PROCUREMENT LAW IN KENYA CAN BE PERPLEXING, WITH PLENTY OF RED TAPE

By Terry Mwango,Angela Waki Wednesday, August 06, 2014
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The enactment of the PPDA and the subsequent 2006 regulations were preceded by an EU and government survey that found Kenya’s procurement system to be flawed. The failings were mostly due to a weak institutional framework, a lack of transparency in procurement institutions, poor linkages between procurement and expenditure, delays and inefficiencies as well as poor record management.

In 2013, the PPPA was enacted, ostensibly to provide for stronger institutions and procedures in the PPP sector. Incidentally, a year on from enactment of the PPPA, a number of critical institutions are yet to be established and this is proving to be a substantial hindrance in moving forward a number of projects that have been outlined by the new government. That said, the PPP Committee and PPP Unit are in operation and are, for the time being, housed at the State Department of Finance (formerly the Treasury).

Under the PPP Act there is a proliferation of Government administrative bodies and procedures that will now form part of the PPP procurement process. The basic institutional structures involved and their corresponding key functions in the procurement process are summarised in the chart below.

Institutional structures and administration of PPP's in Kenya Cabinet or Parliamentary Approval of PPP projects

  • Petition Committee: Chaired by a judge of the High Court of Kenya to consider petitions and complaints submitted by private contractors concerning the procurement process or PPP project agreement.
  • PPP Committee:Committee comprising various Principal Secretaries of State Departments and with the key function of approval of PPP projects, issuing of procurement guidelines, and ensuring legal compliance of PPP projects with the PPP Act. The Committee replaces the PPP Steering Committee under the repealed PPP Regulations issued under the PPDA.
  • PPP Unit: Established within the State Department for Finance with the key function of serving as secretariat of the PPP Committee and providing technical, financial and legal expertise to the PPP Committee and PPP Nodes.
  • PPP Node: Established within a contracting authority that intends to enter into a PPP arrangement headed by the accounting officer of the contracting authority and to provide financial, technical, procurement and legal expertise in respect of PPP arrangements.

The devolved system of government that was introduced after the new government was sworn-in following the 4 March 2013 general elections has brought about substantial challenges. The biggest of which is a turf war between county governments and the central government. There is therefore an urgent need for specific guidelines on where the jurisdiction of county government ends and that of the central government begins.

While enactment of the new law remains a positive step in building effective and transparent mechanisms in procuring public-private partnerships, there are weaknesses that the Act is yet to address and which remain stumbling blocks on the road to a procurement system that is accountable and effective. These are: Procurement time limits and costs: There are no time limits or guidance on reasonableness as to matters of timelines for the procurement cycle or procuring decision-making by contracting authorities.

Restrictions on assignment or transfer of tenders and successful projects: In respect of project companies set up by successful private contractors, the PPP Act prohibits the winding-up of such companies, alteration of their legal structure, and share capital reductions unless the directors of the company have obtained prior written approval by the contracting authority.

After completion of a PPP project, the majority shareholders of a project company are also expressly prohibited from transferring any of their shares held in the project company before the contracting authority’s acceptance certificate of the quality of the project is issued.

Financial reporting and audit: A PPP contractor has an obligation to keep proper books of accounts and records in relation to the project, which are open for scrutiny by the contracting authority. PPP contract standardisation across the public sector: Guidelines to standardise procurement practice across the public sector is provided by way of stipulations on minimum PPP contractual obligations to be specified in PPP project agreements.

Offences: There are no civil contraventions and liabilities specified or criminal offences provided for under the Act. Administrative review of public procurement: Private contractors seem to be caught between many stools, in that there are a multiplicity of public procurement review bodies, including the PPP Unit, PPP Committee, the Public Investments Committee, the Procurement Complaints, Review and Appeal Board (or Public Procurement Administrative Review Board) under the PPDA, and the Exchequer and Audit Act (Chapter 412, Laws of Kenya), and the High Court. On the face of it, having a better institutional framework should strengthen the transparency and efficiency of a procurement system riddled with a history of emptying public coffers.

However, the downside of having so many governmental agencies is that there is a great deal of red tape involved in getting projects off the ground, since inevitably such institutions may in turn have their own problems of graft and inefficiency. It is our hope that the PPPA will not create a burdensome approval process for PPP projects but instead cure the weaknesses in the system.