Public officials agree to review tendering rules

Top public officials have reached an agreement to change procurement rules and give accounting officers flexibility in managing tenders as the government seeks to speed up absorption of donor funds.

Under chairmanship of Prime Minister Raila Odinga, cabinet ministers and permanent secretaries met in Nairobi on Wednesday and resolved to shorten tendering and reduce donor influence in the process.

“We have to change aspects of our procurement rules, which have created bureaucracy in the tendering process instead of facilitating it,” Mr Odinga said.

The lengthy tendering rules introduced in 2005 to boost transparency and rid public procurement of corruption have of late been criticised for paralysing government operations and locking out small-sized businesses.

But the low absorption of donor funds has of late attracted keen interest of policy makers on the rules as the government seeks to boost its expenditure to stimulate economic activity and speed up growth.

Public officials believe 100 per cent absorption of Sh1.158 trillion 2012/13 Budget will raise the chances of the government meeting its 3.5 to 4.5 per cent growth projection for this year.

On Wednesday, Finance minister Njeru Githae said the country was finally back in the good books of donors but was not in a position to make good of it due to low uptake of external funds.

“Now that we’ll be meeting every two months to review trend in budget funds absorption, we have also resolved to redistribute funds that remain unutilised to departments that deserve them,” Mr Githae said

The government agencies have also cited stringent donor conditionalities among the reasons for slow uptake of external funds.

Data prepared by office of the Controller of Budget show that more than 90 per cent of budget raised from domestic sources is absorbed every year compared to just 44 per cent (target 75 per cent) for donor funds.

Even more worrying from the official figures, the government officers have consistently absorbed more than 89 per cent of money allocated for recurrent budgets since 2006.

In comparison, only 36 per cent of development budget has been absorbed over the period despite of the project’s ability to create jobs and fix the country’s external competitiveness.

Out of Sh430 billion that Kenya has received from various donors over the last three years, just 30 per cent of it has been disbursed so far.

“The problem with donors’ money is that even if tendering stalemate prevents it from being disbursed, we still have to pay commitment fee as specified in the contracts signed”, said treasury PS Joseph Kinyua.

He added: “Most of the time, commitment fee is a substantial amount of money that would have lifted a critical segment of the economy.”

On Wednesday, Mr Odinga said the team would with representatives of the donor community in the coming weeks to agree on way out of the impediments currently faced in the use of their funds.

The government team has taken a common position to reduce the time that an external financier is allowed at the moment to raise objection to a project from six to three months.

Contract losers, the accounting officers said, have traditionally taken advantage of this long period available to donors to frustrate major projects.

In the planned meeting with donors’ representatives, the government officers will push for direct disbursement of development funds saying the current practice where some financiers prefer intermediaries such as NGOs was creating unnecessary layer of bureaucracy.

But even as government looks elsewhere for answers, oversight bodies citing poor financial management system and failure to meet conditions agreed by donors said officers were equally culpable for the low uptake of donor funds.

“We have also encountered several cases where delay in paying contractors’ fees has forced them to remove their equipment from sites, further delaying the project period,” said Mrs Agnes Odhimbo, Controller of Budget whose main role is to approve withdrawal of public funds.

Parliamentary committee on budget holds similar views. Yesterday, its chairman Elias Mbau said: “Our observation so far has been that ministries with low absorption rate for development funds are the same ones known to be inefficient in budgetary process.”

The push to increase up take of funds allocated for development projects comes just months before the next election when 47 counties are expected to come up with their own set of priority projects with treasury retailing oversight role.