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Consider this before settling for direct procurement on tenders

OPINION
By Kenneth Matiba | September 3rd 2021

Human rights activists and youths march in Kilifi town to mark World Anti-corruption Day. December 10, 2020. [Omondi Onyango, Standard]

In law, when a State organ or any other public entity contracts for goods or services, it shall do so in accordance with a system that is fair, equitable, transparent, competitive and cost-effective.

To give effect to this constitutional dictate, Public Procurement and Asset Disposal Act, 2015 and Procurement and Asset Disposal Regulations, 2020 have been enacted as the legal frameworks to govern public procurement in Kenya.

The law provides 13 methods of procurement for use by Procuring Entities. The methods may be used depending on diverse factors such as the nature of procurement requirements, timeframe and circumstances, with the ultimate goal being to bolster service delivery.

Part IX of the Act prescribes the pre-conditions for application of the various methods of procurement and procedures. This Article is premised on direct procurement method which is often disregarded and abused by criminal establishments in the supply chain spectrum. Criminals take advantage of inherent loopholes in the process, deliberately and by design, to facilitate fraudulent and acquire illicit profits.

The threshold matrix for this method does not define the minimum or maximum levels of expenditure which also provides impetus for misuse. As a result, the country has witnessed some corruption cases orchestrated and perpetuated through use of the method. For instance, the famous "Anglo Leasing type of contracts” involving billions of shillings were processed through direct procurement.

Because it is “inter-institutional or supplier focused” it is prone to mishandling due to the secrecy in the contracting process. On the global front, the Kenyan direct procurement is comparable to single-sourcing. However, the two are technically different. Whereas direct procurement is meant for acquisition of goods, works and services through a structured process, in single sourcing, a particular supplier is purposefully chosen by the buying organisation, even when other suppliers are available. It is the generalisation of understanding, that at times creates confusion in the application of this method.

Of interest is that the choice of a procurement method is the prerogative of a Procuring Entity, and is one of the "frivolous" or vexatious grounds of appeal under Section 172 of the Act. This provides “temporary” security to Procuring Entities as the law grants them the latitude of choice of procurement methods. In most instances, this is the defense when liability is demanded.

It is necessary to reform this area to entrench accountability, especially in respect to the thresholds of expenditure through direct procurement. The National Treasury, Public Procurement Regulatory Authority (PPRA) and Kenya Institute of Supplies Management (KISM), should invest in targeted capacity-building programmes to enhance understanding by practitioners and other stakeholders involved.

Some of the areas where direct procurement is undertaken include; agriculture, education, health, transport and Information, Communication and Technology among other sectors. During this Covid -19 period, the country has witnessed unprecedented levels of disorder. Direct procurements have been undertaken. The question is whether they have been done in accordance with the law. 

Section 103 of the PPADA, 2015 and Regulation 90 of the PDADR, 2020 provides the procedure for use of direct procurement which is one of the alternative procurement methods, the default being open tendering.

It is allowed as long as the purpose is not to avoid competition, and is only permissible where; First, there is a monopoly of source or the providers have exclusive rights in respect of the goods, works or services, and no reasonable alternative or substitute exists. Second, it is impractical to use other methods of procurement because of the time involved in using those methods due to war, invasion, disorder, natural disaster, catastrophic events or there is an urgent need for the goods.

Third, there is need to ensure standardization or compatibility especially in the context of part purchases and perpetual acquisitions which may warrant unsuitability of alternatives to the goods or services in question. A good example arises in the procurement of equipment and technology where it is difficult to separate a software from a hardware; Lastly, the procurable are to be provided by a public entity as long as the acquisition price is fair and reasonable and compares well with prevailing market prices at the time.

Where a procuring entity has used direct procurement, the reasons and the process culminating to the award must be recorded and the set conditions satisfied. PPRA must thereafter be notified of the award(s) within fourteen (14) days after the notification for contract(s) exceeding Sh500,000. It is expected that all procurements under this method, are undertaken at the prevailing real market price. Where the price offers are high, negotiations are allowed and it should not be used in a discriminatory manner.

The common delusion is that direct procurement does not call for any process. On the contrary, the use of any alternative procurement procedure necessitates prior approval of the accounting officer in writing except under urgent need. 

Criminal formations within the public procurement system, often under the guise of “urgency or urgent needs” ignore the law. The meaning of an “urgent need” under the Act has a high threshold to curb egregious acts of corruption. It means, “the need for goods, works or services in circumstances where there is an imminent or actual threat to public health, welfare, safety, or of damage to property, such that engaging in tendering proceedings or other procurement methods would not be practicable”. 

In conclusion, it is noteworthy that Kenya’s public procurement system has significantly transformed from non-formal regulations in the 1960s, to the use of Treasury Circulars in 1970s and 1990s, to post-2000 era when the country established a definitive legal regime.

Progressively, what is going to transform the procurement paradigm, is strengthening of the institutional, legal and policy framework to deal with emerging issues. As a priority, the offences and sanctions reckoned under the Act should be reformed to provide stiffer penalties for effective enforcement and creation of deterrence.

Mr Matiba is a researcher on public procurement [email protected]

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