PREFERENCE AND RESERVATION REGULATIONS, 2011, & Legal Notice 114, dated 18 th June, 2013

1. PREFERENCE AND RESERVATION REGULATIONS, 2011, & Legal Notice 114, dated 18th June, 2013

2. Introduction Since 2010, PPOA with the support of the African Development Bank had assigned M/s Capital Guardians, a consultant with the responsibility to establish the extent of participation of SMEs and other disadvantaged groups in public procurement and propose a framework for their participation. The assignment deliverable is “Final Report on Establishment of the Extent of Participation of SMEs’ and Disadvantage Groups in Public Procurement and Development of a Framework for Their Participation”

3. Preliminary Cited as Public Procurement and Disposal (Preference and Reservations) Regulations, 2011 Definitions include:- Disadvantaged groups - means persons perceived to be denied, by mainstream society access to or individuals who have been subjected to prejudice or cultural bias because of their identities as members of groups without regard to their individual qualities e.g enterprises owned by women, the youth and persons with disabilities;

4. Preliminary Definitions continued:- "preference" means the right or opportunity to select a person from an identified target group which is considered more desirable than another; Local preference – means the right or opportunity to select a person from an identified target group that is considered more desirable than another in a constituency, local authority or county; "reservations" means exclusive preference to procure goods, works and services set aside to a defined target group within a specified threshold or region;

5. Preliminary Definitions continued:- "region" means a location designated by the Minister within which defined tenderers enjoy certain preferences and reservations; "micro enterprises" means a business undertaking with an initial- (a)staff establishment of not more than ten employees, (b)annual turnover or investment not exceeding Kenya Shillings five hundred thousand;

6. Preliminary Definitions continued:- "small enterprises" means a business undertaking with an initial- (a)staff establishment of not less than eleven and not more than fifty employees, and (b)annual turnover or investment not exceeding five million Kenya Shillings; "target group" means designated tenderers identified /by the Cabinet Secretary to benefit from the preference and reservations schemes;

7. Preliminary Definitions continued:- a local contractor, if it is registered in Kenya citizen contractor, if its owners and shareholders are Kenyan citizens.

8. Target Groups

9. Purpose of the Regulations To promote local, national and regional industry and support socio-economic development by stating:– 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 target groups; the regions within which to apply the scheme; and the means of measuring its effectiveness in achieving the objectives

10. Eligibility Criteria Tenderer must have legal capacity, qualifications, experience and resources where applicable Not insolvent, in receivership, bankrupt Not debarred from participating in procurement proceedings Small or micro enterprise (SMEs) or a disadvantaged group wishing to participate in public procurement shall apply for registration with the National Treasury or the respective county treasury SMEs or disadvantaged groups should be operating and located in the county Have at least 70% membership of youth, women or persons with disability, and the leadership is 100% youth, women or persons with disability If a foreigners must be in joint-venture or sub-contracting arrangements with citizens

11. AGPO REGISTRATION Required Documents Identity Card(s)/Passport(s). Business Registration Certificate/ Certificate of incorporation. PIN/VAT Certificate. Tax Compliance Certificate. Partnership Deed for Partnership Business. Memorandum/Articles of Association and CR12 mandatory for Registered Companies. For Construction Category – Letter/Certificate from the National Construction Authority, Energy Regulatory Commission or any other Authorised Public Technical Body.

12. Unbundling of Procurements Unbundling of procurements includes lotting of goods, works, or services in quantities that are affordable to specific target groups participating in public procurement proceedings. Unbundling of procurements will provide more bidding opportunities for the targeted enterprises and enhance competition.

13. 30% Budgetary Reservations for Target groups Procuring entities are now mandatorily required to allocate at least 30% of its procurement spend for the purpose of procuring goods, works and services from micro and small enterprises owned by youth, women and persons with disability. Procuring Entities should implement this directive through its budgets, procurement plans, tender notices, contract awards and by submitting quarterly reports to the Public Procurement Oversight Authority (the Authority) clearly demonstrating adherence to this requirement as per the attached form.

14. Facilitation for financing LPO/LSO Procuring entities are now required to facilitate financing of enterprises owned by youth, women or persons with disability by authenticating their notifications of tender awards, local purchase/service orders and subsequently entering into an agreement with the relevant financing institution with conditions that shall include paying the contracted enterprise through an account opened with the financier.

15. Prompt Payment Performed Contracts Procuring entities are required to make prompt payments for all performed contracts and shall not delay beyond 30 days Where delay is inevitable, a procuring entity is required to make at least 50% part-payment and to give a written explanation for the delay. Where delay of payments for works performed is likely to happen, a procuring entity is allowed to facilitate invoice discounting arrangements with a financial institution for the purpose of advancing credit to the affected enterprises.

16. 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 Groups For greater certainty, a procuring entity in unbundling procurements may lot goods, works or services in quantities that are affordable to specific target groups participating in public procurement proceedings. Only Tender Securing Declaration required instead of tender security

17. Cont… 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

18. Procurements which can be Reserved for the Disadvantaged Groups (Source Circular Ref. No. Conf.5/4/04/(24) dated 17/10/2012) 1. Supply and delivery of flowers 2. Provision of cleaning services 3. Provision of garbage collection services 4. Supply and delivery of newspapers, journals and magazines 5. Supply and delivery of mobile phone air time 6. Provision of printing services 7. Supply and delivery of office common user items 8. Provision of labor contracts 9. Bush clearing 10. Provision of motor vehicle repair 11. Provision of repair services for office equipment and machines 12. Event organizing 13. Design and branding of promotional materials such as T/shirts, caps, banners and posters 14. Photocopy and video graphy

19. Preference can be given on the following Procurements (Source Circular Ref. No. Conf.5/4/04/(24) dated 17/10/2012) 1. Car Leasing 2. Cab/taxi services 3. Courier Services 4. Provision of security services 5. Contracts for small works 6. Provision of painting works

20. Monitoring of Compliance PPOA shall monitor the schemes and maintain a register of SMEs and disadvantaged groups PEs shall integrate schemes in procurement plans and submit the relevant part to PPOA within 60 days of Financial Year All tender awards applying the schemes must be reported to PPOA within 30 days

21. Conclusion These Regulations are expected to simplify application of preference and reservations schemes by public entities The purpose is to spur socio-economic development in target sectors in Kenya.

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