EFFECTS OF CONFLICT OF

INTEREST ON PROCUREMENT
FUNCTION OF PUBLIC ENTITIES
IN KILIFI COUNTY, KENYA.
CONCEPT PAPER SUBMITTED FOR DEFENCE

JULY 2024
Background to the Study
• Conflict of interest poses a significant challenge in public
procurement, impacting performance by introducing biased decisions
that may not align with organizational interests. These conflicts arise
from personal interests conflicting with professional duties, such as
personal relationships with suppliers or acceptance of incentives.
Such conflicts undermine transparency and integrity, essential for
effective public fund utilization. Addressing these issues through
stringent regulations, transparency measures, and regular audits is
crucial to maintaining trust and accountability in public procurement
processes, globally and across diverse sectors.
Statement of the Problem
• Conflicts of interest in procurement functions within Kenyan public
entities have severely compromised the efficiency and integrity of
these processes. This issue affects various stakeholders, including
government officials, procurement officers, suppliers, and the general
public. Key employees addressing this problem are within the
procurement and finance departments, alongside oversight from
regulatory bodies like the Public Procurement Regulatory Authority
(PPRA) and the Ethics and Anti-Corruption Commission (EACC).The
core issue is the prevalence of conflicts of interest, leading to biased
decision-making and compromised procurement processes.
Statement of the Problem CONT
• The Auditor General’s 2023 report indicated that over 35% of
procurement processes in public entities were influenced by conflicts
of interest, resulting in inflated costs and substandard goods and
services. This has led to inefficiencies, increased operational costs,
and a lack of transparency.The problem originates from both within
and outside the procurement departments, where decisions are often
influenced by personal interests rather than organizational goals. This
affects various operations, including vendor selection, contract
awarding, and sourcing processes.
Statement of the Problem CONT
• Departments like finance and audit are also impacted due to financial
inefficiencies and operational disruptions caused by compromised
procurement decisions.The issue has persisted in Kenya, with notable
increases in cases since 2015, as highlighted by reports from the PPRA
and EACC. Despite various regulatory measures and policies, their
implementation has often been ineffective due to a lack of
enforcement and accountability.
Statement of the Problem CONT
• A comprehensive strategy is required, involving stricter regulations,
enhanced monitoring, and robust accountability mechanisms to be
executed over the next two years.Addressing conflicts of interest in
procurement is crucial for several reasons. It ensures efficient use of
public resources, enhances transparency and accountability, and
fosters a competitive and fair procurement environment, essential for
sustainable economic development. Implementing stringent
measures to prevent and manage conflicts of interest will improve
procurement performance and contribute to the overall integrity and
effectiveness of public entities in Kenya.
Objectives of the Study
• The effects of conflict of interest on procurement function of public
entities in Kilifi County, Kenya.
Specific objectives
• The study will be guided by the following specific objectives:
I. To determine the Influence of Resource-Based Conflicts on
procurement function of public entities in Kilifi County.
II. To determine the Influence of Financial Conflicts on procurement
function of public entities in Kilifi County.
III. To establish the Influence of Relational Conflicts on procurement
function of public entities in Kilifi County.
IV. To determine the influence of Compliance Conflicts on
procurement function of public entities in Kilifi County.
Hypotheses
• The study will be guided by the following hypotheses
• Ho1: There is no significant statistical influence of Resource-Based
Conflicts on procurement function of public entities in Kilifi County.
• H02 There is no significant statistical influence of Financial Conflicts
on procurement function of public entities in Kilifi County.
• H03 There is no significant statistical influence of Relational Conflicts
on procurement function of public entities in Kilifi County.
• H04 There is no significant statistical influence of Compliance Conflicts
on procurement function of public entities in Kilifi County.
Theoretical Framework
• Agency Theory
Agency Theory, developed by Michael Jensen and William Meckling in 1976,
examines the conflicts of interest between principals (owners) and agents
(managers) within organizations. It highlights the issues arising from differing
goals and information asymmetry, which can lead managers to act in their
own interests rather than those of the owners, resulting in agency costs. The
theory proposes mechanisms such as incentive schemes and performance-
based contracts to align the interests of managers with those of the owners.
Research by Eisenhardt and others has shown that proper incentive
structures and monitoring mechanisms can reduce these costs and improve
organizational performance. This theory is applicable both internally within
corporate settings and externally in public procurement, emphasizing the
need for effective governance practices to ensure agents act in the best
interests of their principals.
• Stakeholder Theory
Stakeholder Theory, introduced by R. Edward Freeman in 1984,
expands organizational responsibility beyond shareholders to include all
parties affected by the organization's actions. This theory argues that
the interests of stakeholders—such as employees, customers, suppliers,
and the community—should be considered in decision-making
processes. Freeman's work has influenced corporate governance and
business ethics by highlighting the importance of balancing stakeholder
interests for long-term success.
CONT
• The theory emphasizes managing relationships with diverse stakeholders
through transparent communication, ethical decision-making, and
collaborative strategies, challenging the traditional shareholder-centric
model. For example, companies might improve employee welfare to
boost productivity or engage in community projects to enhance their
corporate social responsibility profile. Research by Donaldson, Preston,
and Clarkson has shown that effectively managing stakeholder
relationships can lead to better financial performance and sustainability.
Internally, balancing employee and shareholder interests can motivate
the workforce, while externally, managing supplier, taxpayer, and
regulatory interests ensures fair and efficient procurement processes.
Relational Contracting Theory
• Relational Contracting Theory, developed by Ian R. Macneil in 1980,
highlights the importance of long-term relationships and mutual trust
in contractual agreements, contrasting with traditional contracts that
focus on specific terms. This theory emphasizes flexibility, mutual
cooperation, and shared understanding, suggesting that contracts
should be seen as ongoing relationships rather than isolated
transactions. Relational contracts are particularly effective in
managing complex and uncertain environments by fostering trust,
communication, and adaptability.
CONT
• For instance, companies may use relational contracting with key
suppliers to ensure steady material supply and foster innovation,
while public procurement agencies can build trust and cooperation
with suppliers, enhancing service delivery. Research by Heide and
John (1992) and Dyer and Singh (1998) supports that relational norms
and governance mechanisms improve cooperation, reduce conflicts,
and lead to superior performance outcomes compared to traditional
contracts, benefiting both internal operations and external
partnerships.
Institutional Theory
• Institutional Theory, introduced by scholars such as John Meyer and
Brian Rowan in 1977, explores how organizations are shaped by the
rules, norms, and beliefs in their environments, suggesting that they
conform to these institutional pressures to gain legitimacy, resources,
and survival prospects. DiMaggio and Powell (1983) further
developed the theory by introducing the concept of institutional
isomorphism, which explains the similarities between organizations in
the same field due to coercive, mimetic, and normative pressures.
CONT
• Coercive isomorphism arises from external pressures like laws and
regulations, mimetic from imitating others in uncertain situations, and
normative from professional standards and practices. For instance,
internally, companies may adopt industry best practices to meet
regulatory requirements, while externally, public procurement
agencies may conform to international standards to enhance
credibility. Research by Scott (2001) and Tolbert and Zucker (1996)
demonstrates that adherence to institutional norms enhances
organizational legitimacy, performance, and transparency, ultimately
improving efficiency and reducing corruption in public procurement
processes.
2.5 Conceptual Framework

Resource-Based Conflicts
 Insufficient Inventory
 Competing Priorities
 Supplier collaboration

Financial Conflicts
Procurement Function
 Budget Discrepancies
 Payment Conflicts  Effective Coordination
 Financial Constraints  Procurement Integrity
 Organizational Reputation

Relational Conflicts
 Conflicting Priorities
 Goal Misalignment
 Work Style Differences

Compliance Conflicts
 Legal Compliance
 Ethical Standards
 Non-conformance Disputes

Independent Variables Dependent Variable

Proposed Research Design,
Methods/Procedures
• Research Design
A cross-sectional survey research design will be used for the
investigation. A cross-sectional survey research approach will be used in
the study to examine the Effects of Conflict of Interest on Procurement
function of public entities in Kilifi County. A cross-sectional survey
research approach allows for the collection of data from a
representative sample of the target population.
• Target Population
The target population for this study on the effects of conflict of interest
on the procurement function of public entities in Kilifi County, Kenya,
includes a diverse group of stakeholders integral to the procurement
process. It comprises 60 procurement officers (25% of the total
population) who are directly involved in procurement activities and
decision-making. Additionally, there are 30 finance officers (12.5%)
overseeing budget allocations and financial compliance, and 20 senior
management personnel (8.3%), such as directors and heads of
departments, providing strategic oversight and governance.
CONT
• The study also includes 10 internal auditors (4.2%) responsible for
assessing compliance and ensuring transparency within the
procurement function. Administrative staff, supporting procurement
operations through clerical and administrative tasks, number 40
individuals (16.7%). Lastly, the study involves 80 external stakeholders
(33.3%), such as suppliers and contractors, who interact with the
public entities' procurement processes and may be affected by
conflicts of interest. In total, the target population consists of 240
individuals whose roles and interactions are crucial for understanding
the impact of conflicts of interest on the procurement function in
public entities within the county.
Table 1 Target Population

Category of Employees Number of Approximation (% of

Employees Total Population)
Procurement Officers 60 25%
Finance Officers 30 12.5%
Senior Management (Directors/Heads 20 8.3%
of Departments)
Internal Auditors 10 4.2%
Administrative Staff 40 16.7%
External Stakeholders 80 33.3%
(Suppliers/Contractors)
Total 240 100%
• Sampling size
Using the Yamane formula with a 5% margin of error, a sample size of
150 will be determined from the target population of 240 individuals.
This sample size was proportionally allocated across the different
categories of employees and stakeholders involved in the procurement
function of public entities in Kilifi County, Kenya. Specifically, the
sample includes 38 procurement officers, who are pivotal in
procurement activities and decision-making. It also encompasses 19
finance officers, responsible for budget oversight and financial
compliance, and 13 senior management personnel, such as directors
and department heads, who provide strategic governance.
CONT
• Additionally, the sample includes 6 internal auditors, who ensure
transparency and compliance, and 25 administrative staff, who
support procurement operations. Moreover, 50 external stakeholders,
including suppliers and contractors, are part of the sample to
represent those interacting with the procurement processes. This
carefully calculated sample size ensures a representative and
comprehensive understanding of the impact of conflicts of interest on
the procurement function within the public entities of Kilifi County.
Table 2 Sample Size

Category of Employees Population Sample Size (using

Size proportional allocation)
Procurement Officers 60 38
Finance Officers 30 19
Senior Management (Directors/Heads 20 13
of Departments)
Internal Auditors 10 6
Administrative Staff 40 25
External Stakeholders 80 50
(Suppliers/Contractors)
Total 240 150
• Sampling Procedure
The researcher will adopt a stratified random sampling technique,
ensuring that all units from the sampling frame have an equal chance
to be drawn and occur in the sample. This technique involves dividing
the population into distinct strata based on predetermined
characteristics.
• Data Collection Methods & Procedures
The necessary data will be gathered using a survey questionnaire.
Close-ended questions that elicit opinions about the Effects of Conflict
of Interest on Procurement function in Public Entities be included in the
questionnaires. The researcher will perform a pilot study on chosen 15
respondents from state corporations in coastal region in the coastal
region, which will be subsequently removed from the main study, to
make sure the research instruments are valid, trustworthy, clear, and
error-free.
• Data Analysis and Presentation
The researcher will employ statistical computer package, the SPSS
version 29 to analyze the data. This study will use quantitative data
specifically descriptive statistics. Regression analysis will be used to
determine whether one variable is a predictor of another variable, thus
it will be used to determine the relationship between the dependent
and independent variables. The findings will be presented in the form
of table, and Percentage.
• The regression model will be as follows:
Y= α +β1X1 +β2X2 + β3X3 + β4X4 + ε Where:
Y = is the dependent variable; which will be procurement function.
α = Constant term
β1, β2 and β3 are the coefficients of the predictor variable and
X1= Resource-Based Conflicts
X2= Financial Conflicts
X3= Relational Conflicts
X4= Compliance Conflicts
ε = Error term.