Public agencies face penalties for failing to deduct a new levy when paying suppliers and contractors, exposing taxpayers to losses that could run into millions of shillings.
This follows revelations that several State agencies have not remitted the Public Procurement Capacity Building Levy to the Public Procurement Regulatory Authority (PPRA) despite paying contractors hundreds of millions of shillings during the year ending June 2025.
The National Treasury introduced the levy in late 2023, requiring all agencies procuring goods and services to withhold 0.03 percent of the contract price for remission to the PPRA.
This would see up to Sh750 million worth of cash previously pocketed by suppliers and contractors handed to the PPRA, ostensibly to implement capacity-building initiatives for procurement officers.
Recent audits, however, show that a number of entities have failed to act on the law, with insiders at the PPRA disclosing that the procurement watchdog has had challenges collecting the levy.
In separate reports for the year ending June 2025, Auditor-General Nancy Gathungu flags four public universities for failing to remit the levy to PPRA despite paying contractors hundreds of millions of shillings.
“During the year under review, the university spent Sh307,363,656 on the acquisition of goods, works and services. It was, however, noted that the management did not deduct and remit the capacity building levy to PPRA as required by Public Procurement Capacity Building Levy Order, 2023,” Ms Gathungu said about Garissa University.
Based on the Sh307 million payment to contractors, the university was expected to remit Sh92,209 to the PPRA, being 0.03 percent of the payments.
The public auditor also flagged Turkana University College for failing to deduct and remit Sh42,381 to the PPRA for the Sh141.27 million payments to contractors and suppliers during the year, breaching the law.
In Meru University, Ms Gathungu observed that while the institution entered into contracts, it could not prove that it complied with the capacity building levy order of 2023, thus breaching the law.
Chuka University was also flagged for failing to remit Sh3,868 for the levy to PPRA.
The Public Procurement Capacity Building Levy Order, 2023 requires that the levy be charged on all procurement contracts signed between the supplier and a procuring entity, at the rate of 0.03 percent of the value of the signed contract.
“The purpose of the Levy shall be to provide funds for the development of capacity through training, technical support, and mentoring of the persons involved in the public procurement and asset disposal system in order to facilitate achievement of value for money in public procurement and enhance quality of public service,” the law says.
Entities are required to deduct the levy from the contract value at the time of making payments for contracts and remit it to the PPRA not later than the 20th day of the following month.
During the year ending June 2025, the PPRA was expected to collect over Sh200 million in the capacity building levy from contracts related to development projects alone.
This was after national and county governments implemented development projects valued at Sh669.56 billion in the year.
The levy collections would rise, taking into account other procurement purchases undertaken during the year as part of the government’s recurrent expenditure, which was more than the development spend.
