Small businesses in Kenya scored big in a Bill signed into law by President Uhuru Kenyatta. The new law paves way for local companies to compete with multinationals in bidding for large government tenders.
The Public Procurement and Asset Disposal (Amendment) Bill, 2020, sponsored by Thika Member of Parliament, Patrick Wainana, was assented to by the President on Thursday, July 7.
The new law now opens the door for Small and Medium Enterprises (SMEs) to expand their operations as it requires all foreign companies which secure government tenders to source not less than 40 per cent of their supplies from local contractors.
Initially, multinationals were required to source at least 20 per cent of their supplies from the local market.
The Bill also increases the amount for tenders where Kenyan citizens are given exclusive preference from Ksh500 million to Ksh20 billion.
The Bill also sought to address cases of construction companies overcharging the government for tenders. In this case, it limits the price of contracts to within 15 per cent of engineer estimates.
According to Wainaina, this will prevent companies such as those in the construction sector from setting high prices that are above the market rate.
Similarly, the caps will prevent underquoting, which could either result in substandard work or upward revision of the contract after awarding a tender.
“The successful tender price shall be within a range of fifteen per cent of the Engineers Estimate where applicable,” reads part of the new law.
With the Bill in place, SMEs will, henceforth, chart a path for maintenance and strengthening of their supply chains to ensure there are no disruptions in future even in cases of global crisis.
To safeguard startups, both the national and county governments will now be mandated to offer payment guarantees upon awarding tenders.
This will allow suppliers and contractors to collect their payments from the bank within 90 days in case the government fails to settle payments on time.
“The national and county government shall make payments to the successful tenderer by way of a bank guarantee. The bank guarantee shall take effect after ninety days,” reads the Bill.
The Bill also means the government will award split tenders to different bidders, allowing more companies to benefit.
