ICPAK SCORECARD ON PUBLIC PROCUREMENT AND ASSET DISPOSAL ACT January 2016

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1 ICPAK SCORECARD ON PUBLIC PROCUREMENT AND ASSET DISPOSAL ACT 2015 INTRODUCTION January 2016 The Institute lauds the government for reforming the public procurement law to comply with the citizens needs and aspirations, the Constitution of Kenya 2010 and international best procurement standards. The Institute is proud to have participated in the reform process by providing input at various stages of enactment of the new law. This scorecard provides an assessment of the extent to which ICPAK proposals were incorporated in the and Asset Act 2015 and its potential impact. We are of the considered view that if well managed, the public procurement system can contribute to a country s economic development by maximizing economy and efficiency. In addition, public procurement can form vital tool for improving service delivery. MAIN HIGHLIGHTS OF THE PUBLIC PROCUREMENT AND ASSET DISPOSAL ACT The new Act sets out an elaborate section on interpretations of terminologies. This is given a broader perspective taking into account the devolved system of government. 2. Guiding Principles (Section 3)- The Act provides guiding principles for and Asset Disposal for State organs and public entities. The Principles are based on values and principles of the Constitution. These include maximization of value for money, incorporation of local content. 3. Governance: The Act has addressed governance well in accordance with the international best practice, for instance It vests powers to establish policy, systems and structures at macro level in the National Treasury, The Act establishes the and Regulatory Authority (PPRA) to among other functions, monitor, assess and review the public procurement and asset disposal system to ensure they respect the national values and other provisions including Article 227 of the Constitution on. This in essence transforms the Oversight Authority (PPOA) from an oversight authority to a regulatory authority as a distinct regulator of procurement related matters within the public sector with a governing board whose mandate would be to oversee prudent procurement practices with the Director General of the Authority to undertake executive role; It has introduced an internal appellate system under the Administrative Review Board under the Authority, The Act has sought to streamline the appointment process for board members (overall and Administrative Review Board), the Director General with clear tenures; 1

2 4. ICPAK Representation: The Act provides that ICPAK shall nominate one person for appointment to the Regulatory Board (Section 10(2)); and three persons to the Administrative Review Board (Section 29(2)). 5. Role of Accounting Officer (Section 44):-The Act under Sec 44 vests the power to oversee public procurement in the hands of the Accounting Officer but acknowledges that the functional head of the procurement unit shall be a procurement professional holding qualifications in procurement that is recognized in Kenya; 6. General Principles of and Disposal (Section 53)- The Act outlines the principles as follows: All procurement entities shall develop annual procurement plans which shall be guided or underpinned on approved budgets; Annual asset disposal plans must be developed; All procurements shall designate/reserve at least 30 per cent to women youth and People with Disabilities No procurement shall be commenced unless there is ascertained sufficient cash flow to carry through the process to conclusion which includes settlement of supplier invoices... contravention of this section is considered an offence 7. Split : Section 54 outlaws split procurements: The Act is clear that No procuring entity may structure procurement as two or more procurements for the purpose of avoiding the use of a procurement procedure except where prescribed. 8. Eligibility to bid: Section 55 defines capacity of persons to engage in tendering - tax compliance has been given prominence 9. List of registered suppliers: The Act provides that the head of the procurement function of a procuring entity shall maintain and update lists of registered suppliers, contractors and consultants in the categories of goods, works or services according to its procurement needs 10. Limitation on contracts with state and public officers(section 59) : A State Organ or public entity shall not enter into a contract for a procurement with a public officer or state officer or a member of a committee or Board of that State organ or public entity; or an officer of that public entity or state organ; 11. Use of ICT (Section 64) has provided for use of ICT in communicating matters relating to procurements this is a clear shift from the previous requirement to have procurement communication run through newspapers of national circulation; 12. Definition of a relative : Section 66 (11) of the Act has defined relative for purposes of establishing conflict of interest to include spouse, child, parent, brother, sister or a child, parent, brother, sister of a spouse. 13. Record Keeping: Section 68 requires appropriate record keeping at all stages of the procurement process. 2

3 14. Opening of Tenders: Section 78 provides for the Accounting officer to appoint a Tender opening committee comprising of at least three members and members of the tender opening committee shall not be involved in the tender evaluations. Deliberations of the tender opening committee shall be communicated in minutes to be signed by all members with initials on each page of the minute document. 15. Evaluation of tenders :The Accounting officer in accordance with Sec 46 shall appoint ad-hoc evaluations committees and shall cause to be followed, an objective and quantifiable evaluation criteria 16. Methods: Part 9 of the Act provides an elaborate array of procurement methods over and above the three methods prescribed under the old Act, to include: Open tender, Two stage tendering, Design competition, Restricted tendering, Direct procurements, Requests for quotations, Electronic reverse auction, Low value procurement, Force account, Competitive negotiations, Request for proposals and Framework agreements. It is noted that by the new Act under Section 93, prequalification is restricted to apply for complex and specialized goods, works and services 17. of Consultancy Services: Part 10 of the Act stipulates the method and process for procurements of consultancy services. The Procuring entity may use a request for proposals in combination with other methods of procurement. 18. Contracts Management: Part 11 provides for contracts management and under Sec 134, it is the responsibility of the Accounting Officer and that any contract exceeding KES 5 billion shall have to be cleared by the Attorney General before they are signed and all CS undertaking such contracts (above KES 5 billion) shall be called upon to provide briefs to the Cabinet on the nature of such contracts. Section 138 requires the accounting officer to publicise all contract awards on their notice boards 19. Preferences and Reservation in : Part 12 make provisions guiding preferences and reservations. This Part speaks to preference given to manufactured articles, materials and supplies partially mined or produced in Kenya; firms where Kenyans are shareholders; and protecting and ensuring the advancement of persons, categories of persons or groups previously disadvantaged by unfair competition. 20. Inventory Control and Asset Management: Part 13 addresses itself to inventory control, asset and stores management for efficiency. Section 161 provides that an accounting officer shall cause to be established an inventory management system to be managed by the head of procurement function; 21. Disposal of Assets: Part 14 provides for disposal of assets and provides that the accounting officer shall establish ad-hoc disposal committee as and when necessary to verify and process unserviceable, obsolescent or surplus assets with the guidance of the head of procurement function. 22. Administrative Review Procedures: Part 15 provide for administrative review procedures by which an aggrieved tenderer shall within fourteen days of notification of award, lodge complaint with the board. It provides for the review board secretariat to facilitate the review board hearings; 23. Offences and Sanctions: Part 16 provide for offences and sanctions and specifies fines not exceeding KES 4 million for natural persons and KES 10 million for body corporate for contravention of any provisions of the law and also open to the consequences of the administrative action. 3

4 Annex 1: Summary of the scorecard Section 1. Section 3: Guiding Principles 2. Section 7: Role of the National Treasury on Public and Asset Disposal 3. Section 8: Public Regulatory Authority 4. Section10: Public Regulatory Board & Asset ICPAK Submissions Implications & General Disposal Act 2015 comments Part I: Preliminary The Act provides guiding principles for Public and Asset Disposal for State organs and public entities. The Principles are based on values and principles of the Constitution ICPAK had proposed the inclusion of an additional principle on interrelationship between the two levels of government as provided for under Article 6(2) and 189 of the Constitution Though the proposal to include the additional principle was not incorporated, this section is important in ensuring that the new and Asset Disposal law is now in line with Constitution of Kenya Part II: Bodies Involved In The Regulation Of And Asset Disposal This Section expressly provides the functions and responsibilities of the National Treasury in regard to. Most of these functions are policy-oriented, such as developing and promoting policy guidelines and standards around public procurement The Act establishes the PPRA to among other functions, monitor, assess and review the public procurement and asset disposal system to ensure they respect the national values and other provisions including Article 227 of the Constitution on Public. The Act establishes the Board to among other functions ensure the proper and effective performance of the functions of the Authority. The Board consists of (1) a Chairperson nominated by the Cabinet Secretary and appointed by the President (2) four members who shall be appointed by the Cabinet Secretary after nomination, through a fair process, by i. the Law Society of ii. Kenya; the Institute of Certified Public Accountants of Kenya; The Institute was concerned that the section included some technical and operational functions. We proposed that the technical functions be assigned to the Public Regulatory Authority (PPRA). The Institute did not have major concerns but wanted a proper demarcation of responsibilities on public procurement policy/operations between the PPRA and the National Treasury. The Institute had proposed the need to provide adequate mix of skills borrowed from members of diverse professional backgrounds. There might be issues of duplication and overlap between the National Treasury and the Regulatory Authority (PPRA) especially on technical and operational functions. The PPRA replaces the PPOA.There s not much difference in terms of functions between the new Public Regulatory Authority (PPRA) and the Public Oversight Authority (PPOA). However, we can seek to further strengthen the new body through the Regulations and guidelines ICPAK submissions were considered. This is a good practice for efficiency and proper delivery of public procurement services in Kenya. In addition, ICPAK shall nominate one person for appointment to the Board 4

5 5. Section 13: Tenure of Office 6. Section 26: Annual reports 7. Sections 27 Public Administrative Review Board iii. iv. the Kenya Institute of Supplies Management; the Association of Professional Societies in East Africa, (3) two other members representing the youth and People with disabilities (4) The Cabinet Secretary or his or her representative (5) The Attorney-General or his or her representative. The Act provides that a member of the Board of the Authority including the chairperson shall hold office for a term of three years but shall be eligible for reappointment for a further term of three years. The Section provides that for each financial year, the Board shall cause an annual report to be prepared. The Board shall submit to the Cabinet Secretary the quarterly reports within thirty days after the end of the quarter and the annual report within three months at the end of the year to which the report relates Sections 27 Act establishes the Administrative Review Board to review, hear and determine tendering and asset disposal disputes; and other related sections ICPAK had proposed that the tenure of office for Board members be staggered for continuity and succession planning purposes as a good corporate governance tenet The Institute had proposed that the section be amended to provide for the creation of Finance Committee; and Audit, Risk and Governance Committees of the board We were concerned that that establishment of another autonomous institution to the Authority may lead to duplicity of functions and strain the current overstretched wage Bill. This section disregarded our proposal on staggered retirement. As such, we anticipate disruptions to activities of the Board and Authority once the term of Board members expires. This calls for further advocacy on this matter through the Public Regulations It is good practice that annual reports be presented by the chairman of finance committee of the board. Audit Risk and Assurance committees play vital role in instilling financial discipline and enhancing good corporate governance practices. There s still room for further input in the Public procurement framework through the anticipated regulations. We are still concerned that that establishment of another autonomous institution to the Authority may lead to duplicity of functions and strains to the wage Bill. 5 Subsequently, we proposed an amendment to the entire section on the Administrative Review Board, to make the Review Board a Committee within the

6 Regulatory Board 8. Section 29(1): Composition of the Review Board 9. Section 29(2): Composition of the Review Board 10. Section 31: Tenure of Office 6 The Act provides that the Review Board shall comprise of the following 15 members who shall be appointed by the Cabinet Secretary taking into account regional balance and gender parity (a) A chairperson whose qualifications and experience shall be as that of a Judge of the High Court (b) Fourteen other members whose qualifications and experience shall be as prescribed in the regulations 29(2) A person appointed as a member under subsection (1) shall be nominated by the following professional bodies from amongst their members as follows a) Three persons nominated by the Law Society of Kenya; b) One person nominated by the Chartered Institute of Arbitrators, Kenya Chapter; c) Three persons nominated by the Kenya Institute of Supplies Management; d) Three persons nominated by the Institute of Certified Public Accountants of Kenya e) Four persons nominated by the Association of Professional Societies in East Africa, provided that the appointed nominees are not members of professional bodies mentioned above Unlike for the Board(under Section13), the Act in this section provides the following for the Review Board: (1) The Chairperson and the members of the Review Board shall hold office for The Institute had recommended amendment to the entire section to make the Review Board a Committee within the PPRB. As above ICPAK had proposed that the tenure of office for Board members be staggered for continuity and succession planning purposes as a good corporate governance tenet There s an opportunity for ICPAK representation in the Review Board. The Institute should be on the look-out for the regulations and nominate the three(3) members to the Review Board There s an opportunity for ICPAK representation in the Review Board. The Institute should be on the look-out for the regulations and nominate three(3) members to the Review Board Good provision, ICPAK proposals incorporated. This provision is in line with the Mwongozo Code on succession planning and continuity.

7 a term of three years and shall be eligible for a further term of three years (2) For continuity of the Review Board's functions and responsibilities, the appointment of the Review Board Members shall be on a staggered period of six months Part III- County Government Responsibilities With Respect To And Asset Disposal 11. Section 33: Roles and Responsibilities of County Governments The Act outlines the roles and responsibilities of County Governments in respect to. The Institute was concerned with the lack of a proper and strong linkage between the County Governments, the Authority and National Treasury on Public policy decisions and operation We recommended amendment of functions of County Treasuries to ensure they consult and liaise with the National Treasury and the Authority on procurement policy Part IV-Powers To Ensure Compliance Since this was not considered, it will be imperative for the Institute to take up this matter through the Regulations. This in essence will ensure that County Departments maintain linkage with the Authority while at the same time respecting the devolved system of government 12. Section 39: Request for a Judicial review The new law provides that the procuring entity and any other person who was entitled to be given an opportunity to make representations, may request for Judicial Review against an order of the Board to the High Court within fourteen days after the order is made ICPAK in its earlier proposals was concerned that the order of appeal fails to exhaust all the available channels before resorting to Court/Judicial intervention. We had recommended that the procuring entity and any other person who was entitled to be given an opportunity to make to the Review Committee; and if unsatisfactory, request for Judicial Review against an order of the Board to the High Court The import of the ICPAK proposal was to ensure that all available review and appeal channels are exhausted before appeal to the High Court. However, we can still take up the issue through the Regulations 7

8 13. Section 41: Debarment 14. Section 66: Corrupt, Coercive, Obstructive, Collusive or Fraudulent Practice, Conflicts of Interest The Act provides grounds for debarment of a person from participating in procurement or asset disposal proceedings. They include: (1) Has committed an offence under this Act; (2) Has committed an offence relating to procurement under any other Act or Law of Kenya or any other jurisdiction; (3) Has breached a contract for a procurement by a public entity including poor performance; (4) Has in procurement or asset disposal proceedings, given false information about his or her qualifications; (5) Has refused to enter into a written contract as required under section 135 of this Act; (6) Has breached a code of ethics issued by the Authority pursuant to section 181 of this Act or the code of ethics of the relevant profession regulated by an Act of Parliament; (7) Has defaulted on his or her tax obligations; (8) Is guilty of corrupt or fraudulent practices; (9) Is guilty of a serious violation of fair employment laws and practices. This is good practice. We hope the Public Authorities will enforce this to ensure accountability and efficiency in the Public procurement and Asset Disposal proceedings Part VI -General And Asset Disposal Principles The Act provides that a person of whom this Act applies shall not be involved in any corrupt, coercive, obstructive, collusive or fraudulent practice; or conflicts of interest in any procurement or asset disposal proceeding. The Institute proposed an additional subsection requiring the Procuring entities to establish a register of interests. This will act as means of verification of interests; and in build the culture of accountability in the public This is good practice. We hope the Authorities will enforce this provision to ensure accountability and efficiency in the Public procurement and Asset Disposal proceedings. ICPAK has a public interest duty of monitoring to ensure compliance and implementation This proposal was not considered in the enacted law. We can still lobby for it in the Regulations and subsequent guidelines 8

9 procurement process. 15. Section 68: Records 16. Section 68(4) : Records The Act provides that an accounting officer of a procuring entity shall keep records for each procurement for at least six years after the resulting contract has been completed or, if no contract resulted, after the procurement proceedings were terminated Sub Section 4 provides that the. The accounting officer of a procuring entity may charge a fee for making the records available but the fee shall not exceed the costs of making the records available to any person. We had argued that 6 years as provided by Act for keeping of procurement records may not be sufficient. We further proposed that the section be amended to read, for at least 10 years The Institute had argued out that it is difficult to establish the cost for availing records. We subsequently proposed amendment to this section to require the entity to charge a fee not exceeding Ksh. 20, 000 It is our considered opinion that some items with tax implications might require the Commissioner to make reference to procurement records. It is imperative for consideration to amend the section to align it with the Income Tax Act(Section 55(2)) for purposes of taxation, especially for a procurement matter that might have implications on tax To avoid charging exorbitantly for availing records, there s need for the Institute to continuously engage on this matter through the Regulations. Availing records and information is a key tenet of the Constitution (Art 35) and thus should be facilitated. Part XVII: Repeal, Transition And Savings Provisions 17. Part XVII: Repeal, Transition And Savings Provisions This section provides Transition and Savings Provisions for the existing offices and institutions such as the Advisory Board and Public Oversight Authority (PPOA). ICPAK argued that the provisions were inadequate. We proposed the provision of Savings and Transitional Provisions for the Advisory Board and institutions that existed before the commencement of this Act This ensures smooth transition and continuity on public procurement proceedings. For instance (a) any undertaking or responsibility falling on the Oversight Advisory Board shall be assumed by the Regulatory Board (b) any undertaking or responsibility falling on the Oversight Authority(PPOA) shall be assumed by the Public Regulatory Authority(PPRA) 9