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.
CONCLUSION
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 info@stralexgroup.co.ke or on + 254 715 310
677 for clarification.
Yours
faithfully,
For: Strategic
Legal Solutions Group Limited
Patrick, Teddy
& Partners Advocates – a participating
Law Firm in the SLS Group of consultancies.
Thanks for the post, very informational.
ReplyDeleteGadgets