On 18th June
2013 the Cabinet Secretary for the National Treasury published the Public Procurement
(Preference & Reservations) (Amendment) Regulations 2013.
The objective of these
regulations is to accord the youth and other disadvantaged groups in Kenya
preference in the supply of goods and services to the government. This is in
line with one of the key promises of the Jubilee government to give the youth,
persons with disability (PWDS) and women at least 30% of all supply contracts
to the Government. The significance of these regulations is that the National
Treasury and all the Treasuries in the 47 County governments shall be required
to register and maintain a database for all Small or Micro-Enterprises (SME) or
disadvantaged groups that wish to participate in public procurement.
The regulations also
seek to favour local businesses by granting exclusive preference to local
contractors who supply motor vehicles, electrical goods, furniture and other
items which are fully assembled or manufactured in Kenya. Road works and
electrical installations of below 1 billion, other public works of below 500
million and supply of goods and services of below 100 and 50 million
respectively are now exclusively reserved for Kenyans. When these regulations
come into effect the government and all its agencies will inevitably become the
largest promoters of the motto, “buy Kenyan, build Kenya”.
The regulations also
make it possible for procuring entities to divide supplies in lots of goods, works
and services into practicable quantities which the youth, SMEs and other
disadvantaged groups can afford. A new
Regulation 31 enjoins the National, County governments and other agencies of
government to allocate at least 30% of their procurement to the youth, SMEs and
other disadvantaged groups. To enhance compliance with this regulation these
procuring entities will now be required to make budgets, issue tender notices
and award contracts with at least 30% participation by the youth, SMEs and
other disadvantaged groups. They will also be required to submit quarterly
reports to the Public Procurement Oversight Authority for compliance audits.
To participate in the
new preferred and reserved public procurement
scheme, the youth, women, persons with disability (PWD), SMEs and other
disadvantaged groups are required to register their enterprises with the
relevant government body e.g Registrar of Companies, Business Names, CBOs, NGOs
etc. The membership of such registered bodies may have 30% members at most who
are not youth, women or PWD but their leadership must be 100% youth, women or
PWD. Procuring entities will be required to pay for supplies made under this
scheme within 30 days. A delay beyond 30 days requires the entity to make 50%
part-payment and explain the delay in writing.
Regulation 33 which
deals with financing is of great importance. While young people often have the benefit
of fresh ideas, energy and vigour they are seriously deprived while in
competition with older people who have the advantage of time, experience and
money. Procuring entities will be required to authenticate Tender Awards and
Local Purchase or Service Orders (LPOs & LSOs) and enter into agreements
with relevant financing institutions with an undertaking that the contracted
enterprise will be paid through the account opened with the financier. Banks,
Deposit Taking Microfinance Institutions (DTMs) and other lenders licensed by
the Central Bank of Kenya must also come up with very innovative ways to help
the government, the youth, PWDs, Women and other disadvantaged groups achieve
the objectives of the new regulations. The youth, women and PWDs need these
contracts but on the other hand government agencies require assurance that the
contracted enterprises will perform their part of the bargain and with the
requisite skill and expertise. One method to ensure satisfaction of reserved
and preferred public procurement contracts may be through the doctrine of cession
which is widely used in South Africa.
The law has created a
new spectrum of proprietary rights for the youth, PWDs & women by dint of
their status in society. These rights are exclusive, reserved and can be
quantified in economic and monetary value once a procuring entity has
authenticated a tender award and issued an LPO or LSO. Once an enterprise owned
by the youth, PWDs or women gets a contract to perform certain obligations for
the procuring entity, such an enterprise acquires a right of claim for payment
in anticipation by virtue of regulation 33. Consequently in terms of the
doctrine of cession in anticipado,
the future right to claim payment may be ceded. This way the youth, PWDs and
Women owned enterprises (cedent) would retain ownership of the contractual
rights but only surrender to a limited degree the ability to enforce those
rights. An agreement to cede would be in writing and a formal document known as
the Instrument of Cession will have to be executed. A cession as opposed to
delegation or sub-contracting would be the best method to facilitate access to
finance and specialist expertise by the youth, women and PWDs who want to
benefit from the preferred and reserved public procurement under the new
regulations.
Twitter: @DeCaptainCFE
