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 Acknowledgment
We wish to express our sincere gratitude to all persons who participated in production of this
handbook. In particular, we acknowledge the sacrifices made by the following to ensure
candidates have the course book.

Writer

Mr. Cyprian Airo

Reviewers

Reuben Mwenda Mauki

Fred Ongisa, PhD, CP3P

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Table of Contents
CHAPTER 1: Introduction to Public Procurement ................................................................................. 1
Introduction to public procurement ..................................................................................................... 2
Evolution of public procurement .......................................................................................................... 2
Public procurement reforms in Kenya .................................................................................................. 8
Public procurement guiding principles ............................................................................................... 11
Role of public procurement on socio-economic development .......................................................... 13
Sustainable public procurement ......................................................................................................... 14
CHAPTER 2: Legislative and Regulatory Frameworks ......................................................................... 18
Introduction to legal and regulatory frameworks .............................................................................. 19
Legal and regulatory frameworks ....................................................................................................... 19
Objectives of public procurement regulatory frameworks ................................................................ 26
Types of public sector organisations .................................................................................................. 28
CHAPTER 3: Public Procurement Bodies in Kenya .............................................................................. 31
Introduction to public procurement bodies in Kenya......................................................................... 32
The National Treasury ......................................................................................................................... 32
The Public Procurement Regulatory Authority ................................................................................... 33
The Public Procurement Administrative Review Board ...................................................................... 34
Kenya Institute of Supplies Management........................................................................................... 35
Kenya Institute of Supplies Examination Board .................................................................................. 36
County Government in Procurement Function .................................................................................. 36
CHAPTER 4: General Procurement Principles and Rules ..................................................................... 39
Introduction to general procurement principles and rules ................................................................ 40
General procurement principles ......................................................................................................... 40
General procurement rules ................................................................................................................ 50
CHAPTER 5: Organisation of Procurement in the Public Sector .......................................................... 56
Introduction to organisation of public procurement ......................................................................... 57
Organisation of procurement in public sector.................................................................................... 57
Consortium buying .............................................................................................................................. 63
Procuring agents or asset disposal agents .......................................................................................... 64
Sector-specific procuring and disposal agencies ................................................................................ 65
Transfer of procuring responsibility to another public entity or procuring agent ............................. 65
CHAPTER 6: Procurement Methods for Goods, Services and Works ................................................... 67

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 Introduction to procurement methods .............................................................................................. 68
Threshold for procurement methods for goods, services and works ................................................ 68
Procurement method ......................................................................................................................... 72
CHAPTER 7: Procurement of Consultancy Services ............................................................................ 85
Introduction ........................................................................................................................................ 86
Terms of reference ............................................................................................................................. 86
Expression of interest ......................................................................................................................... 87
Selection methods for consultants ..................................................................................................... 87
CHAPTER 8: Public Procurement Contracts........................................................................................ 92
Introduction ........................................................................................................................................ 93
Preparation of contract....................................................................................................................... 93
Creation of procurement contract/ procurement contract management plan ................................. 95
Publication of procurement contracts ................................................................................................ 95
Amendments or variations to contracts ............................................................................................. 96
Framework contracting....................................................................................................................... 96
Performance security .......................................................................................................................... 97
Advance payment ............................................................................................................................... 98
Contract administration ...................................................................................................................... 99
CHAPTER 9: Preference and Reservation Schemes in Procurement .................................................. 104
Introduction to preference and reservation ..................................................................................... 105
Preference and reservation in procurement .................................................................................... 105
Implementation of preferences and reservations ............................................................................ 105
Eligibility criteria ............................................................................................................................... 105
Registration procedure ..................................................................................................................... 106
Qualification of contractors .............................................................................................................. 106
Unbundling of procurements ........................................................................................................... 107
Challenges in the implementation of preference and reservation schemes in public procurement
.......................................................................................................................................................... 110
CHAPTER 10: Inventory Control, Asset and Stores Management and Distribution ............................ 112
Introduction to inventory control, asset and stores management and distribution........................ 113
Objectives of holding inventory ........................................................................................................ 113
Stores management and stock control ............................................................................................. 115
Receiving and recording of goods, services and works .................................................................... 117

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 Stores management .......................................................................................................................... 118
Storage and issuance of inventory.................................................................................................... 118
Disposal procedure and methods ..................................................................................................... 121
CHAPTER 11: Administrative Review and Disposal Proceedings ....................................................... 128
Introduction to administrative review .............................................................................................. 129
Appeal/ review mechanism .............................................................................................................. 129
Application for administrative review .............................................................................................. 129
Review procedure ............................................................................................................................. 130
Parties to review ............................................................................................................................... 131
Rights and obligations of parties to review ...................................................................................... 131
Powers of the board ......................................................................................................................... 132
Judicial review in public procurement proceedings ......................................................................... 133
Remedies .......................................................................................................................................... 133
Offences and sanctions ..................................................................................................................... 133
CHAPTER 12: Ethics in Public Procurement...................................................................................... 136
Introduction to ethics in public procurement .................................................................................. 137
Ethics ................................................................................................................................................. 137
Importance of ethics in procurement and supply ............................................................................ 137
Types of unethical practices in procurement and supply ................................................................. 138
Debarment of bidders and contracts ................................................................................................ 142
Principles of procurement and supply chain .................................................................................... 143
CHAPTER 13: Accountability, Responsibility and Authority in Public Procurement ........................... 146
Introduction ...................................................................................................................................... 147
Definition of terms ............................................................................................................................ 147
Clear separation of approval authorities .......................................................................................... 147
Responsibilities, accountability and authority of public officers ...................................................... 148
Performance contracting and monitoring in public procurement ................................................... 149
Declaration of potential conflicts of interest .................................................................................... 157
CHAPTER 14: Emerging Issues and Trends in Public Procurement .................................................... 160
Introduction ...................................................................................................................................... 161
Emerging issues and trends in the procurement of goods, services and works .............................. 161
Coping with or adopting to the emerging issues in procurement of goods, services and works..... 169

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 CHAPTER 1

Introduction to Public Procurement

Chapter Structure

1.1. Introduction to public procurement.

1.2. Evolution of public procurement.
1.3. Public procurement reforms in Kenya.
1.4. Public procurement guiding principles.
1.5. Role of public procurement on socio-economic development.
1.6. Sustainable public procurement.
1.7. Review questions.
1.8. Further reading.

Competence

The trainee should have the ability to apply public procurement principles.

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1.1. Introduction to Public Procurement
Procurement is an activity or function that involves the acquisition by purchase, rental, lease, hire
purchase, license, tenancy, franchise, or by any other contractual means of any type of works,
assets, services or goods to meet an identified need

Public Procurement is the acquisition of systems, goods, services, or works at the best possible
total cost of ownership, in the right quantity, at the right time, and in the right place for the direct
benefit or use of the governments, corporations, or individuals generally via, but not limited to a
contract. The acquisitions can be from third parties or from in-house providers. The process spans
the whole life from the identification of need, through to the end of a service contract or the end
of the useful life of an asset.

In the context of a procurement process, obtaining “best value for money” means choosing the
bid that offers the optimum combination of whole life cost and benefits to meet the customer's
requirement.

Objectives of Public Procurement

The main objectives of public procurement are:
a) To maximize efficiency;
b) To promote fair competition;
c) To promote integrity;
d) To increase transparency and accountability and promote local industry
e) To optimize Costs by lowering transaction costs and overhead costs.
f) To Utilize Assets by outsourcing and inventory management.
g) To create value through process/product development and quality improvement.
h) To facilitate the promotion of local industry and economic development

1.2. Evolution of Public Procurement in Kenya

The public procurement system in Kenya has evolved from an unregulated crude system to a
legally regulated procurement system in accordance with international standards. Since the turn
of the millennium, Kenya has made efforts to reform and modernize its public procurement
system. The development of public procurement in Kenya is traced back to five phase period
which are:
1. Colonial period and after the second world war (1947-1962)
2. Post-colonial period (1963-1989)
3. World Bank period (1990-2000)
4. Public procurement reforms period (2001-2009)
5. 2010 Constitution to date

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Phase 1: Colonial Period and After the Second World War (1947-1962)
After the Second World War, domestic procurement was often seen, rightly or wrongly as
characterized by corruption, inefficiency, political capture, rent-seeking, protectionism, inflated
costs, and the development of cartels. Many people and organizations saw procurement reforms
as necessary to limit these features and reform procurement markets, but how it was to be
achieved remained controversial.

In 1959 the Procurement and Transport Department was established under the Ministry of Works,
which dealt with the acquisition and supply of goods, works, and services.

In 1960 the Treasury issued a Financial Regulation to the Ministry of Works which established
the Procurement Branch which dealt with the acquisition of goods for common use for Ministries,
Departments, and Public Bodies. The Department also set up: Market Research Section;
Receiving and Inspection Section; and the Central Tendering Board (CTB), which was
responsible for acquisitions and awarding tenders.

Phase 2: Post-Colonial Period (1963-1989)

By 1963, the supply services were centralized at the ministry of works. The services covered
purchasing and storage. It was headed by the chief procurement officer and the chief storekeeper.
The chief storekeeper had the responsibility of controlling all the common user items in the
government. The Ministry of Works served all the government ministries and departments. Until
the early 1970s, public procurement in Kenya was largely undertaken by the British firm Crown
Agents, since local supplies were inadequate and most of the needs of the new government could
only be met from external sources.

In 1978 East African supply manuals were developed. The same year the East African community
collapsed; the government of Kenya developed its own procurement guide. The Government's
Procurement system was originally contained in the Supplies Manual of 1978. This manual
created the office of the Director of Government Supply Services was responsible for ensuring
the proper observance of the provisions of the Manual. The Manual created various tender boards
the for adjudication of tenders and their awards. The manual empowered the government to
establish supply offices within its ministries and departments and appointed supply officers to take
charge of procurement. These supplies offices are procured for their ministries and departments.
The Ministry of Finance was given the overall responsibility of regulating public procurement. In
exercising this responsibility, it issued regulations and guidelines in the form of circulars to the
ministries and other public agencies from time to time. To operationalize the manual, the Ministry
of Finance issued the Government Financial Regulations and Procedures which dealt with the
administration of government finances.

Between 1980-1989: Chapter 17 of the Government Financial Regulations and Procedures

established the Central Tender Board (CTB) as an inter-ministerial body, comprising members
appointed by the permanent secretaries of the ministries they represented. The CTB was chaired
by a person appointed by the permanent secretary to the Ministry of Finance. It was responsible
for the procurement of goods and services valued at Kshs. 2,000,000 and above. Under the

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regulations, the Ministerial Tender Boards (MTBs) were responsible for the procurement of goods
and services whose value was below Kshs. 2,000,000. (This cap was reviewed from time to time
by treasury circulars). The central tender board was transferred from the treasury to the
president's office and placed under cabinet affairs.
The above procurement system had several deficiencies.
a) Lack of accountability: There were no sanctions against government officers who breached
them and the system was thus vulnerable to abuse. Indeed, the Government Contracts Act
provided that public officers cannot be sued personally for any contracts which they make in
that capacity. The incentive for public officers to engage in corrupt procurement deals was
thus quite strong.
b) Vague procurement procedures and policies: Procurement policies and procedures were
scattered in various government documents. Thus, for example, it was difficult to comprehend
the Financial Regulations without the benefit of the Treasury circulars. The system could
easily be abused or manipulated by unscrupulous public officers.
c) Corruption: there were common corrupt practices in public procurement thus including public
officers - often under the influence of powerful politicians and businessmen - only inviting
preferred firms, favoring certain firms at the short-listing stage, designing tender documents
to favor particular firms, and releasing confidential information.
d) Lack of structures: This state of affairs was exacerbated by the fact that the procurement
system was manned by junior officers, who were, therefore, powerless to correct any
anomalies and could easily be manipulated by their seniors and powerful politicians.
e) Lack of transparency: Corruption in public procurement was also facilitated by the lack of
transparency in the system the applicable procedures were invariably inaccessible to the
public. To make matters worse, Kenyan law did not prohibit public officials from participating
in private enterprise. Indeed, the civil service was by far the most important launching pad for
businessmen in Kenya as it gave senior government officials and politicians access to public
resources, such as lucrative public procurement contracts. The participation of public officials
in private enterprise thus was a key source of corruption in public procurement since the rules
established to guard against conflicts of interest were invariably been breached.
f) Lack of dispute resolution mechanism: There was no provision for dissatisfied bidders or
the general public to appeal against the procurement decisions of the various tender boards
where, for instance, there were irregularities in the process. The system only allowed for
appeals by accounting officers (usually permanent secretaries) in the relevant government
ministries, departments and agencies. And there was no role for the judicial system as the
decisions of the administrative appeal bodies were deemed final. Quite apart from deficiencies
related to transparency and accountability, the system was also inefficient.
g) Poor planning: It was characterized by overspending, which has been attributed to poor
planning and packaging of procurement contracts by accounting officers and their failure to
check on existing inventory, and lack of supervision and monitoring of project implementation.
h) Lack of checks and balances: Goods and works inferior to the specifications were accepted
by the government, were thus quite common. Indeed, in some cases, no goods or works were
delivered at all and yet in other instances, contracts were varied upwards from the originally
quoted price, often with the connivance of senior government officers. Lead times were also
exceedingly long.

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In 1982 the Government issued the “District Focus for Rural Development Strategy” Document.
The Strategy made the districts centers for the management of rural development. The strategy
set thresholds for procurements to be conducted by Districts Tender Committees which oversaw
small tenders. Ministerial Tender Committee was a level above the District Tender Committee
and it dealt with tenders that could not be handled at the District Tender Committees level. There
was the Central Tender Committee that dealt with tenders valued at Twenty million (20,000,000)
Kenya Shillings and above. The Central Tender Committee was the overall Board that governed
procurement.

In 1983 further changes returned CTB to the Treasury and the Supplies Branch to the Ministry of
Works. The CTB’s procurement budget was increased and its role was elevated to that of award
of contracts and contract management. In 1999 the CTB was again restructured by raising its
membership to the level of Permanent Secretaries. During this time, the chairmanship was placed
in the hands of the Private Sector and the Financial Secretary was the CTB Secretary and the
removal of supplies personnel from the headship of the secretariat.

In the mid-1980s, the need to reform public procurement in Kenya became urgent, as there was
growing scrutiny and pressure from within and outside to reform the procurement process. The
domestic push for reform came mainly from domestic procurement stakeholders. As indicated
earlier, the government's business operations or public procurement affect different elements of
society: the procurement entities, the business community, professional associations, and the
general public.

The local business community complained that inefficiencies in public procurement were
contributing to an unsuitable business environment. They complained of misallocation of
resources, inadequate infrastructure, inefficient services, high taxes, growing indebtedness, and
high risks. For instance, these inefficiencies led to poor physical infrastructure and inefficient
services. These concerns were clearly related to the manner and effectiveness of the public
procurement process. In reacting to these concerns, the governments recognized the need for
reviewing the public procurement process and for being more accountable to the various
stakeholders.

Phase 3: World Bank Period (1991-2000)

External pressures from donors and multilateral organizations played an important role in the
reform process in Kenya. These organizations since the structural adjustment era have made
public procurement reforms a condition for lending to many developing countries, including
Kenya. Some donors and multilateral organizations, such as the World Bank, ITC, UNCTAD and
the WTO supported public procurement improvement programs. The demand for these
organizations was mainly to harmonize the national procurement system with international
procurement guidelines, in order to make the processes more transparent and to devolve
procurement to local entities.

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The World Bank, the African Development Bank (ADB), and ITC, in conjunction with the
Government of Kenya, initiated the public procurement reform process in the late 1990s. This
reform process was meant to create a system that allowed, among other things, a proper
delegation of authority, incentives, procurement thresholds, planning, and the development of
supplies manuals. The reform process focused on addressing the issues of procurement laws,
establishing appropriate procurement institutions and entities, as well as creating adequate and
timely evaluation and monitoring mechanisms. The reforms would also increase transparency in
procurement systems and create reputable agencies.

The World Bank conducted a review of the public procurement assessment which identified
weaknesses in the public procurement system, including:
a) Inefficiency in the management of public funds.
b) The Government's inability to provide services efficiently.
c) Lack of a solid and transparent legal framework.
d) Lack of fair competition which makes it a serious abuse.
A task force was established to take a lead in the reform process. The team comprised mainly
staff from the Ministry of Finance from where the coordination was to be done. The team was
given a period of 24 months to complete its report. This was done and their recommendations
were passed over to parliament. However, the draft bill prepared by the task force on behalf of
the Ministry of Finance was not immediately approved by parliament.

Phase 4: Procurement Reforms Period (2001-2009)

The period saw the development of various legal instruments that contributed immensely
to public procurement reform, these included:

2001- The Exchequer and Audit Regulations

In response to the delay in parliamentary approval, the Minister for Finance approved the
Exchequer and Audit (Public Procurement) Regulations 2001 which were in use from the year
2001 to 2007. These were made under the Exchequer and Audit Act, which empowered the
minister to make regulations governing public procurement. These regulations; Unified all
the circulars that had governed the public procurement system, Abolished the Central Tender
Board, and Heralded the establishment of:
a) Ministerial Tender Committees, etc.
b) Public Procurement Directorate
c) Procurement Appeals Board.

2005 - Law on public procurement and disposal

The Public Procurement and Disposal Act, 2005 was enacted in October 2005 to forestall the
challenges in the Regulations. It was operationalized on 1st January 2007 vide the Public
Procurement & Disposal Regulations, 2006. The new legal dispensation was designed to
transform the procurement system.

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2006 - Regulation of the Law on Public Procurement and disposal
The regulations established procurement procedures and methods, the roles of the public
procurement administrative review committee, procurement thresholds, and the functions of the
various committees in acquisitions, in order to achieve good value for money, competition,
transparency, and fair and equitable procurement.

2007 - PPDA 2005 implementation

After the approval of the public procurement disposal regulations in 2006, the PPDA 2005 was
implemented in the year 2007.

2009- Public Procurement Practitioners manual and Regulations of Public Private

Partnership contracting.
Procurement oversight authority developed a General Procurement Manual to assist participants
in public procurement procedures in applying the 2005 PPDA and the Public Procurement and
Disposal Regulations 2006. It was an important measure to improve the public procurement
system. The manual played an important role in standardizing public procurement practices
across all contracting entities in Kenya. In addition, they developed Manuals for the procurement
of works and those specific to different sectors such as health and education.

Public Procurement and Disposal (Public Private Partnerships) Regulations, 2009, aimed
at improving the economic stimulus; promoting investment, and the creation of value for money,
which is a combination of several factors: risk transfer, specification based on production, long-
term nature of contracts, performance measures, increased competition and management of the
private sector.

Phase 5: 2010 Constitution to Date (2010 - date)

2010 - Constitution of Kenya.
Article 227 of the Constitution lays the groundwork for procurement in the new dispensation,
including preferences and reservations. The constitution stipulates that public procurement must
promote national development goals and must be executed in a fair, equitable, transparent,
competitive, and profitable manner.

2011 - Preferences and Reserves Regulation.

The Public Procurement and Disposal (Preference and Reservations) Regulations, 2011 aimed
at facilitating the promotion of local industry and economic development through the
establishment of preference and reserve regimes that allow public bodies to reserve 30% of
purchases for disadvantaged, small and medium-sized groups enterprises, micro-enterprises, city
contractors, local contractors and city contractors in joint ventures or subcontracting agreements
with foreign suppliers.

2013 - County Governments Regulations

On fifth of April 2013, by virtue of the Legal Note no. 60, the Ministry of Finance published the
Law on public procurement and disposal (regulations of county governments). It focused on public
procurement and disposal of goods, works, and services in the county Governments. It was
crafted to promote local industries and support socio-economic development.

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2014 - Circulars and Guidelines.
The Procurement regulatory authority developed procurement Circulars and Guidelines and
standard tender documents to act as complimentary instruments to achieve sound public
procurement practice that is in compliance with the Public Procurement laws and regulations.

2015 - Public Procurement and Asset Disposal Act.

The Public Procurement and Asset Disposal Act 2005 was repealed. The Public Procurement
and Asset Disposal Act, 2015 (the PPADA, 2015) came into force on 7th January 2016. The
PPADA, 2015 sought to give effect to Article 227 of the Constitution 2010 which required an Act
of Parliament to be enacted to prescribe a framework within which policies relating to procurement
and asset disposal in respect of a State organ or any other public entity shall be implemented.
The Act established public procurement procedures for the purpose of efficient acquisition and
the disposal of assets by public procurement entities and related purposes. The public
procurement entities are required to comply with this law with regard to planning and conducting
acquisitions, inventory management, disposal of assets, and management of contracts, except
when the provisions of the Public Private Partnership Law of 2013 already apply to the acquisition
and disposal of assets, or when the acquisition and the disposal of assets are carried out under
bilateral or multilateral agreements between the government of Kenya and any other offshore
government or multilateral body.

2020 - Public Procurement and Asset Disposal Regulation 2020

The Public Procurement and Disposal regulations 2006 were repealed by the Regulations 2020
which establish the role of procurement agencies, procurement procedures, and methods,
procurement thresholds, and committees, disposition of goods, inventory management, etc., to
support the implementation of PPADA 2015.

2022 - Public Procurement and Asset Disposal (Amendment) Act

The Public Procurement and Asset Disposal (Amendment) Act, 2022 was Assented to on 6th July
2022. The Commencement date was 26th July 2022. The amendment included the definition of
procurement professional, complex and specialized contracts and local contractor. The
amendment also increased the functions of the Public Procurement Regulatory Authority (PPRA),
Composition of the evaluation committee among others.

1.3. Public Procurement Reforms in Kenya

A World Bank-sponsored study was launched in 1997 (Country Procurement Assessment
Review). This was during the dispensation of the Supplies Manual. The Review identified the
following weaknesses in the procurement system: -
a) Reduced effectiveness of the public financial management
b) The Government's inability to deliver services efficiently
c) Obscure rules
d) Not based on a sound and transparent legal framework and
e) Did not promote fair competition, thereby rendering it to serious abuse.

Based on the above findings, the Public Procurement Reform Program was officially launched on
25th November 1998 to forestall the weaknesses. The initial result of the reforms was the Public

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Procurement Regulations that were issued in the year 2001 under the existing Exchequer and
Audit Act. These regulations unified all the circulars that governed the public procurement system
and abolished the Central Tender Board. They also heralded the establishment of the Ministerial
Tender Committees, the Public Procurement Directorate and the Procurement Appeals Board.

These regulations further brought the following changes;

a) They established the Public Procurement Directorate (PPD) as the central organ for policy
formulation, implementation, human resource development and oversight of the public
procurement process. The PPD thus takes over general responsibility for public
procurement from the Minister for Finance. But the PPD is established as a department of
the Ministry of Finance and is therefore answerable to the Minister for Finance.
b) The Regulations applied to all public entities which included government ministries,
government departments such as the Central Bank of Kenya, administrative districts, state
corporations, public universities and other public institutions of learning, local authorities,
and cooperative societies. As an exception to this general rule, however, the Regulations
did not apply where the Minister for Finance decided, in consultation with the head of the
procuring entity, that it was in the interest of national security or national defense to use a
different procedure.
c) The Regulations abolish the Central Tender Board and the resulting procurement system
was thus decentralized, although there was now an authority (the PPD) that was supposed
to regulate its operations. Basically, each public entity constituted a procurement entity
and was required to establish a tender committee.
d) The Regulations promoted transparency. The regulations required that all procurement
regulations and instructions of the Minister of Finance must be promptly made accessible
to the public. Further, procurement entities were now required to maintain records of their
proceedings, which records they must upon request avail to candidates who participated
in those proceedings. Also, tenders would be opened by a committee of at least three
officers of the procuring entity in the presence of the bidders. Finally, at the same time, it
was to notify both the successful bidder and the unsuccessful bidders.
e) The Regulations also provided for the administrative review of procurement decisions,
which formed a critical part of the efforts to ensure transparency in the procurement
process. Pursuant to the Regulations, the Minister established a Public Procurement
Complaints, Review and Appeals Board (PPCRAB) to adjudicate complaints submitted by
any candidate who claims to have suffered, or to risk suffering, loss, or damage due to a
breach of a duty imposed on the procuring entity by the Regulations

Though its promulgation was a great milestone, the then regulations could not forestall problems
such as:
• Uncontrolled contract variations,
• Overpricing (buying at inflated prices),
• Lack of a structured authorization of expenditure levels
• Lack of fair and transparent competition
• Inappropriate application of procurement methods
• Uncontrolled low-value procurement of items

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 • Poor procurement records and documentation
• Excessive delays in the procurement process
• Conflict of interest among players in the procurement system
• Lack of legal permanence and enforcement

An obvious flaw of the new public procurement regime was that it did not have a firm legal basis
(only based on the minister's regulations and not an Act of Parliament). The Minister for Finance
could simply bring the regime to an end by repealing the Regulations. The Minister for Finance
retained a lot of power that could be used to frustrate the reform efforts. In 2003, for instance, the
Minister suspended all procurement officers and public tenders to allegedly purge the
procurement system of corruption. Suspended officers included those of the PPD, so in effect,
the Minister brought the operations of the procurement system to a halt. According to procurement
experts, the real reason behind these suspensions was to enable the Minister to assume control
of public procurements. The procurement system virtually broke down following this move by the
Minister. For example, procurement decisions were for a long time being made by permanent
secretaries in total disregard of the Regulations.

The new public procurement law was enacted in October 2005 to forestall the challenges in the
Regulations. It was operationalized on 1st January 2007 vide the Public Procurement and
Disposal Regulations, 2006. The new legal dispensation was designed to transform the
procurement system and it supports the professionalization of the procurement function. The aim
of the new dispensation of the Act was as follows:

• To maximize economy and efficiency;

• To promote competition and ensure that competitors are treated fairly;
• To promote the integrity and fairness of those procedures;
• To increase transparency and accountability in those procedures; and
• To increase public confidence in those procedures.

The Act also established the bodies below as regulators of public procurement:
• Public Procurement Oversight Authority
• Public Procurement Oversight Advisory Board
• Public Procurement Administrative Review Board.

The Public Procurement Oversight Authority (PPOA) developed a General Procurement Manual
to support entities to apply effectively the public procurement procedures outlined in the 2005
PPDA and the Public Procurement and Disposal Regulations 2006. These measures were
important in order to improve the public procurement system and standardize public procurement
practices across all contracting entities in Kenya. Likewise, the Public Private Partnership
Contracting Regulations of 2009, aimed at improving the economic stimulus; promoting
investment, and the creation of value for money, which was a combination of several factors: risk
transfer, specification based on production, long-term nature of contracts, performance
measures, increased competition and management of the private sector.

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The promulgation of the 2010 constitution especially article 227 also laid down the
groundwork for procurement in the new dispensation, including preferences and reservations.
The constitution stipulates that public procurement must promote national development goals and
must be executed in a fair, equitable, transparent, competitive, and profitable manner.

In the spirit of promoting the local economy, the 2011 Preferences and Reserves Regulation
was enacted to facilitate the promotion of local industry and economic development through the
establishment of preference and reserve regimes that allow public bodies to reserve 30% of
purchases for disadvantaged, small and medium-sized groups enterprises, micro-enterprises, city
contractors, local contractors and city contractors in joint ventures or subcontracting agreements
with foreign suppliers.

On the fifth April 2013, by virtue of the Legal Notice no. 60, the Ministry of Finance published the
law on public procurement and disposal (regulations of county governments) to facilitate the
procurement and disposal of goods, works, and services in county governments. The
Procurement regulatory authority developed procurement Circulars and Guidelines and
standard tender documents in 2014 to act as complimentary instruments in achieving sound
public procurement practice that is in compliance with the public procurement laws and
regulations.

In 2015 the parliament enacted the Public Procurement and Asset Disposal (PPDA) Act of 2015
came into force in 2016 (a review of PPDA 2005). The Act established public procurement
procedures for the efficient acquisition and disposal of assets by public procurement entities. The
Act also tasked the public procurement entities to comply with the law regarding planning and
acquisition of assets, inventory management, disposal of assets, and management of contracts,
except when the provisions of the Public Private Partnership Law of 2013 already apply to the
acquisition and disposal of assets, or when the acquisition and the disposal of assets are carried
out under bilateral or multilateral agreements between the government of Kenya and any other
offshore government or multilateral body.

In the year 2020, Public Procurement and Asset Disposal Regulations established the role of
procurement agencies, procurement procedures, and methods, procurement thresholds and
committees, disposition of goods, inventory management, etc., to support the implementation of
PPADA 2015.

1.4. Principles Guiding Public Procurement

The principles of procurement are the foundation under which procurement operates. The
principles act as a framework of the code of conduct that public procurement practitioners and all
people directly or indirectly involved in the public procurement process should follow failure to
which might lead to consequences. To meet the public procurement objectives, these principles
that guide good public procurement are;

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 a) National values and principles of governance
Public procurement puts into consideration national values which include: equity in the distribution
of opportunities, inclusiveness in decision making, protection of the marginalized groups; good
governance, integrity, transparency, accountability and sustainable development. This means
that the procurement process should be transparent and open to public scrutiny. The processes-
should be capable of being questioned and everything is above board. All information regarding
procurement should be open to all stakeholders including suppliers, the public, and supply chain
partners. Procurement should be open for all individuals and companies to bid. If there is selective
or restricted bidding, it should be only for those firms that meet certain minimum qualification.

b) Equality and freedom from discrimination

The public procurement opportunities are distributed in such a way that they promote equality and
without discrimination on any ground, including race, sex, pregnancy, marital status, health status,
ethnic or social origin, color, age, disability, religion, conscience, belief, culture, dress, language
or birth. This includes having arbitration mechanisms so as to have adequate, representative,
prompt, and fairways to receiving and resolving grievances on procurement issues.

c) Affirmative action programmes

The public procurement takes measures, including affirmative action programmes, to ensure that
the youth, minorities and marginalized groups access procurement opportunities. This informs the
preference and reservation schemes that are observed in public procurement.

d) Principals of integrity
All procurement practitioners whether private or public sector should act in a professional manner
at all times. They should carry out their duties in accordance with procurement laws, regulations
and policies. Practices of fraud, bribery, and corruption are not be tolerated.

e) Principles of public finance

This requires openness and accountability, including public participation in financial matters and
fair sharing of the burden of taxation. This means that the purchases are not wasteful, they are
based on market prices and can generate savings. It also means that bad practices such as
carelessness leading to wastage, wear and tear of stocks, over-invoicing, unplanned expenditure,
shortages of goods when needed, poor quality products, and similar factors are to be avoided.
The expectation is that suppliers will be developed and grown and consequently, the citizens will
see the benefits of public procurement through the increased provision of quality goods and
services. Procurement of goods, services, and works should be able to achieve value for money
and be purchased at the most reasonable market price.

f) Values and principles of the public service

The public procurement is guided by the values and principles of public service which require high
standards of professional ethics; efficient, effective and economic use of resources; responsive,
prompt, effective, impartial and equitable provision of services; involvement of the people in the
process of policymaking; accountability for administrative acts; transparency and provision to the
public of timely and accurate information

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 g) Promotion of local industry, sustainable development and protection of the
environment
This implies that priority should be given to goods manufactured locally so as to promote local
industry. The procurement should also consider the environment. The suppliers, citizens, and
other stakeholders effectively contribute to the operations of public procurement and in the
preparation of the essential legislation as and when necessary. It also means that the
stakeholders are involved in the making of decisions at all stages of the implementation of public
procurement processes. All individuals participating in the procurement process should be treated
equally.

h) Principles governing procurement profession, international norms

These include professional and civil society institutions such as the Kenya Institute of Supplies
Management (KISM), the Architectural Society of Kenya, Universities, and NGOs which are
encouraged to play their role in monitoring public procurement procedures. Likewise, every
person involved in the procurement process is responsible for their own actions in regard to public
procurement. Funds should also be managed in the best way possible according to the stipulated
budget in place.

i) Maximization of value for money

This means achievement of the most advantageous combination of cost, quality and sustainability
to meet customer requirements. In this context: cost means consideration of the whole life cost.
Quality means meeting a specification which is fit for purpose and sufficient to meet the
customer’s requirements. Procurement transactions are made and commitments are met within
a reasonable time frame as time is a resource that must be conserved like all other resources.

j) Information Flow
For effective public procurement, information should be made available and effectively
communicated and shared between various stakeholders.

1.5. Role of Public Procurement on Socio-Economic

Development
a) Ensuring best value for money: acquiring quality goods, works, and services while in
consideration of whole life costs to meet public needs.
b) Developing local capacity and employment: advertising procurement opportunities
widely for every person with the capacity to supply helps to create jobs for the unemployed.
c) Promoting innovation: forward commitment to purchasing and rewards motivate
suppliers to be innovative.
d) Role modeling in ethical practices: adherence to procurement professional bodies’
codes of codes such as those of the Kenya Institute of Supplies Management sets a good
example to the public.
e) Ensuring sustainability: reuse; recycle; remanufacture is a practice in public
procurement which promotes environmental protection.

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The role of public procurement in promoting economy, efficiency, and value for
money practices
• Public procurement promotes fair competition through the selection of appropriate
procurement methods, being transparent and unambiguous about evaluation criteria set
out in bidding documents and avoiding deliberate use of fake competition
• Applying methods of aggregation, where appropriate, in order to take advantage of
economies of scale as well as efficiently utilize better risk mitigation that can be obtained
by choosing efficient procurement methods. However, in doing so consideration must be
given to storage costs arising from the risk of warehouse losses due to such factors as
insect, fungal and bacterial infestation, theft, water damage, and chemical decomposition.
Also, consideration should be given to the direct cost factors such as warehouse costs,
insurance coverage, and distribution costs between the different Procuring Entities taking
part in the aggregation process.
• To the extent possible life cycle costs should be used in considering and selecting
procurement alternatives, taking into account all elements of cost burden including
operational costs, after sale service and maintenance costs, environmental degradation
impact, energy conservation savings, expected operating life, and disposal value;
• Taking into account, in the case of software, computer, communications and high
technology procurement, scalability for easy upgrading along with both backward and
forward compatibility to avoid the costs associated with rapid obsolescence;
• Consideration of the seasonality in prices especially where it pertains to the procurement
of commodities.
• Discouragement of the practice of fake competition which may be easily identified by
watching out for separate bids showing identical spelling errors, similar signatures,
identical phone numbers etc.
1.6. Sustainable Public Procurement
Sustainable public procurement refers to the process of fussing the environmental, social, and
economic variables in a way of achieving value for money to fit into the overall procurement
lifecycle while minimizing damage to the environment.

The aim of sustainable procurement is:

a) To minimize negative impacts of goods, works or services across their lifecycle and
through the supply chain.
b) To minimize the demand for non-renewable resources.
c) To ensure that fair contract prices and terms are applied and respected.
d) To promote diversity and equality throughout the supply chain.

Principles of Sustainable Public Procurement:

a) Application of solid supply chain management practices to achieve tenable outcomes
b) Focus on the ultimate impact the materials sourced may have on the environment. This
may cover the following key aspects:
i. Mechanism for waste management in terms of recycling and disposal
ii. Use of eco-friendly materials
iii. Preservation of biodiversity in the ecosystem to prevent the extinction

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 iv. Regulatory policies crafted to reduce the diverse impact on carbon foot
v. Consequences of environmental pollution: water, air, and sound
c) Adopting sustainable sourcing practices for the various goods and services required
d) Compliance with local and international environmental regulations and standards, e.g.,
ISO 14000
e) Compliance with local and international human rights and labor laws
f) Effective and efficient utilization of available resources in an economical manner
g) Optimal utilization of renewable sources of energy, such as solar, wind, and geothermal
among others

Key steps towards achieving sustainable procurement:

a) Supply chain mapping: Take the initiative to map out all your key suppliers by identifying
key environmental, social and economic challenges bedeviling them and prioritize
resources at your disposal in engaging with those who have adopted and implemented
tenable supply chain operations.
b) Clear channels of communicating expectations: Organizations should put much focus
on developing a code of conduct for their suppliers as a way of communicating required
expectations by constantly involving them in their sustainability initiatives.
c) Use effective tools to measure supplier performance: Corporations can easily asses
their supplier performance in terms of compliance to sustainability standards through the
use of questionnaires or interviews to collect and analyze suppliers’ data.
d) Institute regular training and capacity building: Corporations should focus much effort
and resources on conducting regular supply chain sustainability training on their key
suppliers to build capacity in terms of the requisite set of skills and knowledge.
e) Monitor and review supplier performance: Organizations can easily monitor whether
the suppliers are complaining to agreed supply chain sustainability standards through
periodic onsite audit trials to make an informed decision to continue or not.
f) Work closely with other peer companies in the same industry: Supply chains across
the world are marred with complex challenges that one company cannot handle alone.
Therefore, the need to find and forge close collaborative relations with peer companies
that share the same supply chains and have established sound sustainability standards
so that suppliers can comply with the cross board.

Benefits of Sustainable Procurement

The benefits of adopting and implementing sustainable procurement include the following:

a) Sustainable procurement contributes to reduced environmental degradation, in terms of

pollution and adverse climatic changes
b) Tenable supply of goods and services into the future
c) Uphold good organizational reputation which becomes a brand in strengthening sales
d) Foster closer collaborative relationships with key stakeholders across the supply chain
e) Enhance the acquisition of new business opportunities
f) Facilitate economical utilization of available resources to increase productivity and
generate profitability for the bottom-line

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 g) Contribute to enhanced innovation of eco-friendly goods through clean technology
application

Barriers to Sustainable Public Procurement

However, there are still key challenges experienced by organizations while adopting and
implementing sustainable supply chains across the board. They include the following:

a) High costs involved in the adoption of sustainable supply chains, in terms of resource
capacity
b) Lack of adequate information on sustainability and informed procedures to aid in
implementation across diverse business spaces
c) Lack of support by key stakeholders involved from the onset.
d) Lack of proper methodology to undertake Performance Monitoring and Evaluation of
certain environmental practices by organizations
e) Lack of Corporate Social Responsibility (CSR) by some corporations
f) Inadequate government legislation and regulations in terms of environmental laws and
policies
g) Lack of adequate training offered by key Supply Chain professional bodies

Pillars of Sustainable Procurement

a) Environmental Sustainability: With more stringent measures being put up in terms of
legislation and regulations for companies to become conscious of their environment, there
have been significant environmental achievements cited among key players across the
supply chains. Therefore, most companies are at the forefront of inculcating sound
environmental policies and practices in their operations in terms of supplier selection and
sourcing of eco-friendly goods.
b) Social Sustainability: The social aspect of Supply Chain Sustainability is concerned with
ensuring that the key players across Supply Chains engage effectively in their operations
through advocating the following practices: formulation of health and safety measures,
adherence to labor rights, provision of a conducive working environment, and inclusion of
sound code of conduct guidelines.
c) Economic Sustainability: The economic aspect of procurement sustainability focuses
on the need for organizations to effectively and efficiently utilize their resources in a
tenable manner so as to be able to realize and maintain operational profits to the bottom-
line.
1.7. Review Questions
EAGEN LTD
EAGEN Ltd is a state corporation mandated to procure and distribute electricity countrywide at
affordable rates while generating income for the nation. It has been in operation for the past one
hundred years during which in recent years its sales have constantly dipped every financial year
affecting profit margins significantly.

The Board of trustee and the Chief Executive Officer has realized the importance of restructuring
their entire supply chain operations by enshrining key procurement principles and also

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incorporating sustainable procurement practices. This pronouncement was reached after various
stakeholder meetings were held including views from a task force that was established by the
ministry of energy. Issues identified which were perceived to be impediments to the operations of
supply chain management functions, therefore, affecting the sales included: unreliable and costly
sources of energy from producing companies, constant power failure to customers due to theft of
transformers and other materials, lack of enough water to produce electricity due to climate
change and global warming, and environmental degradation as a result of waste disposal. This
has resulted in unsatisfied customers some opting to install solar panels as an alternative

Required
a) Outline key procurement principles that can guide EAGEN supply chain function
b) Describe the role of public procurement in promoting economy
c) Explain key steps EAGEN, may take in achieving sustainable procurement
d) Discuss key major procurement reforms that may have affected the operations at EAGEN

1.8. Further Reading

Ochieng J. & Muehle M. (2014). Development and Reform of the Kenyan Public Procurement
System.

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 2
Legislative and Regulatory Frameworks

Chapter Structure

2.1. Introduction to legal and regulatory frameworks.

2.2. Legal and regulatory frameworks.
2.3. Objectives of public procurement regulatory frameworks.
2.4. Types of public sector organisations.
2.5. Review questions.
2.6. Further reading.

Competence

The trainee should be able to comply with the law and regulations governing public
procurement.

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2.1. Introduction to Legal and Regulatory Frameworks
The aim of regulating procurement in the public sector is to ensure that procurement is
streamlined to conform to international procurement laws and standards. Public procurement is a
complex issue because of the multiple interests and objectives it strives to achieve
simultaneously, coupled with adherence to numerous regulations and laws. The procurement
laws and regulations are prone to abuse. Procurement laws and regulations aim to achieve a
standard public procurement and asset disposal system that is fair, equitable, diverse,
accountable, transparent, competitive, sustainable, cost-effective and inspires confidence. The
laws and regulations also guide all public entities and other stakeholders in public procurement
and disposal activities. This chapter explains the legal and regulatory frameworks that guide the
general procurement process.

2.2. Legal and Regulatory Frameworks

Legislative and regulatory frameworks are pieces of legislation that regulate public procurement
operations and activities. The sources of procurement law include:

The Constitution of Kenya

Some of the key legal provisions that are key to procurement are:
a) Article 227 of the Constitution of Kenya entails the acquisition of goods, works and services
by public procurement entities. It stipulates that public procurement entities when acquiring
goods, works and services should do so in accordance with the principle of fairness, equity,
transparency, competitiveness, and cost efficiency.
It also asserts that the parliamentary act should prescribe the framework within which
procurement and disposal policies should be enforced and any of the following:
a. Categories of preference in awarding contracts;
b. The protection or promotion of persons, categories of persons or groups previously
disadvantaged by unfair competition or discrimination;
c. Sanctions against contractors who have not performed in compliance with procedures,
contractual agreements or professionally regulated regulations; and
d. Sanctions against those who have not fulfilled their tax obligations or have been involved
in corrupt practices or serious violations of laws and good working practices.

b) Article 10 of the Constitution of Kenya provides the National Values and Principles of
Governance binding all state organs, state officers, public officers, and all persons whenever
any of them:
a. Applies or interprets the Constitution;
b. Enacts, applies, or interprets any law; or
c. Makes or implements public policy decisions

It also outlines the National Values and Principles of Governance which are:
a. Patriotism, National Unity, Sharing and Devolution of power, The rule of law, Democracy,
Participation of the people;

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 b. Human dignity, Equity, Social justice, Inclusiveness, Equality, Human rights, Non-
discrimination, Protection of the marginalized;
c. Good governance, Integrity, Transparency, Accountability; and
d. Sustainable development.

c) Article 232 provides the principles and values of public service.

Values and principles of public service include:
a. High standards of professional ethics;
b. Efficient, effective and economical use of resources; responsive, fast, effective, impartial,
and fair
c. Service Provision
d. Participatory policy-making process.
e. Responsibility for administrative acts;
f. Transparency and timely and accurate provision of information;
g. Fair competition and merit as a basis for engagement and promotion;
h. Representation of the various Kenyan communities; and provide adequate and equal
opportunities for the appointment, training and promotion, at all levels of the public
service, of:
• Men and women;
• Members of all ethnic groups; and
• People with disabilities.
i. Values and principles of public service applies to the public service in all:
• State bodies at both levels of government; And
• State-owned companies.

Public Procurement and Asset Disposal Act 2015 and Regulations 2020
The Public Procurement Law was enacted in 2015 to forestall the challenges in the Regulations.
It was operationalized in 2020 vide the Public Procurement and Asset Disposal Regulations,
2020. The new legal dispensation was designed to transform the procurement system.
The purpose of the Act is to establish procedures for procurement and the disposal of
unserviceable, obsolete, or surplus stores and equipment by public entities to achieve the
following objectives -

• To maximize economy and efficiency;

• To promote competition and ensure that competitors are treated fairly;
• To promote the integrity and fairness of those procedures;
• To increase transparency and accountability in those procedures;
• To increase public confidence in those procedures; and,
• To facilitate the promotion of local industry and economic development

The justification of the act is:

• To provide an efficient and effective Public Procurement and Asset Disposal system
necessary for achieving Vision 2030 and development objectives.

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 • To provide assurance to both foreign and local investors of a reliable Public Procurement
and Asset Disposal system that can maintain fiscal discipline and contain corruption.
• To provide for prudent utilization of the scarce resources in public entities
• A good public procurement system will benefit both the public and the private sector in
conducting business.

The Act applies to all state organs and public entities with respect to:
• Procurement planning;
• Procurement processing;
• Inventory and asset management;
• Disposal of assets; and
• Contract management.

National Public Procurement and Asset Disposal policy

The policy covers public procurement and asset disposal system in the entire public sector at both
levels of Government. It applies to procurement planning, procurement processing, contract
management, inventory and asset management and disposal of assets, and compliance and
enforcement mechanisms. The aim of the policy is:

• To cure challenges in the Public Procurement and Asset Disposal system that contributes
to the loss of government funds and consequently lead to underdevelopment.
• It emphasizes the need for strict compliance with the legal framework and guidelines and
strengthens enforcement capacity.
• To seal loopholes in procurement and asset disposal processes, contract formation and
management previously characterized by unfairness, unclear contract terms and
conditions, nonperformance, unwarranted variations, delays and cost overruns that have
led to inherent financial and operational risks.
• To address ethical issues among persons involved in public procurement and strengthen
governance, thus promoting competition, accountability, transparency and integrity
principles.
• To address record management challenges in procuring entities to enhance their accuracy
and completeness, thus easing audit trails and processes in public procurement and asset
disposal.
• To integrate marginalized groups previously disadvantaged economically due to unfair
competition or discrimination in government procurement opportunities, and promote local
industries through local content initiatives.
• To strengthen the delivery of goods works and services through giving direction on
Procurement planning and prudent inventory management.

Public Finance Management Act 2012

Financial management in public procurement entails the management of all the processes
associated with the efficient acquisition and deployment of both short- and long-term financial
public resources when acquiring goods, works, and services. Public procurement (including
public-private partnerships) is an integral part of effective public finance and public administration

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management, as it is one of the key means by which public money is spent to provide public
services. Public finance management in public procurement is a wide topic covering various
aspects such as; financial planning, control, and decision-making in procurement and supply
chain management. Choosing the right costing method is an essential step in achieving this
objective. Collaboration between finance and procurement departments leads to reduced cost,
better decision making, improved demand planning, increased understanding of supplier
landscape, and reduced procurement cycle time. The supply chain /procurement and finance
department must work collaboratively as married couples to support each other in good or bad
times.
The role of the public finance management act in procurement is to:
• Maximize value for all stakeholders in the value chain
• Minimizing costs
• Reduce supply chain risks.
• Increase efficiency and effectiveness.
• Improve on procurement decision making
• Procurement and Financial planning
Public Finance Management Act set expenditure limits for acquisitions of goods, works, and
services, while the procurement function aims to save resources whenever and wherever possible
through cost savings and supply chain risk mitigation measures. Using an automated IFMIS
procure to pay (P2P) system to link procurement with back-office functions, from purchase
requisition to invoice processing, helps improve efficiency and reduce risk. The finance
department can pay for everything it receives and receives supply orders, and the procurement
department can use the three-way combination to ensure that the items ordered are what they
receive and what they receive is what they pay for.
Financial management also provides expense management reports, income reports and other
critical data that demonstrate the overall performance of the organization. Procurement should
use these reports to facilitate day-to-day decision-making, along with budgeting and financial
planning.

Supplies Practitioners Management Act, 2007 and Regulations

The objective of SPMA No. 17 of 2007 was to make provision for the training, registration and
licensing of supplies practitioners and to regulate their practice. The Act established the Kenya
Institute of Supplies Management, a body Corporate meant to regulate the supplies practice and
supply chain professionals practicing in Kenya in all sectors. The requirements of the SPMA 2007
are applicable to practitioners in all sectors (Public, Private and third sector).
The Act establishes the following:
I. The Institute Council (s.4)
• Composed of PSCM Professionals - chairman and 6 elected members of the Institute
• Representation from the Director General – Public Procurement Regulatory Authority
& Permanent Secretary, Ministry of Finance.
• The term of office is three years
• Perform functions provided for under section 5.

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 II. Examination Board (s.12) - KISEB
• Composed of five (5) Supply Chain Management practitioners nominated by the
Council
• With representation from other institutions – Kenya Institute of Curriculum
Development (KICD), Kenya National Examinations Council (KNEC), Commission for
University Education (CUE), Public Procurement Regulatory Authority (PPRA), Local
Universities and Kenya Private Sector Alliance (KEPSA).
• Secretary to the Board – Examination Officer – responsible for day-to-day affairs of
the board.

Functions of KISEB
a) Prescribe and regulate the syllabus;
b) Conduct examinations;
c) Make examination rules;
d) Prescribe examination fees payable;
e) Issue/award qualifying certificates;
f) Student discipline;
g) Remit 30% of collected fees to the Institute for professional development;
h) Accreditation of institutes carrying out exams in liaison with the Ministry of Education
(MOE); and
i) Promote recognition of KISEB Exams in foreign Countries

A person may be disqualified from being registered and licensed if he/she:

a) Is convicted of an offence involving fraud or dishonesty;
b) Has been convicted of an offense under the Anti-Corruption and Economic Crimes Act
(ACECA), 2003;
c) Is an un-discharged bankrupt;
d) Has not attained the age of 18 years;
e) Has been convicted of an offense under the SPMA & PPADA; and
f) Is incapable of performing his/her duties by reason of mental or physical infirmity - opinion
of a certified medical doctor

Grounds for Removal of One’s Name from the Register Include (r.16):
a) Bankruptcy;
b) Withdrawal of qualifications by the awarding body;
c) Registration was obtained through fraudulent means;
d) Failure to pay the prescribed fee;
e) One wants to be removed from the register and writes to the registrar;
f) Member is deceased; and
g) Convicted of an offense under the Act.

Removal Procedure
1. Notification of removal by the registrar in writing

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 2. Publication in the Gazette of the removal (Name, address & Qualifications)
3. Reinstatement of name is only by direction of council or competent court of law
4. The Certificate of registration is surrendered to the registrar upon removal, suspension or
dead
5. If the certificate is not surrendered –a fine of 5K
6. Endorsement of removal by the registrar on the removal of a name.

Reasons for suspension of license or removal of the name of a licensed person from the
register
a) Registration certificate ceases to be valid;
b) Name has been removed from the register;
c) Convicted of an offense punishable with imprisonment;
d) Convicted of an offense under the PPADA and ACECA;
e) Guilty of gross negligence or malpractice in respect of his/her calling;
f) Guilty of professional misconduct.

What constitutes professional misconduct?

• Willingly failing to follow professional PSCM Standards and ethical guidelines;
• Misappropriation of funds or any property entrusted to him/her
• Knowingly procuring goods, works and services at inflated prices;
• Failure to keep proper records of all transactions;
• Disclose of information acquired in the course of duty without consent of the employer;
• Involved in any corrupt practices;
• Engage in activities which are contrary to those which the Registration and licence
certificates were obtained;
• Found guilty of fraud or any dishonesty act;
• Allowing a person to practice as a procurement practitioner without registration certificate
and licence;
• Enters into partnership with a person who does not hold a license or secures any
professional business through the service of such a person;
• Expressing opinion on a mater without obtaining sufficient information on which to base
the opinion
• Practices or attempts to practice without a valid registration certificate;
• Expresses a professional opinion of a PE, a business or an enterprise in which his relative
has an interest unless he/she expressly unambiguously discloses that interest when
expressing the opinion;
• Fails to disclose in his/her professional capacity, a material fact known to him/her the
disclosure of which is necessary to ensure that his/her statement is not misleading;
• Providing false information to employer, council or other authority; and
• Practices as a consultant without a licence.

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Offenses and Penalties
a) One is not eligible to be registered or licensed but uses any title appropriate to a person
registered or licenced or holds him/herself directly or indirectly as being registered or
licensed.
b) One is not eligible to be registered or licenced practices for gain as a supply’s practitioner.
c) One is eligible to be registered or licensed and is not, and practices as a supply’s
practitioner.
d) The Penalty upon conviction for these offenses is a fine of 100k or imprisonment for a
term not exceeding 2 years or both.
e) Training institutions conducting training courses or examinations without approval of the
Minister for Education. 500k or imprisonment for a term not exceeding 3yrs or both.
f) Any employer who employs unregistered or unlicensed persons as supplies practitioners.
500k or imprisonment for a term not exceeding 3yrs or both.
g) Falsification of registers or records – providing false information either orally or in writing.
100k or imprisonment for a term not exceeding 2yrs or both.

Benefits of SPMA 2007 and its regulations to PSCM professionals

a) Promotion of professionalism, discipline and diligence in PSCM Practice.
• Regulation of professional qualifications;
• Quality Assurance; and;
• Regulated PSCM professionals are suitable candidates for leadership positions
Nationally and across borders
b) Protection of the public whereby PSCM functions: -
• Undertaken under ethical guidelines and standards of professional conduct and;
• Maintain public confidence.
c) Recognition of PSCM professionals in professional circles.
• Upon complying with the Act, confidence of PSCM professionals is built and one
can offer themselves for judgement on their performance outcomes.
d) Enhanced global recognition of a PSCM.
• PSCM qualifications are internationally recognized.

Impact of Regulations on Public Procurement

a) Ensure that the goods and services acquired comply with defined public standards and
specifications.
b) Ensure that all supply chain operations comply with laws, regulations and standards in
areas such as health and safety, environmental sustainability, workers' rights, data
protection and freedom of information requirements.
c) Ensure that all procurement practices comply with public policies, standing orders and
legal procedures, with the overall goal of ensuring the provision of compensation, value
for money, and ethical procurement.
d) Ensure a high level of accountability through detailed procedures and reports (keeping
track of control -audit trail)
e) Ensure that all acquisitions achieve value for money because taxpayers' money is used.

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 f) The tendering procedure is more likely to be more bureaucratic and time-consuming due
to regulations such as the public procurement directives.
g) Exclusion of SMEs in the procurement process.
h) Awarding procurement contracts in accordance to MEAT might eliminate suppliers who
can deliver.

Importance of Complying with Procurement Laws and Regulations

The benefits of aligning procurement/supply chain practices with the legal framework governing
public procurement are:
a) Increase stakeholder satisfaction and confidence
b) Achievement of value for money
c) Improves the organization image and reputation
d) Improves public relations
e) Increase wider supplier base
f) Reduce procurement cost
g) Improves operation process efficiency
h) Reduce corruption
i) Increase transparency and fairness
j) Equal opportunity for tenders to all
k) Prevents penalty and fines

2.3. Objectives of Public Procurement Regulatory

Frameworks
a) Maximize economy and efficiency: An efficient economy aims to provide goods and
services at the lowest possible cost. It is important for a procuring entity to use resources
to maximize output for an economy to be efficient. It is also essential to produce goods
and services at an affordable price so everyone has equal access to them. Economic
efficiency is maximized when the price (P) from selling the product is equal to the marginal
cost (MC) of producing it. Caption: Efficiency maximization. P = MC. When price (P) is
equal to marginal revenue (MR), both profit and efficiency are maximized.

b) Promote competition and ensure that competitors are treated fairly: Both public and
private organizations often rely upon a competitive bidding process to achieve better value
for money in their procurement activities. Low prices and/or better products are desirable
because they result in resources either being saved or freed up for use on other goods
and services. When a market is competitive, businesses will have greater incentives to
lower prices, improve the quality of their products and services, and to provide buyers with
more options. That is, businesses will need to innovate to make their products different
and better than the rest.

c) Promote integrity and fairness of those procedures: Integrity in the context of public
procurement implies that procurement procedures are transparent and promote fair and
equal treatment for bidders, and, where bad performance is identified, especially where it

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 concerns conduct that violates minimum standards, it should be addressed as a priority.
Integrity translates to reliability. Bidders and all other stakeholders need to have the
assurance that they can rely on any information disseminated by the procurement entity,
formally or informally. The integrity of the procurement process assures confidence in the
public procurement process.

d) Increase transparency and accountability in those procedures: Transparency in

procurement takes form in a variety of practices, such as publishing procurement policies;
advance publication of procurement plans; advertisement of tender notices; disclosure of
evaluation criteria in solicitation documents; publication of contract awards and prices
paid; establishing appropriate and timely complaint/protest/dispute mechanisms;
implementing financial and conflict of interest disclosure requirements for public
procurement officials; and publishing supplier sanction lists. Transparency ensures that
information is available that can be used to measure the procuring entity’s performance
and to guard against any possible misuse of powers. In that sense, transparency serves
to achieve accountability, which means that procuring entities can be held responsible for
their actions.

e) Increase public confidence in procurement procedures: Members of the public have

at times lost confidence in the procurement process, terming it “a thing for the selected
few”. A proper public procurement process should restore this confidence by delivering
positive results as is required and expected. Public confidence can be increased by an
adequate degree of transparency and accessibility of general procurement information,
including through the use of information and communication technologies and open data.

f) Facilitate the promotion of local industry and economic development: Promotion of

local industry can be achieved by providing additional points to bids from local firms, within
open and competitive public procurement processes. Targeted preferential treatment can
encourage the formation of joint ventures by local and foreign firms and can allow local
and less-experienced firms to build relevant skills. Public procurement enhances
economic development by ensuring SMEs are included in the government supply chain,
public procurement has the potential to achieve outstanding economic and social
benefits—including the creation of skilled jobs, increased domestic tax revenue, and more
robust domestic economic growth. This has been amplified in the Buy Kenya Build Kenya
initiative whose agenda is to promote local industry.

2.4. Types of Public Sector Organisations

a) Central Government
It is a government that controls power over a unitary state and governs the whole nation. In this
type of government, there are three arms of government: the legislative (Parliament), the
executive (government and Council of Ministers), and the Judiciary.
In a centralized government, procurement is centralized with the aims of:

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 • Improving public services by working with departments to help them meet their efficiency
targets.
• Delivering savings to central government procurement.
• Improving the success rate of programs and projects.

Advantages of central government procurement

• Increased pressure to achieve efficiency savings in supply
• Increased emphasis on the aggregation of requirements and collaborative bargaining.
• Greater focus on the status and role of acquisitions
• Greater focus on professional and career development in procurement
• Greater participation of multifunctional contractual clauses.

b) County Government
It is a government in which each authority (government) is independent within the sphere of power
authorized by the constitution and there is no hierarchy of authorities. The members of the local
authorities (wards) are freely elected together with their mayor (Governors) and they constitute
the local executive as well as legislature.

In local government, procurement is not centrally coordinated fully. Functional departments and
committees are influential, and the procurement role is often limited to advising on procedures
and managing clerical processes.

Benefits of county government procurement

• Improved quality services through sustainable partnerships
• A mixed service delivery economy, with easy access to a diverse and competitive range
of suppliers.
• Achieve continuous improvement through collaboration with partners.
• Greater value of a corporate purchasing strategy
• Obtain community benefits
• Stimulate markets and drive innovation in the design, construction and delivery of
services.

In Kenya, all procurement of goods and services and disposal of assets at the county government
or a county government entity are carried out in accordance with Article 227 of the Constitution
and the Public Procurement and Disposal Act and Regulations.

c) State Agencies and Corporations

A State agency is a permanent or semi-permanent organization in the government apparatus
responsible for overseeing and administering specific functions, such as Kenya Revenue
Authority (KRA), Ethics and Anti-Corruption Commission (EACC), Teachers Service Commission
(TSC). These organizations pursue public service, with or without the guidance of the
government. A State-Owned Enterprise (SOE) is a body formed by the government through legal
means so that it can take part in activities of a commercial nature. Essentially, SOEs are created
to undertake commercial activities on behalf of the government.

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Examples of SOE in Kenya are the Capital Markets Authority of Kenya; Kenya Airports Authority;
Kenya Ports Authority, Kenya Meat Commission etc.

National Health Service procurement

Kenya Medical Supplies Authority (KEMSA) is a state agency that acts as a center of expertise,
knowledge, and excellence in acquiring and supplying health products and services. It advises on
policy and the strategic direction of procurement and its impact on developing health care across
national health services. It also contracted on a national basis for products and services which
are strategically critical national health services and where sectorial aggregation of demand is
through to yield increased savings than local or regional collaboration.

2.5. Review Questions

a) Explain the importance of organizations complying with procurement laws and regulations
b) Illustrate ways in which procurement regulators may impact public sector procurement
c) Describe reasons for the removal of a contractor from the professional register.
d) Discuss sources of procurement laws in Kenya

2.6. Further Reading

Ochieng J. & Muehle M. (2014). Development and Reform of the Kenyan Public Procurement
System.

OECD (2009). Principles for Integrity in Public Procurement.

OECD (2011). Competition and Procurement.

UNOPS (2012). Transparency and Public Procurement.

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government press.

GOK (2007) Supplies practitioners management act. Government Press.

Profex (2012). Context in Procurement and Supply. 1st Edition. Profex Publishers.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 3
Public Procurement Bodies in Kenya

Chapter Structure

3.1. Introduction to public procurement bodies in Kenya.

3.2. The National Treasury.
3.3. The Public Procurement Regulatory Authority.
3.4. The Public Procurement Administrative Review Board.
3.5. Kenya Institute of Supplies Management.
3.6. Kenya Institute of Supplies Examination Board.
3.7. County Government in Procurement Function.
3.8. Review questions.
3.9. Further reading.

Competence

The trainee should have the ability to identify the role of public procurement regulatory
bodies in Kenya.

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3.1. Introduction to Public Procurement Bodies in Kenya
The Public Procurement and Asset Disposal Act, of 2015; the Supplies Practitioners Management
Act, 2007 created bodies that are involved in the regulation of public procurement in Kenya. The
following are the bodies and their roles as stipulated in the acts and the regulations.

3.2. The National Treasury

The National Treasury is established under Article 225 of the Constitution and Section 225 of the
Public Finance Management Act, 2012. In relation to Public Procurement, the National Treasury
is responsible for public procurement and asset disposal policy formulation as provided under
section 7 of the PPADA, 2015.

Functions of the National Treasury in Public Procurement

a) To formulate, evaluate, promote and research on national and county public procurement
and asset disposal policy and standards;
b) To develop policy guidelines for the efficient procurement management and disposal
system for the national executive;
c) To design and prescribe an efficient procurement management system for the national
and county governments to ensure transparent procurement and asset disposal as
contemplated by Article 227 of the Constitution: Provided that the National Treasury shall
prescribe through Regulations a system under this paragraph that operates, respects and
promotes the distinctiveness of the national and county levels of government;
d) To provide technical assistance on procurement and assist in the implementation and
operation of the public procurement and asset disposal system;
e) To manage and administer the scheme of service of the procurement and supply chain
management services cadre for the national government;
f) To carry out general research, develop and promote electronic procurement strategies
and policies in both the national and county governments including state corporations and
other government agencies;
g) To carry out a review of procurement and supply chain management systems to assist
procuring entities;
h) To develop and review policy on procurement of common user items in the public sector
both at national and county government levels;
i) To develop policy on the administration of preference and reservations scheme and
registration of target groups under preference and reservations scheme as prescribed;
j) To facilitate affirmative action for disadvantaged groups in accordance with the
Constitution and advance their participation in the procurement process;

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 k) To develop and review policies and guidelines on the management of assets;
l) To issue guidelines to public entities with respect to procurement matters;
m) To assist county governments in training and capacity building for procurement and supply
chain management; and
n) To publish a list of common user items for utilization and management at least once a
year.

3.3. The Public Procurement Regulatory Authority (PPRA)

PPRA is established under section 8 of the PPADA 2015 as a body corporate. It is a legal entity
with perpetual succession, powers to sue and to be sued in its own name. It has a common seal
(Without which the corporate is not responsible). It has the power of holding and alienating
movable and immovable property.

Functions of PPRA
a) Monitor, assess, and review the public procurement and asset disposal system to ensure
that they respect the national values and other provisions of the Constitution, including
Article 227, and make recommendations for improvements;
b) Monitor the public procurement system and report on the overall functioning of it and
present to the Cabinet Secretary and the county executive member for finance in each
county, such other reports and recommendations for improvements;
c) Enforce any standards developed under the PPADA, 2015
d) Monitor classified procurement information, including that of specific items of security
organs and make recommendations to the Cabinet Secretary;
e) Monitor the implementation of the preference and reservation schemes by procuring
entities;
f) Prepare, issue and publicize standard public procurement and asset disposal documents
and formats to be used by public entities and other stakeholders;
g) Provide advice and technical support upon request;
h) Investigate and act on complaints received on procurement and asset disposal
proceedings from procuring entities, tenderers, contractors, or the general public that are
not subject to administrative review;
i) Research on the public procurement and asset disposal system and any developments
arising from the same; advise the Cabinet Secretary on the setting of standards including
international public procurement and asset disposal standards;
j) Develop and manage the state portal on procurement and asset disposal and ensure that
it is available and easily accessible;
k) Monitor and evaluate the preference and reservations provided for under the Act and
provide quarterly public reports;

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 l) Create a central repository or database that includes—
• complaints made on procuring entities;
• a record of those prohibited from participating in tenders or those debarred;
• market prices of goods, services and works;
• benchmarked prices;
• state organs and public entities that are non-compliant with procurement laws;
• statistics related to public procurement and asset disposal;
• price comparisons for goods, services and works; and
• any information related to procurement that may be necessary for the public.

m) Inform, as applicable, the Cabinet Secretary, Parliament, the relevant County Executive
member for finance, the relevant County Assembly or Auditor-General on issues of non-
compliance with procurement laws once the relevant State organ or public entity ignores
the written directives of the Authority, including material breaches of the measures
established under the Act;
n) Generally, report to Parliament and the relevant county assembly;
o) Develop a code of ethics to guide procuring entities and winning bidders when undertaking
public procurement and disposal with State organs and public entities;
p) In undertaking its functions, cooperate with state and non-state actors with a view to
obtaining recommendations on how public procurement and disposal can be improved;
q) Ensure the procurement entities implement the preference and reservations and provide
data to the Authority disaggregated to indicate the number of disadvantaged groups that
have benefitted;
r) Develop, promote and support the training of personnel involved in procurement and asset
disposal

3.4. The Public Procurement Administrative Review Board

(PPARB)
PPARB was established under section 27 of the PPADA, 2015 as an incorporated body and it
consists of 15 members who are appointed by the Cabinet Secretary taking into account regional
and gender balance.

Functions of the Review Board

a) Reviewing, hearing and determining tendering and asset disposal disputes; and
b) Ensure reasonable accessibility of its services in all parts of the republic by establishing
review panels consisting of at least five members.

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3.5. Kenya Institute of Supplies Management
Kenya Institute of Supply Management (KISM) is a member organization for professionals
engaged in procurement and supply chain management. It is a national body that is mandated by
the law to oversee: the registration, regulation, training, promotion of standards, and management
of disciplinary matters relating to professionals in procurement and supply chain management in
all sectors in Kenya.

The Institute has the mandate to support the development of the procurement and supply
management profession in Kenya by promoting the implementation of established standards,
best practices and professionalism in all sectors.

The Role of KISM

a) Registration and licensing of Procurement and Supply Chain Management professionals
b) Provide training to procurement and supply chain professionals.
c) Establishing, monitoring, improving, and publishing Standards of Professional Conduct.
d) Development and publishing of best practices and code of ethics.
e) Any other duties for the proper administration of the Act.

The function of KISM is as follows;

a) Enhance integrity and professionalism among members and stakeholders in the
procurement profession by offering training in supply chain management and promoting
high standards of skills
b) Promote ethical practices in procurement and supplies management both in the private
and public sectors by providing the very highest quality products and services possible,
while showing leadership in this area.
c) Promote and represent the profession of procurement and supply management through
active involvement in the various forums impacting procurement.
d) Develop improved methods of procurement and supply and promote their use in all
organizations through training and seminars
e) Promote and develop the value of membership in the Institute in order to increase
individual and corporate membership levels.
f) Offer a forum on which supplies management professionals can meet, share, experiences
and discuss issues affecting the profession in practice
g) Encourage publication of supplies management literature in the region and thus promote
awareness and learning in this field
h) Offer consultancy services to client organizations.
i) Encourage training for those interested in the profession and certify members who qualify
through a well-designed program of study and recognizable experiences and contribute
to the profession.

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3.6. Kenya Institute of Supplies Examinations Board
The board has several functions including;
a) Prescribe and regulate syllabuses of instruction for professional supplies certification for
persons seeking registration under the Act;
b) Prepare and conduct examinations for persons seeking registration under the Act;
c) Prepare regulations to be made by the Institute regarding the standard of proficiency to
be gained in each examination for a diploma, degree, or other awards.
d) To make rules with respect to such examinations;
e) To prescribe the fees and other charges payable with respect to such examinations;
f) To issue professional qualifying certificates and other awards to candidates who have
satisfied the examination requirements;
g) To liaise with the Ministry of Education in the accreditation of institutions offering the
examination of the Board for the purpose of carrying out examinations;
h) To promote recognition of its examination in foreign countries.

3.7. The County Government in Procurement Function

County governments have several functions as provided under Section 33 of PPADA 2015,
including:
a) Implementation of public procurement and asset disposal procedures.
b) Coordinating the administration of procurement and asset disposal contracts.
c) Coordinating consultations with county stakeholders on the procurement system in liaison
with the National Treasury and Authority.
d) Co-ordinate consultations with county stakeholders on the procurement system in liaison
with the National Treasury and Authority;
e) Advise Accounting Officers of county government on public procurement.
f) Promote preference and reservation schemes (20% reserved for County)
g) Coordination, monitoring and evaluation of county supply chain function
h) Administer county scheme of service for supply chain management cadre
i) The County Treasury may prescribe an institutional framework to provide for procurement,
administration and management of common user items for the county government.

Key Concerns of PPRA on Procurement and Supply Chain Practices of an Organization

a) Procurement fraud and corruption.
b) Lack of compliance to environmental, labour and social standards
c) Failure to observe competitive procurement procedures
d) Failure to achieve value for money in procurement
e) Ineffective allocation of procurement resources
f) Suppliers’ complaints in regard to irregularity in the award of tenders
g) Lack of inclusion of preference groups in procurement
h) Inflated buying cost
i) Non-transparency in procurement

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3.8. Review Questions
UTR Hospital
The Upendo Teaching and Referral Hospital (UTRH) is a level Five hospital located in the Western
region of Kenya under the Ministry of Health. The Hospital advertised a national tender for the
supply, delivery and installation of Covid 19 Pulse Oximeter machines. The Procurement
department used the technical specifications that were provided by the user department and
experts from some Oximeter manufacturing firms. The head of the user department obtained the
specifications from a supplier of one of the Manufacturers of Pulse Oximeter machines. The
specifications made reference to the brand name of the manufacturer.

After placing the advertisement, several companies bid for the tender and Kikoto OXI firm won
the tender. After the award, the head of the procurement function received emails from several
suppliers seeking for clarification criteria used to award Kikoto OXI firm the tender. One of the
suppliers, Huduma OXI Equipment Distributors Limited applied to the Public Procurement
Administrative Review Board (PPARB) seeking orders to cancel the tender citing skewed
specifications to favor a specific supplier.

The Secretary to the Review Board wrote to PRTH instructing the procuring entity to stop the
procurement proceeding until the case is heard and determined by the Board.

Required
a) Explain the reasons Public Procurement Administrative Review Board would be
concerned with the issue raised by Huduma OXI equipment Distributors Limited.
b) Predict possible determination to be made by Public Procurement Administrative Review
Board concerning the Huduma OXI equipment case
c) Suggest five measure UTR Hospital can put in place to prevent the occurrence of the
same scenario in the future.
d) Advice UTR Hospital on the role of Professional bodies in matters pertaining to
procurement in the organization.

3.9. Further Reading

Ochieng J. & Muehle M. (2014). Development and Reform of the Kenyan Public Procurement
System.

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

GOK (2007) Supplies practitioners management act. Government Press.

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 CHAPTER 4
General Procurement Principles and Rules

Chapter Structure

4.1. Introduction to general procurement principles and rules.

4.2. General procurement principles.
4.3. General procurement rules.
4.4. Review questions.
4.5. Further reading.

Competence

The trainee should have the ability to apply the various procurement principles in
execution of supply chain management functions.

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4.1. Introduction to General Procurement Principles and
Rules
The Procurement Principles and Rules are based on the need to achieve competition,
transparency, accountability, economy and efficiency in both public and private sector operations.
Such procedures, fairly applied, in awarding public sector contracts for goods, works and services
help to create dependable and stable markets for efficient private businesses. They also form the
basis for establishing accountability and encourage the cost-effective use of public funds.

4.2. General Procurement Principles

The procurement principles encompass:
• Strict compliance with the legal and regulatory framework when effecting procurement;
• Achievement of economy and efficiency in the delivery of service;
• Promotion of value for money through effective competition and careful procurement
planning;
• Balancing between the level of control necessary to mitigate against the risk of loss and
the size of transaction costs as it pertains to both direct costs as well as administrative
burden and delay;
• Separation of authority between procurement initiation, vendor selection, commitment,
and receipt inspection and acceptance of procurement objects.
• Promotion of sound public finance management through the appropriate recognition and
management of the linkages of procurement to other areas of public finance management
such as budget preparation, budget execution, finance, accounts and audit.
• Ensuring fairness and equity, and avoiding discrimination in the invitation, evaluation and
award of procurement contracts.
• Observance of ethics in all aspects of procurement and ensuring procurement practice is
devoid of actual or perceived corruption;
• Promotion of transparency and accountability in the whole procurement and disposal
process.
• Promotion of health and safety standards, as well as environmental protection;
• Strict adherence to the use of appropriate documentation for all the steps of the complete
procurement and disposal cycles, and maintaining a comprehensive record of
procurement transactions

a) Procurement and Asset Disposal Planning

A procurement plan is a budget implementation instrument used to record all the forecasted
requirements (goods, services, and works) of all the departments of an organization. It is an
integral part of the budgeting process as the financial estimates are derived from cost estimates
of individual items in the procurement plan.

A procurement plan enables the execution of the approved budget and ensures cost savings,
efficient business operations and increased value for money. A procurement plan should be
based on an indicative or an approved budget. It should contain an elaborate procedure for
planning the procurement of goods, works, services and consultancy services.

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Procurement planning: This is the process of identifying and documenting the requirements that
are to be purchased by the organization, the acquisition method to use and the source market of
the requirements. Simply put it is the process of deciding what to buy, when to buy and from what
source. It is the primary function that determines and guides the subsequent purchasing activities
of the organization for the specified duration of the plan. The procurement planning is then
summarized in the document known as the Procurement Plan.

Procurement Planning guidelines

• All procurement by state organs and public entities must be in compliance with the legal
and regulatory framework when effecting procurement.
• The accounting officer is obliged to prepare an annual procurement plan that is realistic
and in conformance to a format set out in the regulations prior to the commencement of
each financial year as part of the annual budget preparation process.
• The estimates in the procurement plan must be within the approved budget
• Any public officer who knowingly recommends to the accounting officer excessive
procurement of items beyond a reasonable consumption of the procuring entity commits
an offence.
• The asset disposals will be planned by the accounting officer concerned through an
annual asset disposal plan.
• During planning a minimum of thirty percent of the budgetary allocations should be
reserved for enterprises owned by women, youth, persons with disabilities and other
disadvantaged groups.
• Accounting officer will not commence any procurement proceeding until satisfied that
sufficient funds to meet the obligations of the resulting contract are reflected in its
approved budget estimates.
• The approved procurement and disposal plans will include the choice of procurement
and disposal methods and the percentage for the reserved schemes.

Importance of procurement planning:

i. It allows planners to determine if expectations are realistic; particularly the expectations
of the requesting entities, which usually expect their requirements met on short notice and
over a shorter period than the application of the corresponding procurement method
allows.
ii. It is an opportunity for all stakeholders involved in the processes to meet in order to discuss
particular procurement requirements. These stakeholders could be the requesting entity,
end users, procurement department, technical experts, and even vendors to give relevant
inputs on specific requirements.

iii. It permits the creation of a procurement strategy for procuring each requirement that will
be included in the procurement plan. Such a strategy includes a market survey and
determining the applicable procurement method given the requirement and the
circumstances.

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 iv. Planners can estimate the time required to complete the procurement process and award
contracts for each requirement. This is valuable information as it serves to confirm if the
requirement can be fulfilled within the period expected, or required, by the requesting
entity.
v. The need for technical expertise to develop technical specifications and/or scope of work
for certain requirements can be assessed, especially where in-house technical capacity is
not available or is non-existent.
vi. Planners can assess the feasibility of combining or dividing procurement requirements
into different contract packages.
vii. The Procurement Plan is the product of the procurement planning process. It can be
developed for a particular requirement, a specific project, or for a number of requirements
for one or many entities in the public or private sectors.
viii. It helps to decide what to buy, when and from what sources i.e., it defines the need, the
method of procurement and when the procurement process will be initiated.

The information contained in a user requisition document would include:

i. the expected requirement for goods/services/works
ii. quantities/ volume of requirements
iii. The delivery schedule for the identified requirements
iv. Estimated cost/ budget
v. New project procurement.

The information contained in a procurement plan would include:

i. A detailed description and breakdown of goods, services, works and consultancies
required to carry out activities of the buying unit. These should be segregated by the
user department with assistance from the recurrent and development budgets.
ii. A schedule of planned delivery, implementation, or completion dates for all goods,
works, services, and consultancies required taking into account the necessary time
period for effecting the proceedings.
iii. An indication and justification for whether a procurement requirement should be
procured under a single-year period or multi-year arrangement.
iv. An indication of which items should be aggregated for procurement as a single package
or for procurement through any applicable arrangements for common use items. This
is justified on the basis of savings that will be accrued from economies of scale.
v. Where aggregation is justified, the optimal period for such aggregation should be
indicated taking into account seasonal price variations, warehousing and distribution
capacity and product shelf life.
vi. An indication of all items divided into lots.
vii. An estimate of the value of each package of goods, works, services and consulting,
the design required, an indication of the budget and the possible sources of funding.
viii. An indication of rules applicable to procurement: where procurement is not subject to
Public Procurement and Disposal Act and Regulations but to specific rules dictated by
an international agreement like in the case of Donor-funded procurement

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 ix. An indication of the anticipated procurement method for each procurement
requirement including the need for pre-qualification, the anticipated time to complete
a procurement cycle taking into account the applicable approval requirements.
x. An indication of whether the procurement function will be carried out by the procuring
entity, a specialized Procurement Unit, any other special agency designated to procure
common-use items, or any other body.
xi. An indication of the warehouse requirements for storing the planned procurement
xii. An indication of the shelf life of any goods that may be perishable or degradable
xiii. An indication of the resources available for managing the procurement workload
xiv. Details of any committed or planned procurement expenditure under existing multi-
year contract

b) Procurement Pricing and Requirement of Not to Split Contracts

• Procuring entity should not structure procurement as two or more procurements for the
purpose of avoiding the use of a procurement procedure prescribed.
• Standard goods, services and works with known market prices will be procured at the
prevailing market price.
• The regulator will issue on a quarterly basis a market price index as a reference guide
to assist accounting officers in making informed price decisions.
• Public officers involved in transactions in which standard goods, services and works are
procured at unreasonably inflated prices will be required to pay the procuring entity for
the loss resulting from their actions.

c) Registration and Pre-qualification

Registration of suppliers is s the process of identifying and obtaining a list of prospective providers
of a specified category of goods, works or services by a procuring entity for a specified period of
time but not exceeding more than two years, and maintaining them for the purpose of inviting
them on a rotational basis for subsequent tendering proceedings such as request for quotations
or restricted tendering, that may arise during the period of listing. On the other side pre-
qualification is the procedure to identify and shortlist tenderers that are qualified, prior to invitation
for tenders.

Eligibility to bid
Eligibility criteria for a person seeking to bid for a contract in procurement or an asset being
disposed of—
• Must have the legal capacity to enter into a contract for procurement or asset disposal;
• Must not be 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 person and his or her sub-contractor should not be debarred from participating in
procurement proceedings.
• Must have fulfilled tax obligations
• Should not have been convicted of corrupt or fraudulent practices;
• Should not be guilty of any serious violation of fair employment laws and practices.

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 • Should declare any conflict of interest
• Should not submit false, inaccurate, or incomplete information about his or her
qualifications.

Use of list of another state organ or public entity

A State organ or public entity may seek, in writing, to use another State organ's, public entity's,
or regulated professional body's registration list of all registered persons in the category, provided
that the list is valid and developed through a competitive process.

Registration of suppliers
• It is the responsibility of the head of the procurement function of a procuring entity to
maintain and update lists of registered suppliers, contractors and consultants in the
categories of goods, works or services according to its procurement needs.
• The registration list should be updated periodically in accordance with laws and
regulations.

d) Standard Procurement and Asset Disposal Documents

An accounting officer of a procuring entity is responsible for the preparation of tender documents
in consultation with the user and other relevant departments. A procuring entity must use standard
procurement and asset disposal documents issued by the PPRA in all procurement and asset
disposal proceedings. The tender documents used by a procuring entity should contain sufficient
information to allow fairness, equitability, transparency, cost-effectiveness and competition
among those who may wish to submit their applications.

A fee may be charged for obtaining tender documents as prescribed by regulations and stated in
the tender documents.

The tender documents should set out the following:

• The specific requirements prepared relating to the goods, works or services being procured
and the time limit for delivery or completion;
• If work is being procured, relevant drawings and bills of quantities should be disclosed and
the project’s total estimated cost evaluated only on the basis of the criteria disclosed, but
a person shall not be disqualified on the basis that a bidder quoted above or below a certain
percentage of engineer's estimates;
• The general and specific conditions to which the contract will be subject, including any
requirement that performance security is provided before the contract is entered into.
• The tender number assigned to the procurement proceedings by the procuring entity;
• Instructions for the preparation and submission of tenders including—
i. The forms for tenders
ii. The number of copies to be submitted with the original tender;
iii. Any requirement that tenders security be provided and the form and amount of any
such security
iv. Any requirement that evidence be provided of the qualifications of the person
submitting the tender

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 v. The procuring entity facilitation and the submission of tender documents by the
tenderer through either soft or hard copy
vi. The procurement function should ensure that where necessary, the preferences
and reservations of the tender are clearly spelled out in the bidding documents.
vii. an explanation of where and when tenders shall be submitted,
viii. a statement that the tenders will be opened immediately after the deadline for
submitting them and an explanation of where the tenders will be opened;
ix. a statement that those submitting tenders or their representatives may attend the
opening of tenders;
x. a statement of the period during which tenders must remain valid;
xi. the procedures and criteria to be used to evaluate and compare the tenders;
xii. a statement that the accounting officer of a procuring entity may, at any time
terminate the procurement proceedings without entering into a contract
xiii. a provision for providing details of sub-contractors for the bidder, where applicable,
and a declaration that the sub-contractors have complied with the Act

e) Limitation on Contracts with State and Public Officers

To avoid conflict of interest, a state organ or public entity will not enter into a contract or award a
contract to—
• a public officer or state officer or a member of a committee or board of that state organ or
public entity; or
• an officer of that public entity or state organ.
• the state officer's or public officer's spouse or child;
• a business associate or agent; or
• a corporation, private company, partnership or other body in which the officer has a
substantial or controlling interest.

Any state officer or public officer who has an interest in a matter under consideration in a public
procurement or asset disposal should disclose in writing, the nature of that interest and will not
participate in any procurement or asset disposal relating to that interest.

Specific technical requirements in the tender document

The specific requirements will include all the procuring entity's technical requirements with respect
to the goods, works, or services being procured. These requirements include:
• Conformance to design, specification, functionality and performance
• Be based on national or international standards whichever is superior
• Factor in the life of the item
• Factor in the socio-economic impact of the item
• Be environment-friendly
• Factor in the cost disposing of the item
• Factor in the cost of servicing and maintaining the item.

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f) Performance Bond and Tender Security
• A performance bond refers to a monetary or financial guarantee to be furnished by the
successful tenderer for the due performance of the contract placed on it. Performance
Security is also known as Security Deposit. Performance security can also be defined as
the irrevocable and unconditional bank guarantee provided by the consultant as a
guarantee for the performance of its obligations in respect of the contract.
• Tender security means a guarantee required from tenderers by the procuring entity and
provided to the procuring entity to secure the fulfillment of any obligation in the tender
process and includes such arrangements as bank or insurance guarantees, surety bonds,
standby letters of credit, cheques for which a bank is primarily liable, cash deposits,
promissory notes and bills of exchange tender securing declaration, or other guarantees
from institutions
• An accounting officer of a procuring entity may require tender security to be provided with
tenders.
• The tender security should be provided as stated and as an absolute value and the amount
should not be more than two percent of the tender as valued by the procuring entity.
• Tender security can be forfeited if the person submitting the tender withdraws the tender
after the deadline for submitting tenders but before the expiry of the period during which
tenders shall remain valid or refuses to enter into a written contract, or fails to furnish the
required performance security.
• A procuring entity can immediately release any tender security if;
i. the procurement proceedings are terminated;
ii. the procuring entity determines that none of the submitted tenders is responsive;
iii. a contract for the procurement is entered into
iv. a bidder declines to extend the tender validity.
• Tender securities shall not be required in procurements reserved for small and micro-
enterprises or enterprises owned by women, youth, persons with disabilities and other
disadvantaged groups participating in a procurement proceeding instead the target group
will be required to fill and sign the Tender Securing Declaration Form.

g) Termination or Cancellation of Procurement and Asset Disposal Proceedings

Conditions for termination or cancelation of procurement proceedings:
• the subject procurement has been overtaken by operation of law; or substantial
technological change;
• inadequate budgetary provision;
• no tender was received;
• there is evidence that the prices of the bids are above market prices;
• material governance issues have been detected;
• all evaluated tenders are non-responsive;
• force majeure;
• civil commotion, hostilities, or an act of war; or
• upon receiving subsequent evidence of engagement in fraudulent or corrupt practices by
the tenderer.

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h) Form of Communications, Electronic Procurement and Asset Disposal
• All communications and inquiries between parties on procurement and asset disposal
proceedings should be in writing.
• A procuring entity may Information and Communication Technologies (ICT) in
procurement and asset disposal proceedings in the following activities:
i. publication of notices;
ii. submission and opening of tenders;
iii. tender evaluation;
iv. requesting information on the tender or disposal process;
v. dissemination of laws, regulations and directives;
vi. digital signatures
.
i) Corrupt and Conflicts of Interest
• Procurement entity officers or vendors should not attempt to collude to make any proposed
price higher than the prevailing market price.
• A tender, proposal, or quotation submitted by a person should include a declaration that
the person will not engage in any corrupt or fraudulent practice and a declaration that the
person or his or her sub-contractors are not debarred from participating in procurement
proceedings.
• A person charged with a corruption offence will be disqualified from entering into a contract
for a procurement or asset disposal proceeding or if a contract has already been entered
into with the person, the contract shall be voidable.
• A person has a conflict of interest with respect to a procurement if the person or a “relative”
of the person seeks, or has a direct or indirect pecuniary interest in another person or
vendor who seeks, a contract for the procurement; or owns or has a right in any property
or has a direct or indirect pecuniary interest that results in the private interest of the person
conflicting with his duties with respect to the procurement
• Such a person should not take part in the procurement proceedings and in decision-
making relating to the procurement or contract.

j) Confidentiality
• During or after procurement proceedings should disclose the following—
i. Information relating to a procurement whose disclosure would impede law
enforcement or whose disclosure would not be in the public interest
ii. Information relating to a procurement whose disclosure would prejudice legitimate
commercial interests, intellectual property rights or inhibit fair competition
iii. Information relating to the evaluation, comparison or clarification of tenders,
proposals or quotations
iv. The contents of tenders, proposals or quotations.
• An employee or committee member of the procuring entity will be required to sign a
confidentiality declaration form.
• The disclosure of information can only happen if:

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 i. The disclosure is to an authorized employee or agent of the procuring entity or a
member of a board or committee of the procuring entity involved in the procurement
proceedings;
ii. The disclosure is for the purpose of law enforcement
iii. The disclosure is for the purpose of a review under
iv. The disclosure is pursuant to a court order
v. The disclosure is made to the authority or review board under this act.

k) Procurement Records
• Transparency and accountability are promoted through the appropriate recording of
procurement procedures. The Procuring Entity should maintain an individual file for each
procurement requirement, which should be marked with the relevant procurement
reference number.
• All records for each procurement should be kept for at least six years after the resulting
contract has been completed or, if no contract resulted, after the procurement proceedings
were terminated.
• The records for a procurement should include—
i. A brief description of the goods, works or services being procured;
ii. If a procedure other than open tendering was used, the reasons for doing so;
iii. If, as part of the procurement procedure, anything was advertised in a newspaper
or other publication, a copy of that advertisement as it appeared in that newspaper
or publication;
iv. For each tender, proposal or quotation that was submitted
v. The name and address of the person making the submission
vi. The price, or basis of determining the price, and a summary of the other principal
terms and conditions of the tender, proposal or quotation
vii. A summary of the proceedings of the opening of tenders, evaluation and
comparison of the tenders, proposals or quotations, including the evaluation criteria
used as prescribed;
viii. An explanation of the reasons for termination of procurement proceedings that
resulted to no contract.
ix. A copy of every document required under this Act that the procuring entity should
prepare

• The accounting officer may charge anyone a fee to avail the records but the fee should not
exceed the costs of making the records.
• There should be no disclosure whatsoever of the information contained in procurement
records to anybody.
• An accounting officer should maintain a proper filing system with clear links between
procurement and expenditure files that facilitates an audit trail.
• The file should contain all information, documents, and communications related to that
procurement proceeding, including, but not limited to:
i. The authorized procurement requisition, including the description of goods, works or
services required;

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 ii. The procurement plan, including the justification for the use of any method other than
open tendering or request for proposals;
iii. A copy of any invitation to pre-qualify or call for expressions of interest notice and
any pre-qualification documents;
iv. All applications to pre-qualify or expressions of interest received and the evaluation
of qualifications or comparison of expressions of interest;
v. The invitation to bid notice or any shortlist or list of pre-qualified bidders;
vi. The bidding documents, request for proposals or other solicitation documents issued,
including any clarifications or amendments issued and minutes of any pre-bid
meetings;
vii. The record of solicitation documents issued, bids received and all bid or proposal
openings;
viii. All bids, proposals or quotations received, other than bids or proposals returned
unopened to bidders;
ix. Copies of all clarifications requested and received;
x. The evaluation report, including any individual score sheets or other documentation;
xi. Records of any negotiations;
xii. Any notice of proposed award;
xiii. Any notice of bid acceptance;
xiv. A copy of the contract or purchase order document;
xv. Copies of letters rejecting and debriefing unsuccessful bidders;
xvi. A copy of any published notice of contract award;
xvii. Copies of all contract variations and modifications;
xviii. All documentation and correspondence relating to contract administration;
xix. Copies of all documentation demonstrating the performance of the contract, such as
inspection reports, delivery documentation and interim certificates;
xx. Any documentation relating to the cancellation of a procurement process or
termination of a contract;
xxi. Information relating to any applications for review; and
xxii. All approvals from the Procurement Committee and any other award authority;

l) Procurement Approvals
• All approvals relating to any procedures in procurement should be in writing, dated
properly, documented and filed.
• No procurement approval should be made to operate retrospectively to any date earlier
than the date on which it is made except on procurements in response to an urgent
need.
• In approving procurements relating to an urgent need, the accounting officer should
be furnished with adequate evidence to verify the emergency.
• No procurement approval should be made by a person exercising delegated authority
as an accounting officer or head of the procurement function unless such delegation
has been approved in writing by the accounting officer or the head of the procurement
unit.

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 • An accounting officer of a procuring entity should maintain specimen signatures of all
persons authorized to make approvals within the procurement process and these
signatures shall be availed to all staff and members where applicable.
• Responsibility for each approval made in the procurement procedure will rest with the
individual signatories and accounting officer, whether he or she delegated the authority
or not.

4.3. General Procurement Rules

Procurement entity must use standard tender documents issued by the Authority or modify
them to suit its specific requirements relating to goods, works, or services being procured and the
time limit for delivery or completion.

The Procurement Process

a) Need Identification
A needs identification process defines the reasons why you plan to buy goods, works or services.
Before preparing a procurement plan, it's important to define the reasons why you need to buy
goods, works or services and plan for associated risks.

b) Procurement Planning
Procurement planning increases the transparency and predictability of the procurement process.
It helps organizations collect similar requirements under one contract, as well as divide complex
requirements into multiple contract packages to maximize cost savings.

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c) Initiation of the procurement process:
The initiation of the procurement process should be through a purchase requisition form. The
purchase requisition should clearly state the requirements with articulate specifications/terms of
reference/bills of quantities or drawings where applicable.

d) Preparation of bid documents

The procurement function prepares bid documents with the input of the user department. The bid
documents are prepared in such a way that it communicates what is required by the procuring
entity. It states the evaluation and award criteria that encourage fair completion and achievement
of value for money.

e) Invitation to tender
The accounting officer should ensure the preparation of the invitation to tender is done that sets
out all the required information.

Content to be included in an invitation to tender are:

• The name and address of the procuring entity;
• The tender number assigned by the procuring entity;
• A brief description of the goods, works, or services being procured including the time limit
for delivery or completion;
• An explanation of how to obtain the tender documents, including the amount of any fee, if
any;
• An explanation of where and when 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 tenders;
• Applicable preferences and reservations
• A declaration that the tender is only open to those who meet the requirements for eligibility;
• Requirement of serialization of pages by the bidder for each bid submitted

All tender documents sent out to eligible bidders must be recorded.

f) Modifications to tender documents

• Tender documents may be amended by a procuring entity at any time before the deadline
for submitting tenders by issuing an addendum without altering the substance of the
original tender.
• This amendment can be on the procuring entity's own initiative or in response to an inquiry
by a candidate or tenderer.
• A procuring entity will promptly provide a copy of the addendum to each person to whom
the procuring entity provided copies of the tender documents.
• The addendum is deemed to be part of the tender documents.

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g) Submission and receipt of tenders
The manner in which tenders will be submitted and received is as follows:
• In writing, signed and sealed whether the document is in manual or electronic form.
• The tender document and the envelope should bear the tender number assigned by the
procuring entity
• It should be submitted before the deadline
• It should be dropped in an accessible tender box or electronic tender box
• It should be placed unopened in the tender box whether delivered by self or otherwise
• It should be received in a manner set out in the tender documents and the procuring entity
must acknowledge receipt of the same

h) Opening of tenders
The opening of tenders will be carried out by a committee appointed by the accounting officer
whose functions will be among others:
• To open all tenders received.
• Read out loudly the names of persons who submitted the tender and recorded them in the
tender opening register
• Assign an identification number to each tender
• Record the name, the number of pages received, and where applicable, the total price
and tender security.
• Sign each tender on one or more pages as determined by the tender opening committee
• Prepare tender opening minutes and acknowledge the minutes as a true copy by each
member signing against

N/B. A tender is said to be responsive if it conforms to all the eligibility and other mandatory
requirements in the tender documents.

i) Evaluation of tenders
The evaluation of the tenders will be conducted by the tender evaluation committee appointed in
writing by the accounting officer on the recommendation of the HPF and whose functions will be:
• To evaluate all the responsive bidders following the set criteria taking into consideration
price, quality, time and service for the purpose of evaluation
• To prepare an evaluation report containing a summary of the evaluation and comparison
of tenders
• Submit the evaluation report to the person responsible for procurement for his or her
review and recommendation.
• Sign the evaluation report by each member of the evaluation committee.

N/B.
i. A procuring entity may seek in writing, a clarification of a tender from the tenderer to
assist in the evaluation and comparison of tenders and clarification will not change the
terms of the tender.

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 ii. The tender sum as submitted and read out during the tender opening will be absolute
and final and will not be the subject of correction, adjustment, or amendment in any
way.
iii. Local contractors who are Kenyan citizens and own at least fifty-one percent shares
will be entitled to twenty percent of their total score in the evaluation, provided the
entities or contractors have attained the minimum technical score.

j) Post-qualification
• An evaluation committee may, after tender evaluation, but prior to the award of the
tender, conduct due diligence and present the report in writing to confirm and verify the
qualifications of the tenderer who submitted the lowest evaluated responsive tender to
be awarded the contract.
• Due diligence may include obtaining confidential references from persons with whom
the tenderer has had a prior engagement.
• To acknowledge that the report is a true reflection of the proceedings held, each
member who was part of the due diligence by the evaluation committee will initial each
page of the report, and append his or her signature as well as their full name and
designation.

k) Professional opinion
• The head of the procurement function will review the report of the evaluation committee
and provide a signed professional opinion to the accounting officer on the procurement or
asset disposal proceedings.
• The professional opinion provides guidance on the procurement proceeding in the event
of dissenting opinions between tender evaluation and award recommendations.
• The accounting officer will take into account the views of the head of procurement in the
signed professional opinion in making a decision to award a tender.

l) Recommendation for contract awards

All tenders will be evaluated by the evaluation committee of the procuring entity for the purpose
of making recommendations to the accounting officer through the head of procurement to inform
the decision of the award of the contract to the successful tenderers.

Successful tender
The successful tender will be the one that meets meet the following conditions:
• The tender with the lowest evaluated price;
• The responsive proposal with the highest score will be determined by combining, for each
proposal, the technical and financial scores
• The tender with the lowest evaluated total cost of ownership; or
• 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.

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m) Notification of intention to enter into a contract
It is the responsibility of the accounting officer to notify in writing the person whose tender has
been successful and accepted and the successful bidder will accept the award by signing in
writing. The accounting officer should also notify the unsuccessful bidder disclosing the reasons
for their unsuccess.

n) Extension of the tender validity period

The accounting officer may extend the validity of the tender before it expires by writing a notice
of an extension of not more than one month and the extension should only be done once

o) Contract preparation
The accounting officer is responsible for the preparation of contracts in line with the award
decision. All contracts of a value exceeding Kenya shillings 5 billion are cleared by the Attorney-
General before they are signed. Each Cabinet Secretary regularly informs the Cabinet and
national treasury of all government contracts exceeding Kenya shillings 5 billion.

The existence of a contract is confirmed through the signature of a contract document

incorporating all agreements between the parties. The contract is signed by the accounting officer
or an officer authorized in writing by the accounting officer of the procuring entity and the
successful tenderer. An Accounting officer of a procuring entity enters into a written contract with
the person submitting the successful tender based on the tender documents and any clarifications
that emanate from the procurement proceedings.

p) Contract performance and management

An accounting officer or his or her appointed representative is responsible for ensuring that the
goods, works and services are of the right quality and quantity. The head of the procurement
function is responsible for assisting the accounting officer to confirm the right quality and quantity
of goods, works and services have been delivered to the procuring entity and shall issue a
certificate of acceptance to the accounting officer except where technical specifications are from
another technical department or professionals engaged to work on behalf of the accounting
officer. Where goods, works and services, are of technical nature and the specifications were
provided by a technical department or professionals engaged to work on behalf of the accounting
officer, that technical department or professionals engaged to work on behalf of the accounting
officer is responsible for confirming the right quality and quantity of goods, works or services have
been delivered and issue a certificate to the recipient accounting officer.

International Tendering and Competition

Conditions for international bidding:
• The tender documents and the invitation to tender must be in English;
• The advertisement of the invitation to tender will be placed in the tender’s portal or in one
or more English-language newspapers or other publications that have sufficient circulation
outside Kenya to allow effective competition for the procurement
• The technical requirements will be based on international standards or standards widely
used in international trade

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 • The technical requirements will be compatible with requirements under Kenyan law
• The price for both the tender security and the tender document will be quoted in a currency
that is widely used in international trade
• Preference and reservation schemes will apply where local contractors or citizens
participate in the tendering process.

4.4. Review Questions

a) Outline the importance of planning in public procurement
b) Describe the information that should be included in a procurement plan
c) Highlight the eligibility criteria for pre-qualification of suppliers
d) Identify conditions for termination of a procurement proceeding by the accounting officer
e) State the role of the accounting officer in procurement record management

4.5. Further Reading

Ochieng J. & Muehle M. (2014). Development and Reform of the Kenyan Public Procurement
System.

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

GOK (2007). Supplies practitioners management act. Government Press.

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 CHAPTER 5
Organisation of Procurement in the Public
Sector

Chapter Structure

5.1. Introduction to organisation of public procurement.

5.2. Organisation of procurement in the public sector.
5.3. Consortium buying.
5.4. Procuring agents or asset disposal agents.
5.5. Sector-specific procuring and disposal agencies.
5.6. Transfer of procuring responsibility to another public entity or procuring agent.
5.7. Review questions.
5.8. Further reading.

Competence

The trainee should have the ability to manage procurement in public sector.

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5.1. Introduction to Organisation of Public Procurement
Structured organisation of procurement is intended to ensure that the buyer receives goods,
services, or works at the best possible price when aspects such as quality, quantity, time, and
location are compared. Public procurement requires seamless workflow and service delivery to
be able to make corporate decisions, therefore, the procuring entities are to establish various
organizational structures that are necessary to ensure that procurement is done in a more
transparent and accountable manner.

5.2. Organisation of Procurement in the Public Sector

It is very important to have segregated responsibilities in public procurement whose minimum
requirements are:

a) an accounting officer;
b) a procurement function headed and staffed by procurement professionals;
c) establishment of all relevant committees
d) a vote where the budget is approved by the National Assembly or a county assembly or
by a governing body of a public entity

a) The Roles of an Accounting Officer

• Ensuring that procurements of goods, works, and services of the public entity are within
the approved budget of that entity;
• Constituting all procurement and asset disposal committees within a procuring entity in
accordance with the Procurement and Asset Disposal Act;
• Ensuring procurement plans are prepared in conformity with the medium-term fiscal
framework and fiscal policy objectives.
• Ensure proper documentation of procurement proceedings and safe custody of all
procurement records in accordance with the Procurement and Asset Disposal Act;
• Ensuring compliance with Public Finance Management Act.
• Approving and signing all contracts of the procuring entity;
• Ensuring the procurement and asset disposal process of the public entity shall comply
with the Procurement and Asset Disposal Act;
• Ensuring that the procurement processes are handled by different professional offices in
respect of procurements, initiation, processing and receipt of goods, works and services;
• Submitting to the Authority the part in its procurement plan demonstrating the application
of preference and reservations schemes in relation to the procurement budget within sixty
days after the commencement of the financial year; and;
• Ensuring compliance with any other responsibilities assigned by the Procurement and
Asset Disposal Act or any other Act of Parliament or as may be prescribed in Regulations.

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b) The Roles of the Procurement Function
The procurement function should be handled by procurement professionals whose qualifications
and experience are recognized in Kenya. All procurement entities are required to establish a
procurement unit in order to carry out and manage the procurement function.

The role of the procurement function is to:

• Maintain and continuously update standing lists of registered suppliers for the procuring
entity
• Liaise with the Authority in respect of the Authority’s register of procuring agents
• Prepare tender and asset disposal documents to facilitate fair competition;
• Prepare, publish and distribute procurement and disposal opportunities including
invitations to tender, request for quotations and proposals, pre-qualification documents
and Invitations for expressions of interest;
• Coordinate the receiving and opening of tender documents;
• Submitting a list of registered or prequalified suppliers or contractors or consultants to the
accounting officer for approval;
• Issue procurement and asset disposal documents to candidates in accordance with the
Public Procurement and Asset Disposal Act and Regulations;
• Propose the membership of relevant committees under the Procurement and Asset
Disposal Act to the accounting officer for consideration and appointment;
• Coordinate the evaluation of tenders, quotations and proposals;
• Recommend for consideration the negotiation of procurement by the evaluation
committee where negotiations are allowed by the Procurement and Asset Disposal Act
and Regulations and Regulations and participate in negotiations;
• Prepare and publish tender awards;
• Prepare contract documents in line with the award decision;
• Prepare and issue debriefing letters;
• Prepare contract variations and modifications documents;
• Maintain and archive procurement and asset disposal documents and records for the
required period;
• Provide information, as required, for any petition or investigation to debar a tenderer or
contractor or any investigation under review procedures;
• Implement the decisions of the accounting officer, including the disposal committee and
coordinating all procurement activities;
• Act as a secretariat to the evaluation, inspection and acceptance, and disposal
committees;
• Liaise with the National Treasury or relevant county treasury and the Authority on matters
related to procurement and asset disposal;
• Prepare and submit to the National Treasury or relevant county treasury and the Authority
reports required under the procurement and asset disposal Act, these Regulations and
guidelines of the Authority;
• Monitor contract management by user departments to ensure implementation of contracts
in accordance with the terms and conditions of the contracts;

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 • Report any significant departures from the terms and conditions of the contract to the head
of the procuring entity or accounting officer;
• Recommend for transfer of a procurement or asset disposal responsibility to another
procuring entity by the head of the procuring entity when the need arises;
• Prepare consolidated procurement and asset disposal plans;
• Advise the procuring entity on the aggregation of procurement to promote economies of
scale;
• Co-ordinate internal monitoring and evaluation of the procurement and supply chain
function;
• Carry out market surveys to inform the placing of orders or adjudication by the relevant
awarding authority;
• Conduct periodic and annual stocktaking;
• Certify the invoices and vouchers to facilitate the processing of payment to suppliers;
• Recommend extension of the tender validity period;
• Verify that the available stock levels warrant initiating a procurement process; and
• Carry out any other functions and duties as are provided under the Act and these
Regulations and any other functions that might be stipulated by the National Treasury or
relevant county treasury, or the Authority

c) The Roles of the Tender Opening Committee

• The committee is required to open all tenders and bids received at the exact time indicated
in the tender or quotation documents.
• During the tender opening, the committee will assign a number to each bid opened and
record the number of pages.
• Sign each tender document on pages determined by the committee and initial the
quotation price page.
• The committee shall minute the proceeding and hand over the bids and the signed minutes
to the Head of the Procurement Unit.
• The commit shall not disqualify any tender during the opening.

d) The Roles of the Evaluation Committee:

• Deal with the technical and financial aspects of procurement as well as negotiation of the
process;
• Perform the evaluation with due diligence;
• Conduct evaluation within the timeframes provided;
• Not to enter into direct communication with the suppliers/contractors who responded to
the tender under evaluation;
• Seek clarifications on tenders or proposals under consideration through the head of the
Procurement Unit;
• The committee members shall sign the confidentiality declaration forms before conducting
the evaluation;
• Have as its secretary, the person in charge of the procurement function or her/his
designate;

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 • Complete the procurement process for which it was appointed and no new committees
shall be appointed on the same issue unless the one handling the issue has been
procedurally disbanded.
• Adopt a process that shall ensure the evaluation criteria utilized adhered to articles 201(d)
and 227(1) of the constitution;
• Each of the committee to conduct an evaluation of bids independently from other members
prior to sharing his/her ratings with the other members; and
• Prepare an analysis of the tenders and final ratings assigned to each tender and make a
recommendation and submit it to the Head of the Procurement Unit.

e) The Roles of the Head of Procurement

• To manage all procurement and disposal of the procuring entities
• The head is responsible for rendering a professional opinion to the accounting officer.
• The Head of the Procurement function reviews the evaluation report, and issues a signed
professional opinion to the accounting officer on the award.
• The opinion provides guidance in case of dissent between tender evaluation and
recommendation for contract award. Usually, the accounting officer takes into account the
head of the procurement professional opinion in deciding on the award of the contract.

A professional opinion should be:

• Independent and unbiased;
• Based on proper analysis of procurement process and best practice; and
• Supported by a proper governance structure

Contents of Professional Opinion

• A review of the procurement or asset disposal proceedings;
• Adherence to evaluation criteria stipulated in the bid documents;
• Legality of tender award recommendations;
• Whether the recommended price(s) for standard goods, services and works are within the
indicative market prices;
• Availability of funds; and
• A recommendation for change of scope, where the bid document had provided for change
of scope if the successful bid is above the available budget of the procuring entity

f) The Roles of the Contract Implementation Team

• Monitor the performance of the contractor, to ensure that all delivery or performance
obligations are met or appropriate action is taken by the procuring entity in the event of
obligations not being met;
• Ensure that the contractor submits all required documentation as specified in the tendering
documents, the contract, and as required by law;
• Ensure that the procuring entity meets all its payment and other obligations on time and
in accordance with the contract.
• Ensure that there is the right quality and within the time frame, where required;

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 • Review any contract variation requests and make recommendations to the respective
tender awarding authority for consideration and 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;
• Manage handover or acceptance procedures as prescribed;
• Make recommendations for contract termination, where appropriate;
• Ensure 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;
• Ensure that all contract administration records are complete, up to date, filed and archived
as required;
• Ensure that the contractor acts in accordance with the provisions of the contract; and
• Ensure discharge of performance guarantee where required.

g) The Roles of the Project Manager

• Provides a statement of work that the project is expected to cover which forms the basis of
engagement with suppliers/vendors.
• Participates fully in the preparation of procurement document providing technical details
that pertains to the project, services and expected outcome from the suppliers or vendors
• Prepares duties and responsibilities that internal staff should be assigned with regard to
recruitment or outsourcing the necessary staff with the relevant skills and competencies.
• Draws up schedules for receiving of goods and supplies to ensure appropriate project
components are delivered as per the agreed schedule
• Participates in cost analysis and reviews related to the project with aim of ensuring
materials, supplies and services are delivered at a cost that is effective and facilitates the
successful completion of projects
• Prepares performance reports regarding project deliverables and supplier performance
• Communicates desired project changes or adjustments to all stakeholders and their
implications
• Plays a major role in the inspection of deliverables provided by the supplier with a view to
verifying compliance and quality standards
• Facilitates payment for the goods and services rendered to a project by a vendor or
suppliers through the endorsement of the delivery note, goods received note, quality
reports and invoicing.
• Take part in the preparation of an audit report for the procurement aspects of the project.

h) The Roles of the Inspection and Acceptance Committee:

• Immediately after the delivery of the goods, works or services inspect the goods, services,
or works and also ascertain compliance with the terms and specifications of the contract
and where necessary, test the goods received;
• Incorporate an expert in its meetings during inspection of items of technical nature from
within Procuring entity or the wider Public Sector;
• Accept or reject, on behalf of Procuring entity, the delivered goods, works or services;

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 • Ensure that the correct quantity of the goods is received;
• Ensure that the goods, works, or services meet the technical standards defined in the
contract;
• Ensure that the goods, works or services have been delivered or completed on time, or
that any delay has been noted;
• Ensure that all required manuals or documentation have been received; and
• Issue interim or completion certificates or goods received notes, as appropriate and in
accordance with the contract.

i) The Roles of the Asset Disposal Committee

• Be responsible for verification and processing of all disposal recommendations in liaison
with the Head of Procurement;
• be composed of the chairperson and at least two other members appointed by the
accounting officer;
• Conduct a board survey of items identified for disposal;
• Verify the condition and location of the items;
• Determine the current market value of the items;
• Set up a reserve price based on its value and condition;
• Seek technical expertise where necessary to ascertain the value and condition of the
items;
• Prepare disposal report with recommendations and submit the Chairman of the Board for
approval; and
• Conduct the actual disposal with the appointed procurement representative.

j) The Roles of the User Department

It is the department that requisitions goods, works and department. Their role/responsibilities are:
• Initiating procurement and asset disposal requirements and forwarding them to the head
of the procurement function;
• Participating in the evaluation of tenders, proposals, and quotations;
• Managing, monitoring, and reporting any departure from the terms and conditions of the
contract to the head of the procurement function;
• Forwarding details of any required amendments or variations to contracts including
extensions to the head of procurement function for consideration and action;
• Maintaining and archiving copies of records of contract management;
• Preparing any reports required to the head of the procurement function for submission to
the accounting officer;
• Undertaking conformity assessments of supplied goods, works and services with the
specifications of the contract documents;
• Preparing and submitting technical specifications for goods, works and services to the
procurement function;
• preparing departmental procurement and asset disposal plans and submit to the
procurement function;
• making clarifications on tenders, requests for quotations and any other matter through the
head of the procurement function as may be required; and

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 • Carrying out any other functions and duties as provided for under the Act or these
Regulations

k) The Roles of the Cabinet Secretary – National Treasury in Public Procurement

• Gazettes procurement rules and procedures through the acts and regulations
• Appoints members to various boards including examinations, Institutes chair, Director
regulatory board and Director review Board
• Determines terms and conditions of service of the review board members
• Offer advice on procurement matters to county government, state corporations and MDAs
• Prescribes procedures and regulations for evaluating and carrying out low-value
procurement below the threshold, and specially permitted procurement
• Submits list of classified items to be disposed of to the cabinet for approval
• Informs cabinet and national treasury of all government contracts exceeding 5 billion
Kenya shillings.
• Prescribe preference and reservations schemes in public procurement and asset disposal
• Facilitates attainment of quota.

l) The Roles of the Attorney General in Public Procurement

• Clears all government contracts of value exceeding 5 billion Kenya shilling
• Authorizes publication of procurement act and regulations
• Advices national government departments and public bodies on issues to do with
procurement
• Advices government on legal provisions arising prior to or during international
procurement
• Represents the state in international procurement legal proceedings

5.3. Consortium Buying

Consortium buying is a collaborative arrangement in which procuring entities with common
interests join together to combine their individual requirements for goods and services for the
purpose of procuring jointly in order to benefit from economies of scale.

Benefit of Consortium Buying

a) Economies of scale- large purchasing power can be achieved individually
b) Lower transaction costs- The entities can negotiate much lower prices for goods and
services hence significant savings can be realized by individual entities
c) Reduction of process work and workloads- the consortium companies handle a number
of buyers on behalf of the organizations freeing up time for buyers to do other tasks
d) Better prices and shared expertise- Individual entities gain knowledge about how to
succeed in a particular area/region
e) Higher quality experts make sure an organization uses the best process information to
make its decision
f) Lower supply risks- the consortium is able to tap into all its member’s knowledge,
therefore, having a better chance of identifying low risk suppliers

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Limitations of Consortium Buying
a) Serving the needs of the majority is less likely to fulfill the specific needs of an individual
entity when dealing with one supplier.
b) Set-up costs are initially high due to the cost of identifying a consortium, negotiating a
contract and developing relationships with that consortium.
c) Longer lead time-it takes longer to negotiate contracts when it has to be adapted to many
different institutions.
d) There is a need to monitor and communicate with the consortium to ensure consistent
results.
e) Reduced flexibility- individual entities will not have control over the terms and conditions
of the contract.
f) Resistance may develop internally from entities who believe that consortium does not do
enough to negotiate better contracts for the firms.
g) Loss of supplier relationship- entities may lose touch with suppliers and result in working
with suppliers that members have never worked with in the past.

5.4. Procuring Agents or Asset Disposal Agents

A procuring entity may procure and appoint a procuring or asset disposal agent amongst a list of
agents registered and licensed by the Authority to carry out procurement or asset disposal on its
behalf as per the terms of the contract.

A procuring entity should not appoint a procuring or asset disposal agent unless:
a) The procuring entity demonstrates a lack of internal capacity
b) provides evidence of the inability to establish a procurement and disposal unit
c) demonstrates the inability to use the services of other State organs or public entities.

The procuring entity within fourteen days after the appointment of the agent, publicize the
following details on its website-
a) Name and address of the agent;
b) Value of the contract;
c) Items and value of items to be procured or disposed of by the agent;
d) Duration of the contract; and
e) Method of procuring the agent.

Preferential treatment should be given to the local agents before seeking the services of an
international procurement agent.

5.5. Sector-Specific Procuring and Disposal Agencies

A procuring entity or procuring entities with common interest may establish a procuring agency at
the national or county level for the purpose of procurement and distribution of sector-specific
goods, works and services on behalf of procuring entities within the respective sector and will do
that in accordance with the act and the regulations.

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5.6. Transfer of Procuring Responsibility to Another Public
Entity or Procuring Agent
The PPRA has the authority and power to transfer the procuring responsibility of a procuring entity
to another procuring entity or procuring agent in the event of a delay or circumstances prescribed
in the act. An accounting officer should make arrangements upon approval of the governing body
or upon recommendation by the regulator to enable another procuring entity to carry out the
procurement or part of the procurement, on behalf of a procuring entity, in accordance with the
Act.

A procuring entity can use the register list of another state organ or public entity whenever the
procuring entity's list does not suffice. The procuring entity will obtain the whole list of relevant
categories from the state organ or entity, and together with its own relevant list, subject the list to
the Act.

5.7. Review Questions

NATIONAL WATER SERVICE AGENCY (NAWASE)
NAWASE is a State Corporation under the Ministry of Water mandated to ensure the provision of
water resources to citizens. It has set itself a target of achieving at least 50% of the population in
rural areas with safe and affordable water by 2025 and thereafter move to sustainable access to
all by 2030.

The Agency received funding from one of its strategic partners to construct five dams in various
parts of the country at an estimated total cost of Sh.30 billion. An international open tender was
advertised and the bids were submitted. An evaluation committee was constituted to conduct the
evaluation and its membership included external consultants who assisted the agency in
developing the technical specifications of requirements and bills of quantities. The consultants
were selected using quality and cost-based selection (QCBS). All bidders provided evidence of
their eligibility in the form of certifications indicating they were nationals of eligible countries and
that they would source 40% of materials in Kenya. Only three bidders met the technical
requirements and were subjected to financial evaluation. Upendo Ltd. was the lowest evaluated
at a total cost of Sh.25.5 billion. Award was made and all the bidders were notified of the results.
One of the bidders, Chi Construction Ltd. contested the award claiming that the preference
scheme requirement by law was not applied and the notification of intention to award the contract
to Chi Construction Ltd. was sent late and received at a standstill period.

The case was presented to the Review Board for hearing and determination. The documents
presented by petitioners and defendants revealed that the procuring entity had not contravened
any provisions of the law at every stage of the procurement process and that the process was
conducted procedurally and within the provided timeframes. The application by Chi Construction
failed and NAWASE Ltd. was instructed to continue with the contracting process.

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Required:
a) Describe eligibility criteria NAWASE may have used in evaluating the consultant for the
project.
b) Propose the role played by the accounting officer with regard to procurement in the case.
c) Evaluate the role of the contract implementation team in the execution of the project.
d) Predict content that may have been included in the procurement professional opinion.
e) Advice NAWASE on the benefits of consortium buying in projects such as the construction
of the dams in the case.

5.8. Further Reading

Ochieng J. & Muehle M. (2014). Development and Reform of the Kenyan Public Procurement
System.

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

GOK (2007) Supplies practitioners management act. Government Press.

Profex (2012). Context in Procurement and Supply. 1st Edition. Profex Publishers.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 6
Procurement Methods for Goods, Services
and Works

Chapter Structure

6.1. Introduction to procurement methods.

6.2. Threshold for procurement methods for goods, services and works.
6.3. Procurement methods.
6.4. Review questions.
6.5. Further reading.

Competence

The trainee should have the ability to use various procurement methods, procedures and
conditions in procurement of goods, services and works.

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6.1. Introduction to Procurement Methods
The choice of suitable procurement methods will make an organisation achieve multiple interests
and objectives while simultaneously enhancing operational performance with the aim of getting
the most value for money. The organisation will always embrace procurement methods that
improve operational efficiency. Factors taken into consideration in the selection of a procurement
method may include: time/urgency of the requisition, costs of the lifetime of the goods or services,
status and standing of suppliers, exact details/complexity of equipment, goods, or services
offered, financial aspects including payment terms, basis of contractual price, transport, operating
costs, external factors such as the social, political, economic, commercial, technological, and legal
factors which influence the client, the project and the design team throughout the project
timescale/lifecycle.

6.2. Threshold for Procurement Methods for Goods, Services

and Works
The threshold for procurement methods is the established maximum or minimum financial limits
that must not be exceeded when applying a particular procurement method for goods, services,
or works. The procurement threshold represents approximate tender value in monetary terms for
purposes of guiding the choice and use of appropriate procurement method by public entities for
the solicitation of offers from suppliers.

In public procurement practice, the procurement threshold is normally designed in a tabular format
called a threshold matrix. The matrix table provides detailed financial estimates (minimum and
maximum levels of expenditures) for goods, services and works on all the classes of public
procuring entities. Besides, the threshold matrix provides segmentation of duties for different
officers in accordance with the regulations governing public sector procurement.

Maximum or minimum level of expenditure allowed for Segregation of duties for different officers and committees in
the use of a particular procurement method the procurement cycle under section 45 of Part V of the Act
Verification
of receipt
Body Person
Procurement Person of goods,
responsible responsible
Method responsible for services or
Goods Works Services for the for signing
procurement works
awarding the
initiation 150/151
the contract Contract
where
applicable
No minimum. No minimum. No minimum.
Maximum level Maximum level
Maximum level of of expenditure of expenditure Head of the User Accounting
International expenditure shall shall be shall be Department in officer or
Open tender be determined by determined by determined by Accounting Accounting
consultation the his or her
(s 89 of the the funds allocated the funds the funds Officer Officer
with accounting appointee
Act) in the budget for allocated in the allocated in the officer in writing
the particular budget for the budget for the
procurement. particular particular
procurement. procurement.
No minimum. No minimum. No minimum.

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 Maximum or minimum level of expenditure allowed for Segregation of duties for different officers and committees in
the use of a particular procurement method the procurement cycle under section 45 of Part V of the Act
Verification
of receipt
Body Person
Procurement Person of goods,
responsible responsible
Method responsible for services or
Goods Works Services for the for signing
procurement works
awarding the
initiation 150/151
the contract Contract
where
applicable
Maximum level Maximum level
Maximum level of of expenditure of expenditure
expenditure shall shall be shall be Head of the User Accounting
National
be determined by determined by determined by Department in officer or
Open tender Accounting Accounting
the funds allocated the funds the funds consultation with his or her
(s 96 of the Officer Officer
in the budget for allocated in the allocated in the accounting appointee
Act)
the particular budget for the budget for the officer in writing
procurement. particular particular
procurement. procurement.

No minimum. No minimum. No minimum.

Head of the User Accounting

Restricted
Department in officer or
tender under Accounting Accounting
consultation with his or her
sec 102(1)(a) Maximum level Maximum level Officer Officer
accounting appointee
of the Act Maximum level of of expenditure of expenditure officer in writing
expenditure shall shall be shall be
be determined by determined by determined by
the funds allocated the funds the funds
in the budget for allocated in the allocated in the
the particular budget for the budget for the
procurement. particular particular
procurement. procurement.
The Maximum The Maximum
The Maximum
level of level of
level of
expenditure shall expenditure Head of the User Accounting
Restricted expenditure shall
be KES. shall be KES. Department in officer or
tender under be KES. Accounting Accounting
30,000,000 20,000,000 consultation with his or her
sec 102(1)(b) 30,000,000 above Officer Officer
above this above this accounting appointee
of the Act this threshold use
threshold use threshold use officer in writing
open tender
open tender open tender
No minimum No minimum No minimum
No minimum. No minimum. No minimum.
Maximum level Maximum level
Maximum level of of expenditure of expenditure Head of the User Accounting
Restricted expenditure shall shall be shall be Department in officer or
tender under be determined by determined by determined by Accounting Accounting
consultation with his or her
102(1)(c) of the funds allocated the funds the funds Officer Officer
accounting appointee
the Act in the budget for allocated in the allocated in the officer in writing
the particular budget for the budget for the
procurement. particular particular
procurement. procurement.
No minimum. No minimum. No minimum.
Maximum level Maximum level
Maximum level of of expenditure of expenditure
Head of the User Accounting
Request for expenditure shall shall be shall be
Department in officer or
proposals (s be determined by determined by determined by Accounting Accounting
consultation with his or her
116 of the the funds allocated the funds the funds Officer Officer
accounting appointee
Act) in the budget for allocated in the allocated in the
officer in writing
the particular budget for the budget for the
procurement particular particular
procurement procurement

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 Maximum or minimum level of expenditure allowed for Segregation of duties for different officers and committees in
the use of a particular procurement method the procurement cycle under section 45 of Part V of the Act
Verification
of receipt
Body Person
Procurement Person of goods,
responsible responsible
Method responsible for services or
Goods Works Services for the for signing
procurement works
awarding the
initiation 150/151
the contract Contract
where
applicable

No minimum or
No minimum or No minimum or
maximum
maximum maximum
Direct expenditure Head of the User Accounting
expenditure under expenditure
Procurement under this Department in officer or
this method under this Accounting Accounting
under s method consultation with his or her
provided the method provided Officer Officer
103(2) and provided the accounting appointee
conditions under the conditions
(3) of the Act conditions officer in writing
this section are under this
under this
met section are met
section are met

Accounting Accounting
Maximum level Maximum level
Maximum level of Officer or Officer or
of expenditure of expenditure Head of the User Accounting
Request for expenditure under delegated delegated
under this under this Department in officer or
quotations (s this method is person in person in
method is KES. method is KES. consultation with his or her
105 of the KES. 3,000,000 writing by writing by
5,000,000 per 3,000,000 per accounting appointee
Act) per request for the the
request for request for officer in writing
quotation accounting accounting
quotation quotation
officer officer
Maximum level
Maximum level of Maximum level
of expenditure
expenditure under of expenditure
under this
this method is under this
method is KES. A person A person
KES. 50,000 per method is KES. Head of the User Accounting
Low value 50,000 per item delegated delegated
item per financial 100,000 per item Department in officer or
procurement per financial in writing in writing
year per financial year consultation with his or her
(s 107 of the year by the by the
accounting appointee
Act) There is no There is no Accounting Accounting
There is no officer in writing
minimum minimum officer officer
minimum
expenditure for expenditure for
expenditure for the
the use of this the use of this
use of this method
method method
No minimum or
No minimum or No minimum or
maximum
maximum maximum
expenditure Head of the User Accounting
Competitive expenditure under expenditure
under this Department in officer or
negotiation. this method under this Accounting Accounting
method consultation with his or her
(s.131 of the provided the method provided Officer Officer
provided the accounting appointee
Act) conditions under the conditions
conditions officer in writing
this section are under this
under this
met section are met
section are met
No minimum or
No minimum or No minimum or
maximum
maximum maximum
expenditure Head of the User Accounting
Electronic expenditure under expenditure
under this Department in officer or
reverse this method under this Accounting Accounting
method consultation with his or her
auction (s.110 provided the method provided Officer Officer
provided the accounting appointee
of the Act) conditions under the conditions
conditions officer in writing
this section are under this
under this
met section are met
section are met
No minimum. No minimum. No minimum.

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 Maximum or minimum level of expenditure allowed for Segregation of duties for different officers and committees in
the use of a particular procurement method the procurement cycle under section 45 of Part V of the Act
Verification
of receipt
Body Person
Procurement Person of goods,
responsible responsible
Method responsible for services or
Goods Works Services for the for signing
procurement works
awarding the
initiation 150/151
the contract Contract
where
applicable
Maximum level Maximum level
Maximum level of of expenditure of expenditure
expenditure shall shall be shall be
be determined by determined by determined by
the funds allocated the funds the funds Head of the User Accounting
Force account in the budget for allocated in the allocated in the Department in officer or
Accounting Accounting
(s.109 of the the particular budget for the budget for the consultation with his or her
Officer Officer
Act) procurement particular particular accounting appointee
provided the procurement procurement officer in writing
conditions under provided the provided the
this section are conditions under conditions
met. this section are under this
met. section are met.

No minimum. No minimum. No minimum.

Maximum level Maximum level

Maximum level of of expenditure of expenditure Head of the User Accounting
Two stage
expenditure shall shall be shall be Department in officer or
tendering Accounting Accounting
be determined by determined by determined by consultation with his or her
(s.99 of the Officer Officer
the funds allocated the funds the funds accounting appointee
Act)
in the budget for allocated in the allocated in the officer in writing
the particular budget for the budget for the
procurement particular particular
provided the procurement procurement
conditions under provided the provided the
this section are conditions under conditions
met. this section are under this
met. section are met.
No minimum or
No minimum or No minimum or
maximum
maximum maximum
expenditure Head of the User Accounting
Design expenditure under expenditure
under this Department in officer or
competition this method under this Accounting Accounting
method consultation with his or her
(s.100 of the provided the method provided Officer Officer
provided the accounting appointee
Act) conditions under the conditions
conditions officer in writing
this section are under this
under this
met section are met
section are met
No minimum or
No minimum or No minimum or
maximum
maximum maximum
expenditure Head of the User Accounting
Framework expenditure under expenditure
under this Department in officer or
agreement this method under this Accounting Accounting
method consultation with his or her
(s.114 of the provided the method provided Officer Officer
provided the accounting appointee
Act) conditions under the conditions
conditions officer in writing
this section are under this
under this
met section are met
section are met
No Minimum No Minimum No Minimum Head of user Accounting
Department in officer or
Community Accounting Accounting
Maximum Kshs Maximum Kshs Maximum Kshs consultation with his or her
Participation Officer Officer
10,000.000.00 30,000.000.00 5,000.000.00 accounting appointee
officer in writing

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In the private sector, the procurement threshold varies across different organizations and is
normally contained in the individual procurement manual of the organizations. It allocates
responsibility of high tender value procurement to senior officers and low-value procurement to
junior officers.

6.3. Procurement Methods

Organizations or procuring entities can select a variety of procurement methods for the solicitation
of bids for goods, works, or services. The broader objective is to select the most appropriate
method that can best fulfill the requirements of the buying entity efficiently and economically. The
selection of a procurement method may be based on many factors that may include the following:

• The nature of goods, works, or services needed;

• The urgency of the need;
• The value of the goods, works, or services needed;
• The complexity of the need; and
• The regulatory framework governing procurement practices.

a) Open Tendering
Open tendering is the preferred method of procurement and is used by both the private and public
sectors in order to maximize economy and efficiency, promote competition and fairness,
enhancing transparency and accountability, whilst increasing public confidence in the process.

It is done through advertisements in daily newspapers, journals, company websites, etc. The time
for preparing tenders, which is the period between advertising and tender opening, is a minimum
of seven (7) days for public organizations.

During the tender invitation period, the procuring organization will: -

• Open a register for bidders participating in the tenders;
• Respond in writing to any clarifications sought by tenderers within the stipulated duration;
• Amend the tender document at any time before the deadline for submission of tenders by
issuing an addendum on its website. The addendum should be communicated to the
bidders in the most effective way.
• Designate a tender box where bid documents will be received or an e-box tender box;
• Open tenders as per procedures provided in the tender document and organization
guidelines;

Tenders will be evaluated using the evaluation criteria as set in the tender document and a report
prepared. The evaluation committee recommends the award of tender based on the award criteria
in the tender document

The following are the primary principles of the open tendering method:
• Bidding is open to all eligible prospective suppliers/bidders;

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 • Advertised on the appropriate media platform to reach the target market whether
locally or internationally;
• Based on some objective qualification criteria which must be communicated to all
bidders;
• Have clear, fair and objective evaluation criteria applicable to all bidders;
• An award criteria based on the most economically advantageous bid (lowest cost
tender); and
• Based on a clear specification communicated to bidders through tender documents.

Forms of Open Tender Method

The following are the forms of the open tender method
i. International open tender. This is where the scope of the competition is open to
international suppliers, contractors, or service providers. International open tender is used
when the tender value is normally huge and the requirement is meant to meet international
standards or where there is limited local expertise in the works, goods or services needed.
For instance, the construction of an international airport or a regional railroad meant to
meet international standards may necessitate the use of international open tender method
so as to attract the best possible bidders with sufficient expertise and experience.
ii. National open tender: This is used when the scope of the competition is restricted within
the country i.e. the requirement can be provided by the companies domiciled within the
country. In some cases, it may be used as a preference and reservation scheme to protect
local companies from the international market and help build the capacity of the local
suppliers.
iii. County-specific open tender: This is when the open tender competition is restricted
within a specific county i.e., only the market operators registered within a certain county
are allowed to participate in the bidding process. The intention is to protect the suppliers
within a certain county from national competition and to economically empower and build
the capacity of county suppliers.
iv. Special groups’ specific open tender: This is where open tender competition is
restricted to a specific group e.g., women, youth, or people with disabilities (PWDs). This
is a common approach of using procurement as a tool for economic empowerment to uplift
the less fortunate in society. In some jurisdictions e.g., in Kenya, the legal regime
governing public procurement reserves thirty percent (30%) of the annual procurement
budget for such purposes.

Conditions favoring the use of Open Tender Method

• The tender value (value of the purchase) should be large enough to justify the cost of this
method in line with the threshold matrix.
• Competitive market conditions-i.e., there must be an adequate number of suppliers in the
market
• There should be sufficiently time to allow the application of tendering process to be
completed i.e., no agency of the need
• The specifications should be clear enough to give the bidders/tenderers a clear idea of
what is expected of them and the cost involved

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 • The suppliers should be technically qualified and willing to do business

Situations in which Open Tender Method should not be used

• Where there is an urgent need of the goods, works or services
• In a monopolistic market e.g., only one known supplier
• Situations where it is impossible to estimate the cost of the goods, works or a service
• Where there are other considerations other than the cost and technical qualifications.

Demerits of Open Tendering

• Requires a lengthy time frame therefore not suitable for urgent needs
• Expensive in terms of advertisement costs
• May require highly qualified staff or technical staff to come up with technical specification
• Excessive procedures may discourage some competent suppliers from participating in the
process
• The possibility of building a long-term relationship with the suppliers is limited

b) Two-Stage Tendering
This method is used by an organization, when due to the complexity and inadequate knowledge
of what is available in the market, or when it is not feasible to draft proper specifications for the
goods, works, or non- consultancy services. Bidders are invited through the organization’s
website or in newspapers.

In this method, the tendering process is split (separated) into two stages:
1. In the first stage, the buying organization advertises a tender notice inviting tenderers to
submit their proposal without stating the prices of such proposals in the initial phase. This
is meant to allow the buying entity to evaluate the proposal that closely reflects the
procurement entity's need. The evaluation of the proposals at this stage is only intended
to give the buying entity a clearer picture of the need which it could not explicitly specify.

2. In the second stage, the buying entity only invites the bidders/ tenders whose proposals
were successful to prepare to submit their final bids with prices in response to the buying
entity specification. At this stage, the buying entity may still modify any aspect of the
specification originally outlined in the tendering documents, but such modifications or
additions must be communicated to the bidders in the invitation for the submission of final
bids.

In the final stage, bidders who are not willing to submit final bids may withdraw their participation
from the tendering proceedings without forfeiting any tender security that they may have provided.
The final bids are then evaluated and compared to ascertain the winning bidder.

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c) Design Competition
Design competition procedure is used for the purpose of determining the best architectural,
physical planning and any other design scheme, engineering, graphic or any other design scheme
for its use.

Bidders are invited through buying organization website and or newspaper. The received bids are
evaluated by the evaluation committee and at least one independent lay assessor and one
technical assessor recommended by the professional regulatory body governing the design
competition. All bidders are required to transfer all copyrights, intellectual property rights and
patents relating to their designs to buying organization in writing.

In the design competition procedure, the best assessed designs normally receive honorarium
prices as provided for by the internal policies of the procuring entity subject to the guidelines set
out in the regulations governing procurement.

d) Restricted Tendering
This is a procurement method used by the buying entities when participation in the tendering
process is limited to a few suppliers or a qualified list of suppliers, i.e., the tendering process is
restricted and therefore not open to all the bidders who may wish to participate. In public
procurement practice, the procuring entity may only apply restricted tendering method provided
the following conditions are satisfied:
• If the time and cost required to examine and evaluate a large number of tenders/bids
would be disproportionate to the value of goods, works or services to be procured;
• If there is evidence to the effect that there are only a few known suppliers in the market
(oligopolistic market) of goods or services to be procured; and
• If the competition for a contract is restricted to prequalified suppliers because of the
complex and specialized nature of the goods, works or services being procured.

The buying organization maintains a list of suppliers for the different categories of goods, works
and services it may need from time to time. Alternatively, the buying organization may maintain
and keep updating a list of registered suppliers for various categories of goods, works and
services from which to draw the participants in the restricted tendering process. The procedure
followed for restricted tendering is the same as that the of open tender method.

e) Direct Procurement
This is a procurement method where a buyer or a buying organization identifies a single supplier
for the goods, services, or works it requires and awards the contract to the supplier. The supplier
may be chosen purposefully for strategic consideration (single sourcing), or the supplier may be
the sole supply available in the market (sole sourcing). In public procurement practice, direct
procurement is the least preferred procurement method as it may be used to avoid competition
and favor certain economic operators/suppliers.

Direct procurement method is only used under any of the following circumstances:

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 1. In a monopolistic market, i.e., if the goods, works, or services are available only from a
particular supplier/contractor or in a situation where the dealer has exclusive rights in
respect of the goods, works, or services and no reasonable alternative or substitute exists.
2. Urgency- there is an urgent need for the goods, works, or services, making it impractical
to use other methods. The urgency may be due to war, natural disaster or disorder.
3. Compatibility and standardization-this where an entity having procured goods,
equipment, service or technology from a supplier may be forced to use direct procurement
methods from the same supplier for additional supplies for compatibility and
standardization with already existing goods, equipment or technology. For instance,
getting a spare part from the same dealer.
4. Public entity supplier- for acquiring goods, works, or services provided by a public entity
provided the prices of goods or works are fair and compare well with the prevailing market
prices.

In addition to the conditions set above, a public entity in using the direct procurement method
should ensure that the necessary approvals have been granted and make the resulting contract
in writing and signed by both parties. In cases where tenders are issued by the use of direct
procurement, an ad hoc evaluation committee may be appointed to evaluate the tender and where
necessary, post tender negotiation should apply.

f) Request for Proposal

Request for proposals is usually used when the procurement is of services or a combination of
goods and services and or when the services to be procured are advisory or intellectual in nature.
The procuring entity can request for proposal through advertisement or by inviting expression of
interests.

Benefits of Request for Proposals

• Provides an opportunity for competitive bidding
• Procurement entity benefit from the innovations and creativity of suppliers
• Provides an opportunity to evaluate suppliers
• Suppliers get opportunities of submitting organized proposals
• It is easy to visualize how the project will be handled

Limitations of RFPs
• The process itself is time-consuming.
• It consumes the supplier’s time in proposal preparation and also resources
• Non-responsiveness of some suppliers
• Requires knowledge and expertise to evaluate the RFPs.
• Challenging in evaluating responses for RFPs in an organization.

g) Request for Quotations

In this procurement method, the buying organization sends out a bidding document known as a
request for quotation (RFQ) to a specific number of registered suppliers seeking an itemized list
of prices. This document contains the description of the goods, works or services and the

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quantities of goods, works or the service levels required. The request for quotation method has
the effect of generating different quotes and the supplier with the best price offer wins the bid.
The buying organization may use RFQ where goods, services and works are readily available
and for which there is an established market.

When using RFQ method, the suppliers are drawn from the approved list of suppliers. The buying
organization invites suppliers from its list to quote for the requirement. The selection of the
suppliers from the list is done on a rotation basis to ensure all suppliers are given equal chances.
The suppliers are given adequate time to prepare their quotations and submit them.

The RFQ normally includes specifications that must, to the extent possible, be compatible with
requirements under Kenyan Law. It clearly states the conditions to be met by the suppliers. The
RFQ is considered responsive where all conditions have been met by the supplier and the price
is considered to be within the prevailing market price. At least three (3) quotations shall be
received for the evaluation process to take place. All RFQ are to be opened as specified in the
solicitation document.

Where the Procurement Unit is of the view that the successful quotation is higher than the
prevailing market price, it shall reject the quotations and repeat the process by giving fresh
requests to a set of new suppliers.

This procurement method is popular with private institutions for its cost-effectiveness as such
requests are sent electronically to suppliers. However, in public procurement regulation, a buying
organization may request for quotation method only on the following conditions:
• If the procurement is for goods, works, or non-consultancy services that are readily
available in the market;
• When there is an established market for goods, works or services to be procured;
• When the estimated value of goods, works or non-consultancy services being
procured is within the financial threshold as provided by the threshold matrix in the
regulations;

To ensure competition and fairness, a buying organization using the request for quotation method
is expected to observe the following;
• Quotation request is sent to a list of registered suppliers for the identified category of
requirement, i.e., the buying organization must have registered such suppliers under
that category;
• The request is to be sent to as many suppliers as necessary to ensure effective
competition and where possible at least three suppliers; and
• At least three quotations should be received before the commencement of evaluation.

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h) Low-Value Procurement
Low-value procurement is used where the items are not procured on a regular or frequent basis
or are not covered under a framework contract.

In the public sector, only the Head of Procurement may procure low-value items unless delegated
in writing by the Accounting officer to the user department. The thresholds are adhered to when
conducting procurement using this method.

Money is drawn from petty cash for the purchase of low-value procurement. The goods are
procured from well-known market suppliers at the prevailing market rate. The tax receipt is
provided and signed by the person undertaking the procurement. The head of procurement
authorizes all low-value procurements.

i) Force Account
Force account is a procurement procedure where a buying organization implements
infrastructural (or repair and maintenance) works by making use of its government resources
(workforce, materials, and equipment) instead of contracting the work to a private contractor.

This method involves situations where one government agency engages another buying
organization at agreed fees to implement a project or to complete works abandoned by a private
contractor during the implementation phase. This method is named force account because, in
accounting, it is an extra expense resulting from revised works that may not have been budgeted
for.

The buying organization may use the force account method by making recourse to state or public
officers and use public assets, equipment and labor where: -
• Quantities involved are small and scattered or in remote locations and may not
attract qualified construction firms;
• Unforeseen and urgent work is required to be carried out without disrupting
ongoing operations; and
• Where the buying organization needs to complete works delayed by the contractor
who has not responded to a written warning.

In addition to the circumstances identified above, the force account method must be approved by
the accounting officer of the government agency intending to apply this procedure and observe
the following;
i. Justify the need to use of force account and include the estimated cost in the
annual procurement plan;
ii. Purchase materials to be used as inputs in the force account activity;
iii. Justify that it is uneconomical to outsource the works to a private contractor;
iv. Prepare a bill of quantities and technical specifications where necessary, and
v. Ensure that the approval for the use of the method has been granted.

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j) Framework Agreement
Framework contracts are contracting arrangements where one or more suppliers are engaged to
supply goods, services, or works for a period of one to three years at agreed prices among other
contractual terms. A framework contracting approach is ideal in cases where it is difficult to
estimate the exact quantities and the delivery schedule of the needed requirements. In such
arrangements, users draw what they need from the supplier whenever a need arises.

Framework agreements are suitable for goods and services that are required regularly or
consumables, e.g., foodstuff, maintenance and repair materials and any other items of routine
nature. It is worth noting that framework contracting cannot be used for bid solicitation, i.e., it is
not a procurement method that can be applied on its own but is a product of the open tender
method after which the winning supplier is contracted and the framework agreement signed.

The maximum term of the framework contract is three years and for agreements exceeding one
year, a value for money assessment is undertaken annually to determine whether the terms
prescribed in the contract agreement are competitive. All framework contracts should be entered
into in writing and agreement signed by both parties.

In Public Procurement, open tender is used as the primary procedure leading to a framework
contracting. The tender documents must set out the following:
• the intention to form a framework contracting;
• whether the framework is to be established with a single or multiple suppliers;
• the time duration of the framework;
• the total estimates of the value, volume/quantity, or the scope of work expected during
the framework duration; and
• the type of framework arrangement to be established

Alternatively, the buying organization may register qualified suppliers for different but specific
categories of goods, services, and works. From the registered supplier list, a buying entity may
then request quotations for the requirements which are routine and engage suppliers with the best
quotations in the framework arrangement to provide the goods as and when the needs arise.

Types of Framework Agreements

1. Known quantity but not delivery schedule (definite quantity- indefinite delivery schedule).
This is where a supplier or a set of suppliers are contracted to supply a known quantity of
goods to be delivered as and when required during the framework duration.

2. Indefinite quantity -definite delivery schedule. Under this type, the supplier/suppliers are
under a contract to supply a known quantity of goods to be delivered from time to time as
the need arises.

3. Indefinite delivery framework agreement. This is when the need for supplies has been
established but the exact delivery dates and exact quantities of future deliveries are

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 unknown. This type of arrangement permits the procuring entity to keep minimal stock
levels.

k) Community Participation
When using this method of Procurement, the buying organization will:
• Involve the community in the delivery of services.
• Consider economic benefit, value for money, project sustainability, and creation of
employment.

The method involves two approaches:

i. Direct procurement participation: and
ii. Organized community participation.

Conditions for use of Community Participation Method

Where a procuring entity intends to use this method, it will ensure that;

• the project is aligned to the procuring entity’s mandate and strategic plan;
• the project has positive socio-economic outcomes with the community as its main
beneficiary;
• the project requires community involvement in part or in whole for its success and its
continued implementation;
• the project is included in the annual procurement plan for that procuring entity;
• the project proposal prepared is in line with its strategic plan and shall include:
a) setting out the key result areas and the specific roles of the target community; and
b) the objectives, estimated budget, and the target community beneficiaries

Procedure for use of Method

i. Buying entity will organize a meeting of the beneficiary community, whereby:
• the community shall be informed of the activity, the scope of their participation, and
the benefit to the community in return;
• through its representatives, the buying entity shall explain to the community the
document containing obligations of both sides, the appropriate payment, the period
after which participants shall be paid, payment modalities, and any other details related
to goods, works or non-consultancy services execution; and
• the buying entity is to establish a list of community members committed to participating
in the procurement proceedings and those members shall affix their signatures or
fingerprints as evidence of their commitment
ii. require the community to elect or nominate their representative in all communication and
transaction processes and that buying entity shall identify a contact person;
iii. avail technical equipment needed for the execution and shall inform the community of any
equipment they shall bring for the execution of the community project, where applicable;
iv. use its public officers or hire a consultant to technically assist the community for the
supervision of works execution, if needed;
v. with the help of supervisors, assist every participant to sign on daily basis in the register
or on a card prepared for that purpose, as appropriate;

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 vi. before execution of the community project, require every participant to provide his or her
full identification, and if necessary, her or his bank account where the payment may be
deposited;
vii. where a buying entity is unable to organize the community participation, delegate to
another buying entity capable of managing that activity; and
viii. ensure that a project management committee composed of at least five volunteer
members is elected or nominated by the beneficiary community who shall:
• participate in the preparation, management and implementation of the project;
• monitor the implementation of the project; and
• report to the accounting officer of the buying entity.

l) Reverse auction
In a reverse auction, the buyer puts up a request for a required good or service. Sellers then place
bids for the amount they are willing to be paid for the good or service, with the winner being the
bidder who offers the lowest amount. In other words, in the reverse auction method of
procurement, a procuring entity invites all registered suppliers in the specific category to compete
through an advertisement of its requirements on its website including the period of time and goods
specifications, the prices of bidders within the prescribed time are visible to other bidders without
revealing the bidder’s identity, and a pre-qualified supplier is not allowed to revise its bid upwards
within the prescribed time.

Subject to the reserve price set by the procuring entity, the successful bid is usually the bid with
the lowest price at the bid submission deadline.

m) Electronic Reverse Auction

This is a procurement method where listed /registered suppliers in a specific category are invited
to compete in an electronic bidding process. The buying organization posts its requirements on
its website and provides a detailed specification of the need. To ensure that the process is fair to
all participating bidders, the exact bid opening time and closing time must be stated, and secure
software is in place with procurement functionalities and capabilities to electronically evaluate and
rank the submitted bids based on the pre-set evaluation criteria.

Any public organization wishing to use this method will do so after obtaining approval from the
PPRA. The buying organization may only use this method if it has a procurement portal, and
secure software with electronic procurement capabilities and functionalities.

The invitation is advertised on the buying organization’s website including the period of time and
the specifications of the goods. The successful bidder is the one who has bid the lowest price and
is within the reserve price set by buying organization.

This procurement method can be used by organizations in buying as well as in the disposal of
assets. The buying organization intending to use this method must have the following:
i. A website/website portal;
ii. A functioning procurement portal;

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 iii. A secure electronic procurement software;
iv. Qualified staff to operate the electronic procurement portal;
v. Advertisement requirements on the website or a dedicated government website;
vi. Invites all the registered suppliers in the specific category to compete in the electronic
bidding;
vii. Indicate the exact time when the bidding starts and ends;
viii. Once the bidding process is opened, the bid prices of the participating bidders are
visible to all but not their identities;
ix. The bidders are not allowed to adjust their prices upwards when the process is on;
x. The winning bid is the one with the lowest price at the time the submission closes;
xi. The report of the process is automatically generated by the procurement software in
the procurement portal;
xii. The report is forwarded to the head of the Procurement Unit for award processing; and
xiii. The winning bidder is notified of the award decision in writing.

Should the winning bidder reject the award, the next lowest bidder price gets the offer.

n) Specially permitted procurement

A specially permitted procurement procedure is any procurement method identified and explained
by a procuring entity and is not provided for in the Act and the Regulations and has been specially
permitted by PPRA to be used for a particular procurement by that particular procuring entity.
Specially permitted procurement procedure may be considered and allowed by the regulator if
the following apply:
• Where exceptional requirements make it impossible, impracticable or uneconomical to
comply with the Act and the regulations.
• Where the market conditions or behaviour do not allow effective application of the Act and
the Regulations.
• For specialized or particular requirements that are regulated or governed by harmonized
international standards or practices.
• Where strategic partnership sourcing is applied.
• Where credit financing procurement is applied

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6.4. Review Questions
Case Study
A public entity wishes to procure the following for its office use

Item Value (sh.) Quantity

20KV generators 750,000 20

Air conditioners 250,000 12

42’ Coloured TV 75,000 8

Gas cookers 120,000 5

Sound system 320,000 1

Cabinets 154,000 5

Office binders 220,000 10

Paintings 134,000 5

Required
a) With justification propose a procurement method for each item
b) Outline the merits of each of the proposed methods stated in (a) above
c) Suppose the 20KV generators could only be obtained from oversee supplier, highlight the
key stages the procurement function would follow to obtain the item
d) Describe circumstances that would favour framework contracting.

Questions
a) Identify the attributes of open tender procurement procedure that makes it the most
preferred method.
b) Explain circumstances under which direct procurement may be permitted in public
procurement practice.
c) What circumstances justifies frame work contracting?
d) Discuss FIVE procurement methods that a procuring entity can use for the procurement
of goods, services and works.
e) Under what circumstances can a buying entity be allowed to use Community participation.
f) Discuss the demerits of open tender method
g) Explain the steps used in choosing open tendering method as a procurement method.

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6.5. Further Reading
CIPS (2011) Purchasing Context. CIPS London

Kenya Institute of Supplies Examination Board, (Undated). Procurement of Goods Services and
Work. Draft Instructional Module.

Public procurement and disposal general manual, 2009

Republic of Kenya. Public procurement and asset disposal act, 2015

Republic of Kenya. Public procurement and assets disposal regulations 2020

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 CHAPTER 7
Procurement of Consultancy Services

Chapter Structure

7.1. Introduction.
7.2. Terms of reference.
7.3. Expression of interest.
7.4. Selection methods for consultants.
7.5. Review questions.
7.6. Further reading.

Competence

The trainee should have the ability to select consultants using the appropriate selection
method.

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7.1. Introduction
Procurement of consultancy services refers to the procurement of services (or a combination of
goods and services) when the services to be procured are advisory or intellectual in nature.

A procuring entity can procure consultancy services only when:

a) It does not have the capacity to provide these services
b) The time is not available due to workload

7.2. Terms of Reference (ToR)

The terms of reference refer to the source document that outlines the objectives and scope of a
consultancy assignment, the responsibilities of the selected consultant and provides a detailed
description of the expected output from the consultancy assignment. The ToR is drafted prior to
issuing the Request for Proposals (RFP).

The Purpose of Terms of Reference is;

a) Define the objective of the expected consultancy assignment
b) Outline the expected output from the consultancy assignment
c) Provide an outline for carrying out the evaluation of the received proposals
d) Provide the foundation for preparing the resulting contract
e) Basis against which the final output of the consultant is received
f) Provide the process for measuring the performance of the consultant/consulting firm

Contents of a Terms of Reference

a) Background of the assignment: The background of the consultancy assignment gives
potential consultants an opportunity to identify the broader vision for the proposed
consultancy. The background gives an introduction of the client organization and how the
consultancy assignment will fit within the business functions of the client organization.
b) Scope, approach and methodology: The ToR defines the scope of the evaluation, the
planned duration for the assignment, flexibility that can be afforded to the consulting firm,
proposed methodology for undertaking the assignment and the expectations of the client
organization from the consultancy assignment
c) Qualifications, experience and expertise of the consultant(s): The ToR provides details
on the qualifications and experience of the required consultant or team of consultants. This
section seeks to ensure that only the consultants with the right qualifications will be selected.
d) Deliverables and expected output: The expected outputs from the assignment will be
defined in this section with a requirement for the consultant to provide their work plan which
shall make reference to timelines for meeting the deliverables.
e) Proposed budget: Although not a mandatory requirement, it is necessary for the ToR to
provide a guide on the planned budget for the assignment. This can either be in monetary
form or expected time that the consultants will put into the assignment.
f) Governance and accountability arrangements: The ToR provides details on the roles and
responsibilities of the consultant and the client organization as well as any other party that
might be involved in carrying out the assignment. The reporting arrangements for the

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 consultant are also outlined in the ToR and the ethical guidelines that will need to be adhered
to by both parties.
g) Payment schedule: The ToR also provides for a payment schedule that will be included in
the final contract. Examples of payment schedules include percentages based on
achievement of certain milestones in the consultancy assignment.
h) Any other pertinent information: In this section, the client organization can provide any
other information that it may deem necessary to enable the potential consultants prepare their
proposals.

7.3. Expression of Interest (EOI)

An Expression of Interest (EOI) is a pre-qualification process in procurement of consultancy
services where a buyer requests the supplier/contractors to express interest in providing goods
and services for the organization. Usually, the procuring entity prepares a notice inviting interested
suppliers/contractors to submit expressions of interest. The notice inviting expression of interest
sets out the following:
a) Name and address of procuring entity
b) A brief description of the services being procured
c) Qualification requirements
d) Where and when expressions of interest must be submitted

7.4. Selection Methods for Consultants

Methods of selection for consultant are outlined below:
a) Quality and Cost Based Selection - QCBS
b) Quality Based Selection- QBS
c) Least Cost Selection- LCS
d) Fixed Budget Selection - FBS
e) Single Source Selection - SSS
f) Consultants Qualifications Selection – CQS
g) Individual consultant’ selection-ICS
h) Competitive negotiation
a) Quality and Cost-Based Selection - QCBS
In this method, a consultant firm/contractor (based on the importance of the consultancy service
sought) is selected based on the weight assigned to technical and financial criteria of the proposal.
The bidder with the highest combined score is awarded the contract.

Features of Quality and Cost-Based Selection - QCBS

• Expression of interest may be invited
• RFP document must be prepared
• Evaluation criteria must be clearly evaluated and established
• Numerical scores may be applied to the evaluation criteria.
• The contract is to be awarded to the lowest evaluated tender.

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 • Where numerical scores are used the contract is to be awarded to the bidder
with the highest combined score.
• Professionalism must be used for this procurement method.

Steps for hiring under QCBS method

• Preparation of the Terms of Reference (TOR);
• Preparation of cost estimate and the budget;
• Advertising;
• Preparation of the shortlist of consultants;
• Preparation and issue of the Request for Proposal (RFP);
• Receipt of proposals;
• Evaluation of technical proposals: consideration of quality;
• Evaluation of financial proposal;
• Final evaluation of quality and cost incorporating the weightage assigned to quality of the
proposal and the cost as quoted
• Negotiations and award of the contract to the selected firm.
• Publication of award in website and debriefing of unsuccessful consultants

b) Quality Based Selection- QBS

This method is appropriate for complex or highly specialized assignments or those, which invite
innovations, high downstream impact etc. The selection is based on the quality of the proposal
(Quality-Based Selection -QBS). In this method a consultant with a proposal having the highest
combined technical and financial score after evaluation is invited for negotiation prior to the award
of the contract. The characteristics of this method includes:
• Expressions of interest are invited if necessary
• Shortlisted consultants or known consultants are invited to submit technical and financial
proposals
• The RFP document is to be used
• The consultant found to have the best technical proposal is selected and price is
negotiated.
• Where it is possible to select the best from EOI, the selected consultant is requested to
submit a technical and financial proposal after which the contract is negotiated.

c) Least Cost Selection- LCS

A consultant firm/contractor is considered based on the price quoted in the proposals. The
contract with the lowest evaluated tender is to be awarded the contract. The features of this
method include:
• RFP document must be used
• The evaluation criteria must be clear and particularly the minimum technical qualification
• Those not meeting the minimum technical specifications are disqualified.
• Financial evaluation criteria must be clear and will be applied
• The contract is awarded to the bidder who is determined to be the lowest evaluated
• If the bidders are not known, EOI should be invited.

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d) Fixed Budget Selection - FBS
This method is appropriate only when the assignment is simple and can be precisely defined.
RFP should indicate the available budget and request the consultants to provide their best
technical and financial proposals. The consultant who submitted the highest-ranked technical
proposal shall be invited for negotiation. The best proposals within the fixed budget are selected.

The features of fixed budget selection method include:

• It is used for small contracts where the consultants are known
• The estimated cost of the consultancy is fixed by the procuring entity and is based on the
knowledge of the market.
• The consultants submit technical bids as required by the RFP document and also submit
the financial proposals.
• Those not passing the technical evaluation are disqualified
• Those bidding above the fixed cost by the procuring entity are also disqualified
• The fixed cost is kept confidential by the procuring entity depending on the circumstances
and the type of contract
• The contract is awarded to the lowest evaluated bidder

e) Single Source Selection - SSS

This method should be discouraged, it is appropriate only if it presents a clear advantage over
competition: It should only be used:
• For tasks that represent a natural continuation of previous work carried out by the firm;
• Where a rapid selection is essential (emergency operation)
• For very small assignments; or
• When only one firm is qualified or has experience of exceptional worth for the assignment

Characteristics of Single Source Selection method include:

• It applies to special cases where the procuring entity decides on the best services to be
obtained from a single known source in the best interest of the procuring entity.
• The approval of the procuring entity’s tender committee must be obtained prior to
commencement of the procurement process.
• The contract is negotiated between the procuring entity and the consultant and must be
approved by the tender committee.
• A fee paid to the consultant as approved by the tender committee must be favourable
comparable to the consultants’ market rate which should be known to the procuring entity.

f) Consultants Qualifications Selection – CQS

This method is used for very small assignments for which the need for preparing and evaluating
competitive proposals is not justified. In such cases, the procuring entity should prepare the TOR,
request for EOI and consultant’s experience and competence relevant to the assignment,
establish a short list, and select the firm with the most appropriate qualifications and references.
The selected firm should be asked to submit a combined technical- financial proposal and then
be invited for negotiating the contract.

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g) Individual Consultant Selection-ICS
Individual Consultants are selected on the basis of their qualifications and experience for the
assignment. They may be selected on the basis of references, or through a comparison of
capabilities among those expressing interest in the assignment or approached directly by the
Client. Individuals employed in this way should meet all relevant qualification requirements and
should be fully capable of carrying out the assignment. Ideally, individual Consultant assignments
should be advertised in freely accessible (preferably web-based) media. Limiting competition to
only those firms that the Client has experience with, can limit innovation and new approaches,
thereby limiting project success.

Capability is evaluated based on: academic qualifications, skills, experience and, as appropriate,
knowledge of the local conditions such as language, culture, building codes and practices,
administrative systems, etc. The Consultancy fee is established through negotiations between
the Client and the Consultant, similar to the Quality Based Selection method

h) Competitive negotiation
Competitive negotiation is the process in which bidders are given an opportunity to review their
prices, having passed the technical requirement. It is conducted where:
a) there is a tie in the lowest evaluated price by two or more tenderers;
b) there is a tie in highest combined score points;
c) the lowest evaluated price is in excess of available budget; or
d) there is an urgent need that can be met by several known suppliers.

In the procedure for competitive negotiations, an accounting officer of a procuring entity should
identify the tenderers affected by tie; identify the tenderers that quoted prices above available
budget; or identify the known suppliers. In the case of tenderers that quoted above the available
budget, an accounting officer of a procuring entity should reveal its available budget to tenderers;
and limit its invitation to tenderers whose evaluated prices are not more than twenty five percent
above the available budget. An accounting officer of a procuring entity should request the
identified tenderers to revise their tenders by submitting their best and final offer within a period
not exceeding seven days. The revised prices should not compromise the quality specifications
of the original tender. Tenders should be evaluated by the evaluation committee appointed in the
initial process. The successful best and the final offer should be the best rated tender using
evaluation criteria set forth in the tender documents.

7.5. Review Questions

UMEME ENGINEERING COMPANY (EEC)
Umeme Engineering Company (UEC) is a plant whose objective is to generate carbon-free
power from renewable energy sources and distribute it to customers within the Central Africa
region. EEC electricity distribution has been growing very fast owing to its excellent customer
relationship. This has led to an increased sales turnover of Sh.5.5 billion while the procurement
spending has doubled up to an estimated Sh.2.85 billion. For excellent service provision, UEC

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Board has requested the supply chain processes to be reviewed and re-engineered to deliver
increased value on the fronts of economy, effectiveness and efficiency.

The Chief Executive officer has thus called for a meeting with the senior managers to deliberate
on ways to identify gaps that will inform the expression of interest and the request for proposal
to engage a qualified consultant to drive the project. The consultants were selected using quality
and cost-based selection (QCBS). Arising from the meeting, the Board members have tasked
the senior management to craft ideal measures for the deliverables, the desired qualification of
the consultant and other emerging values and add areas that will guide the contract to govern
the engagement.

Required
a) Prepares a notice inviting interested suppliers/contractors to submit expressions of
interest
b) Identify content to be included in terms of reference for the engagement
c) Describe features of Quality and Cost-Based Selection (QCBS) as a supplier selection
method
d) Outline the benefits of quality and cost-based selection over competitive negotiation as a
method of selecting a supplier

7.6. Further Reading

Ochieng J. & Muehle M. (2014). Development and Reform of the Kenyan Public Procurement
System.

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

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 CHAPTER 8
Public Procurement Contracts

Chapter Structure

8.1. Introduction.
8.2. Preparation of contract.
8.3. Creation of procurement contract/ procurement contract management plan.
8.4. Publication of procurement contracts.
8.5. Amendments or variations to contracts.
8.6. Framework contracting.
8.7. Performance security.
8.8. Advance payment.
8.9. Contract administration.
8.10. Review questions.
8.11. Further reading.

Competence

The trainee should have the ability to develop, implement, negotiate contracts and
effectively manage performance, resolve disputes and respond to requests for variations.

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 8.1. Introduction
A procurement contract is a written agreement between a procurement entity and a consultant or
supplier/contractor which is enforceable by law. In a procuring contract, the contractor has the
responsibility of performing the contract according to the terms and conditions of the contract. The
procuring entity has the responsibility of meeting its obligation of paying the contractor according
to terms and conditions of the contract.

The essential elements of a procurement contracts are:

a) There must be an offer and an acceptance, to constitute an agreement.
b) There must be lawful consideration.
c) There must be an intention to create legal relations.
d) The parties must have capacity to contract.
e) The parties must contract of their own free will, (consent).
f) The purpose for which the contract is entered into must be lawful

8.2. Preparation of Contract

Document required in the preparation of procurement contracts are:

a) The Procurement File

The procurement file is important in the management of a procurement contract. The file is opened
for the purpose of processing the procurement before the contract is awarded.

It contains the following.

• Extract of the budget
• Extract of the procurement plan
• Procurement initiation requisition.
• All correspondence on the procurement.
• Bid document.
• Bids received.
• Bid opening report
• Evaluation report
• Professional opinion and award of the contract.
• Information on the award of the contract and particulars of the contract.

Detailed explanations of what the procurement file contains:

i. Requisition: In the public sector, it is a requirement in the law, that subject to all approved
procurement plan, all procurements must start with a requisition. A requisition is a request
from the user that orders the goods or services or works required. It becomes an order only
when accompanied with the confirmation on the source of funds or account to be charged.
The procurement unit must be satisfied that the intended amount to be paid, given the
estimated value does not exceed the funds authorized in the requisition.
ii. The specifications: The user unit must provide specifications for the goods, services and/ or
works required. Without specifications, nobody can guarantee the quality. Provision of
specifications is important because a supplier who fails to supply as per the specifications has

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 not fulfilled part of her obligations. Unless there are conditions to the contrary, supplies not
meeting the specifications should be rejected and returned to the supplier at the supplier’s
expense.
iii. Procurement implementation plan: This plan includes the procurement method to be
applied in that specific procurement. From the method, the procurement unit identifies all the
steps in the procurement process and the respective timelines. Without this, the exact time
will be compromised
iv. Bid document: Copy of the bid document that was sent to suppliers.
v. Advert: Copy of the advert whether sent normally or electronically by advertising. This is an
invitation to treat.
vi. Bid opening results: Bid opening report and minutes if any. Bids received are offers from
potential suppliers.
vii. Evaluation report: This is a very crucial copy which will be used to compare the assessed
bidders’ capabilities and the actual performance of the winning bidder.
viii. Professional opinion: This is an advice given by the head of a procurement function to the
accounting officer of a procuring entity in respect of a procurement matter. In the public sector,
this is compulsory under the law since it forms the basis of award.
ix. Award decision: This is the decision made by the accounting officer after the professional
opinion is presented. In instances where the award recommendation is rejected, the reason
for rejection must be documented. This is the stage where the procuring entity accepts the
offer given by the bidder.
x. Notification letters: All bidders whether successful or not must be notified of their results.
This is the stage of communicating the offer.
xi. Letter of acceptance: This comes from the supplier who was awarded the contract.
xii. Signed contract: A contract is signed if there is no appeal. Where there is an appeal, the
details of the same is part of the procurement process and remains with the procurement file.
Once the appeal process is over, then the decision of the quasi – judicial or judicial process
is implemented. Eventually, a contract shall be signed.

b) Contract File
No contract is formed between the vendor and the buying organization unless they enter into a
written contract. The contract file for either goods, works or services is opened after the contract
is signed and is usually opened by the contract administrator. The file is used for keeping a record
of the actual performance of the contract. It usually contains the following information/documents:

i. Appointment letter of contract implementation team;

ii. The original contract outlining the duties of various parties, the terms and conditions,
the applicable penalties when obligations are not fulfilled or adequately done, the
breaches, the timelines, and the expected quality standards and so on;
iii. Any modifications to the contract (amendments and variations);
iv. A copy of any performance security required;
v. Project implementation schedule showing the timelines with specific actions, likewise,
in the contract management;

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 vi. Minutes of review/site meetings. The meetings are usually held at the contract site.
Site meetings may address any issue concerning the project, but concentration is on
the remaining three rights, namely Quality, Quantity and time;
vii. Payments details. Payments so far made, and those withheld and reason thereof,
retained payments, taxes deducted etc.;
viii. Any correspondence between parties pertaining the contract;
ix. Completion Certificate(s);
x. Disputes, if any and how they were resolved are recorded here both in process and
conclusion; and
xi. Contract closure and project handling over reports.

8.3. Creation of a Procurement Contract/ Procurement

Contract Management Plan
The procurement/contract manager should prepare a management plan which gives a
background of the contract and capture key focus areas of the contract. It should contain the
following.
a) Background information.
b) Contract management team.
c) Contractor details.
d) Scope of contract management.
e) Key provisions of the contract.
f) Duties and responsibilities.
g) Communication channels.
h) Review and reporting requirements.
i) Activities and timescales.
j) Any other information which will assist the contract management team in its task.

8.4. Publication of Procurement Contracts

The accounting officer of a procuring entity should publish and publicize all contract awards on
their notice boards at conspicuous places, the procuring entity website and in the Public
Procurement Information Portal (PPIP).

8.5. Amendments or Variation to Contracts

Any variation of a contract can only be effective if and only if:

a) The price variation is based on the prevailing consumer price index obtained from Kenya
Bureau of Statistics.
b) The quantity variation for goods and services does not exceed fifteen percent of the
original contract quantity.
c) The price or quantity variation is to be executed within the period of the contract.

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 d) The cumulative value of all contract variations for goods do not result in an increment of
the total contract price by more than twenty-five per cent of the original contract price.
e) The cumulative value of all contract variations for professional services do not result in an
increment of the total contract price by more than twenty- five per cent of the original
contract price.

8.6. Framework Contracting

It is a contractual arrangement which allows a procuring entity to procure goods, works or services
that are needed continuously or repeatedly at an agreed price over an agreed period of time,
through placement or a number of orders which may include consortium buying.

There are three main types of framework contracts, namely:

a) Definite-Quantity Framework Contracts.
b) Indefinite-Quantity Framework Contracts.
c) Requirements Framework Contracts.

a) Definite-Quantity Framework Contract provides for delivery of a definite quantity of specific

goods or services for a fixed period, with deliveries or performance to be scheduled at designated
locations upon order.

This may be used when:

i. A definite quantity of goods or services will be required during the contract period; and
ii. The goods or services are regularly available or will be available after a short lead time.

b) Indefinite–Quantity Framework Contract provides an indefinite quantity, within stated

limits, of goods or services during a fixed period, and may be either a delivery order framework
contract or a service order framework.

This is used when:

i. the buying organization cannot predetermine, above a specified minimum, the precise
quantities of goods or services that will be required during the contract period, and it is
inadvisable for the procuring entity to commit itself for more than a minimum quantity; and
ii. the buying organization should use an indefinite-quantity framework contract only when a
recurring need is anticipated.

c) Requirements Framework Contract provides for fulfilling all actual purchase requirements
of one or more public bodies for goods or services during a specified contract period, with
deliveries or performance to be scheduled by placing orders with the contractor. This is
appropriate for acquiring any goods or services when a procuring entity anticipates recurring
requirements but cannot predetermine the precise quantities of goods or services that the
procuring entity’s activities will need during a definite period.

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Conditions for Use
The appropriate type of framework contract may be used to:
i. Acquiring goods and/or services when the exact times and/or exact quantities of future
deliveries are not known at the time of contract award;
ii. Permit stocks to be maintained at minimum levels; and
iii. Acquires goods and services on a “when-required” basis
8.7. Performance Security
It refers to a monetary or financial guarantee to be furnished by the successful tenderer for the
due performance of the contract placed on it. Performance security is also known as security
deposit. Performance security can also be defined as the irrevocable and unconditional bank
guarantee provided by the consultant as a guarantee for the performance of its obligations in
respect of the contract.

A successful tenderer should submit a performance security equivalent to not more than ten
percent of the contract amount before signing of the contract.

The procedures to be followed for withdrawal, substitution or modification must be stated clearly
in the bidding document.

In exceptional circumstances, the procuring entity may solicit the tenderer’s consent to an
extension of the period of tender validity. The request and responses should be made in writing.
The tender security should also be suitably extended. A tenderer can refuse the request without
forfeiting its tender security. A tenderer granting the request will not be required nor permitted to
modify its tender.

Nature of Performance Security

The performance security may not generate interest and it should be determined in accordance
with the form provided for in the tendering document and may be paid in form of a bank guarantee,
issued by an authorized financial institution or an irrevocable letter of credit.

Seizure of the Performance Security

The performance security should unconditionally be fully seized by the procuring entity as
compensation without prejudice to other penalties. The bank or authorized financial institution will
be obliged to give to the procuring entity all the amount of the performance security upon claim
by the latter. The bank or authorized financial institution will also be obliged to pay an additional
interest of one percent (1%) for every day of payment delay after ten (10) working days from the
receipt of the claim provided this requirement is disclosed in the performance security and if it is
necessary to take the matter to courts, and that the court rules in favour of the procuring entity,
this interest will continue to accrue up to the time the court’s decision is executed. If the contractor
is foreign, the guarantee will be issued by a local bank or authorized financial institution issued
by a corresponding bank in Kenya recognized by the Central Bank of Kenya.

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Recovery of the Performance Security
The performance security will be returned to the successful tenderer within thirty (30) days
following the final acceptance by the accounting officer of the procuring entity. The thirty (30) days
include the retention period except in cases of procurement for works where the period will
commence from the date of practical completion or handover, whichever is earlier.

The procuring entity has to release bid securities promptly to unsuccessful bidders before the
expiry of the term of the security on the formation of a contract with the successful bidder and
submission of any required performance security. The bid security of the successful bidder is
usually not released, until the contract or any required performance security has been received
(where such performance security is required). The conditions for forfeiture of bid security are
usually specified in the bidding documents. The bidders may withdraw, substitute or modify their
bids at any time prior to the deadline for submission of bids, without forfeiting the bid security. The
Bid Security of the successful bidder is usually returned, without any interest whatsoever, after
the receipt of performance security as outlined in the contract.

8.8. Advanced Payment

Goods, services, or contracts should not be paid for before they are executed or delivered and
accepted by the accounting officer of a procuring entity.

Under exceptional circumstances, advance payment may be granted and should not exceed
twenty percent (20%) of the price of the tender and should be paid upon submission by the
successful tenderer to the procuring entity of an advance payment security equivalent to the
advance itself. The security should be given by a reputable bank or any authorized financial
institution issued by a corresponding bank in Kenya recognized by the Central Bank of Kenya, in
case the successful tenderer is a foreigner.

Use of Advance Payment

The successful tenderer should use the advance paid only in activities related to the tender. If the
successful tenderer uses the entire advance or part of it in other activities that are unrelated to
the tender, the advance will immediately be considered as a debt which should be paid by seizing
the entire security or part of it.

Payments to Suppliers
It is very important for the contractor to perform the contract satisfactorily. Similarly, it is important
for the procuring entity to make payments to the contractor timely and according to the contract
requirements. Payments should not be made unless the invoice or the fee note is accurate and
also submitted in accordance with the provisions of the contract.

Failure to pay the contractors in a timely manner by procuring entities gives public procurement
a bad name. This is one of the reasons why bidders in public procurement quote high prices to
cover for the payment delays which they will always anticipate.

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Unless the contract states otherwise, the procuring entity should pay interest on the overdue
amounts; and the interest to be paid shall be in accordance with the prevailing commercial bank
rates. The procuring entities are therefore required to plan their procurement and cash/fund flows
to ensure that contractors are paid in a timely manner.

Sub-Contracting
The prime contractor should be responsible for administering any subcontracts and the procuring
entity will monitor only the prime contractor’s management of its subcontracts. If the tender
documents do not prohibit subcontracting, the successful tenderer may subcontract part of the
tender but only if the person to be subcontracted has not been debarred from procurement
proceedings or has participated in the procurement of goods, works or services related to that
contract.

The successful tenderer is responsible to the procuring entity for the obligations of the sub-
contractor.

The procuring entity will not directly administer any subcontracts, except where:
a) There is a risk of the procuring entity incurring undue cost or delay
b) Successful completion of the prime contract is threatened
c) Special surveillance of high risk or critical subsystems is required.

8.9. Contract Administration

Contract administration refers management of terms of procurement or asset disposal contracts
made with contractors or suppliers after tender award by a procuring entity, for the purpose of
assuring compliance with obligations such as timely delivery, quality and quantity inspection,
acceptance, payment, claims, dispute resolution and completion, among other terms. It involves
the preparation of procurement documentation, the processing and approval of such
documentation, monitoring contract implementation, approving and administering contract
variations and modifications, and possibly canceling or terminating contracts.

It is sometimes defined as the process of systematically and effectively managing contract

creation, execution and analysis for maximizing operational and financial performance and
minimizing risks.

Weak contract administration is an invitation to corrupt practices. If a procuring entity fails to

ensure that the vendor or contractor delivers to the specification or quantities of the contract it can
lead to substantial losses. If a procuring entity approves contract variations that lead to significant
deviations from original agreed costs, it will undermine the effective competition since for example
an increased volume of delivery addressed at the time of tender could have led to significantly
lower per unit prices from the competing bidders.

An accounting officer or his or her appointed representative shall be responsible for ensuring that
the goods, works and services are of the right quality and quantity. The Contract administrator is
responsible for:

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 a) Monitoring the performance of the contractor, to ensure 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 bidding
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 adequate cost, quality and time control, where required;
e) Preparing any required contract variations or change orders and obtaining all required
approvals before their issue. Such variations or change orders must be clearly justified in
writing backed by supporting evidence;
f) Managing any handover or acceptance procedures;
g) Making recommendations for contract termination, where appropriate, obtaining all
required approvals and managing the termination process;
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; and
j) Ensuring that the contractor and the procuring entity act in accordance with the provisions
of the contract.
k) Discharge of performance guarantee where required.

Contract Implementation Team

For complex and specialized procurement contract, the accounting officer of a procuring entity
will appoint a contract implementation team which will include members from the procurement
function, and the requisitioner, the relevant technical department and a consultant where
applicable.

The roles of the contract implementation team:

a) Monitoring the performance of the contractor to ensure that all delivery or performance
obligations are met or appropriate action is taken by the procuring entity in the event of
obligations not being met.
b) Ensure that the contractor submits all required documentation as specified in the tendering
documents (the contract) as required by law.
c) Ensure that the procuring entity meets all its payment and other obligations on time and
in accordance with the contract.
d) Ensure that there is right quality and within the time frame, where required.
e) Review any contract variation requests and make recommendations to the respective
tender awarding authority for considerations and such reviews for variation will 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) Manage handover or acceptance procedures.
g) Make recommendations for contract termination, where appropriate.

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 h) Ensure 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) Ensure that all contract administration records are complete, up to date, filed and archived
as required.
j) Ensure that the contractor acts in accordance with the provisions of the contract.
k) Ensure discharge of performance guarantee where required.

An accounting officer of a procuring entity may co-opt a member of the contract implementation
team from another procuring entity or outsource.

Risk Management and Maintenance of Risks Register

Adequate steps for risk mitigation must be taken in all public procurement contracts. Where the
tender document so requires, an unconditional performance security must be provided by the
successful tenderer issued by a reputable bank or approved insurance company based in Kenya
or by cash. If a tender is international, the security must be partly payable in Kenya Shillings and
be issued by local institutions. The value of the two securities should be in the same proportions
of foreign and local currencies as requested in the form of foreign currency requirements.

Failure of the successful tenderer to lodge the required performance security will constitute a
breach of contract and sufficient grounds for the annulment of the award and forfeiture of the
tender security and any other remedy under the contract.

The greatest risks which must be mitigated in the management of procurement contracts are:
a) The supplier delivering late or not delivering at all.
b) The quality of the required goods, works or services being of inferior quality
c) Being charged a higher cost than what the contract provided for.
d) The risk of paying for work not done

A risks register should be maintained in which identified risks should be recorded and monitored.
The common contract risks that should be watched are:
a) Incomplete or incorrect specifications.
b) Supplier lacking sufficient resources.
c) Production problems.
d) Quality problems including technology.
e) Shipment details.
f) Underestimation of costs by supplier.
g) Inflation trends.
h) Unexpected events.

Measurement and Control of Performance

The requirements of the contract must be closely watched to ensure that there are no deviations
or risks and those identified are dealt with in time.

Some of the key performance indicators will be

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 a) Cost overruns.
b) Effectiveness of communication.
c) Inputs, process and outcomes.
d) Timeliness.

Contract Monitoring
The head of the procurement function will prepare monthly progress reports of all procurement
contracts of the procuring entity and submit them to the accounting officer.

Termination of Contract
Upon the request of the procurement management unit, the accounting officer of a procuring entity
may approve the request for termination of contract. A contract document will specify the grounds
on which the contract may be terminated and specify the procedures applicable on termination.

Contract Close Out

An accounting officer of a procuring entity will close out a procurement contract immediately after
completion and the close out will involve the following:
a) The head of procurement function issuing a certificate to the contractor confirming delivery
and acceptance of goods, works and services, where the contract is not complex and
specialized.
b) For complex and specialized procurement, the technical department will issue a certificate
to the accounting officer of the procuring entity confirming the quality and quantity of such
goods, works and services;
c) The receipt of goods, works and services as prescribed.

In large procurement contracts it is good practice after the contract is completed to conduct a
contract close-out review. This should be done by the contract management team. The review
should consider the following:
a) The timeliness of contract performance.
b) Cost and quality performance.
c) Risks analysis.
d) Organizational and operational effectiveness.
e) Appropriateness of the procedures.
f) Suppliers’ performance.

Contract Review Reports

After the review a report should be prepared and distributed as necessary. The report will provide
good lessons for management of future contracts. Where there is need for action resulting from
the report, the management of the procuring entity will decide. Where the team has performed
well it should be commended and where it has not done very well it shall note for future
improvement.

In large procurement contracts the contract management plan should provide for review meetings.
Review meetings are held periodically as found necessary for the purpose of face-to-face

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communications of contract performance and discussing the way forward and preparing status
reports.

After a review meeting a status report should be prepared to be shared by the parties which
should include:
a) Executive summary.
b) Report on performance of activities and budget.
c) Other issues relevant to the contract such as environmental
d) General observation including the performance rating.

It is important for the contract manager to report to the procuring entity’s administration the
outcome of such contract review meetings.

8.10. Revision Questions

a) Identify contents that should be included in a contract management plan
b) Explain the role of the contract administrator in project procurement
c) Illustrate documents found in the contract file
d) Describe the essential elements of procurement contracts

8.11. Further Reading

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 9
Preference and Reservation Schemes in
Procurement

Chapter Structure

9.1. Introduction to preference and reservation.

9.2. Preference and reservation in procurement.
9.3. Implementation of preferences and reservations.
9.4. Eligibility criteria.
9.5. Registration procedure.
9.6. Qualification of contractors.
9.7. Unbundling of procurements.
9.8. Challenges in the implementation of preference and reservation schemes in public
procurement.
9.9. Review questions.
9.10. Further reading.

Competence

The trainee should have the ability to identify, assess and manage preference and
reservation schemes throughout a procurement process.

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9.1. Introduction to Preference and Reservation
Preference can be defined as the right or opportunity to select a tenderer from an identified target
group that is considered more desirable than another. Reservation on the other hand involves
exclusive preference to procure goods, works or services set aside to a defined target group of
tenderers within a specified threshold or region. The government, being the largest buyer, can
achieve targeted socio-economic goals by creating opportunities for the participation of
disadvantaged and marginalised groups and local industries in public procurement. Considering
socio-economic development factors, the government should implement affirmative programmes
and preference schemes to facilitate the participation of disadvantaged groups and local
contractors and promote locally manufactured products through public procurement and asset
disposal.

9.2. Preference and Reservation in Procurement

The purpose of preference and reservation schemes is to promote local, national and regional
industry and support socio- economic development. The Government of Kenya has identified:
a) The target group and eligibility requirements for benefiting from the preference and
reservations schemes;
b) The percentage margin of the preference;
c) The goods, works and services set aside or reserved for specified target groups;
d) The regions within which to apply the schemes; and
e) The means of measuring its effectiveness in achieving the intended objectives.

9.3. Implementation of Preferences and Reservations

In the public sector, procuring entities are required to reserve a minimum of 30% of procurement
budgetary allocations to enterprises owned by women, youth, persons with disabilities and other
disadvantaged groups. The firms of the disadvantaged groups are to provide the Access to
Government Procurement Opportunities (AGPO) certificate to evidence registration in a specific
category. The firms have to meet the eligibility criteria, evaluation criteria and qualification criteria
to be awarded the contract.

9.4. Eligibility Criteria

To benefit from preference and reservation scheme, one must meet the following qualification
criteria:
a) legal capacity to enter into a contract for procurement or asset disposal;
b) not insolvent, in receivership, bankrupt or in the process of being wound up;
c) if one is a member of a regulated profession, has satisfied all the professional
requirements;
d) the person and his or her sub-contractor, if any, is not debarred from participating in
procurement proceedings;
e) fulfilled tax obligations;
f) has not been convicted of corrupt or fraudulent practices; and
g) Is not guilty of any serious violation of fair employment laws and practices.

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Target group for preference and reservation scheme are:
a) Micro, small and medium enterprises
b) People living with disabilities / People living with disabilities owned enterprises
c) Youth / Youth owned enterprises
d) Women / women owned enterprises
e) Local contractors/suppliers/ Firms where the locals are the shareholders

A person is not be qualified to benefit from a preference and reservation scheme:

a) As a contracting firm, unless that person is qualified as a local contractor or a citizen
contractor; and
b) As a micro enterprise or an enterprise owned by the disadvantaged group, unless that
person is registered by National Treasury.
c) All firms registered by the National Treasury are automatically included in list of
registered suppliers of a procuring entity upon submission of the National Treasury
Registration Certificate.

9.5. Registration Procedure

Firms wishing to participate in public procurement are to apply for registration with National
Treasury using a prescribed registration form.

The registration form has two Parts:

a) Details of the applicant (contact information and overview of the enterprise); and the list
of attachments (certificate of incorporation, PIN and VAT certificates, bank statement,
company profile, national ID/Passport, etc).
b) All lists of registered firms from national and county levels should be submitted to the
Public Procurement Regulatory Authority for consolidation and updating in the state portal.

9.6. Qualification of Contractors

A firm is qualified as a:
a) Local contractor - if the firm is registered in Kenya and has above 51% Kenyan
shareholding; or
b) Citizen contractor – if wholly owned and controlled by persons who are Kenyan citizens.
c) A citizen contractor registered outside Kenya - will only benefit from Preference and
Reservation Schemes when bidding in international tendering competition.
d) A Foreign Contractor – will benefit from Preference and Reservation Scheme by entering
into a joint venture or through subcontracting by a firm registered in Kenya where Kenyan
citizens have majority shares.

A ten percent (10%) margin of preference in the evaluated price of the tender is applied where
Joint Venture or subcontracting arrangements have been entered into.

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9.7. Unbundling of Procurements
A procuring entity may for the purpose of ensuring maximum participation of citizen contractors,
disadvantaged groups, small, micro and medium enterprises in public procurement, unbundle a
category of goods, works and services in practicable quantities. A larger contract is unbundled
when it is divided into smaller lots of goods, works or services in quantities that are affordable to
specific target groups participating in public procurement proceedings. The same overall scope
and work are completed, just with separate components.

Benefits of Unbundling of Procurements

a) Increased competition, distribution of risk across multiple sources, and promotion of
inclusive spending practices with small and diverse businesses makes unbundling
contracts an essential contracting and procurement strategy.
b) Unbundling contracts balances the savings from economies of scale versus the diversity
that multiple contracts can provide. This practice can enhance competition, promote
innovation, and support more segments of the economy.
c) Unbundled contracts also allow buyers to distribute risk amongst multiple contractors,
avoiding having “all their eggs in one basket.” If one vendor fails to perform, the buyer has
more options to replace the contractor while keeping business continuity.
d) Barriers to smaller businesses, like challenges with bonding, insurance, and access to
capital, can be avoided if a specific service is segmented from a contract through
unbundling. This allows businesses facing these challenges and those focusing on a
particular service to bid on the contract.
e) Breaking up larger contracts into smaller portions promotes opportunities for small and
diverse businesses and increases the participation of small and diverse businesses in
government contracting and procurement.
f) Large, consolidated contracts are difficult for smaller suppliers, consultants, and
contractors to bid on.
g) Contracts with large scopes make it difficult for businesses that specialize in specific skills
to bid, and larger contracts generally cover multiple disciplines. Small businesses are often
able to do one or two things extremely well, but generally cannot cover multiple skill areas
because of their size.

Factors to Determine if Unbundling Should Occur:

a) The contract for work is in more than one location- If the contract involves multiple
locations, it may call for unbundling. This allows for a natural segmenting of a contract by
geography. Small and diverse businesses located near each location are also more likely
to possess local expertise than a single, larger company overseeing multiple locations.
b) Size and complexity of the procurement- Large and complex contracts are more likely to
have components that may be unbundled rather than small and simple contracts.
Unbundling a complex contract has the added benefit of simplifying the required work.
c) Range of the goods and services involved- A contract with a wide range of goods and
services needed can be ideal for unbundling. Different goods and services may be
acquired from businesses specializing in the required areas. The specific expertise
possessed by those businesses can lead to better quality of service.

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 d) Timing and delivery of the work- time considerations and scheduling are important factors
in determining the viability of unbundling. A contract with tight deadlines should probably
remain consolidated. Contracts that have more flexibility, longer timeframes, or are less
complex are less likely to experience a work disruption if unbundled.

N/B unbundling of procurement should NEVER be used to avoid competition

National Reservations
National reservations are offered to citizen contractors offering goods, works and services that
are assembled, manufactured, mined, extracted or grown in Kenya which include:
a) motor vehicles, motorcycles, bicycles, plant and equipment which are assembled in
Kenya;
b) furniture, textile, foodstuffs, oil and gas, ICT, steel, cement, sanitary products, and any
other goods made in Kenya;
c) Goods manufactured, mined, extracted or grown in Kenya; or
d) Hospitality, air travel and security guarding services.

Inability to procure these items should be reported to the National Treasury by the procuring entity.

Important Requirements
a) Tender Security Requirement: Tender security is not required for disadvantaged groups’
enterprises for reserved procurement proceedings. Target groups are required to sign the
Tender Securing Declaration Form provided for under the 4th schedule of the Public
Procurement and Asset Disposal Regulations 2020. Bidders not adhering to the terms of
Tender Securing Declaration Form should be liable to debarment. The Tender Securing
Declaration Form must be annexed to the tender document.

b) Preference and Reservation Term Limit: An enterprise registered by National Treasury as

a target group benefiting from the Preference and Reservation Scheme is entitled to such
benefits for a period of two years, which may be renewed biennially for up to a maximum
period of ten years.

c) Transfer of Skills and Technology: When procuring items not wholly or partially
manufactured in Kenya, a procuring entity should ensure that the tender document has a
mandatory requirement for:
• Transfer of technology, skills and knowledge through training, mentoring and
participation of Kenyan citizens; and
• Reservation of at least 75% of employment opportunities for Kenyan citizens for
works, consultancy services and non-consultancy services, of which not less than 20%
should be reserved for Kenyan professionals at management level.

d) Tender Documents: The tender document must have a local content plan for transfer of
technology which must include:
• Positions reserved for employment of local citizens
• Capacity building and competence development programme for local citizens;
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 • Time frames within which to provide employment opportunities;
• Demonstrable efforts for accelerated capacity building of Kenyan Citizens;
• Succession planning and management; and
• Sourcing of at least 40% inputs from the local market.

The secretariat responsible for the implementation of the preferences and reservations play the
following roles:
a) Registration, prequalification and certification of the persons, categories of persons or
groups as provided for by the act;
b) Training and capacity building of the above target groups;
c) Providing technical and advisory assistance to procuring entities in the implementation of
the preferences and reservations under this Act;
d) Monitoring and evaluating the implementation of the preferences and reservations under
this Act.

To ensure compliance of Preferences and Reservation schemes firms must

a) Integrate preferences and reservations in their procurement plans- During Procurement
planning reserve a minimum of 30% of budgetary allocations to enterprises owned by
women, youth, persons with disabilities and other disadvantaged groups.
b) Ensure Mandatory Reporting on the extent of compliance to the secretariat responsible
for the implementation of the scheme.
c) Do advertisement of the tenders for visibility
d) Enshrine the Ethical Employment Practices in their processes.
e) Submit to the Authority the part in its procurement plan demonstrating the application of
preference and reservation schemes in relation to the procurement budget within sixty
days after the commencement of the financial year.
f) Report all procurement awards where a preference or reservation scheme was applied
with disaggregated data to the Authority on a quarterly basis.
g) Create awareness of AGPO in the organization

9.8. Challenges in the Implementation of Preference and

Reservation Schemes in Public Procurement
a) Lack of strict enforcement
b) Lack of financial capacity to deliver the awarded contract
c) Delivery of poor-quality goods and services due to lack of modern equipment and
technologies.
d) Prolonged delay in delivery of goods and services due to lack of modern transport
facilities.
e) Lack of technical capacity to deliver as past experience is not a requirement for
qualifications.
f) Delayed payment due to financial constraints by some procuring entities.
g) One group getting a higher percentage of opportunities than others/corruption/ favouritism
/ discrimination.

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 h) Ignorance/lack of awareness.

9.9. Review Questions

Case Study
UJENZI CONSTRUCTIONAL AUTHORITY (UCA)
Ujenzi Construction Authority, a state Corporation under the Ministry of Transport intends
to construct its headquarters at Upper Hill Nairobi at a cost of shillings Five Hundred
Million. The project is to be implemented in a period of one year within the 2023 -2024
financial year. Some elements of works of this project is to be given to the special group
suppliers that have the capacity to deliver.

The company does not have procurement capacity to conduct the procurement and
contract implementation processes and it is also considering unbundling the procurement
for efficiency purposes. The UCA Board of Management has hired you as the Director
Procurement to oversee the procurement functions and the project implementation.

Required
a) Examine the role of the tender opening committee in the RRB construction project.

b) Advise the Chief Executive Officer on the appointment and role of the evaluation
committee for this project.

c) Identify the groups targeted by the reference and reservation scheme.

d) Explain the benefits UCA may get from unbundling procurements.
e) Suggest five eligibility criteria that the special group suppliers must meet to benefit
from the Preference and Reservations opportunities in this project.

f) Discuss the five disposal methods that UCA may use to disposal of the construction
residue materials.

g) Point out the challenges the Director Procurement is likely to face in the
implementation of preference and reservation schemes.

9.10. Further Reading

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 10
Inventory Control, Asset and Stores
Management and Distribution

Chapter Structure

10.1. Introduction to inventory control, asset and stores management and distribution.
10.2. Objectives of holding inventory.
10.3. Stores management and stock control.
10.4. Receiving and recording of goods, services and works.
10.5. Stores management.
10.6. Storage and issuance of inventory.
10.7. Disposal procedure and methods.
10.8. Review questions.
10.9. Further reading.

Competence

The trainee should have the ability to effectively manage assets, inventory and
distribution.

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10.1. Introduction to Inventory Control, Assets and Stores
Management and Distribution
Inventory control, assets, stores management and distribution entails prudent management of
movable and immovable assets, stores and associated logistics arrangements geared towards
the timely delivery of value. Deliberate efforts should be put in place to maintain stock at optimal
and economic levels, eliminate theft, security and safety threats, losses, wastage and misuse, to
ensure efficient and effective management of assets and distribution of stores.

Stores represent cash, and the utmost economy in their use, and accuracy in all transactions
relating to them, is essential. Procuring entities manage their inventory, assets and stores for the
purpose of preventing wastage and loss, and continuing utilization of supplies. To avoid
unprofitable lock-up of funds, stocks must be kept to the minimum necessary for the efficient
conduct of the procuring entities. The Procuring Entity may employ inventory management and
control software to assist it meet the objectives of sound supply management.

10.2. Objectives of Holding Inventory

Objectives of holding inventory may be specified as below:

a) To avoid losses of sales: One of the main objectives of holding inventory is to avoid the
losses of sales. If the firm holds inadequate inventory of finished goods, then the firm won’t
be able to satisfy customer's demand timely. As a result, the customers requiring immediate
supply of goods will move to the competitors, which is known as stock-out problem.

b) To gain quantity discounts: Economies associates with buying or manufacturing in large

quantities more than offset the cost of storage. Suppliers usually offer a quantity discount on
bulk purchase of materials. Therefore, if a firm has a relatively lower holding cost of material,
it could maintain relatively larger investment in inventories to gain from the quantity discount
offered by suppliers. However, it should be noted that the benefit from quantity discount must
be greater than the cost of maintaining inventories.

c) To reduce order costs: If a firm's ordering cost is relatively higher for order placed each
time, frequent purchasing in small quantity is not economical. Therefore, placing lessor
number of orders in relatively large quantity each time could reduce the variable costs
associated to ordering of material.

d) To achieve efficient production run: When a firm schedules production the firm has to
maintain a fixed production set up costs for each time. Therefore, by maintaining adequate
inventories the firm can set up relatively longer run of the machines so as to reduce set up
cost per unit. Operational risks require the holding of stock to guard against breakdown on
uncertainties;

e) To hedge the organization against price fluctuations: Owing to fluctuations is the price of
a commodity it is desirable to acquire stocks when prices are low;

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Responsibilities of the Accounting Officer with respect to Inventory Management
a) Ensures preventive measures are put in place to eliminate theft, security and safety threats
b) Transfer or receipt of inventory to or from another public entity.
c) Ensure items lost, destroyed, damaged or rendered unserviceable have been removed from
stores record through a loss adjustment report.
d) Ensure proper management of inventory, assets and stores for the purpose of preventing
wastage and loss, and continuing utilization of supplies.
e) Avoid unprofitable lock-up of funds, stocks shall be kept to the minimum necessary for the
efficient conduct of the procuring entities.
f) Employ inventory management and control software to assist in meeting the objectives of
sound supply chain management.
g) Prevent wastage and misuse of inventory.
h) Employ and deploy qualified officers to manage inventory.
i) Approve annual procurement plan and budget.
j) Establish a disposal committee as and when prescribed for the purpose of disposal of
unserviceable, obsolete, obsolescent, or surplus stores, equipment or assets.
k) set up an inventory management system which shall be managed by the head of the
procurement function, for the purpose of control and managing its inventory, stores and
assets

Responsibilities of the Head of Procurement Unit

The Head of Procurement unit should amongst other things ensure that:
a) An officer is appointed to be in charge of stores.
b) All stores purchased are actually received, recorded and taken on charge.
c) Arrange for occasional visits of inspection to the stores, at least twice in each calendar
year, by himself or by a representative in order to ensure that storekeepers carry out their
duties as laid down.
d) That stores are not allowed to suffer deterioration from any preventable cause.
e) That overstocking of any particular item is avoided.
f) That adequate fire-fighting appliances as approved by the relevant fire authority are
installed in the store premises, are maintained in good working order and are readily
available for emergencies, and that watchmen and staff are instructed in their use.

Responsibilities of the Stores Officer

The stores officer should amongst other things have the following responsibilities.
a) Ensure that the store-rooms are kept clean, properly ventilated and in good condition and
that the stores are well arranged and easy to access;
b) Inspect the store regularly and report to the Head of the Procurement Unit any case of loss,
leakage, damage or deterioration;
c) Report half-yearly in writing to the Head of the Procurement Unit of any obsolete or
unserviceable stores;
d) Examine frequently the locks of doors and fastenings of windows; he will not permit the store-
rooms to remain unattended when open for any purpose and will be solely responsible for

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 the keys of all store-rooms and buildings and will not delegate the duty of locking up the
rooms to any unauthorized person;
e) Ensure the stores are properly stored, frequently examined and adequately protected. In
particular, clothing and other stores subjected to deterioration by dampness or insects
should be frequently examined and not be placed on the floor. Fluids contained in tins or
drums should, whenever possible, be stored off the ground to enable leakage to be readily
detected;
f) Apply good storage and preservation practices for all store items.
g) Ensure Damaged and expired stores for condemnation are kept separately from unused
stores;
h) Ensure all stores of highly inflammable or explosive nature are kept in a separate storeroom;
i) Ensure issues are made from old consignments of stores before issuing new consignments.
Special care should be taken to ensure that drugs are not allowed to expire through lapse of
time. Such drugs should be frequently reviewed;
j) Ensure bin cards are properly kept for each item of stores and placed on or near the
respective item; and
k) Ensure notices prohibiting smoking are prominently exhibited within the store premises.
l) Ensure access to the stores is restricted.
m) Responsible for safe custody of all empty cases, drums, tins and packing materials that may
be of any value quantity.

10.3. Stores Management and Stock Control

The following are some of the terms used in stock control:

a) Stock control: This is maintenance of stocks at the appropriate levels to satisfy customer
requirements at the minimum costs.
b) Lead time: This is the length of time from the notification of non-availability of an item to the
time the item is purchased and is in the store.
c) Reserve (Buffer stock): This is the extra stock that will be included in the re-order level as
safety stock to meet unexpected demand for materials. Extra stocks for critical items to take
care of increased demand or lengthened lead time. It is calculated and specially approved.
d) Dues-in: These are orders which have been placed but the deliveries have not been made.
e) Dues-out: These are items which have been requisitioned for but cannot be issued because
there are out of stocks in the store.
f) Re-order level: This is the quantity of stock for a particular item when action to place a new
order is taken. This is the stock level expressed in specific units of issue, at which
ordering/replenishment action shall be indicated in time for the material to be delivered before
stock falls below the minimum. Factors governing the determination of this level are:
• The anticipated rate of consumption;
• The lead time;
• Availability of funds; and
• The shelf life.

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g) Minimum stock level: This is the quantity of stock below which stocks should not be allowed
to fall before a new delivery is received to replenish the stocks. This is the quantity expressed
in units of issue below which the stock of any given commodity shall not be allowed to fall.
h) Maximum stock level: This is the highest quantity of stock which is expected to be achieved
when a new delivery for replenishment of stocks is received. Maximum stock level is the
amount (quantity) of stocks expressed in units of issue above which the stock shall not be
allowed to rise. The main factor to be considered in fixing this level is the storage capacity and
consumption rate.
i) Provisioning period: This is the duration to be considered to be covered by the new order
to be placed. It shall be arrived at taking into considering the average monthly issue rate (MIR)
and lead time.
j) Contingency reserves: These are special extra stocks which may be authorized from time
to time to meet such unexpected calamities as epidemics, draughts, floods and other natural
disasters and specific situations of the procuring entity. These must always be maintained as
approval and no issues should be made from them without a written approval by the head of
the procuring entity.

Categories of Stores
Stores are classified into the following major categories.
a) Permanent items are those items which have a long life and also are expensive. When in
use they are expected to be maintained and when they become unserviceable, they are also
expected to have salvage value and they should be disposed of in accordance with the
provisions of the Act and the Regulations.
b) Consumable items are those items whose nature changes in use or are consumed and are
therefore issued only once and they are not to be entered into any inventory. Such items shall
include, stationery, foodstuff, drugs, fuel etc.
c) Expendable items are those which are procured and cannot be classified as permanent or
consumable and can be placed in a class of their own i.e., expendable items. The
management of expendable items is similar to that of permanent items. Such items include
tools, cutlery, bulbs, tube lights, rulers, staplers, lamps etc. This category of stores does not
need to be controlled from the stores and therefore there is no permanent record for them in
the stores.

Other Classifications
a) Administrative and stationery supplies, which should include office and computer supplies
such as paper, pens, toner, printer cartridges, notebooks, and CDs. Such stores may be kept
in locked facilities within the offices and do not require separate warehouse facilities;
b) Shelf-life Store items characterized by an expiry date less than five years beyond which the
item cannot be used. These would include such items as drugs and medical supplies and
chemicals. In the case of shelf-life Store Items specialized storage facilities must be used and
the Shelf-life Stores Register should include item identification code, location code, quantity,
expiry date, date of acquisition, special storage instructions, if any, and cost value. Issuance
of Shelf-life Items should be strictly on a first in first out basis.

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c) Durable Store Items that do not have expiry dates such as spare parts and equipment
consumables. In the case of Ordinary Store Items separate warehouse facilities should be
utilized and the Ordinary Stores Register should include item identification code, location
code, quantity, date of acquisition, special storage instructions, if any, and cost value;
d) Foodstuff and other sensitive perishables should be stored in a separate facility which are
clean and do not permit contamination from chemicals and other toxic pollutants;
e) Fuel and Lubricants should only be stored in special storage facilities approved specifically
for fuel and lubricants and should be subject to the highest standards of safety and protection
against environmental damage;
f) Assets such as stores of a capital nature, such as plant, machinery, vehicles, office and
house furniture and equipment, books etc., excluding consumable stores, should be properly
tagged, recorded in appropriate Asset Inventory Registers indicating the location and the
Asset holder.

10.4. Receiving and Recording of Goods, Services and Works

The process of receiving and recording goods works or services
a) Goods are received in physical stores and posted to the approved system.
b) Goods are stocked systematically according to the store layout [i.e., bins, racks and floor].
c) Goods are marked to aid identification.
d) The store should remain under lock and key and is accessed by authorized officers during
receiving and issue hours.
e) Items are kept free from dust by regular dusting.
f) Continuous stock checking of inventory is held against bin card balances in order to avoid
discrepancies.
g) In charge of Inventory will open and maintain a register where such items are recorded
when received.
h) Details of the received items are posted on the bin card.

Receiving of goods Procedure

a) Only goods that meet quality standards and specified conditions in the contract are to be
received.
b) All the materials are to be received at the designated place of the buying organization but
mostly at the warehouse/store.
c) Supplier should deliver the goods with a delivery note, describing the goods.
d) All goods should be checked for quality and quantity. If found to be satisfactory, the stores
in charge will prepare a goods received note (GRN).
e) The user department should be involved to confirm the suitability of the goods.
f) If the goods are damaged, the supplier is informed immediately for possibility of
replacement. Items not conforming to the specifications are returned to the supplier at
his/her own cost for replacement or order cancellation where the supplier is unable to take
the corrective action.

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 g) Store in charge acknowledges receipt of the goods subject to inspection. The stores
section informs the Inspection and Acceptance Committee about the delivery and
furnishes them with copy of the LPO/Contract and approved sample where applicable.

10.5. Stores Management

The following measures should be undertaken to ensure stock are well managed:
a) Stores must be stored in a secured area under lock and key and free from pilferage and
theft;
b) Proper insurance must be taken for items in the store so that in case there is any damage
or loss of the inventory, the corporation will be compensated;
c) Only authorized personnel should be allowed in the warehouse;
d) Inventory must be well arranged to make checking and handling easier;
e) Inventory must be well labelled for easy identification. Bin cards, stock labels or tags
should be placed beside the goods for easy identification and verification;
f) FIFO (first in-first out) should be applied for items with a short shelf life or for any other
items to avoid cases of expiration or obsolesces;
g) Proper care should be taken when handling inventory to avoid damage or breakages;
h) Safety standards should be exercised in inventory storage to avoid accidents happening
to goods or stores personnel;
i) The stores head should delegate an official to ensure safe custody of the warehouse in
his absence;
j) Custody of the keys to the store room should be allocated by the authorizing officer to the
person who will be accountable for them;
k) Whenever stores personnel are changed, stock taking has to be done;
l) An independent auditor will be employed to do stock takes once in a while and in case of
any discrepancies, the stores officers will be liable; and
m) Fire precautions must be adhered to. All flammables must be handled in a manner that
they do not endanger the whole premises and the area should be clearly labeled as
flammable. Proper fire extinguishing equipment must be made available.

10.6. Storage and Issuance of Inventory

Inventory or stores represent cash/tied up capital hence they should be properly handled to avoid
losses. It is the basic responsibility of supply management to ensure that the buying organization
is prevented from loss, wastage and that supplies are well utilized. Upon disposal of items, a fair
return value should be obtained. In order for this to be achieved, very sound inventory control
techniques, careful testing and inspection need to be applied.

Inventory Control
Inventory are stock items that a company holds for purposes of future resale, production or as
safety stock. Inventory control is same as stock control. It involves managing all aspects of
company’s stores including procurement, purchasing, logistics, receiving of goods, storage of
inventory, reordering, etc. It also involves maintaining appropriate stock levels in order to satisfy
demand or production.

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Objectives of Inventory Control
a) Helps in minimizing expenditure and investments of materials by ensuring storage and
ordering costs are kept low.
b) Ensures there is enough inventory to support production department so as to avoid
production stoppage.
c) Ensuring profitability to the company by saving on all costs related to inventory holding.
d) Ensuring that the right amount of inventory is available for selling at the sales department.
e) Ensures that store items are safely stored and are not damaged or lost.
f) To avoid having excess inventory as stock is tied up capital which is an expense to the
company.

Stock Levels
The stores function has to establish and adhere to stocking norms to satisfy customers
requirements at the minimum cost and when needed with due regard to economy in storage and
ordering costs, purchase prices and working capital.

Stock levels/ control involve the following processes:

1. assessing the items to be held in stock;
2. deciding the extent of stock-holding of items individually and collectively;
3. regulating the input of stock into the stores; and
4. regulating the issue of stock from stores.

These processes have to facilitate the continuous adjustment of quantity and value of stocks held
to conform to prevailing circumstances from time to time.

The stock control system to be applied has to be a continuous review system in which stocks are
replenished when they fall to some pre-determined level, i.e., re-order level.

Factors Considered When Setting Stock Levels

a) Unit of issue- kg, meter, grammar, tones;
b) Probable requirements –estimates of future usage;
c) Availability of supply;
d) Frequency of delivery- depending on geographical distance;
e) Price discounts for quantities;
f) Cost of ordering;
g) Seasonal fluctuations;
h) Standard ordering quantities; and
i) Obsolescence.

Process of Issuing Inventory

Issuing inventory involves removing goods from the warehouse, making adjustments to the
inventory balance, and recording the transactions in the inventory ledger.

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The following is the process followed in issuing inventory:
a) Only the warehouse/store staff are allowed to issue inventory from the store.
b) Inventory can only be issued if the user has an approved material requisition form. After
issuing inventory, the requisition form should be ruled off below the last item to avoid the
possibility of an item being added after it has been approved by the relevant authority.
c) The user department must acknowledge they have received the goods by signing the
requisition.
d) Inventory can only be issued for official purposes only and not for personal use.
e) All materials issued must be entered in into the inventory system which is approved by the
head of stores.

Inventory Issuing Procedure

a) The user department raises a store requisition note. This should be approved by the head
of department;
b) A stores issues register has to be opened by the Stores- In-charge;
c) Stores in charge has to post the issues in the stores ledger card;
d) Goods are removed from racks, bins, floor to the goods issue point and issued to the user
representative collecting them;
e) The user representative should acknowledge receipt of goods by signing the stores
requisition form and receive the goods;
f) The issue is then recorded in the issues register; and
g) The user acknowledges receipt of goods by signing and returning to the store a copy of
stores requisition form
Documents used Storage and Issuance of Inventory

a) Material Requisition Note: This a document used by the user department to obtain materials
from the store whenever they need them. It usually indicates what materials are needed
including their quantities. The form usually has to be authorized by the head of the user
department through a signature. The person receiving the materials usually signs the form
when he receives the goods. Whatever has been issued is usually entered into a material
issued record which is signed by the store keeper.

b) Purchasing Order: This is an official document offered by buyer to seller indicating what
product to be supplied by the seller, their quantities, prices and any other terms and conditions
agreed upon.

c) Goods Received Note: Usually contains particulars of a supplier, the purchase order number,
the requisition number, etc. The finance department initiates payment process for the items
received based on this.

d) Goods Returned Note: At times, a part of the goods received may not reach the acceptable
quality standards and have to be returned to the vendor. This document is used to return the
goods and has to show why the goods were returned.

e) Stock Ledger: This a document which the buying organization enters all its inventory
transactions and usually part of the corporate records book. The physical stock count should

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 match with what is in the ledger at any given time. A separate stock record for individual items
in the store is usually recorded in a bin card.

f) Bin Card: This is a document that is usually opened for every individual item in the store. It
indicates how much of the goods have been received, issued and what quantity is available
in the store.

Safety and Security of Stores

The Head of the procuring entity should ensure that all the necessary safety, precautions and
security is provided during storage and transportation of goods. Such precautions should include
but not be limited to:

a) Ordering periodic fumigation where and when necessary;

b) Ordering periodic fire-fighting drills;
c) Ensuring that water is stored exclusively for the use of fire-fighting;
d) Ensuring the availability and regular servicing of fire-fighting equipment.
e) Ensuring that all windows and doors are securely locked when the Stores are not being
manned
f) Ensuring availability of protective gear for staff.

10.7. Disposal Procedure and Methods

Disposal is a critical element of the stores, equipment and other assets management of a
procuring entity. When any equipment is obsolete, its keeping, through maintenance costs,
storage, parking, insurance, etc., may well exceed the returns that can be derived from that piece
of equipment and the investment of additional monies. When stores are perishable, keeping them
run risks of misuse, using shelf space unduly and not signaling requirements for what may be life
savings products. Disposal is thus one of the elements of managing procurement and supply and
distribution. It focuses on safeguarding assets and on sending information for decision making.

Disposing is thus a function that is necessary to guarantee that public monies are not applied to
useless or obsolete equipment and assets and that when stores are disposed of, they are sold at
the best achievable value in the market.

Disposal may be considered as the third life of any items acquired by a procuring entity;
a) First, it is procured and accepted (the procurement cycle);
b) Second it is utilised by the procuring entity in the discharge of its duties (the usage life
cycle, often referred to as life cycle);
c) Third and finally, it has then to be disposed off (the disposal cycle).

Because disposal involves residual values that may be received and can contribute to the cost of
renewal, it involves deciding when to dispose of a certain item and may involve health and safety
standards issues. It has to be regulated and managed as provided for by the Act and the
Regulations.

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Reasons for Disposal
Items can be available for disposal because they are:
a) Required to be disposed of under a particular policy
b) No longer required due to changed procedures, functions or usage patterns
c) Occupying storage space and not being needed in the foreseeable future
d) Reaching their optimum selling time to maximize returns
e) No longer complying with occupational health and safety standards
f) Found to contain hazardous materials
g) Beyond repair but able to be sold for scrap.
h) Reaching stage in life where the cost of maintenance too high.

Disposal Cycle
• Establish annual assets and stocks
• Establish needs for disposal
• Preparation and approval of annual disposal plan
• Board of survey by the disposal plan
• Choice of disposal method
• Actual disposal
• Receive Payments
• Administer contract
• Write off the records
• Report and deposit all monies from disposal

a) Authority to Dispose
• The user department should have the responsibility of identification of items to be
disposed of. The disposal committee should recommend the disposal including the
disposal method.
• The accounting officer has the final authority of accepting or rejecting the
recommendations of the disposal committee.
• Obsolescence should be avoided by procuring entities by disposal of items as surplus
before they become obsolete.
• The causes of having excess surplus items in the stores should also require to be
investigated and justified.

Roles of the disposal committee

a) Review and approve disposal plan
b) Approve for each disposal requirement initiated and the method of disposal chosen
c) Select the winning candidates;
d) Negotiate disposal where necessary and in compliance with the Regulations;
e) Nominate the Evaluation and other ad-hoc Committees for the purpose of selection
f) Advise the Head of the Procuring Entity on items to be disposed

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 g) Responsible for verification and processing of all disposal recommendations in liaison with
the Head of Procurement;
h) Conduct board of survey of items identified for disposal;
i) Verify the condition and location of the items;
j) Determine the current market value of the items;
k) Set up a reserve price based on its value and condition;
l) Seek technical expertise where necessary to ascertain the value and condition of the
items;
m) Prepare disposal report with recommendations and submit to the Board/ governing body
for approval; and
n) Conduct the actual disposal with the appointed procurement representative.

b) Disposal Plan
It is the responsibility of the head or the user department to identify any items which are due for
disposal and where possible assemble them together. It is expected that a proper inventory record
is maintained by every user.

Contents of Annual Disposal Plan

• Detailed breakdown of the stores, assets and equipment to be disposed of
• Schedule of the disposal
• Indication of the justification for disposal
• Estimate of the value of each store, asset or equipment
• Reference to the asset register or records of the stores
• Indication of the method of disposal envisaged
• Indication of whether the disposal of the stores, assets or equipment will be managed by
the procuring entity or any special agency designated or hired.
• Indication of the resources available.

Disposal plan content

• Item description of boarding
• Quantity
• Unit of issue
• Date of purchase
• Purchase price
• Estimated current value
• Justification for disposal
• Estimated current value
• Lifespan of item for boarding
• Reference number to the assets register or records of the stores
• Time schedule
• An indication whether the disposal is to be managed by the procuring entity or any
special agency or hired expert; and
• The cost of managing the disposal process.

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c) Disposal Procedure
i. The user department of a procuring entity is responsible for identification of items due for
disposal and will capture them in the annual departmental disposal plan.
ii. The head of a user department will submit the disposal plan prepared to the head of the
procurement function thirty days after the close of the financial year for consolidation.
iii. The consolidated annual disposal plan will be submitted through the accounting officer to
the Cabinet Secretary or county executive committee member for approval.
iv. The consolidated annual disposal plan for state corporations under the national
government or county corporations under the county government will be submitted to the
accounting officer of that entity.
v. Once the consolidated disposal plan has been approved, the head of the procurement
function will process the disposal through the disposal committee.
vi. The disposal committee will consider the proposed items and recommend the reserve
price where technical advice is not required and recommend the appropriate disposal
method to the accounting officer.
vii. An accounting officer will consider and take into account the recommendations of the
disposal committee and approve or reject it within fourteen days after receiving the
recommendation of the disposal committee.
viii. If the accounting officer approves the recommendations of the disposal committee, the
head of procurement function should initiate the disposal process.
ix. If an accounting officer rejects the recommendations of the disposal committee, he or she
will return the report to the disposal committee with his or her recommendations for further
consideration.
x. For the disposal of a building or land, a procuring entity should obtain the approval of the
National Treasury or the respective county treasury.

Disposal cost includes:

• Valuation of stores, assets or equipments;
• Consultancy costs for preparation of a disposal proposal;
• Disposal proceedings management and supervision costs in the case that a disposal
agent may be hired; or
• Costs relating to facilities, services or resources to be provided by the procuring entity,
such as office space or communication facilities for consultants or counterpart staff,
access to the stores, assets and equipment in the case of pre-bid site visits and
conferences.

d) Cancellation of Disposal Proceedings

The cancellation of Disposal proceedings should be avoided whenever possible, but may be
permitted where:

i. The disposal need has ceased to exist or changed significantly;

ii. Insufficient funding is available for covering the transactions costs of disposing of the
stores, assets or equipment;

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 iii. There is a significant change in the required technical details, bidding conditions,
conditions of contract or other details, such that the recommencement of proceedings is
necessary;
iv. Insufficient, or no responsive bids are received;
v. There is evidence of collusion among bidders; or
vi. It is otherwise in the public interest.

e) Methods of Disposal
Factors to consider include:
• the type and condition of the surplus goods;
• whether there have been any offers from other public authorities;
• the nature of the recipient market;
• time and resource issues;
• the costs and benefits provided by each disposal option

Choice of the most appropriate disposal option will normally be influenced by the nature of the
goods for disposal and by their location and market value.

The methods of disposal may include:

i. Sale by open tender
ii. Sale by public auction to the highest bidder subject to a reserve price;
iii. Transfer to another public entity with or without financial adjustment: Transfer to another
public entity method of disposal apply only when a procuring entity may want to dispose
of stores, assets or equipment to another procuring entity, hereafter named the receiving
procuring entity or the other party, which should always be a public entity. The transfer
should be justified by the Disposal Committee when preparing the disposal
recommendations to the accounting officer or the head of the procuring entity. The
justification should emanate from the need of the procuring entity to dispose of the stores,
assets or equipment.
iv. Destruction, dumping or burying where stores are harmful to human health: A procuring
entity that conducts disposal using the destruction, dumping or burying method should be
cautious of the fact that there are other laws regarding safety and health to be observed
in the disposal. Destruction, dumping or burying method of disposal should be subject to
the laws pertaining to public health and safety, environmental protection and instructions
issued by the regulatory authority on this method of disposal. After the execution of the
disposal, a disposal/destruction certificate should be issued and signed by those
conducting the disposal.
v. Donation to charitable organizations such as children's homes and orphanages;
vi. Disposal to employees as guided by the Clauses 202 of the PPADR, 2020;
vii. Trade- in
viii. Waste Disposal management

Benefits of disposal by open tender

• Achieves value for money

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 • Process is transparent
• Process is open and competitive
• Achieves maximum return purchase
• Tenderers may be vetted

Limitations of disposal by open tender

• Resource intensive
• Requires advertising
• Delays may result from appeals or a failure to finalize

Benefits of disposal by public auction

• Enables efficient disposal
• Process is open and competitive
• Achieves maximum return may be left with undisposed goods
• Items may not be shown at real value
• Procurement entity uses minimal resources
• Effective disposal for spare parts, scrap

Limitation of disposal by public auction

• Requires transporting goods to auction
• May take considerable time to dispose of goods or may be left with undisposed goods.
• Costs are known prior to disposal
• Buyers may enter into anti-competitive practices
• No control over who purchases goods.

Benefits of disposal by transfer to another procurement entity

• May achieve market price
• Achieves value for money
• Enables efficient disposal
• Process is transparent

Limitations of disposal by transfer to another procuring entity

• May not achieve maximum price
• Requires considerable effort

10.8. Revision Questions

a) Explain reasons why an organization would hold inventory
b) Outline the responsibilities of the Accounting Officer with respect to inventory
management.
c) Describe the procedure of receiving goods services and works in an organization
d) Identify factors considered when setting stock levels.
e) Point out the documents used in storage and issuance of inventory.

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 f) Propose reasons why an entity would disposal off its assets
g) State the benefits of disposing of off assets using the open tender method

10.9. Further Reading

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 11
Administrative Review and Disposal
Proceedings

Chapter Structure

11.1. Introduction to administrative review.

11.2. Appeal/ review mechanism.
11.3. Application for administrative review.
11.4. Review procedure.
11.5. Parties to review.
11.6. Rights and obligations of parties to review.
11.7. Powers of the board.
11.8. Judicial review in public procurement proceedings.
11.9. Remedies.
11.10. Offences and sanctions.
11.11. Review questions.
11.12. Further reading.

Competence

The trainee should have the ability to apply legal and administrative processes in dispute
resolution.

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11.1. Introduction to Administrative Review
Public procurement administrative review means a procedure by which the administrative Review
Board may provide an opportunity in public procurement, an important platform for bidders, to
have recourse against wrongful decisions of procuring entities and seek remedy for dissatisfaction
with a decision regarding the furnishing or denial of services. It generally gives the bidders an
opportunity to enforce compliance with the law and also promotes the function of correcting legal
violations in procurement. A proper-functioning procurement system requires a well-designed
regulatory framework supported by an adequate enforcement environment. A well-functioning
and independent complaint, review, and appeals mechanism under the Public Procurement and
Asset Disposal Act,2015 and the Regulations 2020 is key in ensuring a credible procurement
system. An ideal public procurement administrative review tribunal must ensure fairness in the
review process.

11.2. Appeal/ Review Mechanism

Public Procurement Administrative Review Board was established to promote and uphold fairness
in the public procurement system.

Types of Review
a) Review against the decision of the procuring entity in a public procurement and asset
disposal proceedings.
b) Review against a breach of the law in the procurement and asset disposal process prior
to award.

11.3. Application for Administrative Review

A tenderer or candidate who claims to have suffered or is likely to suffer, loss or damage as a
result of breach of an obligation imposed on a contracting entity may request an administrative
review within 14 days of notification of the award or the date on which alleged violation occurred
at any stage of the acquisition or disposal process, as required.
The request must:
a) Indicate the reasons for the complaint, including any alleged violation of the Constitution,
the law on public procurement and disposal of assets and its regulations;
Common Grounds for Review Include:
• Failure to include evaluation criteria in the tender documents
• Introduction of a new criteria in addition to the evaluation criteria established in the
tender documents
• Misunderstanding of the meaning of the lowest bidder evaluated
• Not notifying winning and non-winning bidders at the same time
• Evaluation of offers beyond the allowed 30 days

b) Be accompanied by any statements/document that the applicant deems necessary in

support of his application;

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The request for review must be accompanied by a refundable deposit of fifteen percent (15%) of
the applicant’s tender sum. A request for review must be heard and resolved in an open forum,
unless the issue in question could compromise national security or the review procedure.

Contents of the Application

A tenderer requesting a review must submit a written request to the Public Procurement Review
Administrative Board. Applications must contain the following:
(a) The name and address of the applicant
(b) The name and address of procuring entity
(c) The date of submission of the written application
(d) The reference number of the procurement procedure and the date of issuance of the
tender documents, request for proposals or request for quotations
(e) The signature of the applicant

Matters that are not Subject to Review

a) The choice of a procurement method;
b) A termination of a procurement or asset disposal proceedings
c) Where a contract is signed by accounting officer of the contracting authority and the
successful tenderer incorporating all their agreements.
d) A decision by the Procuring Entity to reject all tenders, proposals or quotations;
e) Where an appeal is deemed frivolous/futile.

A practice which undermines the credibility of the administrative review process is the submission
of futile applications without mentioning the administrative burden and delay that is introduced in
the procurement procedure. To reduce the occurrence of this practice and increase levels of
responsibility, all requests must include the following statement:

"I hereby declare that this request is not frivolous and has been made solely for the purpose of
redressing suffering or the risk of suffering loss or damage due to the breach of an obligation
imposed on a contracting entity by the law on Public Procurement and Asset Disposal or the
Regulations. I understand that if the Administrative Review Board determines that this question
is frivolous, I could be prosecuted for misrepresentation’’

11.4. Review Procedure

Upon receipt of a request for review, the secretary of the Review Board will notify the contracting
entity's accounting officer of the pending review by the Review Board and the suspension of
procurement procedures in the prescribed manner. The Secretary of the Board of Reviewers will
refuse a request for review if the appeal fees have not been paid within the prescribed period.
The secretary of the review board, at least three (3) days before the date set for the hearing,
invites the members of the panel of the review panel to attend the hearing.

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At the hearing on the request for review, unless otherwise decided by the Review Board, the
applicant will be given the first opportunity to present the case in support of the request for review
and the contracting authority will have the opportunity to respond to the request.

11.5. Parties to Review

a) The individual who requested the review;
b) The accounting officer of the procuring entity/contracting authority;
c) The tenderer notified as winner by the contracting authority; and
d) Any other persons as the Review Board may determine

11.6. Rights and Obligations of Parties to Review

Rights
• Right to request for review
• Right to be granted a free and fair hearing.
• Right to judicial review to procurement

Obligation of the Parties

a) Applicant
• Filling complaint, including any alleged violation of the constitution, the law on public
procurement and disposal of assets and its Regulations;

b) Accounting officer
• Submitting to the secretary a written memorandum of response to the request for
review together with such documents.
• Submitting of confidential documents pertaining the procurement proceeding to the
review board.

c) Interested party
• Filling response to the request for review through a notice of preliminary objection
clearly raising grounds.

d) Experts
• To assist in any proceedings in which it feels it lacks the necessary expertise, but
the opinion of the expert is not binding to the review board.

e) Review board
• Examining, hearing and resolving disputes over tendering and asset disposals

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Considerations by Review Board.
The Review Board will initiate an investigation which will consider, as appropriate:
i) The information and evidence contained in the request for review;
ii) Information from the procurement registers of the contracting authority;
iii) Information provided by the staff of the contracting authority;
iv) Information from other tenderers;
v) Information in the investigation and decision of the Chief Executive Officer, if applicable.

11.7. Powers of the Board

During the completion of a review, the Review panel may take one or more of the following
actions:
a) Nullifying everything that the head of the procurement entity had done in the procurement
procedure, including the cancellation of the procurement or disposal procedure in totality;
b) Instructing the head of the procurement entity on everything that needs to be done or
redone in the award or disposal procedure;
c) Replace any decision of the accounting officer of a contracting entity in the acquisition or
divestiture procedures with the decision of the Review Board;
d) Order the payment of expenses between the parties to the review at the prescribed rate;
And
e) Order termination of the procurement procedure and initiate a new procurement
procedure.

The Administrative Review Board after hearing the review request shall issue a written decision
within 21 calendar days which should indicate:
(a) Whether the application is upheld or rejected;
(b) The reasons for the decision; and
(c) Any corrective measures to be taken, in accordance Public Procurement and Asset
Disposal Act and regulations.

The Review Board may announce its decision immediately after the hearing pending the written
decision.
Copies of the written decision are sent to:
i) The bidder who submitted the application for review
ii) The Procuring Entity
iii) All other parties to the Review

The Review Board may dismiss a request for a review if it is of the opinion that the request is
frivolous or vexatious or was made solely for the purpose of delaying the procurement
proceedings or the procurement.

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11.8. Judicial Review in Public Procurement Proceedings
A person affected by a decision made by the Review Board may apply for a judicial review
by the High Court within 14 days from the date of the Review Board's decision, failure to
which the Review Board's decision will be final and binding to both parties. The application
for judicial review should be accepted only after the affected person has paid a percentage
of the contract value as a fee of security. The High Court will determine the request for
judicial review within 45 days of such request.

A person dissatisfied / aggrieved by the High Court's decision may appeal to the Court of
Appeal within 7 days of that decision and the Court of Appeal will issue a decision within
45 days, which decision will be final. If the High Court or the Court of Appeal does not
make a decision within the prescribed period, the decision of the Review Board will be final
and binding on all parties.

A party to the review who disobeys the decision of the Review Board or the High Court or
the appellate court shall have violated the law and any such party's action contrary to the
decision of the Review Board or the High Court or Court of Appeal will be null and void.
When a decision of the Board of Review has been overturned, the High Court will not
impose any costs to either party.

11.9. Remedies
a) Cancelation of the whole procurement and disposal procedure and initiating new
procurement process.
b) Prohibition of the head of procurement function from acting in an unauthorized manner in
the future.
c) The procurement decision is reviewed and replaced with that of review board.
d) Payment of damages to the complainant.

11.10. Offenses and Sanctions

Due to the special and additional public trust placed on procurement professionals as
custodians of public funds, a special and additional level of rules, compliance, obligations
and sanctions governing the activities of all officials engaged in any way in public
procurement regardless of their rank or function is applied. Adherence to the provisions of
procurement law and regulations by public officials is obligatory and failure to do so is
considered an offence which is subject to sanctions/penalties.

The Public Procurement and Disposal Act, 2015 prohibits: -

• Obstruction or hinder a person carrying out a duty or function
• Lying or misleading information;

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 • Delaying without justifiable cause the opening, evaluating or awarding of a tender/
contract beyond the prescribed period
• Delayed payment of contractors beyond contractual
• Undue influence on any member of the various committees
• Opening any sealed tender, including such tenders electronically submitted and
tenders inadvertently opened
• Divulging confidential information relating to evaluation, clarification of tenders,
proposals or contents of tenders, proposals or quotations or disclosing information
relating to procurement whose disclosure would prejudice commercial interests,
intellectual property rights or inhibit fair competition.
• Splitting procurements
• Commit a fraudulent act
• Knowingly withholds the notification of award to both successful and unsuccessful
tenderers.
• Signing a contract contrary to the requirements of the Public Procurement and
Asset Disposal Act or Regulations.
• Contravening a lawful order of the Authority or the Review Board given under the
Public Procurement and Asset Disposal Act, 2015.

Penalties/ sanctions for breach

All persons involved in noncompliance to ethical standards such as being involved in fraudulent
and/or corrupt practices will be subject to the following sanctions/penalties:
a) If the person is a natural person, to a fine not exceeding four million shillings or to
imprisonment for a term not exceeding ten years, or to both;
b) If the person is a body corporate, to a fine not exceeding ten million shillings.
c) A state or public officer involved in unethical practice is subject to internal disciplinary action
d) Any other person who is not a state or public officer shall be debarred.
e) If a person or an employee or agent of a person contravenes the ACT shall be disqualified
from entering into a contract for the procurement; or
f) If contract has already been entered into with the person who contravened the ACT, the
contract shall be voidable at the option of the procuring entity.

Note: Employees/persons who are involved in the preparation of tender estimates and the
management of the procurement process, are prohibited from assisting or providing
services to contractors in the preparation of their bids.

11.11. Revision Questions

a) Identify common grounds for review in procurement
b) Outline contents to be included in the application for public procurement review by an
aggrieved party.
c) Describe powers conferred to the Public Procurement Review Board

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 d) Explain possible remedies that can be issued by the Public Procurement Review Board
to aggrieved parties.

11.12. Further Reading

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2012). Public finance management act. Government Press.

GOK (2007) Supplies practitioners management act. Government Press.

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 CHAPTER 12
Ethics in Public Procurement

Chapter Structure

12.1. Introduction to ethics in public procurement.

12.2. Ethics.
12.3. Importance of ethics in procurement and supply.
12.4. Types of unethical practices in procurement and supply.
12.5. Debarment of bidders and contracts.
12.6. Principles of procurement and supply chain.
12.7. Review questions.
12.8. Further reading.

Competence

The trainee should have the ability to adhere to ethical standards in public procurement.

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12.1. Introduction to Ethics in Public Procurement
Ethical practices in public procurement and asset disposal are founded on values that preserve
public confidence, public interest, fairness, impartiality, transparency, accountability,
professionalism and ethical standards. The governance system should spell penalties and
sanctions to deter corrupt, unethical practices and enforce values in the procurement function.
Weak governance in public procurement and asset disposal systems impedes competition,
accountability, transparency and integrity principles, which ultimately raise the cost of the
government's procurement of goods, works and services. This results in a waste of resources and
loss of public funds. There is, therefore, a need to promote professionalism, integrity, ethics,
accountability and transparency in public procurement and asset disposal system.

12.2. Ethics
Ethics are set of moral principles or values guiding our behavior. In a business setting, ethical
behavior is the use of recognized social principles involving justice and fairness throughout a
business relationship. When interacting with suppliers, an ethical buyer treats them in a just,
decent, fair, honest, and fitting manner. The code of ethics issued by Public Procurement
Regulatory Authority (PPRA) are intended to set minimum standards of ethical behavior for
persons participating in public procurement and asset disposal activities in Kenya and to ensure
compliance with the procurement law and the adoption of good business practices.

12.3. Importance of Ethics in Procurement and Supply

a) It helps in claiming professional status for procurement and supply chain as it acts as a
point of reference in the professional behaviour.
b) It is essential in creating long term relationships and establishment of supplier goodwill.
c) Buyers especially procurement professionals have a greater say in terms of writing
professional opinion on which supplier to receive the award.
d) Procurement have power over large sums of money and hence the power has to be
regulated by the ethical code of conduct.
e) It is essential in creating organizational reputation.
f) It helps in avoiding any form of temptations to act unethically.
g) Ethics also helps in maintaining objectivity and rational thinking in procurement process.

Factors Influencing Unethical Behavior

• The failure to enforce professional codes of ethics by the professional body mandated to
oversee procurement processes in organizations
• Inadequate legislative compliance
• Severe competition
• Economic downturn- brought by harsh economic conditions
• Inadequate ethical education
• Cultural- it is believed that people who are rich are given high esteem irrespective of how
they acquired their wealthy

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What Constitutes Professional Misconduct?
• Willingly failing to follow professional PSCM standards and ethical guidelines;
• Misappropriation of funds or any property entrusted to him/her
• Knowingly procuring goods, works and services at inflated prices;
• Failure to keep proper records of all transactions;
• Disclose of information acquired in the course of duty without consent of the employer;
• Involvement in any corrupt practices;
• Engage in activities which are contrary to those which the Registration and licence
certificates were obtained;
• Found guilty of fraud or any dishonesty act;
• Practising procurement as a procurement practitioner without registration certificate and
licence;
• Enters into partnership with a person who does not hold a licence or secures any
professional business through the service of such a person;
• Expressing opinion on a mater without obtaining sufficient information on which to base
the opinion.
• Practices or attempts to practice without a valid registration certificate;
• Expresses a professional opinion of a procuring entity, a business or enterprise in which
his relative has interest unless he/she expressly unambiguously discloses that interest
when expressing the opinion;
• Fails to disclose in his/her professional capacity, a material fact known to him/her the
disclosure of which is necessary to ensure that his/her statement is not misleading;
• Providing false information to employer, council or other authority; and
• Practices as a consultant without a licence.
• Use of office to improperly enrich yourself or others

12.4. Types of Unethical Practices in Procurement and Supply

a) Reciprocity: This action involves giving preferential treatment to suppliers that are also
customers of the buying organization. In simple terms, it refers to a purchasing
arrangement that dictates “I’ll buy from you if you buy from me.”
b) Personal buying: This occurs when a procurement department purchases material for the
personal needs of its employees.
c) Accepting supplier favors: Accepting gifts and favors from a supplier is the most common
ethical infraction involving buyers. These gifts and favors can affect a buyer’s judgment to
evaluate and select the most capable suppliers. The policy on supplier offerings is often a
confusing issue. At what point does a supplier’s gift or favor depart from being a form of
appreciation for a firm’s business to an attempt to influence a buyer’s purchase decisions?
d) Sharp practices: A sharp practice is any misrepresentation by a buyer that falls just short
of actual fraud. Sharp practice occurs whenever a buyer “plays games” with a supplier and
operates in an underhanded manner. The practice includes many different behaviors:
• Willful use of misinformation, when a buyer knowingly deceives a supplier to realize
some advantage. For example, requesting quotes on inflated volumes and then
placing smaller orders at the reduced price is a willful use of misinformation.

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 • Exaggerating problems. A buyer who exaggerates the size of a supplier caused
problem to extract a larger penalty or concession from a supplier is using a sharp
practice.
• Requesting bids from unqualified suppliers for the sole purpose of driving a qualified
supplier’s price lower. A buyer should request bids from qualified suppliers only.
• Gaining information unfairly through deception.
• Sharing information on competitive quotations. The integrity of the competitive bid
process requires confidentiality. Buyers who share supplier-quoted information
violate the ethics of the bid process.
• Not compensating a supplier for design or other work. Buyers often request design
and cost-savings assistance from suppliers. A supplier that helps a buyer should
receive fair compensation for its efforts.
• Taking unfair advantage of a supplier’s financial situation. A buyer who knowingly
pressures a financially troubled supplier into providing a lower than- normal price
places the supplier in further financial jeopardy. Taking advantage of a financially
susceptible supplier is an unethical business practice.
• Lying or misleading. Any instance of lying or misleading a seller is a sharp practice.
e) Misinformation: Procurement ethics entails provision of fair, truthful and accurate
information that is not misleading. Professionals in purchasing should avoid inflating
estimates of order sizes that may attract unfair prices thus turning unethical. Confidential
information obtained in the course of business should not be disclosed without proper and
specific authority, or unless is a legal duty to disclose.
f) Unfair dealing: Deception or unfair situations are termed unethical, hence should be
avoided. This may involve deliberate errors in quotations, seeking quotations or tender bids
from suppliers with no intention of purchase, favouring some vendors over others, and
hence damaging buyer-supplier relationships.
g) Conflict of interests: Procurement professionals should not make decisions or provide
confidential information for personal gain. Such create conflict of interests, as best
practices of the firm or internal clients conflict with personal interests of the individual. It
may also involve preference of a particular supplier due to financial interests in the supplier
firm. Receiving of gifts and offers of hospitality may be tricky if such practices induce
favourable sourcing or contract award, disclosure of confidential information, bribery and
hence should be avoided or declared.
h) Fraud: Procurement professionals need to be aware of a range of activities that may be
considered fraudulent; hence such should be clearly articulated in organizational policies,
rules and expectations in regard. This can be as simple as accepting kickbacks or as
complex as employees deliberately rejecting goods already paid for, as defective and
returning them to suppliers to be delivered as new goods.
i) Corruption: Corruption is a form of dishonesty or a criminal offense which is undertaken
by a person or an organization which is entrusted in a position of authority, in order to
acquire illicit benefits or abuse power for one's personal gain. Corruption can be classified
in two forms; petty corruption which occurs when citizens are asked for bribes for basic
services, or to have an infraction overlooked, the amounts here are small. Large scale
corruption which occurs in the public sector, mainly through government procurement and

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 includes public purchases made at inflated prices, fictitious companies being paid for
contracts they never executed.
j) Bribes It is illegal to accept bribes and gratuities in the form of money or any other valuable
goods or services with the intent to influence decisions. It is important to also understand
that even the perception of unethical conduct must always be avoided. This includes
accepting frequent meals and entertainment from suppliers or any gifts that could be
considered to have even nominal value. In a position of financial trust, one must exercise
impeccable judgment.

Procurement systems that can facilitate corruptions are.

• weak oversight institutions,
• lack of transparency,
• poor linkages between procurement and expenditure,
• delays in procurement proceedings
• Inefficiencies in management of procurement
• poor records management

Measure that May be Taken to Curb Corruption in Public Procurement

There are different measures that have been taken and can take to curb corruption and ensure
accountability in the public sector. These measures include:
a) Competitive bidding- Competitive bidding will ensure transparency in the procurement
process. The main elements in competitive bidding process including; public notification of
bidding opportunities, documents that clearly set out the needs describe the bidding process,
contract terms, conditions, and the criteria for choosing the winner, opening pf sealed bids in
the presence of bidders are all geared to enhancing transparency.
b) Declaration of conflict-of- interest rules- A public officer is expected to use his best efforts
to avoid being in a position which puts him in conflict between his personal interests and public
duties and is not allowed to take part in the procurement proceedings. In addition, public
officers are required to disclose any personal interests they have and declare their wealth
status prior to taking public office. Furthermore, there should be penalties for non-disclosure
and breach of the conflict-of-interest rules. Another aspect of the rules is to forbid the receiving
of gifts by public officers from potential or current contractors.
c) Enforcement of rules-The enforcement of procurement rules will ensure integrity in the
procurement process and make it easier for public officials to renounce corruption. Codes of
conduct are a "compulsory" part of any procuring institution. However, they should not just
remain on paper, but characterize all forms of bureaucratic activity. A step in that direction
would be to include ethical standards in the legal framework. Codes of conduct are supposed
to serve as an obstacle for private interests to interfere with those of the government.
d) Public participation- Increased public participation and information sharing will increase
accountability.
e) Procurement sanctions on bidders- Within the procurement process, the measures which
can be taken to deter or punish bidders involved in corrupt practices include automatically
excluding contractors who have been involved in collusive tendering, providing false
information, canvassing or such similar circumstances relating to the procurement in order to

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 deter corruption and penalise from the current and future bids. Also, terminating an existing
contract where the contractor was involved in corrupt practices for example paying bribes in
order to be awarded the contract. Offering and receiving of bribes is a criminal offence and
the perpetrators should be fined or imprisoned as provided by the law. The current penalties
include a fine not exceeding KES.4 million or imprisonment for term not exceeding 10 years
or both for an individual and if corporate body, fine not exceeding KES. 10 million. Depending
on the amount of the bribe, the penalties may not be punitive enough to deter corruption.
f) Internal control mechanisms- One suggestion of a way to combat corruption would be to
make it mandatory for firms bidding for government contracts to put in place internal control
mechanisms which can detect, deter and combat corruption. Such mechanisms can take the
form of the public officers submitting declaration forms that they have not been involved in
any corrupt activities. Furthermore, firms it should be mandatory for firms to declare in their
annual reports the internal control mechanisms which they have put in place.
g) Whistle blowing- Contracting firms and government agencies should put in place whistle
blowing policies and procedures to be followed which will enable the reports on corrupt
practices to be made anonymously by others. The policy should also include protection of the
witnesses who report on such practices.
h) Training-The contractors and public officers should be trained on the required standards of
conduct and the rationale for such standards. The training will assist in ensuring that the
standards are known and understood to help to motivate public officials on the moral validity
of the standards, how to identify and detect corrupt practices and to ensure enforcement of
the standards. Training can be used to instill professionalism in the procurement profession.
i) Reducing political interference-It is argued that one of the major problems faced in public
procurement is the interference of the tender process by ministers in order to fulfil their own
personal interests, which is done by obtaining information from the procuring entity which is
used to cancel tenders and allege compromising of the process. Strict measures need to be
put in place to address the problem of ministerial interference with procurement process.
j) E-Procurement- The procurement procedures should be automated by the implementation
of e-procurement. This will ensure transparency especially as it will enable sufficient audit
trails to be carried out. An automated system will also contain checks and controls which can
help curb corruption and will result in higher compliance levels.
k) Independent experts- One of the complaints received from suppliers is that bid evaluation
committee members do not have the technical expertise necessary to properly evaluate bids
and as such are prone to be influenced by other factors in evaluating bids. To solve this,
technically competent evaluation committee members, experts, observers ad monitors should
be involved in the evaluation process to ensure transparency. Impartial evaluation and
comparison of bids should be done by competent evaluators without influence or interference
by bidders or other parties.
l) Contract due diligence- Suppliers and contractors engage in corrupt activities including bid
suppression (contractors agree to refrain from bidding or agree to withdraw a previously
submitted bid), bid rotation schemes (bidders collude to take turns being the lowest bidder) or
they agree to divide the pie (contractors agree in advance the winning bid). These avenues
of corruption can be reduced by the procuring entity conducting adequate due diligence of the
contractors.

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m) Proper evaluation of suppliers and contractors performance- Corruption risks exist in the
contract implementation stage in cases of unjustified variation of orders, diversion of goods
for personal use/resale or receipt of the less quantity of goods or of a lower quality of goods.
At the implementation or delivery stage, contractors' performance to be properly evaluated to
ensure that goods are of the correct quality and quantity as is provided for in the contract.
n) Establishing clear payment procedures- Lack of proper payment procedures facilitate
corruption. For instance, some payments are done before the delivery of goods or full
payments for partial delivery. In other circumstances, there is selective payment of suppliers
based on which supplier has paid the highest amount of kick-backs. There needs to be
sufficient clear and documented payment processes to close this loophole.
o) Competition- Competition is usually efficient to curb corruption in procurement. Monopoly
suppliers are one element, but also monopoly providers of public services can be problematic.
In a given example where the office issuing driver licences frequently demands bribes, even
when you have all papers in perfect order, an idea could be to establish other public offices
with the same authority. That way you could address the office which does not add the extra
price the bribe money incurs. Competition in the provision of public services have in some
cases been forwarded as a possible solution.

12.5. Debarment of Bidders and Contractors

The regulator may debar a bidder or contractor from participating in procurement proceedings on
the ground that the bidder or contractor:

a) Has committed an offence under the Public Procurement and Asset Disposal Act, 2015 or
is in contravention of any of the clauses of the Public Procurement and Asset Disposal
Regulations 2020.
b) Has committed an offence relating to procurement under any Act
c) Has breached a contract for a procurement by a public entity
d) Has, in procurement proceedings, given false information about his qualifications or
capabilities
e) Has refused to enter into a written contract.
f) Has breached the code of ethics.

12.6. Principles of Procurement and Supply Chain

Purchasers have power over large sums of money i.e., the greatest outflow of funds from the
enterprise is through procurement of good, works and services. Purchasers have the greatest say
in determining of which supplier will receive the order. Principles of procurement are key to
uphold ethics in procurement. They include:

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• Accountability-Effective mechanisms must be in place in order to enable accounting officers
to discharge their responsibility on issues of procurement risk and expenditure.

• Competitive Supply-Public procurement must be carried out in a competitive process unless

specifically justified in accordance the law or policy.

• Consistency- Procurement policy and procedures should be similar and consistent across
the public sector.

• Effectiveness-Public sector entities should maximize the contribution to the commercial,

regulatory and socio-economic goals of government in a balanced manner appropriate to the
procurement requirement.

• Value for money-The procurement processes should be carried out to achieve the most
advantageous combination of cost, quality and sustainability over the life cycle of the project.

• Fair-dealing- Suppliers should be treated fairly and without unfair discrimination, including
protection of commercial confidentiality where required. public sector entities should not
impose unnecessary burdens or constraints on suppliers or potential suppliers.

• Integrity-There should be no corruption or collusion with suppliers or other persons involved

in a procurement project.

• Legality- Public sector entities should conform to legal requirements.

• Responsiveness- Public sector entities should endeavour to meet the aspirations,

expectations and needs of the community served by the procurement.

• Transparency- Public sector entities should ensure that there is openness and clarity in the
conduct of the procurement policy including in the carrying out of all actions and decisions.

Best Practices in Procurement and Supply Chain

• Effective internal communication-It is vital for supply chain and procurement teams and
may lead to quick identification and solving bottlenecks, customer satisfaction and improved
organizational agility.
• Automation of procurement processes-A reliable procurement process requires end-to-
end efficiency. Digitization of risk-prone procurement processes, like negotiating terms or
sourcing a supplier, is beneficial to the procurement function. Automation also reduces the
risk of human error and further expedites workflow by streamlining daily tasks. Most
businesses employ multiple systems to manage their supply chain operations. These include
basic programs such as Excel spreadsheets and applications that are then integrated with the
enterprise resource planning (ERP) system.
• A successful, efficient supply chain relies on access to real-time information and supply
chain analytics to ensure data-driven strategies and enable swift action when necessary.

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 Automation, predictive analytics and digitized documentation will make supply chains more
efficient and cost-effective.
• Transparent work flow- increasing transparency in the supply chain helps in preventing
disruptions and bottlenecks. Visibility drives sustainability and increases ownership for team
members. The ability to see the big picture of procurement is key in identifying potential holes
in the process.
• Establish Alliances with suppliers- Building strong partnerships with suppliers is vital to
supply chain success, often saving expenses and improving reliability. If both sides treat this
as a partnership, these relationships should be equally beneficial.
• Economies of scale- Taking advantage of economies of scale can be a cost-effective way
to manage inventory. Understanding demand from all areas of the functions of the
organization and making a single purchase lowers supply chain costs via volume discounts
and reduced administrative and warehousing labor costs compared to multiple supply
purchases.

Other ways to set up volume purchases includes:

• Blanket orders establish a set price and quantity for products delivered as needed over a
certain amount of time, often one year. This will protect the buyer from price increases and
can assist in inventory stability as one can request additional products when stock gets low.
• Standing orders provide similar price protection as blanket orders, but supply delivery occur
in predetermined quantities on predetermined dates over a certain period of time. These
provide less flexibility than blanket orders, but eliminate guesswork and short-term
forecasting.
• Diversify supplier relationships to avoid supply failure- Supplier-side delays are one of
the most common reasons for supply chain disruptions. Lack of availability of raw materials,
import/export issues, weather and natural disasters, political and regulatory issues and other
unforeseen obstacles can cause disruption in supply.
• Optimize inventory management- Once the buyer can reliably predict demand, it becomes
easy to calculate optimal inventory levels for current and future demand and develop
replenishment best practices.
• Environmental and social sustainability- Being a leader in Supply Chain sustainability
initiatives and also in compliance with various laws and regulations can bolster a company's
brand value and reputation and its bottom line.
• Practice risk mitigation and compliance- Supply chains are inherently full of risks. Natural
disasters, raw material shortages, port disruptions, trade disputes, theft, cybersecurity
breaches, non-compliance with laws and regulations and reputational damage all represent
potential supply chain disruptions. Known risks such as distribution limitations, demand
fluctuations, supplier issues and regulatory non-compliance can be identified, measured and
managed, and it’s often possible to quantify their impact on the supply chain.
• Focus on total cost of ownership (TCO)- The total cost of ownership (TCO) encompasses
all of the costs associated with every aspect of the supply chain. It's how businesses account
for each activity's costs within the supply chain, including material acquisition, storage, selling,
transportation, currency exchange costs, trade incentives and restrictions.

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12.7. Revision Questions
a) State the importance of ethics in procurement and supply
b) What constitutes professional misconduct in procurement and supply
c) Outline possible types of unethical practices in procurement and supply
d) Describe measures that may be taken to curb corruption in public procurement
e) Propose best practices in procurement and supply chain that can be adopted by an
organization

12.8. Further Reading

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

GOK (2007) Supplies practitioners management act. Government Press.

GOK (2003) Public officer ethics act, Government Press.

CIPS (2012). Context in Procurement and Supply. 1st Edition. Profex Publishers.

PPRA (2009). Public procurement and disposal general manual. Government Press.

PPRA (2014). User guide to the public procurement and disposal act, 2005, and the public
procurement and disposal regulations, 2006. Government Press.

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 CHAPTER 13
Accountability, Responsibility and
Authority in Public Procurement

Chapter Structure

13.1. Introduction.
13.2. Definition of terms.
13.3. Clear separation of approval authorities.
13.4. Responsibilities, accountability and authority of public officers.
13.5. Performance contracting and monitoring in public procurement.
13.6. Declaration of potential conflicts of interest.
13.7. Review questions.
13.8. Further reading.

Competence

The trainee should have the ability to promote accountability and responsibility in the
whole procurement and disposal process.

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13.1. Introduction
There are a number of important principles necessary to ensure sound procurement practice and
mitigate opportunities for collusion, fraudulent practices corruption and conflicts of interest.

These include:
a) The separation of authorities
b) Having all approvals in writing
c) Not allowing retrospective approvals
d) Maintaining specimen signatures to serve as a security reference basis for authenticating
the authority of procurement documentation

13.2. Definition of Terms

a) Responsibility is an obligation upon a subordinate, to whom authority or duties has been
delegated to use such delegated powers purely for the purposes for which they are intended
and in accountability to the person who delegated them.
b) A superior is always responsible for the activities of his subordinate and cannot escape this
responsibility by delegation.
c) Authority refers to the right to use power. This should be clearly defined, understood and
accepted by all those over whom it is exercised (excessive use of this power tends to lead to
authoritarianism, block lines of communication upwards as well as downwards, inhibits
initiative by subordinate and their job satisfaction).
d) Delegation is the process of entrusting authority and sometimes responsibility to others in a
way which enable them to make the decision their superior would otherwise make as opposed
to merely carrying out the superior’s detailed instructions.
e) Accountability means that officials are responsible for the actions and decisions that they
take in relation to procurement and for the resulting outcomes.
f) Transparency involves relevant entities taking steps to enable appropriate scrutiny of their
procurement activity.

13.3. Clear Separation of Approval Authorities

All procuring entities should strictly adhere to the principle of separation of authorities in respect
to origination of procurement proceedings, the selection of vendor, the commitment of the
procuring entity by contract with the vendor, and the acceptance of the item by the procuring
entity. Where the procuring entity has too few staff to achieve total separation of authorities then
the use of a second signature by a senior officer to endorse the approval should be allowed.
Advice may also be sought from the regulator on the matter. Other measures include:

a) Requirement for all Approvals to be in Writing: All approvals pertaining to any

procedures in the procurement cycle or associated administrative procedures will be in
writing and properly dated, documented and filed. Original records of all such approvals
will be filed.
b) No Retrospective Approvals: There should not be retrospective approvals on
procurement and disposal proceedings by any of the bodies or officials involved with any

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 of the proceeding in the procurement and disposal cycles, or in any of the administrative
procedures pertaining to procurement or disposal. Such bodies will include but not be
limited to the Public Procurement Oversight Authority, the Administrative Review Board,
the Administrative Review Panels, the Procuring Entities, the Procurement Entities,
Procurement Committees, the Tender Committees, the Tender Evaluation Committees,
the Disposal Committees, and the Goods Inspection and Acceptance Committees.

c) Approvals Under Delegated Authority: When approvals are made under delegated
authority, such delegation of authority should be made to an officer with sufficient seniority
and expertise to effectively carry out the approvals. Each procuring entity must maintain
names and specimen signatures of all of the persons authorised to make approvals within
the procurement process irrespective of if the person has direct or delegated approval
authority. The responsibility for each approval made in the procurement procedure resides
with both the person who delegates the authority and the person who is delegated the
approval authority.

d) Maintaining Specimen Signatures as a Security Reference: The procuring entity must

ensure that all specimen signatures of all persons authorised to make approvals within the
procurement cycle are maintained and kept securely as a basis for effective control and
to establish probity and clear lines of accountability for all documented procurement
procedures.

13.4. Responsibilities, Accountability and Authority of Public

Officers
a) All public officers or state officers involved in procurement or asset disposal processes will
bear responsibility for their actions and omissions.
b) Any public officer who knowingly recommends to the accounting officer excessive
procurement of items beyond a reasonable consumption of the procuring entity commits
an offence under the procurement laws.
c) Any state or public officer who fails to prepare procurement and disposal plans should be
subject to internal disciplinary action.
d) Public officers involved in transactions in which standard goods, services and works are
procured at unreasonably inflated prices should, in addition to any other sanctions
prescribed in the Public Procurement and Asset Disposal Act, 2015 or the Public
Procurement and Asset Disposal Regulations, 2020, be required to pay the procuring entity
for the loss resulting from their actions.
e) A state organ or public entity should not enter into a contract for a procurement with a
public officer or state officer or a member of a committee or Board of that State organ or
public entity; or an officer of that public entity or state organ.
f) A state officer or a public officer should not award or influence the award of a contract to
himself or herself or to the state officer's or public officer's spouse or child or a business
associate or agent or a corporation, private company, partnership or other body in which
the officer has a substantial or controlling interest.

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 g) A state officer or public officer who has an interest in a matter under consideration in a
public procurement or asset disposal should disclose in writing, the nature of that interest
and shall not participate in any procurement or asset disposal relating to that interest.

Responsibilities, Accountability and Authority of Vendors

a) Bidders as well as contractors should at all times abide by their obligations under the Public
Procurement and Asset Disposal Act, 2015 and Public Procurement and Asset Disposal
Regulations 2020, organizational policies, procurement contracts, and other instruments
applicable to their conduct and activities related to procurement.
b) A bidder, or a contractor, should not engage in or abet corrupt or fraudulent practices,
including the offering or giving, directly or indirectly, of improper inducements, or the
misrepresentation of facts, in order to influence a procurement process or the execution of
a contract.
c) Bidders should not engage in collusion, prior to or after bid submission, designed to allocate
procuring entities among bidders, establish bid prices at artificial non-competitive levels or
otherwise to deprive the procuring entity of the benefits of free and open competition.
d) A procuring entity must reject a bid if the bidder offers, gives or agrees to give an
inducement referred to above and promptly notify the rejection in writing to the bidder
concerned, to the regulator and to the relevant law enforcement authorities.

13.5. Performance Contracting and Monitoring in Public

Procurement
Public procurement monitoring refers to the systematic observation of the public procurement
system conducted in a coherent way in order to assess how this system functions and develops
over time and to establish whether the desired (targeted) state defined by policy makers has been
achieved.

Public procurement monitoring also refers to the analysis of a contracting authority's compliance
with public procurement laws at all stages of the procurement process through systemic
observation and analysis of information. The role of monitoring is to assess whether these
objectives (targets) are being met.

Monitoring and evaluating procurement procedures is an integral part of the management of an

organization. The procurement process deserves a high level of attention from management to
ensure that it does not fall prey to fraud and corruption. Procurement procedures need to include
effective controls to achieve accountability and transparency. Management’s continuous
monitoring and evaluating of the procurement process establishes integrity and compliance with
laws and ethical standards.

Steps in Monitoring of Public Procurement

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STEP 1. Identification of the internal controls: Identify the internal controls that exist and
whether the controls are operating as designed. No opportunity should exist for the any of the
controls to be overridden. Key internal controls to assess include segregation of duties,
supervisory controls, receiving controls, authorization controls and recording controls.

STEP [Link] of compliance checklist: Develop a compliance checklist to determine if

procurement procedures are being followed. The checklist should be designed with collaboration
from employees and management. By participating in the development of the checklist, the
employee is essentially being trained and has greater awareness of the process. A good
compliance checklist reinforces existing procedures and translates the objectives of fairness,
openness and competition.

STEP 3. Risk Assessment: Perform a risk assessment to map out or identify possible concerns,
weaknesses or areas of high risk. By identifying indicators or “red flags,” the organization can
ensure that adequate internal controls are in place to prevent irregularities. By identifying risks,
conflicts of interest and incidence of fraud and corruption can be curtailed.

STEP 4. Trace specific procurement: Trace specific procurements through the entire
procurement process. Consider whether the procurement provided for open competition and if it
was transparent and free from discrimination to certain suppliers. Determine if the procurement
method used was appropriate for the good or service being acquired and ensure that it was
adequately documented.

Monitoring of public procurement usually involves such activities as:

• Collection;
• Analysis; and
• Dissemination of data concerning various aspects of public procurement (e.g., its
transparency, openness, competitiveness and efficiency).

The Role of Monitoring in Public Procurement

Monitoring in public procurement has the following functions:
• Assessing the way in which the public procurement system develops as a whole and the
direction in which it is moving – some trends can be identified only after years of
observation and thereby providing meaningful information that is essential for policy
making.
• Identifying the need for any changes in the system.
• Setting short and long-term priorities and evaluating whether they have been achieved.
• Analyzing the potential effects of alternative solutions.
• Providing guidance for procurement policy and implementation decision making
• Providing information of relevance to decisions made by other policy makers.

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Benefits of Monitoring Public Procurement at the Level of Contract Managers:
a) Helps to enforce contractual obligations: The requirements of the contract must be closely
watched to ensure that there are no deviations or risks and those identified are dealt with
in time.
b) Helps to ensure that the subject of procurement will give value-for-money;
c) Allows comparison, if benchmarked, with other contracts and other contracting authorities;
d) Identifies strengths and weaknesses in the procurement process;
e) Provides inputs for improvements at higher levels.

Sources of information used in monitoring

• Notices related to public procurement – contract notices, contract award notices, voluntary
ex ante transparency notices (i.e., notices of the contracting authority indicating its
intention to award a contract without applying competitive and transparent procedures);
• Individual reports, notifications of contracting authorities (information on the application of
exceptional procurement procedures, records of the procedures);
• Summary reports prepared on a regular basis (e.g., annually) by contracting authorities
and delivered to the public procurement office or agency/authority.

Institutions (actors) in monitoring

• Public procurement offices (agencies/authorities);
• Statistical offices;
• Contracting authorities;
• Review bodies;
• Economic operators;
• State audit offices and other inspections;
• Non-governmental organizations (NGOs);
• Academia (universities, academics).
Types of Monitoring
The following forms of monitoring can be identified:

a) Audit of Compliance: The audit of compliance consists of verifying that the legal provisions
on public procurement have been properly applied. This type of monitoring means the
verification of the actions of contracting authorities in terms of their formal (legal) compliance.
The monitoring is conducted through checks (inspections) of the legality of the actions
undertaken by the contracting authorities (such as the qualification of economic operators or
the selection of the best tender) or their omissions (for example, the failure to publish a
contract notice where its publication was required). Those checks do not concern the
evaluation of public expenditures from the point of view of sound management, effectiveness,
efficacy and integrity (as this is the role of independent audit institutions)

b) Performance Evaluation/ Performance Measurement: Performance measurement is about

seeking to answer the fundamental question of whether the procurement system and
operations ultimately deliver in accordance with the main objectives set. This kind of
monitoring focuses on the assessment of the functioning of the procurement system in terms

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 of its efficiency and effectiveness. To perform this assessment, the bodies involved in the
monitoring need to collect and proceed with a wide array of data concerning procurement
processes. This data may be collectively referred to as procurement indicators. Indicators
should normally include:
1. Information about the number of procurement procedures published and/or launched
during a given reporting period which is required for the assessment of the
competitiveness and openness of the market;
2. Average time span between the publication of the procurement opportunity and the
conclusion of a contract. This information enables conclusions to be drawn on the
efficiency of the system;
3. Estimated value of the contract and the prices of selected tenders which is an indicator of
the size of the procurement market;
4. Number of tenders submitted in a given procedure which serves as measurement of the
competitiveness of procurement procedures;
5. Number of tenders rejected in procurement processes which is a good indicator of the
competitiveness of the procurement market – tenders rejected are not taken into account
during the award, and therefore the pool from which the contracting authority may choose
is smaller;
6. Number of complaints (appeals) submitted in comparison with the total number of
procurement procedures conducted;
7. Average duration of the review procedure and similar performance evaluations in order to
assess the efficiency of the review system.

An analysis of indicators provides information enabling the monitoring body to draw conclusions
with regard to:
1. Transparency of procurement processes, as expressed in the share of open and
transparent procedures in the total number of procedures; the lower percentage of
procedures initiated without the publication of contract notices indicates a more open and
transparent public purchasing system;
2. Competitiveness of procurement procedures, measured by the number of tenders
submitted on average in response to published calls for competition; a low number of
tenders would not only lead to higher prices paid by the contracting authority for goods,
services or works acquired (lower competitive pressure), but should also make the
monitoring body consider whether this situation results from the preparation of biased
technical specifications that artificially limit competition by setting too high the
requirements concerning minimum capacity levels expected from candidates (bidders)
and similar activities of contracting authorities;
3. Efficiency and effectiveness of procurement processes, measured by the average
duration of procurement processes, counted as from the moment of publication of the
contract notice up until the decision to award a contract or the conclusion of a contract;
4. Efficiency of review processes conducted by review bodies, measured by the number
of days that elapse between the receipt of an appeal and the decision (judgment) adopted
by the review body;

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 5. Suitability of specific procurement procedures to ensure value-for-money, measured
by the savings obtained by the contracting authorities.

Performance measurement is conducted at various levels:

• National level – assessing the performance of the national public procurement system as
a whole.
• Contracting authority level – assessing the performance of the contracting authority’s
operations.
• Contract management level – addressing the issue of delivery of an individual contract.

c) Policy-Compliance Monitoring: Consists of the assessment of the instrumentality of public

procurement processes in the achievement of specific procurement policy goals, such as
sustainable public procurement, greater participation of SMEs, youth, women and people
living with disabilities and the use of e-procurement). Sustainable public procurement covers
the inclusion of environment related considerations (green public procurement) and social
considerations (socially responsible procurement) in public procurement processes.

Public Procurement Performance Measurement

Public procurement performance contracting main objective is to deliver efficiency and value
for money in the use of public funds. Ensuring that public entities carry out public procurement
in line with these objectives constitutes one of governments' important mandate.

The rationale for measuring performance in public procurement

• Public procurement contracts represent a major share of any country’s GDP and public
expenditure budget. These levels of expenditure alone provide sound reasons for
analyzing the performance of public procurement operations at all levels.
• The overriding objective of a state’s public procurement system is to deliver efficiency and
“value for money” in the use of public funds, whilst adhering to requirements of the national
laws and policies. Performance measurement is about seeking to answer the fundamental
question of whether the procurement system and operations ultimately deliver in
accordance with the main objectives set.
• Three different levels of performance measurement within a public procurement system
are broadly identifiable There are close links between the three levels in terms of
performance interdependency. However, the needs, objectives and methodologies for
measuring performance can differ.

Benefits of Effective Performance Management

The main benefits of effective performance management are outlined below with reference to the
three different levels of performance measurement identified.

i) National (Meta) Level: Good quality information on the performance (standard or quality) of
the public procurement system at a national level:
• Assists policy makers to understand how various policy goals interact and how policy
impacts on the overall performance of the procurement system;

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 • Enables governments and parliaments to improve the quality of decision-making and to
take constructive and long-term actions that will most effectively develop their public
procurement systems (e.g., in terms of procurement policy and regulatory reform,
institutional development and capacity strengthening);
• May create stronger incentives on governments to improve their public procurement
systems, help them to set priorities for reform actions in the area of public procurement
and to monitor progress against the objectives set;
• Can provide valuable information for the assessment of the public expenditure system.

ii) Contracting Authority (Macro) Level: A good performance measurement system can assist
contracting authorities in the effective implementation of their operational goals and strategies
and in decision making by:
• Providing information which puts them in a better position to determine the degree of
efficiency and effectiveness of their procurement operations as a whole and at the level of
individual projects, such as major infrastructure projects;
• Identifying strengths and weaknesses in their procurement operations and monitoring
progress over time, so assisting in setting the correct priorities and in taking the
appropriate actions to improve weak areas;
• Forming an integral part of long-term strategic and operations planning, including the
annual budget process, management and staff development.

iii) Contract Management (Micro) Level: Contract management at individual contract level, with
its linkage to payment mechanisms:
• Incentivizes better and higher-quality delivery of contract requirements;
• Assesses whether a contract works efficiently and delivers “value-for-money”;
• Provides valuable feedback and confirmation of the extent to which the procurement
process has been efficiently planned and managed, in particular with regard to: the design
of the technical specifications or terms of reference; the choice of contracting strategy and
contract model; the choice of procurement procedure; the setting of selection and award
criteria; and the conduct of the tender evaluation and the award of the contract;
• Will generate good arguments and incentives for change and improvements of the
procurement process in all its parts, and in the internal and external relationships through
continuous review of lessons learned;
• Where benchmarking is used as a performance measure, a contracting authority will be
in a position to compare its own performance and results with the contracting authorities
responsible for similar types of operations.
Challenges of Performance Measurement Systems at all Three Levels Outlined Above
• Consistent policy goals and objectives: Policy goals and objectives that change or are
inconsistent can render performance measurement systems meaningless and act as a
constraint on opportunities to maximise the economic outcome and efficiency of public
procurement operations. Consistency in policy and other objectives is therefore a critical
element in effective performance assessment and management.
• Accurate and reliable statistical information: Performance assessment and
management is dependent on good quality, relevant and appropriate data which must

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 collected in a robust and consistent manner based on strong research SIGMA. Significant
efforts need to be made to ensure that information collected is of practical use.
• Defining and measuring efficiency: Performance measurement often seeks to measure
“efficiency” but there is no single definition or way in which to measure efficiency. Care
therefore needs to be taken to ensure that a clear definition is agreed and applied
consistently.
• Introducing a performance driven culture: Regulatory and institutional mechanisms
may offer few incentives for contracting authorities to strive for improved efficiency or
better performance, although contracting authorities may seek such improvements if
driven by economic imperatives or by concerns relating to improvements in quality.
Consideration therefore needs to be given to how regulatory and institutional mechanisms
can support positive performance assessment.
• Strong central support and guidance: Many of the above factors are dependent on
strong central support and guidance both at central government level and within particular
institutions. This may require a broad information campaign, led by organisations with a
clear mandate, national level guidance documentation and support. It may also require a
national level policy decision obliging contracting authorities to implement meaningful
performance management systems and to provide relevant information for the purposes
of collecting national data
• Availability of information: Information that is not disseminated widely may be of little
practical use, making the reporting of achievements and results important. The results and
findings should be presented in an annual report and made accessible in a transparent
manner within the public administration for comparative and benchmarking purposes, as
well as to the general public.

With reference to the fundamental objectives set for the operations and procurement
measurement system, the report should:
• Describe the main findings in terms of strengths and weaknesses of public
procurement operations, and
• Define a list of recommended actions for improvement of the system. The results
should form part of strategic planning in the short and medium terms.

How to Measure Performance

The following are the methodologies for measuring performance at different levels of the public
procurement system.

Methodologies at the National (Meta) Level

a) Peer Reviews and Assessments: A peer review is an instrument for diagnosing public
sector operations, including public procurement, which was developed by the Organisation
for Economic Co-operation and Development (OECD) and has been used for a long time.
The peer review team consists of international senior experts with extensive background
and expertise in the area under review. The purpose is to identify strengths and
weaknesses (performance review) in the procurement system, with special focus on the
main components, such as legislative and institutional frameworks, procurement

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 organisations in terms of capacity and capability, and markets. Based on the analysis and
conclusions, the peer review team provides recommendations for improvements where
needed, but it is entirely a matter for the country to decide on the actions to be taken
following the recommendations.
b) Regulatory Impact Assessment (RIA): The role of a regulatory impact assessment (RIA)
is to provide a detailed and systematic appraisal of the potential impacts of a new law or
regulation in order to assess whether the regulation is likely to achieve the desired
objectives.
c) Stakeholder Surveys: Regular surveys can be carried out addressing important areas
and issues connected to the performance of the public procurement system. The survey
should be disseminated, as appropriate, to a selection of contracting authorities, business
associations and individual economic operators, audit institutions, universities and other
important stakeholders with an interest in public procurement. The survey could be
prepared and managed by the public procurement office of the country or by an
independent organization or academic institution. If the survey is repeated on a regular
basis, there is a possibility of capturing the differences in opinions from one survey to
another. The results of the surveys should be used by the government as a basis for
considering changes in the procurement system in areas where problems have been
identified.
d) External Audit Institutions: External audit institutions have important tasks, on an ex-
post basis, in the identification of strengths and weaknesses in the execution of public
procurement operations at the level of contracting authorities. These audits aim to
determine the extent of compliance or non-compliance with laws and regulations as well
as the performance and achievements that have been made in relation to the objectives
and targets set for a procurement activity.

Methodologies at the Contracting Authority (Macro) Level

a) Setting performance targets: The performance targets used should have the following
qualities:
i. Relevant to what the organisation is aiming to achieve;
ii. Attributable – the activity measured must be capable of being influenced
by actions that can be attributed to the organisation, and it should be clear
where accountability lies;
iii. Well-defined – with a clear, unambiguous definition so that data will be
collected consistently and the measure will be easy to understand and use;
iv. Timely, producing data regularly enough to track progress and quickly
enough so that the data is still useful;
v. Reliable – accurate enough for its intended use and responsive to change;
vi. Comparable with either past periods or similar programmes elsewhere;
vii. Verifiable, with clear documentation supporting it, so that the processes
producing the measure can be validated.

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b) Benchmarking: Benchmarking that involves the comparative study or analyses of successful
procurement systems of all or a number of contracting authorities can be an excellent method
of assisting with the definition of performance targets. Benchmarking is also a method by
which a contracting authority may compare its own operations in various aspects with
comparable external undertakings, such as a similar contracting authority known for its
excellence. Benchmarking can also be used for various other comparisons, such as prices or
service levels.

Methodologies at the contract implementation (micro) level

The methodologies can be divided into three broad areas: delivery management, relationship
management and contract administration. Performance measurement is part of the contract
management process. Performance measurement of individual contracts will follow essentially
the same route as described above by setting out methods for information and data gathering,
defining performance areas, performance targets, baselines, indicators, measures and methods
of analysis.

Some of these will be

a) Cost overruns.
b) Effectiveness of communication.
c) Inputs, process and outcomes.
d) Timeliness.

13.6. Declaration of Potential Conflicts of Interest

All members of any committee, board or panel involved in procurement proceedings should
declare any potential conflicts of interest and exclude himself or herself from participating in the
proceedings. All such declarations must be made in writing and kept as part of the record of the
proceedings.

All members of a procurement unit, evaluation committee, tender committee or procurement

committee, all staff involved in contract administration, accounting officers, chief executives and
members of boards should, prior to commencing any procurement activities or the approval of
any procurement proceeding make a declaration to the effect that they have no:
• Marital or direct birth relationship with a bidder, its legal counsel or its officers;
• During the last three years, has not been an employee or officer of a bidder or held a
financial interest in a bidder;
• Is not negotiating or has no arrangement concerning prospective employment in a bidder.

13.7. Review Questions

Case Study
Metropolitan Construction Agency (MCA) is government agency under the ministry of transport
established to build regional access roads in the urban part of the capital city. In 2021, MCA
advertised an international open tender for the construction of 42km express way in the capital

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city to grant access to farmers wanting to supply horticultural products to international markets
via the international airport. Wang Yeng International Construction Ltd was single sourced and
awarded the contract to construct and hand over the road by the end of the year 2022.

In the year 2022, Wang Yeng International wrote to MCA requesting for more time to complete
the work citing court cases due to land issues by the residents as the major reason hampering
the progress of the work. MCA later realized during the routine inspection that Wang Yeng
International Construction Ltd had abandoned the work before completion and had evacuated all
the equipment from the site.

MCA tried tracing the contractor using the contacts provided in the bidding documents but all
efforts to trace Wang Yeng International Ltd efforts bore no fruits. Following the disappearance of
Wang Yeng International Ltd from the site, MCA board decided that a new contractor be found to
complete the work.

Required
a) Explain the benefits MCA could have obtained by monitoring the performance of Wang
Yeng International Construction Ltd before disappearance.
b) Describe the challenges MCA faced while measuring the performance Wang Yeng
International Construction Ltd.
c) Illustrate methodologies MCA could have adopted in measuring the performance of
Wang Yeng International Construction Ltd.
d) Justify what would be the most appropriate procurement method that MCA can use to
complete the work abandoned mid-way by Wang Yeng International Ltd.
e) Point out the limitations of using International Open tender to organizations such as
MCA.

13.8. Further Reading

GOK (2015). Public procurement and asset disposal act. Government Press.

GOK (2020). Public procurement and asset disposal regulations. Government Press.

GOK (2010). Constitution of Kenya. Government Press.

GOK (2012). Public finance management act. Government Press.

GOK (2007) Supplies practitioners management act. Government Press.

[Link]

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 CHAPTER 14
Emerging Issues and Trends in Public
Procurement

Chapter Structure

14.1. Introduction.
14.2. Emerging issues and trends in the procurement of goods, services and works.
14.3. Response mechanisms to the emerging issues and trends in procurement of
goods, services and works.
14.4. Coping with or adopting to the emerging issues in procurement of goods, services
and works.
14.5. Review questions.
14.6. Further reading.

Competence

The trainee should have the ability to respond to the emerging issues and trends in public
procurement.

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14.1. Introduction
Increasingly, procurement management is becoming a strategic priority of firms for their
sustainable competitive advantage in turbulent times. In today's dynamic market environment,
procurement is positioned as a critical integrative business process and its focus has been
extended from short term cost minimization to long term value creation and delivery.

There is need for more changes in the way procurement of goods, works, or services is carried
out as well as the supply chains. A procurement system need to be very agile and quick to adapt
to customers ever changing needs.

Technology is the leading change agent in procurement today. Many organizations can adapt
several procurement technologies such as e-sourcing, e-procurement, e-catalogs, e-invoicing, on
line contract administration, etc.

These procurement technologies will remain relevant in the future as their goal is to achieve more
saving in the supply chain. Mostly now that the world is increasing doing international
procurement, e-procurement is and will remain a very helpful tool in the supply chain.

14.2. Emerging Issues and Trends in the Procurement of

Goods, Services and Works
a) Investing in IT solutions: There has been an increase of use of information technology in
the supply chain. Adoption of IT in communication and information sharing like use of e-
procurement systems for procurement management, use of Electronic Data Interchange for
information sharing, Material Requirement Planning for inventory management. The
government has in the recent past automated public procurement with a directive to ensure
all procuring entities are using e-procurement. This has been done through Integrated
Financial management System (IFMIS) and ERP systems. The use of e procurement system
has increased the efficiency and transparency in the procurement process. The National
treasury is in process of acquiring a national e procurement software (e-GP) which will be
deployed to all procuring entities.

Cloud computing and software as service (SaaS) products are used to support many
business operations and procurement. Cloud-based platforms are allowing companies to
lower upfront investment, reduce overhead, and enhance real-time information sharing.
Employees can access applications from anywhere and at any time. That helps organizations
improve productivity and stay competitive in the global economy.

A data-driven approach will help businesses gain insights into and devise innovative
solutions for modern challenges. They will reduce uncertain decision-making, inefficient use
of resources, etc., to demonstrate the value of procurement and drive organizational changes.

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 The key to leveraging an analytically-driven approach in procurement is to embed analytics
into the decision-making process instead of treating it as a separate project.

The availability of data means businesses need the ability to process the large amount of
information in real-time so they can make accurate data-driven decisions. For example,
Artificial Intelligence (AI) can be used to source vendors and aid contract management by
analyzing key metrics for renewal and performance. Machine learning can be used to
facilitate review and approval processes, as well as update catalog or contract data on
products, materials, and suppliers to minimize errors.

Mobile devices and mobile-friendly services allow users to manage the procurement
process from anywhere with an Internet connection. It augments the benefits of cloud
computing by increasing the accessibility of various digital tools. As more millennials take on
decision-making roles, the demands and expectations for mobile services are only going to
rise. As before, mobile helps improve cost efficiency and productivity.

The new generation of procurement system will be user-driven instead of office-controlled.

Self-service portals help improve customer experience, customer satisfaction, and customer
retention. They also allow companies to lower cost and improve efficiency Self-service
procurement platforms enables end-users to execute non-critical purchases and manage their
account information. This frees up procurement resources and personnel to handle complex
transactions

b) Public participation and effective communication: There is an increased focus on public

consultation in developing and formulating changes to the public procurement system and
standard processes. Policy makers promote public consultations, invite the comments of the
private sector and civil society, ensure the publication of the results of the consultation phase
and explain the options chosen, all in a transparent manner. Effective communication should
be conducted to provide potential vendors with a better understanding of the country’s needs,
and government buyers with information to develop more realistic and effective tender
specifications by better understanding market capabilities. Such interactions should be
subject to due fairness, transparency and integrity safeguards, which vary depending on
whether an active procurement process is ongoing. Such interactions should also be adapted
to ensure that foreign companies participating in tenders receive transparent and effective
information.

c) Sustainable public procurement (SPP): Public procurement wields enormous purchasing

power, accounting for up to 30 percent of GDP in many developing countries. Leveraging this
purchasing power by promoting public procurement practices that are sustainable, in
accordance with national policies and priorities, plays a key role in achieving sustainable
public procurement (SPP). Sustainable Public Procurement (SPP) is a process by which
public authorities seek to achieve the appropriate balance between the three pillars of
sustainable development - economic, social and environmental - when procuring goods,

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 services or works. SPP can be a tool in establishing synergies among the three pillars of
Sustainable Development under the principle of good governance:
• Economic feasibility: Value for money (VfM), economic growth, job creation, promotion of
small and medium enterprises (SMEs), environmental and social integration, total cost of
ownership and life cycle costing.
• Environmental balance: Efficient use of natural resources, maintaining the quality of the
ecosystems (air, water and land), conservation of biodiversity, reduction of the ecological
footprint, alternative energies.
• Social progress: protection of human rights, reduction of poverty, hunger and inequality,
food security, decent work and living conditions, health and safety, gender equality

d) Harmonisation of public service delivery: There is movement to rationalise public

procurement spending by combining procurement processes with public finance management
to develop a better understanding of the spending dedicated to public procurement, including
the administrative costs involved. This information can be used to improve procurement
management, reduce duplication, and deliver goods and services more efficiently. Budget
commitments should be issued in a manner that discourages fragmentation and is conducive
to the use of efficient procurement techniques. Where necessary, multi-year budgeting and
financing to optimise the design and planning of the public procurement cycle is encouraged.
Flexibility, through multi-year financing options – when justified and with proper oversight –
should be provided to prevent purchasing decisions that do not properly allocate risks or
achieve efficiency due to strict budget regulation and inefficient allocation. There should be
consistency and harmonisation of public private partnerships and public procurement
principles across the spectrum of public services delivery.

e) Outsourcing: Outsourcing not only enables companies to concentrate on their core business
but also to get expertise in particular areas like procurement and disposal, security, logistics,
cleaning, and manufacturing while saving on costs. It enables companies to produce best
quality on their core business. There are various reasons why a company may outsource:
• To get access to world class products or services
• To concentrate on company’s core business
• Reduce operational costs
• To share risks with external partnership
• To save on time for time consuming functions
• Maximize the use of external resources

f) Changing roles of procurement professionals: The procurement role has changed and will
continue to change. It has shifted from being technical to more managerial in nature. There is
an emerging trend to ensure that procurement officials meet high professional standards for
knowledge, practical implementation and integrity by providing a dedicated and regularly
updated set of tools, for example, sufficient staff in terms of numbers and skills, recognition of
public procurement as a specific profession, certification and regular trainings, integrity
standards for public procurement officials and the existence of a unit or team analysing public

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 procurement information and monitoring the performance of the public procurement system.
Secondly there are efforts to provide attractive, competitive and merit-based career options
for procurement officials, through the provision of clear means of advancement, protection
from political interference in the procurement process and the promotion of national and
international good practices in career development to enhance the performance of the
procurement workforce. Another emerging trend is the collaborative approaches with
knowledge centres such as universities, think tanks or policy centres to improve skills and
competences of the procurement workforce. The expertise and pedagogical experience of
knowledge centres should be enlisted as a valuable means of expanding procurement
knowledge and upholding a two-way channel between theory and practice, capable of
boosting application of innovation to public procurement systems.

g) Strategic sourcing and supplier management: After locating proper suppliers and securing
contracts, it then falls to the purchasing function to monitor and control the suppliers'
performance until the contracts are fulfilled—and beyond, if further business is to be
conducted. All purchasing organizations need some vehicle for assessing supplier
performance. Many firms have formal supplier-evaluation programs that effectively monitor
supplier performance in a number of areas, including quality, quantity delivery, on-time
delivery, early delivery (just-in-time users do not like early deliveries), cost, and intangibles.

For some firms, consistent supplier performance results in certification. Supplier certification
generally implies (or in some cases formally asserts) that the supplier has been a part of a
formal education program, has demonstrated commitment to quality and delivery, and has
proven consistency in his processes. Frequently, organizations are able to take delivery from
certified suppliers and completely bypass the receiving inspection process.

The buyer is also responsible for maintaining a congenial relationship with the firm's suppliers.
If the buyer is an unreasonable negotiator, and does not allow the supplier to make an
adequate profit, future dealings may be endangered. The supplier may refuse to deal with the
buyer in the future, or the supplier may greatly increase the price of a product the buyer could
not obtain elsewhere. Also, relations can become strained when the buyer consistently asks
for favored treatment such as expediting or constantly changing a particular order's delivery
schedule.

h) Global Sourcing: Globalization is the integration of international trade, people, culture and
investment around the world. People are now increasingly adopting globalization as there is
a growing need to export, outsource or import from other countries in order to get best of
quality, better prices, more variety, better technology, etc. Global sourcing is therefore
sourcing products and (sometimes services) irrespective of national boundaries. Purchasing
companies are seeking low labor and production costs which are not countered by high
delivery costs. Many improving countries also offer attractive tax and tariffs to encourage
purchasing from them.

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i) Purchasing Cards: As transaction costs soar companies are looking to buy smarter and cut
costs any way possible. One popular method is recent years is to supply certain employees
with purchasing cards, or corporate procurement cards. In most cases, the cards are used to
purchase small business items, and then a master bill is sent straight to the purchasing
department. In some cases, the cards work only between a buyer and suppliers identified in
advance, eliminating the bank that is involved with credit cards. Additionally, the cards can be
coded to include a variety of important transaction information that reduces the amount of
paperwork needed to track the sale, including sales tax data, customer code (such as job
number or cost center), taxpayer identification number, and more. This coding allows
companies to receive valuable information about each transaction and greatly streamlines the
purchasing process.

The cards are beneficial to suppliers as well. The most important advantage is that the vendor
receives payment much more quickly than in the past—sometimes in as short a period as two
or three days. Additionally, the supplier saves money by not having to issue and mail an
invoice, and the supplier knows the credit worthiness of the customer before the transaction
is even processed.

j) Lean Manufacturing/JIT: Lean manufacturing encompasses a number of things. Lean

manufacturing is a process for measuring and reducing inventory and streamlining production.
It is a means for changing the way a company measures plant performance. A knowledge-
based system, lean manufacturing takes years of hard work, preparation, and support from
upper management.

It involves identifying and eliminating non-value-adding activities in design, production, supply

chain management, and customer relations. Lean producers employ teams of multiskilled
workers at all levels of the organization and use highly flexible, increasingly automated
machines to produce volumes of products in potentially enormous variety. In effect, they
incorporate the advantages of both mass production (high volume, low unit cost) and craft
production (variety and flexibility). Quality is higher than in normal mass production.
Compensation and rewards are based on meeting the total cost equation rather than on labor,
overhead, or individual quality measures. Lean manufacturing and JIT (lean/JIT) share most
of the same characteristics, goals, and philosophy. In fact, the terms are often used
interchangeably.

14.3. Coping With or Adopting to the Emerging Issues in

Procurement of Goods, Services and Works
Organisations are employing different strategies to adopt to the changing environment in
procurement and supply chain.

a) Adopting more agile supply chain: Combining visibility with the right level of control will
result in the type of agile supply chain that organisations need, to be able to adjust to changing

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 trends and circumstances in the supply chain for them to deliver services or retain customers
and be ahead of competition.

b) Adopting strategic cost saving initiatives: In order for entities to save on cost, they should
go beyond just reducing the cost of logistics or warehousing. There is now more focus try to
get more discounts, negotiating for best rates, optimizing inventory cost as well as managing
the working capital. Good procurement practice dictates that inventory should be reduced to
an optimum level that will not allow overstocking or accommodate increased demand.
c) Giving more focus to specific customer segments: For state owned enterprises (SOE),
more focus is now being given to a specific niche of customers rather than serving a large
crowd of people without a specific focus. Procurement should be more focused on the niche
since niche products are more unique and the profits are higher. Even in a low tide in the
economy, customers are willing to pay more for their unique product.

d) Aligning organizational supply chain objectives with organizational objectives: In an

organization, various departments will be involved in the supply chain or procurement
activities. If these departments are able to work together, will lead to a successful procurement
function. Outsourcing non-core activities will enable a firm to focus on his strength.
Implementing this part of a strategy requires finding the right partners and working closely
together with them.

e) Achieving Quality and Compliance: Due to globalization and increased competition has
compelled firms to create or sell high quality goods, works and services consistently. Quality
has to be addressed at every level from the raw materials, production, packaging, logistics
and all staged of product handling. Firms need to ensure that they meet local and international
standards in their procurement. Companies need to ensure they are certified by quality
organizations such as ISO.

f) Data management and Supply Chain Integration: Companies are increasing overcoming
supply chain challenges by properly managing their data and integrating their supply chains.
Due to increased globalization, companies may be overwhelmed by massive data coming
from their supplies and customers in different regions which they need to manage. Information
in the supply chain may differ from material prices, demand forecasting, freight bills,
compliance documents, contracts with suppliers, etc. Companies will be able to solve this
challenge by connecting their supply chain systems with those of suppliers and partners. This
will give them visibility and control over their supply chain processes, production,
warehousing, logistics, etc.

14.4. Review Questions

a) Describe challenges procurement professionals face due to the emerging trend in
procurement of goods, services or works?

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 b) Explain ways organizations have adopted to cope up with emerging trends in procurement
of goods, works or services?

14.5. Further Reading

[Link]
[Link]
Lysons, K & Brian Farrington, B. (2000). Procurement and supply chain management. Pearson
Education
W.C. Jr, (2006). Purchasing and Supply Management. Benton.
Kenya Institute of Supplies Examination Board, (Undated). Procurement of Goods Services and
Works. Draft Instructional Module.

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