Public Procurement & Government Contracts 2021 Comparisons

Last Updated April 07, 2021

Law and Practice

Authors



CMS Daly Inamdar Advocates is a leading Kenyan law firm and is the Kenyan member firm of CMS, a leading global law firm, which has over 75 offices in over 43 countries, and over 4,800 lawyers. CMS Daly Inamdar Advocates is an independent, full-service Kenyan law firm that engages in corporate, commercial, property, litigation and arbitration practice. The firm comprises more than 30 lawyers and is one of the oldest and most reputable law firms in Kenya, with offices in Mombasa and Nairobi. The firm’s team comprises experienced lawyers, several of whom are specialists in their fields. The firm’s core practice areas are admiralty and maritime law, capital markets, company secretarial services, corporate and commercial law, energy, infrastructure, mining, employment, environmental law, finance, fintech and banking, foreign direct investments, insurance, intellectual property, litigation and dispute resolution, mergers and acquisitions, private client, property and real estate, and tax law.

Broadly, the Constitution of Kenya, 2010 provides the general principles that govern the procurement process in Kenya.

More specifically, the process of procurement of government contracts in Kenya (public procurement) is regulated by the Public Procurement and Asset Disposal Act, No 33 of 2015 (the "Act”) and the attendant subsidiary legislation, the Public Procurement and Asset Disposal Regulations, 2020 (the "Regulations”) (both referred to as the “Procurement Laws”).

The Procurement Laws apply to all State organs and public entities which utilise public money for purposes of procurement, ie, national government or a department thereof, county governments or a department thereof, parastatals, the Judiciary, public institutions and companies owned by a public entity, etc.

The Act applies to all state organs and public entities with respect to any contract for an acquisition by way of purchase, rental, lease, hire purchase, licence, tenancy, franchise, or by any other contractual means for any type of works, assets, services or goods or any combination thereof, and includes advisories, planning and processing in a supply chain system.

The Procurement Laws also apply to contracts for the divestiture of public assets, including intellectual and proprietary rights and goodwill and other rights of a State entity by any means including sale, rental, lease, franchise, auction or any combination thereof.

The Procurement Laws apply regardless of the value of the contract, that is, there is no de minimus which would result in exclusion or exemption from the Procurement Laws. However different procurement methods may apply dependent on the value, or the nature of the goods, services and works.

Permitted Public Procurement Methods

Procuring entities are permitted to utilise either of the following methods under the Act:

  • open tender;
  • two-stage tendering;
  • design competition;
  • restricted tendering;
  • direct procurement;
  • request for quotations;
  • electronic reverse auction;
  • low value procurement;
  • force account;
  • competitive negotiations;
  • request for proposals; and
  • framework agreements.

Notably, public procuring entities are permitted to utilise the low value procurement method where the estimated cost of the goods, works or services being procured per item per financial year is as below the applicable threshold matrix of KES50,000 for goods and services and KES100,000 for works.

A tenderer is eligible to bid for a contract in procurement, only if the person satisfies a set of criteria which includes the requirements that:

  • the tenderer has the legal capacity to enter into a contract for procurement or asset disposal;
  • the tenderer is not insolvent, in receivership, bankrupt or in the process of being wound up;
  • the tenderer, if a member of a regulated profession, has satisfied all the professional requirements;
  • the procuring entity is not precluded from entering into the contract with the tenderer due to an order by the Director General of the Public Procurement Regulatory Authority;
  • the person and their sub-contractor, if any, is not debarred from participating in procurement proceedings for compliance reasons listed in the Act;
  • the tenderer has fulfilled their tax obligations;
  • the tenderer has not been previously convicted of corrupt or fraudulent practices; and
  • the tenderer is not guilty of any serious violation of fair employment laws and practices.

As regards the jurisdiction of the tenderers, the Procurement Laws do not prohibit tenderers from other jurisdictions. However, there are certain provisions which provide that preference shall be given to:

  • firms where Kenyans are shareholders; or
  • manufactured articles, materials and supplies partially mined or produced in Kenya or, where applicable, assembled in Kenya.

Additionally, preferential treatment may apply to the procurement of goods, services or works under any bilateral or multilateral agreements between Kenya's government and any other foreign government, agency, entity or multilateral agency.

Finally, the Act permits procuring entities to give preference to tenderers so as to enable disadvantaged persons (enterprises in which a majority of the members or shareholders are youth, women, persons with disability) more access to government contracts as is required in the Procurement Laws.

Obligations for Procuring Entity

The key obligations under Kenyan procurement laws include:

  • constitutional obligations – procurement procedures are required to be conducted in a manner that is fair, equitable, transparent, competitive and cost-effective;
  • obligations to minorities and disadvantaged persons – the Act requires that at least 30% of government procurement opportunities be set aside for the youth, women and persons with disability;
  • advertisement obligations – accounting officers are required to make an invitation to tender to all eligible bidders in line with the requirements of the Act as regards the details of the advertisement including but not limited to the contact details of the procuring entity and the manner in which the tender document is to be filled out and submitted for evaluation;
  • procedural obligations – a procuring entity’s head of procurement is obliged to provide a professional opinion n the proceedings, alongside the evaluation report submitted by the evaluation committee, for purposes of advising the accounting officer of the legality of the process; and
  • reporting obligations – the head of procurement of a procuring entity is also under an obligation to maintain a list of the entity’s suppliers, contractors and consultants for its procurement needs.

A procuring entity is under an obligation to take such steps as are necessary to bring the invitation to tender to the attention of those who may wish to submit tenders. In connection with this, if the value of the goods, works or services exceeds certain prescribed thresholds for advertising, the procuring entity will be under an obligation to advertise the tender in the state portal, or on its own website, or publish a notice in at least two daily newspapers of nationwide circulation. If the value of the goods, works or services is below certain prescribed thresholds for advertising, the procuring entity will be under an obligation to advertise the tender in the state portal as well as in a prominent place reserved for this purpose within its premises.

An invitation to tender should contain the following information:

  • the name and address of the procuring entity;
  • the tender number assigned to the procurement proceedings;
  • a brief description of the goods, works or services being procured including the time limit for delivery or completion;
  • an explanation as to how to get the tender documents, including the amount of any fee;
  • an explanation of where and when the tenders shall be submitted and where and when the tenders shall be opened;
  • a statement that those submitting tenders or their representatives may attend the opening of the tenders;
  • applicable preferences and reservations pursuant to the Act;
  • a declaration that the tender is only open to those who meet the requirements for eligibility; and
  • requirement of serialisation of pages by the bidder for each bid submitted.

Preliminary market consultations are implicit with respect to use of the following procurement procedures:

  • restricted tendering;
  • low value procurement;
  • force account procurement;
  • framework agreements; and
  • specially permitted procurement by the National Treasury and community participation.

The Act prescribes various tender procedures which may be used for procurement of goods, works and services, in different circumstances. Notably, open tendering shall be the preferred procurement method, with alternative procurement procedures available where permitted under the Act and prescribed conditions are met.

Alternative procurement procedures include:

  • two-stage tendering;
  • design competition;
  • restricted tendering;
  • direct procurement;
  • request for quotations;
  • electronic reverse auctions;
  • low value procurement;
  • force account;
  • competitive negotiations;
  • request for proposals;
  • framework agreements; and
  • specially permitted procurement.

Negotiations are permissible under the direct procurement method provided that the Act is adhered to. An ad hoc evaluation committee appointed in accordance with the Act may negotiate on terms which include price, terms of contract, terms of delivery and scope of work or service.

Negotiations are also permissible in the procurement of consultancy services (Part X of the Act). In this instance the accounting officer of the procuring entity may negotiate with the person who submitted the successful proposal and may request and permit changes to the form of contract that had been supplied as part of the tender/bid documents. If the negotiations with the person who submitted the successful proposal do not result in a contract, the accounting officer may negotiate with the second person who submitted the proposal that would have been successful had the successful proposal not been submitted.

Finally, competitive negotiations are permissible where:

  • there is a tie in the lowest evaluated price by two or more tenderers;
  • there is a tie in highest combined score points;
  • the lowest evaluated price is in excess of available budget; or
  • there is an urgent need that can be met by several known suppliers

The choice of procurement procedure is not at the sole discretion of the procuring entity. The Act sets out the default procurement procedure for goods, works and services (open tendering). The Act permits use of alternative procurement procedures only where various criteria set out for use of those particular procurement procedures have been satisfied. 

The obligation imposed by legislation is that the standard tender documents contemplated by the Act to be developed by the Public Procurement Regulatory Authority (the “Authority”) and to be used by procuring entities shall bear references to, among other matters,  procurement requirements, provision for dates and signatures of authorising officers. 

The time limits for each procurement process are prescribed in the tender documentation issued by the procuring entity.

A person is eligible to bid for a contract in procurement if that person satisfies the following criteria:

  • the person has the legal capacity to enter into a contract for procurement;
  • the person is not insolvent, in receivership, bankrupt or in the process of being wound up;
  • the person, if a member of a regulated profession, has satisfied all the professional requirements;
  • the procuring entity is not precluded from entering into the contract with the person;
  • the person and their sub-contractor, if any, is not debarred from participating in the procurement by reason of the preferences and reservations provisions of the Act or Regulations;
  • the person has fulfilled their tax obligations;
  • the person has not been convicted of corrupt or fraudulent practices; and
  • the person is not guilty of serious violation of fair employment laws and practices.

A procuring entity is bound to ensure that its tender documentation contains a mandatory requirement of preliminary evaluation criteria specifying that the successful bidder shall:

  • transfer technology, skills and knowledge through training, mentoring and participation of Kenyan citizens (to be evidenced by a local content plan in this connection); and
  • 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.

A procuring entity may use restricted tendering if any of the following conditions are satisfied:

  • competition for the contract, because of the complex nature or specialised nature of the goods, works or services is restricted to prequalified tenderers who qualified pursuant to a prequalification procedure undertaken by a procuring entity in accordance with the Act;
  • the time and cost required to examine and evaluate a large number of tenders would be disproportionate to the value of goods, works or services to be procured;
  • there is evidence to the effect that there are only a few known suppliers of the whole market of the goods, works or services;
  • an advertisement is placed, where applicable, on the procuring entity website regarding the intention to procure through limited tender.

Where the procuring entity utilises restricted tendering as per bullet point two, the entity shall invite tenders from at least ten persons selected from the list they are under an obligation to maintain in accordance with the Act.

Where the procuring entity utilises restricted tendering by reason as per bullet point three, the entity shall invite tenders from all the known suppliers of goods, works or services.

Generally, tenders will be evaluated on the basis of the criteria set out in the tender documents: the Act requires that such criteria shall be, to the extent possible, objective and quantifiable.

Where the tender is for professional services, there will be regard for the selection method adopted by the procuring entity (the default of which is the quality and cost-based selection method) as well as the statutory instruments issued by the relevant professional associations regarding regulation of fees chargeable for services rendered. Alternate selection methods in a tender for professional services include, quality-based selection, least cost selection, consultants’ qualification selection, individual consultants’ selection, fixed budget selection and single source selection.

There is an obligation to disclose the technical and financial evaluation criteria. These criteria are to be contained in any tender documents to be used by a procuring entity in a procurement process. 

Where expressions of interest have been invited, the procuring entity is under an obligation to notify participants in writing of the results of the expression of interest. There is no express provision in the Act or the Regulations making it an obligation for the procuring entity to set out within such notification the reasons that informed the expression of interest results.

Before the expiry period during which tenders must remain valid, the procuring entity is under an obligation to notify in writing the person submitting the successful tender that their tender has been accepted. Simultaneously, all the unsuccessful bidders shall be notified in writing of the contract award decision (together with reasons – related only to their specific bid – on their lack of success). 

A successful bidder in accordance with the Act is one who meets any one of the following as specified in the relevant tender document:

  • the tender with the lowest evaluated price;
  • the responsive proposal with the highest score determined by the procuring entity by combining, for each proposal, in accordance with the procedures and criteria set out in the request for proposals, the scores assigned to the technical and financial proposals where the request for proposals method is used;
  • the tender with the lowest evaluated total cost of ownership; and
  • 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. 

The Act provides for a standstill period of 14 days as from notification of the contract award decision, provided always that the execution of the contract shall be signed within the tender validity period.

Review of Awards

The Public Procurement Administrative Review Board (PPARB) has been granted the mandate under the Act to deal with any administrative reviews of procurement proceedings regarding the award of any government contract. 

Review of PPARB Decisions

The Act enables persons aggrieved by the decisions of the PPARB to appeal further to the High Court and further to the Court of Appeal, should the legal circumstances permit any such further appeal.

Remedies from the PPARB

The remedies available to aggrieved parties at the PPARB include any or a combination of:

  • annulment of any violating conduct by the accounting officer or the procurement proceedings in their entirety;
  • quasi-judicial orders for anything to be done or redone in the procurement proceedings to ensure compliance with the law;
  • substitution of decisions of the PPARB with any invalid decision made by the accounting officer of the procuring entity;
  • quasi-judicial orders for the payment of costs as between contentious parties; and/or
  • quasi-judicial orders for the termination of procurement proceedings and the commencement of a new procurement process.

Under the Act, a challenge from an aggrieved candidate at the PPARB triggers the immediate suspension of the contract award for a period of 14 days following notification of the appeal to the PPARB as well as 14 days following the decision of the PPARB to allow for any subsequent appeal to be filed by an aggrieved party.

The PPARB Secretary is required to notify the accounting officer of the procuring entity of the pending review and the suspension of the procurement proceedings so as to ensure that no contract is signed by the successful candidate during the pendency of the procurement proceedings.

To have standing to request a review of an award before the PPARB, a party must produce evidence that they either:

  • bought a tender document with the intention of bidding; or
  • submitted a tender document.

An aggrieved tenderer is required to file an appeal to the PPARB within 14 days of the award citing a breach of duty on the part of the procuring entity while ensuring to indicate the sections of the law that have been breached in the procurement process.

The PPARB is required under statute to conduct and complete its review within 21 days of its receipt of the request for review. Similarly, the High Court, and any subsequent appeal through the Court of Appeal, is required to determine the appeals within 45 days of the filing of the relevant appeal. These timelines may, however, be affected by the ordinary delay experienced in the court system.

In recent years, the volume of procurement claims has been as follows:

  • 2020 – 161 procurement claims;
  • 2019 – 147 procurement claims; and
  • 2018 – 169 procurement claims.

It is estimated that there are, on average, roughly 150 claims per year before the PPARB, excluding the matters that are contested further at the High Court or the Court of Appeal. It is impossible to determine how many matters proceed on appeal to the superior courts from decisions from the PPARB due to the lack of a register of pending court proceedings in Kenya. 

The Regulations, at the Fifteenth Schedule, mandate the applicable filing fees for instigating a review of an award by a procuring entity. The filing fees for reviews by the PPARB are calculated on a graduating scale basis based on the value of the tender in question. Generally, filing fees for a review before the PPARB will depend on the ascertainable value of the contract under bid and will range from a minimum of KES5,000, for filing a preliminary objection, to a maximum of KES250,000 for unquantifiable tenders as well as for tenders that exceed KES50,000,000.

Amendments to procurement contracts already awarded are permissible provided that the amendment has been approved in writing by the respective tender-awarding authority within a procuring entity as from 12 months after the date of signing the contract and shall only be considered if the following conditions are satisfied:

  • any price variation is based on the prevailing consumer price index obtained from the Kenya National Bureau of Statistics or the monthly inflation rate issued by the Central Bank of Kenya;
  • any quantity variation for goods and services does not exceed 15% of the original contract quantity;
  • any quantity variation of works does not exceed 20% of the original contract quantity;
  • any price or quantity variation is to be executed within the period of the contract; and
  • any cumulative value of all contract variations does not result in an increment of the total contract price by more than 25% of the original contract price.

It is worth noting that the Regulations distinguish between a variation and amendment of a contract entered into following a tender award. An amendment is defined in the Regulations as a change to the terms and conditions of an awarded contract whereas a variation is defined as a change to the price, completion date or statement of requirements of an awarded contract.

Procuring entities may utilise direct procurement as long as the intention is not to avoid competition and provided that one of the following requirements have been satisfied:

  • the goods, works or services are available only from a particular supplier or contractor, or a particular supplier;
  • the supplier or contractor has exclusive rights in respect of the goods, works or services, and no reasonable alternative or substitute exists;
  • unforeseen circumstances such as war, invasion, disorder, natural disaster or there is an urgent need for the goods, works or services, and engaging in tendering proceedings or any other method of procurement would therefore be impractical;
  • owing to a catastrophic event, there is an urgent need for the goods, works or services, making it impractical to use other methods of procurement because of the time involved in using those methods;
  • the procuring entity, having procured goods, equipment, technology or services from a supplier or contractor, determines that additional supplies shall be procured from that supplier or contractor for reasons of standardisation or because of the need for compatibility with existing goods, equipment, technology or services; or
  • for the acquiring of goods, works or services provided by a public entity provided that the acquisition price is fair and reasonable and compares well with known prices of goods, works or services in the circumstances.

Recent Landmark Decisions

In a recent forum Webb Fontaine Group FZ – LLC v Public Procurement and Administrative Review Board & 3 others [2020] eKLR before the Court of Appeal, the appellant sought to have an award overturned on account of a purported illegality in the procurement proceedings. The PPARB had ruled prior that it lacked jurisdiction to hear the matters due to the appellant’s delay in lodging a complaint as against the tendering process undertaken which resulted in the complaint being time bound. The appellant then proceeded to the High Court by way of a Judicial Review application which was also dismissed by the court on account that such an appeal would involve the Court delving into the merits of the decision in a manner to suggest that it was sitting on appeal of the decision itself which is not within its ambit.

Still being dissatisfied with the decision of the High Court, the appellant proceeded further to the Court of Appeal seeking to overturn the order of the High Court which preserved the award of the tender as is. The Court of Appeal, in dismissing the final appeal, found that any Request for Review ought to be filed within the time limits pronounced in the Act. The Court of Appeal held that where time limits have lapsed, the PPARB was correct in finding that it lacked the jurisdiction to hear to hear any contentions over an award, particularly as the Act does not provide for an extension of this time. This further precluded the High Court from having the jurisdiction to hear the appeal before it brought by the appellant.

The significance of this decision lies in the importance of complying with time restrictions in the procurement process as the Procurement Laws do not provide for the extension of time under any circumstance. Any delay in contesting an award beyond the time permitted in the legislation will inevitably lead to a lack of forum through which to lodge any such complaint.

On 25 February 2021, the Cabinet Office in the Executive Office of the President released a press statement announcing, among other matters, that the Cabinet is to transmit to the Parliament for due consideration various bills, among them a Public Procurement and Asset Disposal (Amendment) Bill, 2020 (the "Bill"), as a priority be passed in its legislative programme for the year 2021. One of the key amendments in the current version of the Bill seeks to address issues pertaining to the delay in payments to local contractors and suppliers by the national and county governments. The Bill seeks to introduce payments by way of an Irrevocable Bank Guarantee so as to ensure that contractors are remunerated in a timely manner.

CMS Daly Inamdar Advocates

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Law and Practice in Kenya

Authors



CMS Daly Inamdar Advocates is a leading Kenyan law firm and is the Kenyan member firm of CMS, a leading global law firm, which has over 75 offices in over 43 countries, and over 4,800 lawyers. CMS Daly Inamdar Advocates is an independent, full-service Kenyan law firm that engages in corporate, commercial, property, litigation and arbitration practice. The firm comprises more than 30 lawyers and is one of the oldest and most reputable law firms in Kenya, with offices in Mombasa and Nairobi. The firm’s team comprises experienced lawyers, several of whom are specialists in their fields. The firm’s core practice areas are admiralty and maritime law, capital markets, company secretarial services, corporate and commercial law, energy, infrastructure, mining, employment, environmental law, finance, fintech and banking, foreign direct investments, insurance, intellectual property, litigation and dispute resolution, mergers and acquisitions, private client, property and real estate, and tax law.