The National Treasury is set to review the suitability of processes used to identify public-private partnership (PPP) deals amidst the fallout from the cancellation of projects linked to the Adani Group.
President William Ruto was forced to cancel the proposed Jomo Kenyatta International Airport (JKIA) deal with the Indian conglomerate in November, following public outrage over the impact of the transaction including the potential for job losses.
The exchequer has now sought consulting services to review its PPP framework including the suitability of procurement methods.
“Assess the extent to which project development process is fit for purpose for PPP projects prepared and procured through the procurement methods provided for in the PPP Act of 2021 through an evaluation of a sample of those projects,” the exchequer notes in new tender documents.
The review of the PPP framework also comes on the back of warnings from Kenya’s multilateral partners over loopholes in the structuring of the deals.
The World Bank Group for instance cautioned Kenya against seeking unsolicited PPP deals on the back of the cancellation of the nearly Sh387.6 billion ($3 billion) contracts linked to Adani Group companies.
The Washington based lender warned that such deals risked undermining public confidence in the search for private investors to build infrastructure by triggering protests which could turn deadly.
The National Treasury has turned to PPP deals to fund key infrastructure projects in the backdrop of a narrow fiscal space arising from high expenditures on public wages and debt payments.
PPP deals have nevertheless invited critiques including concerns that unsolicited deals are shrouded in secrecy.
The review of the framework is expected to assess the process of identification of PPP projects and its progress up to the start of feasibility studies.
The consultancy is also expected to assess and scrutinize the various modes of project identification employed by the PPP Directorate and contracting authorities to identify potential projects and the links between the Directorate and contracting authorities in preparing project concepts.
The review further probes processes leading to the appointment of transaction advisors and analyses the tendering, post commercial close, construction, operation and maintenance stages.
The National Treasury says PPP projects grown rapidly, warranting a review of set processes and guidelines.
“With a growing number of project proposals approved by the PPP Committee, the PPP program in Kenya is gathering pace and is taking shape. As of today, there is a substantial pipeline of PPP projects in the transaction phase aiming for successful commercial and financing close. It is against this background that the PPP Directorate is continuously seeking to strengthen its institutional and technical capacity for efficient management and success of its program,” the National Treasury noted.
Kenya’s PPP portfolio includes five projects aggregating to Sh129.2 billion ($1 billion) under implementation including the Nairobi Expressway, Road Annuity Projects Lot15: Lot 18 and Lot 33 Road Annuity and the 35-megawatt Sosian Menengai Geothermal Power Plant.
The PPP portal lists 32 projects at various stages-feasibility, procurement, construction, contract negotiations, commercial close and operations and maintenance.
The projects include the construction of Galana Dam, the Nairobi-Mombasa Expressway (Usahihi Express), Londiani Dam Water Project and the Galana Kulalu Food Security Project.
PPPs are currently governed by the Public Private Partnerships Act 2021, which describes the process used in project identification and selection while further listing approved procurement methods.
A contracting authority intending to implement a project through a public private partnership is required to consult the PPP Directorate in conceptualizing, preparing and running tender processes on potential projects.
The Act allows for four procurement methods including direct procurement, privately initiated proposals, competitive bidding and restricted bidding.
The cancelled Adani deals were a result of a privately initiated process where the multinational submitted a privately initiated proposal to the Ministries of Transport and Energy.
Private initiated deals have proved controversial given the probability of collusion between firms and procuring entities.
The Law Society of Kenya (LSK) and the Kenya Human Rights Commission (KHRC) for instance challenged the JKIA deal stating the project was not only unaffordable but also threatened job losses and that it did not offer value for money.
The cancellation of the two multi-billion-shilling deals involving Adani Group saw Kenya risk contract breach costs running into the hundreds of millions.
Sources at the National Treasury for instance indicated that Kenya would pay a small share of the project’s cost to cater for the loss of earnings and the cost of putting together the project ahead of approval.
