President William Ruto’s administration plans to standardise pricing of public infrastructure projects in a sweeping reform to tame inflated contract costs and cut wastage of taxpayer money.
The Cabinet on Tuesday approved what it called a ‘Comprehensive Framework for Infrastructure Projects Pricing’ in a bid to eliminate irregular, inconsistent and expensive processes in the implementation of public projects such as roads, bridges, dams, power plants and electricity transmission lines.
The framework will introduce a data-driven system for determining costs of infrastructure, replacing the current precedent-based approach which the government has used for decades in budgeting for public projects.
The current framework has, however, been heavily criticised for fuelling cost overruns, which have made the cost of building projects in Kenya among the most expensive in Africa.
The new practice borrows heavily from the United Kingdom, Australia and Singapore, which apply the First Principles Approach to derive project costs from fundamental input data such as materials, labour, equipment and location-specific conditions.
The Cabinet estimates the new system could cut cost overruns by up to 25 percent, helping to restore discipline in planning and execution of public projects.
“The framework seeks to eliminate the irregular, inconsistent, and costly practices that have characterised the pricing of government infrastructure projects,” read a dispatch from the Cabinet after a meeting on Tuesday.
“It aims to establish a data-driven system for determining infrastructure costs, ensuring accountability and prudent use of public resources.”
The Cabinet said that despite the government spending heavily on infrastructure over the past two decades, Kenya continues to suffer from cost variability, budget overruns and project delays.
These challenges are linked to reliance on outdated pricing formulas and limited market intelligence.
The looming policy shift comes barely two months after the Kenya National Highways Authority (KeNHA) announced plans to overhaul the formula the agency uses to adjust project prices for inflation, citing ballooning costs that have derailed or stalled major road projects.
The KeNHA said in September it would review the Variation of Price (VOP) formula applied to contracts after uncovering “unprecedented escalation of variation of prices” that had made projects expensive and caused budgetary distress.
VOP, a standard provision in long-term contracts, adjusts a project’s cost to account for fluctuations in input prices such as labour, fuel and construction materials.
But KeNHA’s recent audit found that poor formula design, unbalanced cost weightings, and misapplied indices have led to billions of shillings in unplanned costs.
“The authority has experienced unprecedented escalation of variation of prices in ongoing development contracts, making projects expensive and giving rise to budgetary challenges,” KeNHA said.
A Business Daily analysis of the Treasury and Transport ministry data earlier revealed that 26 major infrastructure projects — primarily under KeNHA and the Kenya Urban Roads Authority —overshot their original combined budgets of Sh682.7 billion to Sh703.4 billion, a jump of Sh21 billion.
Among the affected projects are the Kenol-Sagana-Marua highway, Mombasa-Mariakani road, and Horn of Africa corridor, which have all experienced cost jumps linked to compensation delays, poor design documentation, and underestimated feasibility studies.
For instance, the cost of the Sagana-Marua dual carriageway ballooned by nearly 50 percent in just three years, from Sh6.1 billion to Sh9.1 billion, according to a March 2025 audit by Auditor-General Nancy Gathungu. The surge was attributed to omissions in the feasibility study and land acquisition delays.
Similarly, the cost of the Kenol-Sagana section rose by Sh3 billion after budget cuts by the Treasury slowed payments to landowners.
The KeNHA has since initiated a pricing audit covering seven flagship projects, including the Eldoret Bypass, Mombasa-Mtwapa-Kilifi road, and Isiolo-Mandera corridor, with a view to determining reasonable variation thresholds and preventing future overruns.
The authority will also benchmark against projects funded by development partners such as the World Bank, European Union, Exim Bank, KfW, and JICA, which typically maintain stricter cost-control mechanisms.
