PREFERENCE & RESERVATIONS PREFERENCE & RESERVATIONS REGULATIONS

Presented to NDMA

Presentation Outline

Introduction

Preliminary

Target Groups

Purpose of the Regulations

Eligibility Criteria

Regions

Local Preference

National Reservations

National Preference

General Principles

Monitoring of Compliance

Conclusion

Introduction

The Study Report was successfully validated in a

Stakeholder Consultative Forum held on 25th

January, 2011.

Based on the findings the Minister promulgated the

Public Procurement and Disposal (Preference andPublic Procurement and Disposal (Preference and

Reservations) Regulations, 2011 which were

gazetted on 8th June, 2011 under Legal Notice No.

58 and as Amended Vide Legal Notice No. 114 of

18th June, 2013

Introduction Contd

Sec. 39 of the PPDA, 2005 stipulated provisions for

Preference and Reservations empowered the Minister

for Finance to issue Regulations on the same.

The Minister made provisions under Regulation 28 of

PPDR, 2006 but appeared inadequate for applicationPPDR, 2006 but appeared inadequate for application

by stakeholders.

Since 2009, the Ministry of Finance through PPOA, with

the support of the ADB commissioned a Study on

Establishment of the Extent of Participation of SMEs

and Disadvantage Groups in Public Procurement and

Development of a Framework for Their Participation

Preliminary Cited as Public Procurement and Disposal (Preference and

Reservations) Regulations, 2011

Definitions include:-

Constituency Development Fund

Disadvantaged group

Disability

5

Local preference

Micro-enterprises

Preference

Region

Reservations

Small enterprises

Target group

Youth

Application/Target Group

Small enterprises

Micro enterprises

Disadvantaged groups

Citizen contractors

Local contractors; and Local contractors; and

Citizen contractors in Joint Venture or Sub-

Contracting arrangements with foreign suppliers

Purpose of the Regulations

To promote local, national and regional industry and

support socio-economic development by defining:

the target group and eligibility requirements for benefitting

from the preference and reservations schemes;

the percentage margin of the preference, where applicable;

the goods works and services set aside/ reserved for specified the goods works and services set aside/ reserved for specified

target groups;

the regions within which to apply the scheme; and

the means of measuring its effectiveness in achieving the

objectives.

Eligibility Requirements

Tenderer must have legal capacity, qualifications,

experience and resources where applicable

Must belong to a target group

Registered with the National Treasury or respective

county treasury with which they operate and are county treasury with which they operate and are

located as SME or Disadvantaged Group

A list of registered enterprises from national and

county levels shall be submitted to PPOA for

consolidation and publication.

If a foreigner(s) must be in joint-venture or sub-

contracting arrangements with citizens

Regions

Constituencies

Local authorities

Counties

Threshold applicable when using CDF and LATF funds Threshold applicable when using CDF and LATF funds

Local Reservations

Applicable to:-

Constituencies;

Local authorities; and

Counties.

Exclusive preference to resident tenderers in the Exclusive preference to resident tenderers in the

regions to a maximum threshold of Kshs. 1M to all

procurements except where established that local

capacity is not available

National Reservations/Exclusive Preference

Local contractors enjoy reservations where:-

Motor vehicles plant and equipment assembled in Kenya

Construction material and other material used in transmission

and conduction of electricity of which such material is made in

Kenya.

Furniture, textiles and foodstuffs and other goods made or Furniture, textiles and foodstuffs and other goods made or

locally available in Kenya

Exclusive preference for citizen contractors up to:-

Kshs. 1Billion for procurement of road-works

Kshs. 500M -other works

Kshs. 100M-Goods

Kshs. 50 M -Services

National Preference

15% margin of preference for goods, manufactured,

mined, extracted or grown in Kenya

Margin of preference to citizens:-

6% if citizen shareholding is less than 20%

8% if citizen shareholding is between 20% and 50% 8% if citizen shareholding is between 20% and 50%

10% if citizen shareholding is above 51%

10% if in joint-venture or sub-contracting arrangements

with citizens

Application of Margin of Preference

General Principles

Candidates entitled to only a single preference scheme at a time in a

procurement proceeding.

Where more than one preference scheme is entitled to a candidate,

the highest advantage to the tenderer shall be applied.

Unbundling of Procurements limited for SMEs and Other Disadvantaged

GroupsGroups

Only Tender Securing Declaration required instead of tender security

Target group candidate entitled to such benefits for a period of five

years renewable for a further one more term.

Competition limited to target group and same requirement must be

stated in invitation notice

PE shall use framework contracting arrangement with SMEs and

disadvantaged groups

Monitoring of Compliance

PPOA shall monitor the schemes and maintain aregister of SMEs and disadvantaged groups

PEs shall integrate schemes in procurementplans and submit the relevant part to PPOAwithin 60 days after commencement of the F/Y.

All procurement awards where preference orAll procurement awards where preference orreservations schemes are applied must bereported to PPOA on quarterly basis

Monitoring of Compliance Contd.

At least 30% of PEs Procurement Spend for purposes ofprocuring goods, works and services from Micro andSMEs owned by Youth, Women and Persons withDisability. This should be factored in the budgets,Procurement plans, tender notices, contract awards andsubmit quarterly reports to PPOA.

An enterprise owned by youth, women and persons withdisability shall be a legal entity registered with therelevant government body.

Has at least 70% membership of youth, women andpersons with disability respectively.

A PE shall facilitate financing of local purchase orservice orders with the relevant financing institution.

Monitoring of Compliance Contd.

Prompt payments for performed contracts through electronic mediaand shall not delay beyond 30 days.

Where delay is inevitable, a PE shall make at least 30% partpayment and shall give a written explanation for the delay to theenterprise.

Where delay of payments for works performed are likely to happen,a PE may facilitate invoice discounting arrangements with aa PE may facilitate invoice discounting arrangements with afinancial institution for the purpose advancing credit to theaffected enterprises.

For the purposes of ensuring sustainable promotion of localindustry, A PE in its tenders documents shall have a mandatoryrequirement for preliminary evaluation for all foreign tenderersparticipating in international tenders to source at least 40% of theirsupplies from citizen contractors prior to submitting a tender.