Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.
Last Published: 8/13/2019

U.S. firms have had limited success bidding on government tenders in Kenya. There are widespread reports that corruption often influences the outcome of public tenders. In 2014, the government inaugurated the Integrated Financial Management Information System (IFMIS), which the government argues will improve transparency and accountability in government financial management through the automation of budget, accounting, procurement, and revenue management functions. As part of the IFMIS, the government launched an E-Procurement system to automate tenders. In July 2015, the government made use of the E-Procurement system mandatory for national and county government institutions, but subsequently suspended the system due to complaints about lack of connectivity. In December 2016, the National Treasury announced it has allocated approximately $76 million to maintain, upgrade, and address challenges with the IFMIS system.

In January 2016, a new procurement law, the Public Procurement and Asset Disposal Act, came into force, operationalizing Article 227 of the 2010 Constitution and reserving preferences to firms owned by Kenyan citizens and to goods manufactured or mined in Kenya. For tenders funded entirely by the government with a value of less than 50 million Kenyan Shillings (approximately $575,000), the preference for Kenyan firms and goods is exclusive. Where the procuring entity seeks to contract with non-Kenyan firms or procure foreign goods, the Act requires a report detailing evidence of an inability to procure locally. The Act also calls for at least 30 percent of government procurement contracts to go to firms owned by women, youth, and persons with disabilities. The Act further reserves 20 percent of procurement contracts tendered at the county level to residents of that county.

In May 2015, President Kenyatta announced an initiative, dubbed “Buy Kenyan Build Kenya,” to require state ministries, departments and agencies to procure at least 40 percent of supplies locally.

The Public Procurement Oversight Authority is responsible for facilitating and ensuring the implementation of an effective and efficient public procurement and disposal system. It also ensures that at least 25% of the annual procurement by public entities is allocated to youth in accordance with such conditions that the Cabinet Secretary for the National Treasury may prescribe to safeguard this provision against possible abuse. The Cabinet Secretary appoints the Authority’s nine-member Oversight Advisory Board. The director of public procurement is a member of the Kenyan National Committee on World Trade Organization (NCWTO).

The Public Procurement and Disposal Act is intended to make procurement more transparent and accountable. It requires procurement agencies to carry out an annual update of pre-qualified firms especially when dealing with restricted procurements such as military tenders. Open tendering is the most preferred method of tendering, as it brings about desirable competition among bidders and ensures value for money is realized. However, because of the tedious procedure requirements for this method, when certain parameters such as value, time, and unforeseen emergencies are taken into account, the open tender method may not be feasible. This leads to the necessity to adopt other methods for prudence and expediency of duty. Hence the Act stipulates six alternatives for procurement:

1)  Restricted Tendering
2)  Direct Procurement
3)  Request for Proposals
4)  Request for Quotations
5)  Procedure for Low Value Procurements
6)  Specially Permitted Procurement Procedure

The Act gives guidelines on when each of the options is applicable. In most cases for large budget items, open tendering is the standard practice as it is seen to be the most transparent and least controversial process; however, it has been prone to abuse in some cases and frivolous law suits in others.

In the event of a grievance or perception by a bidder of unfair practices, the Act also establishes the Public Procurement Complaints, Review and Appeals Board (PPCRAB) that is responsible for receiving, reviewing and acting on complaints. The Act provides for penalties for violations of the law, with fines for individuals of up to 4 million Kenyan Shillings (approximately $43,200), or imprisonment for 10 years, or both. For corporations, the fines are up to 10 million Kenyan Shillings (approximately $108,000).
In addition to these penalties, the Act provides for the disqualification of government officials and debarment of private individuals involved in the transaction.

The procurement legislation gives exclusive preferences to Kenyan citizens where the funding is 100% from the Government of Kenya or a Kenyan body, and the amounts are below $500,000. The law allows for restricted tendering under certain conditions, such as when the complex or specialized nature of the goods or services limits the competition of pre-qualified contractors. Restrictions can also be imposed if the time and costs required to examine and evaluate a large number of tenders would be disproportionate to the value of the tender.

The World Bank, IMF, European Union, and other donors have conditioned some of their official assistance programs, including direct budget support, on reform of public procurement. The donor community is hopeful that the revised public procurement laws will improve Kenya’s public procurement performance, which has frequently been marred by flawed contracts, awards to noncompetitive firms, and awards to firms in which government officials have a significant interest. Kenya’s relatively meager conflict-of-interest regulations are rarely enforced.

The U.S. Commercial Service Kenya offers advocacy support to U.S. bidders that are competing for government contracts.
 

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.