Njuguna Ndungú targets price undercutting in new tender rules
National Treasury Principal Secretary Chris Kiptoo (left) confers with National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung’u on August 18, 2023. PHOTO | BONFACE BOGITA | NMG
The Treasury has set new rules limiting access to special pre-negotiated umbrella prices and quality of goods and services for multiple government contracts in a move aimed at curbing abuse of procurement processes.
In a shift, the Treasury said the procurement option known as framework agreements would now only be granted in special conditions unlike presently when contractors have blanket access to the special deals.
A framework agreement is a form of procurement used to create an ‘umbrella’ deal between one or more buyers and a single supplier or multiple suppliers.
This framework sets out the terms and conditions under which goods, works, or services can be purchased throughout the agreement including price, quality, quantities, and timescales.
“An accounting officer shall apply framework contracting arrangements under sub-regulation (1)(b) and (c) where the procuring entity determines that no single bidder is able to meet the full demand within the timeline given; the risk to award to a single bidder may affect strategic service deliver and; national interest, national emergency or security is involved,” said Treasury Cabinet secretary Njuguna Ndung’u in new regulations.
He said the framework contracting agreements would also apply where the procuring entity is required to ensure maximum participation of citizen contractors, disadvantaged groups, and small micro and medium enterprises.
Sources at the Treasury told the Business Daily that the new rules are targeting curbing price undercutting and safeguarding the quality of goods and services.
“Framework agreements are mainly focused on achieving cost savings but may also result in some form of price erosion or undercutting, where suppliers are forced to lower their prices to win contracts. This can be damaging because it has consequences on their profitability and would by extension reflect on the quality of product and services” a source said.
The new regulations published by the CS further said that accounting officers granting multiple awards under framework contracting would be required to make justification and provide details such as the maximum number of bidders to be considered for multiple awards of goods, works, or services as well as the estimated quantity required during the contract period, the value of the contract and the prevailing circumstances.
“Apportion the contract quantity by allocating 60 percent of the quantity to the best-evaluated bidder, where the award is to be made to two bidders, allocating fifty percent of the quantity to the best-evaluated bidder where the award is to be made to two bidders and there is a tie on price,” said Prof Ndung’u in the regulations.
In the new rules, accounting officers would be required to allocate 40 percent of the contract quantity to the best-evaluated bidder where more than two but less than five bidders are awarded or allocate 30 percent of the quantity to the best-evaluated bidder where five or more bidders are to be awarded the contract and distribute the remaining quantity equal to the rest of the bidders.
“Ensure that a bidder that withdraws his bid or declines to match their price with the best-evaluated bidder shall not forfeit the tender security but shall be disqualified from further consideration,” the rules said.
“Invite an equivalent required number from the responsive bidder who was ranked outside the minimum number to revise their prices accordingly where the number of bidders who accept to revise their prices is less than the number disclosed in the tender document” the rules stated.
