Understanding Public Procurement Law for Entrepreneurship

Chege Njoroge - Managing Partner, Lesinko Njoroge & Gathogo Advocates
April 2019

Government spending is a critical component and forms a huge part of the gross domestic product (GDP) of Kenya. In contracting for goods and services, Article 227 of the Constitution requires state organs and public entities to do so in accordance with a system that is fair, equitable, transparent, competitive and transparent.

As a regulatory framework for procurement of goods and services as well as for disposal of assets contemplated in the Constitution, Parliament enacted the Public Procurement and Disposal Act, 2015. The Act repealed the law that was in place since 2005. The law is applicable to State organs and public entities with respect to procurement planning, processing, inventory and asset management, disposal of assets and contract management. It provides for the guiding principles that must be complied with in undertaking public procurement and disposal of assets. To enumerate, these include adherence to national values spelt out in the Constitution; equality and freedom from discrimination; affirmative action programmes; principles of integrity, public finance, public service, professionalism, international norms, value for money, sustainable development; promotion of local industry, citizen contractors and protection of environment.

Bearing in mind that Government procures goods and services from the private sector, a good understanding of the procurement law by entrepreneurs seeking to do business with Government is critical. National Treasury, Public Procurement Regulatory Authority and Public Procurement Administrative Review Board play critically important roles in public procurement systems. Beyond defining the roles of National Treasury in the formulation of the procurement policy, the law creates Public Procurement Regulatory Authority having the functions of monitoring procurement systems and enforcing values and standards by procuring entities. To its credit, the Authority, formerly Public Procurement and Oversight, has developed a general procurement Manual, code of conduct for procurement officers and a set of standard documents in order to achieve uniformity in procurement of public procurement. These have aided in standardisation of procurement practices across all entities. It is debatable whether that has achieved a fair, transparent, equal, efficient and value oriented practices as contemplated in the law given that the Courts have in the past cancelled many procurement contracts based on breach of law by procuring entities.

An important body created by the law is the Public Procurement Administrative Review Board. It has the mandate of reviewing, hearing and determining tendering and assets disposal disputes. Critically, in exercise of its mandate, the Review Board has power to debar a tenderer from participating in procurement on a number of grounds, including: breach of procurement laws in Kenya and other jurisdictions, giving of false information, breach of and refusal to sign a contract, breach of code of ethics, engagement in corrupt or fraudulent practices, as well as failure to perform a contract in accordance with professionally recognised procedures. A contractor may be debarred for three years but the law provides for an avenue to challenge such a decision by way of judicial review proceedings in the High Court. Needless to mention, to be eligible to bid in a tender process, a person or an entity must have legal capacity to enter into a contract, must not be bankrupt, insolvent or under receivership, must meet professional qualifications where applicable, and must not have been debarred by the Board or Authority. Other conditions of the tender must be met including technical qualification, financial capability, provision of tender security and filling in of requisite declaration forms. The law requires tenderers to be prequalified by the procuring entity for participation in a tendering process.

Towards promotion of local industry and participation of marginalised groups in government procurement, the law makes allowance for preferences and reservations for certain groups such as small scale enterprises, citizen contractors and disadvantaged groups. By way of illustration, small or micro enterprises or a disadvantaged group wishing to participate in public procurement may apply for registration with the National Treasury or the respective County Treasury, which qualifies them for preferential treatment in the tender processes. Under the scheme, exclusive preference is given to local contractors offering motor vehicles, and plant and equipment that are assembled in Kenya, among others. Citizen contractors are given preference for procurements in respect of road works not exceeding Kenya Shillings (Kshs) 1 billion; construction materials and other materials used in transmission and conduction of electricity made in Kenya not exceeding Kshs 500 million, amongst other categories. Under affirmative action programmes, a procuring entity is required to allocate at least thirty percent (30%) of its procurement budget for goods, work and services from micro and small enterprises owned by youth, women and persons with disability.

The Authority installed a Tenders Portal accessible at www.tender.go.ke as a publication platform for information on tenders and contract awards. The platform performs the role of database storage for tender advertisements and awards worth Kshs 5,000,000 and above. With this, access to Government tenders has been made easy; it has also fostered the implementation of e-procurement, among others. Advertisement is to be made in three nationwide circulated newspapers for those that cannot access the internet.

For more information regarding procurement, please get in touch with Chege Njoroge at: njoroge@lesinkonjoroge.com