Introduction
The Public
Procurement and Asset Disposal Bill, 2014 proposes important changes to the
existing public procurement legal regime. Some of the changes appear directed
at compliance with the new constitutional order. Others are intended to improve
public procurement generally. It has many provisions intended to
professionalize public procurement. The main changes are as discussed below:
Definition of public entities
The
definition of public entities under the bill includes the following new bodies:[1]
Constituencies
Independent
Offices established under the Constitution
Cities
and urban areas created under the Urban Areas and Cities Act
Kenya’s
diplomatic missions
Public
entity pension funds
Bodies
which are not necessarily state corporations under the State Corporations Act
but in which the national or a county government has controlling interest
Bodies
using public assets under contract undertaking (including public private
partnerships)
Companies
owned by public entities
Notably, the
Bill proposes to exclude cooperative societies from the definition. Recently,
there was a dispute between Githunguri Cooperative Society and National
Treasury.[2]
Objectives
The Bill
prioritizes the objective of maximising economy, efficiency and value for
money,[3]
though it still contains the objectives enumerated in the Public Procurement
and Disposal Act (PPDA). The objectives sometimes conflict and judges need a
guide on which objectives to give more weight. The prioritization creates a
hierarchy, though not a satisfactory one, which can guide judges.
The bill
also includes other objectives that are not contained in the PPDA including:
·
Promoting
professionalism in procurement
·
Providing
sanction against tenderers who are not tax compliant
·
Providing
sanctions against tenderers and contractors who have committed serious violations
of employment laws
·
Creating
an enabling environment for small medium and micro enterprises without
foregoing quality and high standards
Government to government procurement
Kenyans must
remember government officials defending the award procedure of Kenya’s biggest
procurement contract, the Standard Gauge Railway contract, by saying that the
contract was outside the scope of PPDA because it was a government to
government agreement.[4]
The argument was fallacious because contract was illegal rather than legal and
outside the scope of the Act since the PPDA does not recognize such
arrangements.
Section 7 of
the Bill provides for government to government procurement between the
Government of Kenya and a foreign government on the basis of a bilateral or
multilateral agreement. The term government to government procurement is to be
interpreted to refer to the procurement of goods, works or services between the
Government of Kenya and a foreign government through a negotiated loan or
grant.
Section 7
also provides for the possibility of the foreign government identifying the
supplier but requires that the foreign government must use a competitive
process. The concurrence of the Government of Kenya is also necessary before
the tender can be awarded.
Policy formulation
Section 9
provides that the National Treasury shall be the central organ responsible for
formulating public procurement and disposal policy. This is a departure from
the present position where the Public Procurement Oversight Authority (PPOA) is
responsible for initiating public procurement policy.[5] The National Treasury is also proposed
to have many other responsibilities which include:
a) Maintaining linkages between public
procurement and other financial management aspects;
b) Managing and
administering the scheme
of service of the
procurement and supply
chain management services cadre
for the National Government;
c) Developing and promoting electronic
procurement strategies and policies
in both the
national and county governments
including state corporations and other government agencies;
d) Carrying out review of procurement
and supply chain management system to assist procuring entities;
e) Promoting policy
on professionalism in the supply chain
management functions with
key stakeholders;
f) Steering consultations with
stakeholders of the public procurement and asset disposal system;
g) Developing and
reviewing policy on procurement of common
user items in the public
sector both at national and county government levels;
h) Development of a curriculum, management
and coordination of professional examinations for supply chain management
cadres;
i)
Issuing
guidelines to public
entities with respect
to procurement matters and
monitor their implementation and
compliance.
The Director General of PPOA
The Bill
provides for the appointment of a Director General (DG) by the Public
Procurement Oversight Advisory Board with the approval of the Cabinet Secretary
for National Treasury.[6]
PPDA provides for the appointment to be appointed by the Advisory Board with
the approval of Parliament.[7]
A university degree in law is now recognized as qualifying one to be a Director
General while a degree in engineering no longer qualifies. The Act requires a
person to have the following qualifications in addition to a degree in
procurement, supply chain management, law, commerce, business administration,
economics, or a related field of study, to be qualified for appointment:
a) a post-graduate degree
in a related
field of study from a recognised
university in Kenya;
b) a professional qualification
in supply chain management from
a reputable organisation recognised in Kenya;
c) a full member of the Kenya Institute
of Supplies Management and of good standing;
d) at
least ten years’
experience in senior management position
in procurement and
supply chain management; and
e) meet the requirements of
Chapter Six of the
Constitution.
These
requirements are more stringent than those contained in PPDA and would ensure
that the Director General is an expert in procurement matters. The Bill should
be amended to require the Director General to be competitively recruited.
Section 15 provides for the Director General to vacate his office if he/she
loses his/her membership of the Kenya Institute of Supplies Management.
The Advisory Board
The Advisory
Board proposed by the Bill is to comprise of 7 persons down from the 12 under
the PPDA.[8]
It also required that the chairperson and vice chairperson and two members must
be competitively recruited. They must have a university degree and be
procurement professionals who are members of Kenya Institute of Supplies
Management. The other member are the Principal Secretary of the National
Treasury or his alternate, the Attorney-General or his representative and the
Director-General of the PPOA. The reduction in the size of the Board and the
requirement for 4 of the 7 members to be competitively recruited procurement
professionals are important developments. The latter makes the Board more
professional than it is today. With
regard to the former, there is no justification for the Board to be as large as
it is under the PPDA.
New provisions on county government
Section 33
provides that the County Treasury shall be responsible for implementation of
public procurement and asset disposal policy in a county. Specific functions
include:
·
implementing
public procurement and
asset disposal procedures;
·
coordinating
administration of procurement and asset disposal contracts;
·
developing
county-specific procurement and inventory strategies which
shall be consistent
with the national policy
on public procurement
and asset disposal matters;
·
maintaining
linkages between the
county and the national government;
·
coordinating consultations
with county stakeholders of the
public procurement and
asset disposal system in
liaison with the
National Treasury and the Authority;
·
advising the
accounting officers of
county government entities on
public procurement and asset disposal matters.
Qualifications for contract award
Section 31
of the PPDA provides for the qualifications for the award of a contract. Section
53 of the Bill proposes four additional qualifications. They include
·
the
person if a
member of a
regulated profession has
satisfied all the professional requirements;
·
the
person has fulfilled tax obligations;
·
the
person has not
been convicted of
corrupt practices; and
·
the
person has not violated
fair employment laws
and practices.
An
accounting officer of a procuring entity is required to determine whether a
person is qualified and for that purpose may seek proof of qualification. A
person must be disqualified for submitting false, inaccurate or incomplete
information about his or her qualifications.
Termination of procurement proceedings
Section 59
provides for the termination of proceedings only where certain conditions are
applicable. Section 36 of the PPDA does not specify the basis on which a
procurement entity may terminate procurement proceedings. Under section 36, a
procurement entity has almost unlimited discretion on whether or not to
terminate proceedings. The limit of the powers of a procurement entity was the
issue at the centre of the Selex case.
Open tendering and Procurement methods (s. 89 – 91)
Section 89
of the Bill maintains the preference for open tendering provided for by section
29 of the PPDA. The Bill, however, permits an accounting officer to use
alternative procurement procedure if that procedure is allowed and conditions
for it to be used are satisfied. It introduces procurement procedures that are
not recognized by the PPDA. These include two stage tendering, electronic
reverse auction, competitive negotiation, force account and community
participation.
Performance security (s. 140 – 143)
Section 140 introduces more elaborate provisions on performance security than there is in the PPDA. It provides that where required,
performance security shall be submitted by a successful tenderer before signing
the procurement contract. However, there is no provision in the Bill indicating
when performance security may be required. It shall be between five per cent
(5%) and ten per cent (10%) of the contract value. In case
the contract is
not fully or
well executed,
the performance
security shall unconditionally be
fully seized by the procuring entity
as compensation without prejudice to other penalties provided
for by the Act. The performance security shall be returned to the successful
tenderer within thirty (30) days following the
final acceptance by
the accounting officer
of the procuring entity.
This does
not apply to tenders related to consultant services, works and supplies where
their estimated value does not
exceed a threshold established by
the procurement Regulations.
Advance payment
Section 144
of the Bill requires that no works, goods
or services contract
shall be paid for
before they are
executed or delivered
and accepted by the accounting officer of a procuring entity or an
officer authorized by him / her in writing except where so specified
in the tender
documents and contract agreement. There is no similar
provision in the PPDA.
Implementation team
Section 149
provides for the appointment of a contract implementation team for every complex and
specialized procurement contract.
The team shall include members from the procurement function, and
the requisitioner, the relevant
technical department and a consultant where applicable and shall be
appointed by the accounting officer
of the procuring entity. If well implemented, the idea of an
implementation team is a great one. It will ensure effective delivery by
contractors.
For the
purpose of managing
complex and specialized procurement
contracts the contract implementation team is responsible
for—
a. monitoring the
performance of the
contractor, to ensure that
all delivery or
performance obligations are met
or appropriate action taken by the procuring entity in the event of obligations
not being met;
b. ensuring that
the contractor submits
all required documentation as
specified in the
tendering documents, the contract and as required by law;
c. ensuring that
the procuring entity
meets all its payment
and other obligations
on time and in
accordance with the contract.
d. ensuring that there is right quality
and within the time frame, where required;
e. reviewing any
contract variation requests
and make recommendations to the
respective tender awarding authority
for considerations. Such
reviews for variation shall
be clearly justified
by the technical department in
writing backed by
supporting evidence and submitted
to the head
of the procurement function for
processing;
f.
managing handover
or acceptance procedures
as prescribed;
g. making recommendations for
contract termination, where
appropriate;
h. ensuring that the contract is
complete, prior to closing the contract file including all handover procedures,
transfers of title
if need be
and that the
final retention payment has been made;
i.
ensuring that
all contract administration records
are complete, up to date, filed and archived as required;
j.
ensuring
that the contractor act in accordance with the provisions of the contract; and
k. ensuring discharge of
performance guarantee where required.
Conclusion
The above
changes are the most significant proposed by the Bill. There are many minor
other changes also. The discussion here has only focussed on the main changes.
The proposed changes are progressive and can lead not only to greater value for
money but also to improved service delivery by the government. There are
provisions that also need to be re-examined and they should be re-examined
before the Bill is passed.
[1] Kenya,
Public Procurement and Asset Disposal Bill, 2014 s 2.
[2] ‘Dairy Farmers Oppose New
Procurement Rules’
<http://mobile.nation.co.ke/business/Dairy-farmers-oppose-new-procurement-rules/-/1950106/2757050/-/format/xhtml/-/pd51yh/-/index.html>
accessed 30 July 2015.
[3] Kenya
Public Procurement and Asset Disposal Bill, 2014 (n 1) s 3.
[4] ‘Railway Deal Exempt from
Procurement Law, Court Told’
<http://www.businessdailyafrica.com/Railway-deal-exempt-from-procurement-law/-/539546/2092370/-/tldorkz/-/index.html>
accessed 30 July 2015.
[5] Public
Procurement and Disposal Act, Cap 412C s 23.
[6] Kenya
Public Procurement and Asset Disposal Bill, 2014 (n 1) s 12.
[7] Public
Procurement and Disposal Act, Cap 412C (n 5).
[8] Kenya
Public Procurement and Asset Disposal Bill, 2014 (n 1) s 24.
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