. The head of government (not to be confused with the head of state) is responsible for national government policy and in a democracy, he or she can be re-elected or defeated based on his or her performance in the role.
ii. Local government.
Some countries are organised into regional authorities, with some powers devolved down to these subnational bodies, as they are best handled by local people. For example, feeder roads, utilities, local schools, agriculture, etc. The counties of Kenya are geographical units envisioned by the Constitution of Kenya, 2010 as the units of devolved government. The powers are provided in Articles 191 and 192, and in the fourth schedule of the Constitution of Kenya and the County Governments Act of 2012.
The Procurement Regulations, 2013 focus on Procurement and disposal within the newly established County Governments. The purpose of the Regulations is to operationalize the application of the Public Procurement and Asset Disposal Act, 2015 in County Governments and promote local industries. Otherwise, the principles and tenets of Public Procurement and disposal remain the same.
iii. State agencies and corporations.
A government agency, sometimes an appointed commission, is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as the Kenya Maritime Authority. There is a notable variety of agency types. Although usage differs, a government agency is normally distinct both from a department or ministry, and other types of public body established by government. The functions of an agency are normally executive in character, since different types of
organizations (such as commissions) are most often constituted in an advisory role -this distinction is often blurred in practice however.
A government agency may be established by a national government by legislation or by executive powers. The autonomy, independence and accountability of government agencies also vary widely.
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