Power to Issue Directions
Public Procurement and Oversight Authority’s Circular No. 1 of 2012 (hereinafter referred to as the PPOA Circular 1/2012) was issued by the Public Procurement and Oversight Authority in exercise of powers conferred upon it pursuant to section 9 (c) (iv) of the Public Procurement and Disposal Act, 2005. The Section provides that one of the functions of the Authority is to:
issue written directions to public entities with respect to procurement including the conduct of procurement proceedings and the dissemination of information on procurements.
Necessitating Factors for the Circular
Among other reasons, it was necessitated by practical challenges that professional services providers faced in respect of award of tenders, many of which would be awarded to firms which often presented financial proposals below scales prescribed by the legislations governing professional fees chargeable. This consequently led to complaints of unfair competition by firms who made financial proposals based on relevant professional services regulations, as procuring entities, in a bid to cut costs, often awarded professional services tenders to firms who quoted lower professional fees.
Conflict of Laws Argument
At this point, it is arguable that the principal law governing all matters affecting procurement is the Public Procurement and Disposal Act, 2005, and accordingly, it prevails in the event of any inconsistency with any other statute on matters of public procurement. For clarity, section 5 (1) of the Act provides that:
If there is a conflict between this Act or the regulations made under this Act and any other Act or regulations, in matters relating to procurement and disposal, this Act or the regulations made under this Act shall prevail.
This argument would be advanced on the basis of Section 66 of the Public Procurement and Disposal Act, with a PE positing that it’s obliged to award the tender to the lowest evaluated tenderer. This argument will not succeed if the conflict of laws provision is read in tandem with Section 2 of the Act, relating to the Purpose of the Act. Among others, the Public Procurement and Disposal Act purposes:
(a) to promote competition and ensure that competitors are treated fairly;
(a) to promote the integrity and fairness of those procedures.
With that in mind, all the provisions of the Act must be read and interpreted in consideration of Section 2 of the Act, and on that basis, an argument citing the conflict of laws section together with the mandate on public entities to award tenders to the lowest evaluated tenders, would fails.
Procurement of Professional Services
Professional services under the Act are often (but not exclusively) procured by a process of prequalification, followed by procuring entities requesting for proposals (in the form of RFPs) from prequalified firms. In response, it is the practice that firms would submit technical proposals (showing how they would go about executing the project as well as their professional competences and experiences relevant to the project) and financial proposals (showing their professional fees, VAT, reimbursables, miscellaneous expenses, etc for consideration). For instance, financial proposals from law firms should be governed by the Advocates (Remuneration) Order.
This is where problem arise. Law firms would charge fees below scale in order to win RFPs or PEs would favour firms with lower quotes, sometimes below the professional prescribed scale. Consequently, both firms and PEs become complicit in breach of relevant laws, namely, Section 36 of the Advocates Act and Section 2 of the Public Procurement and Disposals Act, respectively.
It is in an attempt to level the playing field for all professional service providers and further the intent of Section 2 of the Act, that PPOA issued PPOA Circular 1/2012, whose effect is to direct all PEs to decline quotes below the scales provided for in professional services fees regulations.
Further, the PPOA Circular 1/2012 obliges PEs to settle professional fees per scale and not below scale. This therefore calls for the need of PEs officers managing the procurement process as well as settlement of professional fees to be conversant with the provisions of the professional scale fees regulations. Deliberate training initiatives are therefore necessary for such public officers, especially in view of the complexity of calculation of professional fees.
Way Forward for Professional Services Firms
Whereas service providers are acutely aware of instances of challenging economic times even for PEs, law firms (for example) still have an obligation to enforce the spirit and intents of all laws, and in this instance, the Advocates Act and the Public Procurement and Disposal Act. Firms which are faced with challenges of PEs insisting on fees below scale may therefore cite Section 36 of the Advocates Act, Section 2 of the Public Procurement and Disposal Act as well as PPOA Circular 1/2012 to encourage PEs to settle professional fees per scale.
Interests on Overdue Amounts
Often, some procuring entities take inordinately longer to settle professional fees. It is noteworthy that during prequalification, tenders are requested to indicate timelines within which they would expect their fees to be settled by the PE.
That notwithstanding, there may arise instances when there is inordinate delay in settlement of such fees. Firms and PEs should be aware of section 48 of the Public Procurement and Disposal Act on overdue amounts which provides that:
a) unless the contract provides otherwise, the procuring entity shall pay interest on the overdue amounts; and
b) the interest to be paid under paragraph (a) shall be in accordance with prevailing commercial bank rates.
Accordingly, where a PE delays in settlement of professional fees as agreed by the parties following an award of tender and commencement and or completion of a project, firms have the right to demand and enforce interest on overdue amounts. It is therefore in the best interest of PEs and more so PE officers in charge of contract management and settlement of fees to ensure that fees are paid promptly, as and when there are due.
We trust that the above will be useful in your decision making processes. However, should you have any further queries regarding public procurement in Kenya, please do not hesitate to contact us at email@example.com or on + 254 715 310 677 for clarification.
For: Strategic Legal Solutions Group Limited
Patrick, Teddy & Partners Advocates – a participating Law Firm in the SLS Group of consultancies.