Bid to amend Public Finance Management Act counterproductive

Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

There currently is a privately sponsored Bill by Kikuyu MP Kimani Ichungwáh whose bid is to effectively amend the Public Finance Management Act of 2012.

The effect of the proposal under this Bill is to restrict deposit and investment of surplus funds held by state corporations, constitutional commissions, county governments and generally any public entity as defined under the Public Procurement and Asset Disposal Act, 2015 to only State-controlled banks as opposed to opening it up to all the Central Bank of Kenya regulated commercial banks.

The Bill defines a State owned bank as one in which government owns or holds at least 20 percent) of share capital.

If approved then any such deposits by public entities would only be legally be allowed to be deposited with banks like Kenya Commercial Bank and its newly acquired subsidiary National Bank of Kenya, Development Bank and Consolidated Bank.

But where are we getting it wrong in the said proposal? The Public Procurement and Asset Disposal Act, 2015 is the prevailing law on matters public procurement.


The issue being addressed is in all respect a public procurement matter.

The Act defines public procurement to mean a public entity making a procurement or asset disposal to which the public procurement Law applies. Banking services is one of the applicable services and is not in any way exempted under the Act. It is the only law under which the principles of public procurement are going and supposed to be realised. Non-competitive procurement practices should not this day and age be allowed to stand in the name of protection of or giving preferences to state controlled institutions.

If anything there has been major concerns that the public procurement of banking services has a ‘black hole’’ which needs to be done away with by ensuring that banking services are procured and any deposits done in accord with Articles 201(a), (d) and (e) and 227 of the Constitution and Section 3 of the Public Procurement and Asset Disposal Act, 2015 all alluding to competition, value for money, transparency and accountability.

Competition remains a crucial means and enabler for the realization of value for money. The existence of competition amongst different bidders naturally induces them to give their best offer which is to the benefit of public entities and tax payers.

It’s for this reason that most of the public procurement legislative regimes in the world make it a requirement that competitive methods of procurement be utilised by public institutions by allowing as many suppliers to participate in competing for the available publicized procurement opportunities and contracts.

Through this state entities have the benefit of obtaining the goods or services they need at the best value in terms of price, quality and contract terms and conditions.

The Constitution of Kenya underscores the importance of transparency in public service delivery. It does so by making it as one of the binding values on all state officers and institutions.

High levels of transparency and accountability encourage more bidders to participate in public procurement and this often leads to increased competition.