Kenya is not a signatory of the WTO Agreement on Government Procurement. U.S. firms have limited success bidding on government tenders in Kenya. Several U.S. companies have reported corruption influencing the outcome of public tenders, though specific allegations may be difficult to prove. Therefore, it is advisable for U.S. firms bidding or otherwise submitting proposals on government tenders to engage the U.S. Commercial Service in Kenya for advocacy support and guidance.
In January 2016, a new procurement law, the Public Procurement and Asset Disposal Act (PPADA), came into force, operationalizing Article 227 of the 2010 Constitution and reserving preferences to firms owned by Kenyan citizens and to goods manufactured or mined in Kenya. For tenders funded entirely by the government with a value of less than Ksh 50million (approx. $500,000), the preference for Kenyan firms and goods is exclusive. If not possible, the Act requires a report detailing evidence of an inability to procure locally. The Act also calls for at least 30% of government procurement contracts to go to firms owned by women, youth, or persons with disabilities. The Act further reserves 20% of procurement contracts tendered at the county level to residents of that county. Additional regulations enacted in 2020 stipulate that:
a) Exemption of bilateral/multilateral agreements (otherwise known as government to government or G2G) from the Act. These must however prove to be fair, transparent, competitive, and cost-effective.
b) A company that violates provisions of the Act may be blacklisted/debarred for a period not less than three years. This extends to directors and partners of the said company. Any successor entity is also debarred.
c) Mandatory requirement for successful bidder transfer technology / skills through training and mentorship to Kenyans; must reserve 75% employment for Kenyan citizens of which 20% must be reserved for Kenyans at professional/management level; and must include a local content plan.
Foreign contractors planning to participate in construction/infrastructure projects are required to register with the National Construction Authority, (NCA) before signing contracts or starting any construction works. Foreign firms are also required to subcontract or enter a joint venture with a local firm for not less than 30% of the value of the contract work. The local firm should be a NCA-registered contractor. In addition, foreign firms are required to transfer technical skills to locals.
The PPADA established the Public Procurement Administrative Review Board (PPARB), an independent procurement appeals review board, that hears and determines tendering and asset disposal disputes. The Board has the capacity to overturn contract awards that are deemed to have flouted procurement regulations and companies with complaints are encouraged to appeal to this entity. PPADA is intended to make procurement more transparent and accountable. Open competitive tendering is the most preferred method of tendering. However, the Act stipulates six alternatives for procurement:
1) Restricted Tendering
2) Direct Procurement
3) Request for Proposals
4) Request for Quotations
5) Procedure for Low Value Procurements
6) Specially Permitted Procurement Procedure
The Act gives guidelines on when each of the options is applicable. In most cases, for large budget items, open tendering is the standard practice as it is seen to be the most transparent and least controversial process; however, it has been prone to abuse in some cases and frivolous lawsuits in others.
U.S. companies bidding on GoK tenders may also qualify for U.S. Government advocacy from the U.S. Commerce Department’s International Trade Administration. The Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Multilateral Development Banks and Financing Government Sales.
Kenya’s 2023/2024 budget estimates stood at $2926.1 bn with a budget deficit of $5.1 bn to be financed through domestic and external borrowing. Kenya historically borrows from bilateral and multilateral financial institutions through concessional loans and government bonds. Some of the institutions Kenya borrowed from in the past include the World Bank, African Development Bank, IFC, AFD of France, EIB of Europe, JICA, and various others. Unless a project is deemed a government to government (G2G)-project, foreign funded projects are held to the WB procurement guidelines for competitive bidding. Government agencies will advertise ongoing procurements in the local press, on their websites, on DG Markets as well as the newly launched Public Procurement Information Portal. It is imperative that a company bidding on any government tender adhere to all the requirements stipulated in the tender documents no matter how mundane the requirement seems. In Kenya, Multilateral Development Banks (MDBs) have funded projects such as roads, electrification programs, ICT projects, health, etc.
Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the MDB. A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different MDBs: the African Development Bank; the Asian Development Bank; the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.
Learn more by contacting the:
- Commercial Liaison Office to the African Development Bank
- Commercial Liaison Office to the World Bank
Financing of Projects
Kenya has largely pursued a debt-driven infrastructure development agenda, including such large projects as the Chinese-built Standard Gauge Railway from Nairobi to Mombasa. As public debt has risen at an unsustainable pace, however, Kenya has more recently shifted towards public-private-partnerships (PPP) for major projects to reduce fiscal pressures. Of note, the recently concluded Chinese-built Nairobi Expressway was a PPP project.
There are three sources of external assistance: multilateral, bilateral, and Private Voluntary Organizations (PVOs). The first category can further be divided into United Nations Organizations and non-United Nations multilateral institutions. Bilateral donors lead in the provision of project financing, followed by multilaterals and PVOs.