State firms face tender sanctions over special groups

State-owned agencies which fail to reserve part of their procurement contracts for the youth, women and people with disability will not get the deals approved, the body that oversees the process has said.

The Public Procurement Oversight Authority (PPOA) said it will henceforth block any deals that are not compliant with the law that requires 30 per cent of the contracts to be reserved for the special groups.

“It has come to our attention that most procuring entities are mainstreaming the legal requirement at a very slow pace as evidenced by low levels of reporting compliance with the preference and reservation schemes,” PPOA director-general Maurice Juma said in a circular to all public institutions.

Mr Juma said most public institutions have continued to ignore the provisions of Legal Notice 114 of June 2013 — commonly known as the Public Procurement and Disposal (Preference and Reservations) Regulations 2013 – that reserves part of government contracts to the special groups.

Last September, the Treasury issued a circular requiring public agencies to allocate 30 per cent of their procurement spend to micro and small enterprises owned by the youth, women and people with disability.

Mr Juma said PPOA would henceforth not endorse any public procurement contract that did not comply with the preference rules for the special groups.

“All public entities are required to submit mandatory quarterly reports to the authority, clearly demonstrating adherence to the aforementioned subsidiary legislation and its subsequent amendments,” he said.

READ: 5,000 youth groups get the nod to apply for State tenders

Public institutions are required to capture the special reservation rules in their budgets, procurement plans, tender notices and the eventual contract awards.

“All procurement entities should submit to this authority (PPOA) all the pending procurement reports of their organisations since the beginning of the financial year 2013/14,” the circular says.

The reports must be submitted by the end of this month.

Nominated MP Johnson Sakaja Monday said he plans to introduce a new Bill in Parliament that seeks to reinforce compliance.

“I will be seeking to push things from just mere regulations by a legal notice that can be abused or circumvented by naughty individuals. We want the 30 per cent rule anchored in law as an Act of Parliament such that not even the executive can make changes to suit its whims,” he told the Business Daily.

Mr Sakaja said there was need to enact a law that is binding even to county governments for higher-level of compliance.

The nominated MP also promised to provide for the creation of a special agency to monitor compliance with the reservations law.

“Procurement issues are quite complex and if you don’t pay keen attention compliance may remain extremely low,” the MP said.

Reservation of contracts for the special groups was part of President Uhuru Kenyatta’s key election promises and is meant to correct the economic injustices that such groups have suffered because of their exclusion from government contracts and from the financial services market.

The Treasury is currently negotiating with commercial banks to help youth, women and persons with disability access working capital upon winning government tenders.

READ: Treasury seeks loans for special groups

Celestine Otunga, the public procurement director at the Treasury, last month said banks would extend loans to the businesses on the strength of local purchase orders (LPOs) and enable the groups to compete for the Sh240 billion worth of public goods and services reserved for them annually.

Under the arrangement, entrepreneurs bidding for tenders under Access to Government Procurement Opportunities (Agpo) will present a local purchase order — indicating type of products, quantity and price — to banks for financing.

Statistics show that more than 15,000 special interest groups — mostly women and youth — have been registered to compete for billions worth of public contracts in the current financial year.

The Treasury will act as the loan guarantor for the youth groups to help reduce the big risk factors associated with them.

“The Treasury will reimburse the funds a bidder owes a bank at the agreed time, according to the terms and conditions,” Ms Otunga told a public forum in Nairobi.

The Treasury is also expected to endorse invoices from suppliers, enabling them to release goods to tenderers on credit for payment when the contract is closed. Registration under Agpo is done at the Treasury and in the 47 counties.

The government has since relaxed bidding conditions for its tenders to encourage participation by the intended groups. For instance, special groups do not have to prove their financial standing to participate in a tender.

Besides, they also do not have to place a performance bond that shields the government from losses in case the contractor supplies substandard goods or does shoddy work.

The Treasury recently said the proprietors of youth enterprises would be required to provide details of their preferred type of business, a profile of their employees and business turnover.

They will also be required to submit key documents such as value added tax (VAT) certificate, business registration certificate, personal identification number (PIN) and the youth group registration certificate as well as copies of national IDs.