Alternative Public Procurement Methods in Kenya
Public procurement law regulates the purchasing by public entities of goods, works or services. Its aim is to open up supply of goods and services in the public sector to competition, primarily to guarantee quality of supplies. In Kenya, this law is enacted in the Public Procurement and Asset Disposal Act, No. 33 of 2015 (“the Act”).
Under the Act, open (competitive) tendering is the preferred and default procurement method for public entities. However, situations may arise (typically owing to urgency, the type of goods or services sought to be procured or the supplier’s circumstances) which warrant the use of alternative procurement methods and procedures. In this article, we look at the most distinct of these methods, which, under the Act, include two-stage tendering, restricted tendering, direct procurement, electronic reverse auction, framework agreements, and specially permitted procurement procedures.
Two-stage tendering is used when, due to complexity of the goods or services sought to be procured and inadequate knowledge on the part of the entity, it is not feasible for the procuring entity to formulate detailed technical specifications for the goods or services. The procuring entity therefore invites tenderers to submit initial tenders containing proposals with technical specifications but without financial quotes. The entity evaluates the initial tenders and invites the tenderers whose tenders are retained to submit a second round of tenders with respect to a single set of technical specifications (generated by the procuring entity from tenders received in the first round) and with financial quotations. It is from this second round of tenders that the entity selects a supplier.
Restricted/limited tendering is tendering restricted to certain potential suppliers and may be used only where (i) the complexity or specialized nature of the goods or services requires that tendering be limited to pre-qualified suppliers, (ii) the time required to conduct open tendering would be disproportionate to the value obtained in the long run, or (iii) there are only a few known suppliers of the relevant goods or services.
Direct procurement occurs when the procuring entity issues a tender document directly to a particular supplier inviting the supplier to make a proposal to the procuring entity for negotiation. This method can only be used where (i) the goods or services are available only from a particular supplier and no reasonable alternative or substitute exists, (ii) there is urgent need for the goods or services due to an unforeseeable event beyond the control of the procuring entity which makes it impractical to use the other procurement methods, (iii) it is necessary to purchase from that supplier for reasons of standardization or because of the need for compatibility with existing goods, technology or services, (iv) the supplier is a public entity supplying on terms that are fair and comparable to those obtainable in the open market.
An electronic reverse auction (also known as e-action, procurement auction or e-sourcing) is a relatively new trend in public procurement. In a reverse auction, unlike a traditional (forward) auction that involves a single seller and many buyers, there is a single buyer (the procuring entity) and many suppliers. The buyer indicates its requirements and tenders compete on technical proposals and price quotations. An electronic reverse auction is a reverse action that is conducted through electronic media, either remotely or on site. For a procuring entity to utilize this method, the Act requires that it must possess a procurement portal and suitable software.
A framework agreement is an agreement between a procuring entity and various suppliers that sets out terms upon which the procuring entity will procure specified goods and services from the suppliers who are party to the agreement. During the term of the agreement, the procuring entity may make specific purchases through call-offs or inviting mini-competitive bids from among suppliers that have entered into the agreement in the respective category. Framework agreements are typically used when the required quantity of goods or services cannot be determined at the time of entering into the agreement. Under the Act, such an agreement must include at least 7 alternative vendors for each category of goods or services.
Specially permitted procurement, a concept introduced in the Act in 2017 following the IEBC Kiems procurement debacle, is not a specific procurement method but a rule under the Act empowering the National Treasury to allow any public body to use a specially permitted procedure (essentially allowing that body to not comply with the Act) where (i) exceptional requirements make it impossible, impracticable or uneconomical to comply with the Act, (ii) market conditions or behaviour do not allow the effective application of the Act, (iii) procurement of the goods or services is regulated or governed by harmonized international standards or practices, (iv) strategic partnership with the supplier is applied, or (v) credit financing procurement is applied. In addition, the Cabinet Secretary for the National Treasury is given power to determine the procedure to be followed in carrying out procurement using this method, which procedure will vary with prevailing circumstances.
Availability of the above and other alternative procurement methods enables suppliers and contractors seeking to do business with public sector players to engage with the latter while avoiding the tedious processes involved in open tendering and public private partnerships.
Please note that this publication is meant for general information only and does not create an advocate-client relationship between any reader and Mboya Wangong’u & Waiyaki Advocates. For particular expert advice on any matter dealt with above, please contact us.