TECHNICAL UNIVERSITY OF KENYA

FACULTY OF ENGINEERING AND THE BUILT ENVIRONMENT

SCHOOL OF CONSTRUCTION AND PROPERTY STUDIES

DEPARTMENT OF CONSTRUCTION ECONOMICS AND MANAGEMENT

ACADEMIC YEAR; 2024/2025

BACHELOR OF QUANTITY SURVEYING

YEAR 4 SEMESTER I

EACQ 4112 : PROCUREMENT MANAGEMENT

STUDENT NAME: JUMA IAN WAFULA

REG NO. EFCN/03069P/2021

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Contents
1. Types of Public Procurement Methods as Provided by the PPAD Act 2015 and Regulations 2020 ................... 3
2. Evolution of the Public Procurement System in Kenya .................................................................................... 5
3. Differentiation Between Periodic Prequalification and Project Prequalification ............................................... 7
1. Discussion of Procurement Methods ................................................................................................................. 9
2. Procurement of Consultancy Services under Part X of the PPAD Act 2020 and Regulations ........................... 12
3. Contract Administration (See PPRA Manual) .................................................................................................. 13
Pre-Construction Planning Decision Support Tools for a Proposed Construction Project ................................... 17
1. Procurement Methods Permitted in the Public Procurement and Asset Disposal Act (PPADA) 2015 ............. 21
2. Public-Private Partnerships (PPP) Procurement Methods** ............................................................................ 23
Procurement Plan in the Context of the Public Procurement and Asset Disposal Act (PPADA) 2015 and
Regulations ........................................................................................................................................................... 27
Cost Reimbursement & Cost-Plus Percentage Fee Contracts ............................................................................... 34
Merits and Demerits of Cost-Plus Percentage Fee Contracts ............................................................................... 35
Cost-Plus Fixed-Fee Contracts .............................................................................................................................. 36
Discretionary Procurement Systems .................................................................................................................... 36
Procurement System for a Project ....................................................................................................................... 38
Public-Private Partnerships (PPP) Procurement System ...................................................................................... 40

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1. Types of Public Procurement Methods as Provided by the PPAD Act
2015 and Regulations 2020

The Public Procurement and Asset Disposal (PPAD) Act 2015 and the PPAD Regulations

2020 provide a comprehensive framework for public procurement in Kenya. The Act outlines

various procurement methods, which can be categorized as follows:

a) Open Tendering

- This is the most common and preferred method of procurement.

- It involves advertising the tender publicly, allowing any interested and qualified bidder to

submit their bids.

- It promotes transparency, competition, and fairness.

- Suitable for high-value procurements where competition is essential.

b) Restricted Tendering

- This method is used when only a limited number of suppliers or contractors are capable of

delivering the required goods, works, or services.

- The procuring entity invites a select list of prequalified suppliers to submit bids.

- It is used in specialized procurements or where open tendering is not feasible.

c) Direct Procurement

- This method involves procuring goods, works, or services directly from a specific supplier

without competition.

- It is used in exceptional circumstances, such as emergencies, sole-source situations, or

where the procuring entity has determined that direct procurement is the most appropriate

method.

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 - Requires approval from the relevant authority.

d)Request for Proposals (RFP)

- This method is used for the procurement of consultancy services or complex projects

where the focus is on the quality of the proposal rather than just the price.

- Bidders submit technical and financial proposals, which are evaluated based on predefined

criteria.

e) Request for Quotations (RFQ)

- This method is used for low-value procurements where the procuring entity requests

quotations from a number of suppliers.

- It is a simplified and faster method compared to open tendering.

f) Framework Agreements

- These are long-term agreements with suppliers for the provision of goods, works, or

services over a specified period.

- They are used for repetitive procurements and help streamline the procurement process.

g) Electronic Reverse Auction

- This is an online bidding process where suppliers compete to offer the lowest price for

goods, works, or services.

- It is used for standardized and price-driven procurements.

h) Force Account

- This method involves the procuring entity using its own resources (e.g., labor, equipment)

to carry out the procurement.

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 - It is used when it is more economical or practical to use internal resources rather than

outsourcing.

2. Evolution of the Public Procurement System in Kenya

The public procurement system in Kenya has undergone significant changes over the years,

evolving from a fragmented and non-transparent system to a more structured and regulated

framework. Key milestones in this evolution include:

a) Pre-2001 Era

- Public procurement was largely unregulated, with each government department or agency

having its own procurement procedures.

- Lack of transparency and accountability led to widespread corruption and inefficiency.

b) Enactment of the Public Procurement and Disposal Act (2005)

- The Public Procurement and Disposal Act (PPDA) of 2005 was a landmark legislation

that established a unified legal framework for public procurement in Kenya.

- It created the Public Procurement Oversight Authority (PPOA) to regulate and oversee

public procurement processes.

- The Act introduced principles of transparency, accountability, competition, and value for

money.

c) Amendments and Reforms (2007-2015)

- Several amendments were made to the PPDA to address emerging challenges and improve

efficiency.

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 - The introduction of e-procurement systems aimed to enhance transparency and reduce

manual processes.

d) Enactment of the Public Procurement and Asset Disposal Act (2015)

- The PPAD Act 2015 replaced the PPDA 2005, introducing more comprehensive

provisions to address gaps in the previous legislation.

- It emphasized the use of technology, introduced new procurement methods, and

strengthened oversight mechanisms.

e) PPAD Regulations (2020)

- The PPAD Regulations 2020 provided detailed guidelines for the implementation of the

PPAD Act 2015.

- They introduced new procurement methods, such as framework agreements and electronic

reverse auctions, and emphasized the use of e-procurement systems.

f) Current Trends

- The public procurement system in Kenya continues to evolve, with a focus on digitization,

sustainability, and inclusivity.

- The use of e-procurement platforms, such as the Integrated Financial Management

Information System (IFMIS), has enhanced transparency and efficiency.

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3. Differentiation Between Periodic Prequalification and Project
Prequalification

a) Periodic Prequalification

- Periodic prequalification is a process where suppliers or contractors are prequalified for a

specific period, usually one or two years.

- It is used for recurring procurements, such as routine maintenance works or supply of

goods.

- Prequalified suppliers are included in a list from which the procuring entity can directly

invite bids for specific projects or procurements.

- It reduces the time and cost associated with prequalification for each individual project.

b) Project Prequalification

- Project prequalification is specific to a particular project or procurement.

- Suppliers or contractors are prequalified based on their ability to meet the specific

requirements of the project.

- It is used for large or complex projects where specialized skills or resources are required.

- Once prequalified, suppliers are invited to submit bids for the specific project.

Key Differences:

- Scope: Periodic prequalification is for multiple procurements over a period, while project

prequalification is for a specific project.

- Duration:Periodic prequalification is valid for a set period, whereas project

prequalification is valid only for the duration of the specific project.

- Applicability: Periodic prequalification is used for routine or repetitive procurements,

while project prequalification is used for unique or specialized projects.

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---

4. Roles of the Contractor and Client in Procurement

a) Roles of the Contractor

- Bid Submission:The contractor is responsible for preparing and submitting a bid in

response to the client's tender documents.

- Contract Execution: Once awarded the contract, the contractor is responsible for

delivering the goods, works, or services as per the contract terms and specifications.

- Compliance:The contractor must comply with all legal, regulatory, and contractual

requirements, including quality standards, timelines, and safety regulations.

- Reporting The contractor is required to provide regular progress reports to the client,

especially in long-term projects.

- Risk Management: The contractor is responsible for managing risks associated with the

project, including financial, operational, and environmental risks.

- Resource Management: The contractor must ensure that adequate resources (e.g., labor,

materials, equipment) are available to complete the project on time and within budget.

b) Roles of the Client

- Tender Preparation: The client is responsible for preparing and issuing tender

documents, including specifications, terms, and conditions.

- Evaluation and Award: The client evaluates bids and awards the contract to the most

suitable contractor based on predefined criteria.

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 -Contract Management: The client oversees the execution of the contract, ensuring that the

contractor delivers as per the agreed terms.

- Payment: The client is responsible for making timely payments to the contractor upon

satisfactory completion of milestones or deliverables.

- Monitoring and Supervision: The client monitors the progress of the project and ensures

that the contractor adheres to quality standards and timelines.

- Dispute Resolution: The client is responsible for resolving any disputes that may arise

during the execution of the contract.

- Compliance: The client must ensure that the procurement process complies with all

relevant laws, regulations, and policies.

4. Discussion of Procurement Methods

a) Force Account

- Definition: Force Account is a procurement method where the procuring entity uses its

own resources (e.g., labor, equipment, and materials) to carry out a project instead of

outsourcing to a contractor.

- Applicability: This method is used when it is more economical or practical to use internal

resources, especially for small-scale or emergency projects.

- Advantages:

- Cost-effective for small projects.

- Faster execution as there is no need for tendering.

- Full control over the project by the procuring entity.

- Disadvantages:

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 - Limited to the capacity and expertise of the procuring entity.

- May not be suitable for large or complex projects.

b) Competitive Negotiations

Competitive Negotiations involve inviting a limited number of prequalified suppliers or

contractors to submit bids, followed by negotiations to finalize the terms of the contract.

- Applicability: This method is used for complex or specialized procurements where price

is not the only determining factor.

- Advantages:

- Allows for flexibility in negotiations to achieve the best value.

- Suitable for procurements where technical expertise or innovation is critical.

- Disadvantages:

- Can be time-consuming.

- Requires skilled negotiators to ensure fairness and transparency.

c) Framework Agreement Method

A Framework Agreement is a long-term agreement with one or more suppliers for the

provision of goods, works, or services over a specified period.

-Applicability: This method is used for repetitive procurements, such as routine

maintenance or supply of goods.

- Advantages:

- Streamlines the procurement process for recurring needs.

- Reduces administrative costs and time.

- Ensures a steady supply of goods or services.

- Disadvantages:

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 - Limited flexibility if the needs of the procuring entity change.

- Requires careful management to ensure compliance with the agreement.

d) Specifically Permitted Procurement

This method refers to procurement that is allowed under specific circumstances as outlined

in the PPAD Act 2015 and Regulations 2020.

- Applicability: It is used in exceptional cases, such as emergencies, sole-source situations,

or where other procurement methods are not feasible.

- Advantages:

- Allows for quick procurement in urgent situations.

- Provides flexibility in unique or specialized procurements.

- Disadvantages:

- Requires justification and approval from the relevant authority.

- Potential for misuse if not properly regulated.

e) Community Participation

Community Participation involves engaging local communities in the procurement process,

often for small-scale projects that directly benefit the community.

- Applicability: This method is used for community-driven projects, such as local

infrastructure development or social services.

- Advantages:

- Promotes local ownership and sustainability of projects.

- Enhances transparency and accountability.

- Empowers local communities by involving them in decision-making.

- Disadvantages:

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 - Limited to small-scale projects.

- Requires effective coordination and capacity building within the community.

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5. Procurement of Consultancy Services under Part X of the PPAD Act

2020 and Regulations

a) Overview

- Part X of the PPAD Act 2020 and the corresponding regulations provide specific

guidelines for the procurement of consultancy services.

- Consultancy services are typically required for specialized tasks such as feasibility

studies, design, supervision, and technical assistance.

b) Procurement Methods

- Request for Proposals (RFP):The most common method for procuring consultancy

services. Bidders submit both technical and financial proposals, which are evaluated based on

predefined criteria.

- Quality and Cost-Based Selection (QCBS): A method where the technical proposal is

evaluated first, and the financial proposal is considered only for those who meet the technical

threshold.

- Direct Procurement: Used in exceptional circumstances, such as when the consultant is

uniquely qualified or in emergencies.

c) Key Considerations

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 - Evaluation Criteria: The evaluation of consultancy proposals typically focuses on the

quality of the technical proposal, the experience and qualifications of the consultants, and the

cost.

- Contract Management: The client must ensure that the consultancy contract is well-

defined, with clear deliverables, timelines, and payment terms.

- Ethical Standards: Consultants are expected to adhere to high ethical standards,

including confidentiality, impartiality, and avoidance of conflicts of interest.

6. Contract Administration

a) Definition: Contract administration involves the management of a contract from the time

it is awarded until its completion, ensuring that both the client and the contractor fulfill their

obligations.

b) Key Activities

-Monitoring and Supervision: The client monitors the contractor's performance to ensure

compliance with the contract terms, including quality, timelines, and budget.

- Payment Management: The client processes payments to the contractor based on

milestones or deliverables as specified in the contract.

- Variation Management: Any changes to the contract scope, timelines, or costs must be

documented and approved through a formal variation process.

- Dispute Resolution: The client is responsible for resolving any disputes that arise during

the contract period, often through negotiation, mediation, or arbitration.

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 - Performance Evaluation The client evaluates the contractor's performance at the end of

the contract, which may influence future procurement decisions.

4. Contract Documents

a)Definition

- Contract documents are the formal agreements that define the terms and conditions of the

contract between the client and the contractor.

b) Key Components

Contract Agreement: The main document that outlines the rights and obligations of both

parties.

- Scope of Work: A detailed description of the goods, works, or services to be provided.

- Terms and Conditions:Legal and commercial terms, including payment terms,

warranties, and penalties.

- Specifications and Drawings:Technical details and drawings that define the quality and

standards of the deliverables.

- Schedule of Rates: A breakdown of the costs associated with the contract.

- Performance Security:A guarantee provided by the contractor to ensure the fulfillment

of the contract.

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5. Theories Applied in Procurement

a) Value for Money (VfM)

Value for Money is a principle that seeks to achieve the optimal balance between cost,

quality, and sustainability in procurement.

- Application: VfM is achieved by selecting the option that offers the best combination of

quality and cost over the lifecycle of the product or service.

- Key Elements:

- Economy: -Minimizing the cost of resources used.

- Efficiency: Maximizing output for a given level of input.

- Effectiveness: Achieving the desired outcomes.

- Equity: Ensuring fairness and inclusivity in procurement processes.

6. Feasibility Study as Outlined by the PPP Act and PPP Arrangements

a) Feasibility Study

A feasibility study is a comprehensive analysis conducted to determine the viability of a

Public-Private Partnership (PPP) project.

- Key Components:

- Technical Feasibility: Assesses the technical requirements and constraints of the project.

- Financial Feasibility: Evaluates the financial viability, including cost estimates, funding

sources, and revenue projections.

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 - Economic Feasibility: Analyzes the economic benefits and costs of the project to

society.

- Legal Feasibility: Ensures that the project complies with all relevant laws and

regulations.

- Risk Assessment: Identifies and evaluates potential risks and mitigation strategies.

b) PPP Arrangements (Second Schedule of the PPP Act)

- Build-Operate-Transfer (BOT): The private partner builds and operates the facility for a

specified period before transferring it to the public sector.

- Build-Own-Operate (BOO): The private partner builds, owns, and operates the facility

indefinitely.

- Concession: The private partner operates a public asset for a specified period, often in

exchange for revenue generated from the asset.

- Management Contract: The private partner manages a public asset or service for a fee,

while ownership remains with the public sector.

- Joint Venture: A partnership between the public and private sectors to develop and

operate a project, sharing risks and rewards.

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7. Pre-Construction Planning Decision Support Tools for a Proposed
Construction Project

Pre-construction planning is a critical phase in any construction project, as it lays the

foundation for successful project execution. Decision support tools are essential during this
phase to ensure that all aspects of the project are carefully analyzed, planned, and
documented. Below is a discussion of key pre-construction planning decision support tools,
including contract and tender documents:

1. Feasibility Studies
- Purpose: Feasibility studies assess the viability of the project by analyzing technical,
financial, legal, and environmental factors.
- Tools:
- Cost-Benefit Analysis (CBA): Evaluates the economic feasibility of the project by
comparing costs and benefits.
- Risk Assessment Tools: Identify potential risks and their impact on the project.
- Environmental Impact Assessment (EIA): Assesses the environmental implications of
the project.
- Outcome: Determines whether the project is viable and worth pursuing.

2. Project Planning and Scheduling Tools

- Purpose: These tools help in creating a detailed project plan and schedule, ensuring that
all activities are properly sequenced and resources are allocated efficiently.
- Tools:
- Gantt Charts: Visualize project timelines and task dependencies.
- Critical Path Method (CPM): Identifies the longest path of tasks and helps in managing
project deadlines.
- Program Evaluation and Review Technique (PERT): Estimates project duration by
analyzing task durations and dependencies.
- Building Information Modeling (BIM): Provides a 3D model of the project, enabling
better visualization and coordination.
- Outcome: A well-structured project plan that ensures timely completion of the project.

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3. Cost Estimation Tools
- Purpose: Accurate cost estimation is crucial for budgeting and financial planning.
- Tools:
Automates the process of calculating material quantities from project drawings.
- Cost Databases: Provide up-to-date information on material and labor costs.
- Estimating Software: Integrates quantity takeoff and cost databases to generate detailed
cost estimates.
- Outcome: A reliable cost estimate that forms the basis for the project budget.

4. Risk Management Tools

- Purpose: Identify, assess, and mitigate risks that could impact the project.
- Tools:
- Risk Registers: Document identified risks, their likelihood, impact, and mitigation
strategies.
- Monte Carlo Simulation: Analyzes the impact of risk on project outcomes by running
multiple simulations.
- SWOT Analysis: Evaluates strengths, weaknesses, opportunities, and threats related to
the project.
- Outcome: A risk management plan that minimizes the impact of uncertainties on the
project.

5. Stakeholder Analysis and Communication Tools

-Purpose: Ensure effective communication and engagement with all stakeholders.
- Tools:
-: Identifies key stakeholders and their interests.
- Communication Plans: Outline how information will be shared with stakeholders.
-Collaboration Platforms: Facilitate real-time communication and document sharing
among project teams.
- Outcome: Improved stakeholder engagement and alignment with project goals.

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6. Tender and Contract Documents
- Purpose: Tender and contract documents formalize the agreement between the client and
the contractor, ensuring clarity and legal compliance.
- Key Documents:
- Tender Documents:
- Invitation to Tender (ITT): Invites contractors to submit bids for the project.
- Instructions to Tenderers: Provides guidelines on how to prepare and submit bids.
- Bill of Quantities (BOQ): Lists the quantities of materials and work required for the
project.
- Specifications and Drawings: Provide detailed technical information about the project.
- Form of Tender: A standardized form for submitting the bid.
- Contract Documents:
- Contract Agreement: Outlines the terms and conditions of the contract.
- Scope of Work: Defines the work to be performed by the contractor.
- Payment Terms: Specifies the payment schedule and conditions.
- Performance Security: A guarantee provided by the contractor to ensure contract
fulfillment.
- Dispute Resolution Mechanism: Outlines the process for resolving disputes.
- Outcome: Clear and legally binding agreements that protect the interests of both parties.

7. Procurement Management Tools

- Purpose: Manage the procurement process to ensure timely and cost-effective acquisition
of materials and services.
- Tools:
- E-Procurement Systems: Automate the procurement process, from tendering to contract
award.
- Supplier Management Software: Track supplier performance and manage relationships.
- Inventory Management Systems: Monitor material availability and usage.
- Outcome: Efficient procurement processes that minimize delays and cost overruns.

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8. Sustainability and Compliance Tools
- Purpose:Ensure that the project complies with sustainability standards and regulatory
requirements.
Tools:
- Life Cycle Assessment (LCA): Evaluates the environmental impact of materials and
processes.
- Compliance Checklists: Ensure adherence to building codes and regulations.
- Green Building Certification Tools: Assess the project against sustainability standards
such as LEED or BREEAM.
- Outcome: A project that meets environmental and regulatory standards.

9. Decision-Making Frameworks
- Purpose: Provide a structured approach to making key decisions during the pre-
construction phase.
- Tools:
- Multi-Criteria Decision Analysis (MCDA): Evaluates alternatives based on multiple
criteria, such as cost, time, and quality.
- Decision Trees: Visualize decision options and their potential outcomes.
- Cost-Utility Analysis (CUA): Compares the cost and utility of different options.
- Outcome: Informed decisions that align with project objectives.

10. Document Management System

- Purpose: Organize and manage all project-related documents to ensure easy access and
retrieval.
- Tools:
- Cloud-Based Document Management Systems: Store and share documents securely.
- Version Control Systems: Track changes to documents and maintain a history of
revisions.

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 -Outcome: Efficient document management that supports collaboration and decision-
making.

8. Procurement Methods Permitted in the Public Procurement and

Asset Disposal Act (PPADA) 2015

The Public Procurement and Asset Disposal Act (PPADA) 2015 provides a comprehensive
framework for public procurement in Kenya. The Act outlines various procurement methods
that can be used by procuring entities, depending on the nature and value of the procurement.
These methods include:

a) Open Tendering
- Definition: Open tendering is the most common and preferred method of procurement. It
involves advertising the tender publicly, allowing any interested and qualified bidder to
submit their bids.
- Applicability: Suitable for high-value procurements where competition is essential.
- Advantages: Promotes transparency, fairness, and competition.
-Disadvantages: Can be time-consuming and resource-intensive.

b) Restricted Tendering
- Definition: Restricted tendering involves inviting a select list of prequalified suppliers or
contractors to submit bids.
- Applicability: Used when only a limited number of suppliers are capable of delivering
the required goods, works, or services.
- Advantages: Reduces the time and cost associated with open tendering.

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 - Disadvantages: Limited competition, which may not always result in the best value for
money.

c) Direct Procurement
Direct procurement involves procuring goods, works, or services directly from a specific
supplier without competition.
-Applicability: Used in exceptional circumstances, such as emergencies, sole-source
situations, or where the procuring entity has determined that direct procurement is the most
appropriate method.
- Advantages: Quick and efficient for urgent or specialized procurements.
- Disadvantages: Requires justification and approval from the relevant authority; potential
for misuse.

d) Request for Proposals (RFP)

RFP is used for the procurement of consultancy services or complex projects where the
focus is on the quality of the proposal rather than just the price.
- Applicability: Suitable for procurements where technical expertise or innovation is
critical.
- Advantages: Allows for flexibility in evaluating both technical and financial proposals.
- Disadvantages: Can be complex and time-consuming.

e) Request for Quotations (RFQ)

RFQ is a simplified method where the procuring entity requests quotations from a number
of suppliers.
- Applicability: Used for low-value procurements.
- Advantages: Faster and less resource-intensive than open tendering.
- Disadvantages: Limited to low-value procurements; may not always ensure the best value
for money.

f) Framework Agreements
Framework agreements are long-term agreements with suppliers for the provision of goods,
works, or services over a specified period.
- Applicability: Used for repetitive procurements, such as routine maintenance or supply of
goods.

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 - Advantages: Streamlines the procurement process for recurring needs; reduces
administrative costs.
- Disadvantages: Limited flexibility if the needs of the procuring entity change.

g) Electronic Reverse Auction

An online bidding process where suppliers compete to offer the lowest price for goods,
works, or services.
- Applicability: Used for standardized and price-driven procurements.
- Advantages: Promotes competition and can result in lower prices.
- Disadvantages: Limited to procurements where price is the primary factor.

h) Force Account
Force Account involves the procuring entity using its own resources (e.g., labor, equipment)
to carry out the procurement.
-Applicability: Used when it is more economical or practical to use internal resources
rather than outsourcing.
- Advantages: Cost-effective for small projects; full control over the project.
- Disadvantages: Limited to the capacity and expertise of the procuring entity.

9. Public-Private Partnerships (PPP) Procurement Methods**

Public-Private Partnerships (PPPs) are collaborative arrangements between the public and
private sectors for the delivery of public infrastructure or services. The PPP Act of 2013
provides the legal framework for PPPs in Kenya, and the procurement methods for PPPs are
outlined in the Act and its regulations. The key PPP procurement methods include:

a) Competitive Bidding
Competitive bidding is the most common method for procuring PPP projects. It involves
inviting bids from private sector entities through a public tender process.
Applicability: Suitable for large-scale infrastructure projects such as roads, hospitals, and
energy projects.

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 - Advantages: Promotes transparency, competition, and value for money.
- Disadvantage: Can be time-consuming and resource-intensive.

b) Competitive Dialogue
Competitive dialogue is a procurement method where the procuring entity engages in
discussions with prequalified bidders to develop the best solution for a complex project.
- Applicability:Used for highly complex projects where the requirements cannot be clearly
defined at the outset.
- Advantages: Allows for flexibility and innovation in developing project solutions.
- Disadvantages: Requires skilled negotiators and can be time-consuming.

c) Direct Negotiation
Direct negotiation involves negotiating directly with a single private sector entity without a
competitive bidding process.
- Applicability: Used in exceptional circumstances, such as when there is only one suitable
private sector partner or in emergencies.
- Advantages: Quick and efficient for urgent or specialized projects.
- Disadvantages: Limited competition; requires strong justification and approval.

d) Unsolicited Proposals
Unsolicited proposals are initiatives proposed by private sector entities without a formal
request from the public sector.
- Applicability: Used when a private sector entity identifies a unique opportunity or
innovation that can benefit the public.
- Advantages: Encourages innovation and private sector initiative.
- Disadvantages: Requires careful evaluation to ensure value for money and alignment
with public interests.

e) Swiss Challenge
The Swiss Challenge method involves a private sector entity submitting an unsolicited
proposal, which is then challenged by other bidders to improve upon the original proposal.
- Applicability: Used for innovative projects where the original proposer has a unique
solution.
- Advantages: Promotes innovation while allowing for competition.

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 - Disadvantages: Can be complex to administer and may discourage original proposers.

f) Pre-Qualification and Shortlisting

Pre-qualification involves assessing the technical and financial capabilities of potential
bidders before inviting them to submit detailed proposals.
- Applicability: Used for large and complex projects to ensure that only qualified bidders
participate.
- Advantages: Ensures that only capable bidders are considered, reducing the risk of
project failure.
- Disadvantages: Can be time-consuming and may limit competition.

g) Concession Agreements
- Concession agreements involve granting a private sector entity the right to operate a
public asset or service for a specified period in exchange for revenue generated from the
asset.
- Applicability: Used for infrastructure projects such as toll roads, airports, and ports.
- Advantages: Transfers operational risks to the private sector; generates revenue for the
public sector.
- Disadvantages: Requires careful management to ensure that public interests are protected.

h) Build-Operate-Transfer (BOT)
- BOT is a PPP model where the private sector builds and operates a facility for a specified
period before transferring it to the public sector.
- Applicability: Used for infrastructure projects such as power plants, water treatment
facilities, and highways.
- Advantages: Transfers construction and operational risks to the private sector.
- Disadvantages: Requires long-term commitment and careful contract management.

i) Build-Own-Operate (BOO)
BOO is a PPP model where the private sector builds, owns, and operates a facility
indefinitely.
- Applicability: Used for projects where long-term private sector involvement is desirable.
- Advantages: Reduces the financial burden on the public sector.
- Disadvantages: Public sector may have limited control over the asset.

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j) Management Contracts
Management contracts involve the private sector managing a public asset or service for a
fee, while ownership remains with the public sector.
- Applicability:Used for public services such as hospitals, schools, and water supply
systems.
- Advantages: Improves efficiency and service delivery without transferring ownership.
- Disadvantages: Limited risk transfer to the private sector.

k) Joint Ventures
Joint ventures involve a partnership between the public and private sectors to develop and
operate a project, sharing risks and rewards.
- Applicability: Used for projects where both sectors can contribute expertise and resources.
- Advantages: Promotes collaboration and shared responsibility.
- Disadvantages: Requires careful negotiation and management of the partnership.

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Procurement Plan in the Context of the Public Procurement and Asset

Disposal Act (PPADA) 2015 and Regulations

A procurement plan is a critical document in public procurement that outlines how an

organization intends to acquire goods, works, and services over a specified period. The Public

Procurement and Asset Disposal Act (PPADA) 2015 and its accompanying regulations

provide a legal framework for public procurement in Kenya, emphasizing transparency,

accountability, and value for money. Below is a detailed discussion of the procurement plan,

its purposes, and its contents in the context of the PPADA 2015 and regulations.

1. Definition of a Procurement Plan

A procurement plan is a detailed document that outlines the procurement activities to be

undertaken by a procuring entity within a specific period, usually a financial year. It includes

information on what is to be procured, the procurement methods to be used, timelines, and

estimated costs. The plan ensures that procurement activities are aligned with the

organization's objectives and budget.

2. Purposes of a Procurement Plan

a) Ensuring Compliance with Legal and Regulatory Requirements

- The procurement plan ensures that all procurement activities comply with the PPADA

2015 and its regulations, as well as other relevant laws and policies.

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b) Promoting Transparency and Accountability

- By detailing the procurement activities in advance, the plan promotes transparency and

accountability in the use of public funds.

c) Enhancing Efficiency and Effectiveness

- A well-prepared procurement plan helps in the efficient allocation of resources, timely

delivery of goods and services, and avoidance of delays and cost overruns.

d) Facilitating Budgeting and Financial Planning

- The procurement plan provides a basis for budgeting and financial planning, ensuring that

funds are available for planned procurement activities.

e) Supporting Strategic Objectives

- The plan aligns procurement activities with the strategic objectives of the organization,

ensuring that procurement supports the overall goals and priorities.

f) Risk Management

- The procurement plan identifies potential risks and outlines mitigation strategies, reducing

the likelihood of procurement-related issues.

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3. Contents of a Procurement Plan

The PPADA 2015 and its regulations provide guidelines on the contents of a procurement

plan. A comprehensive procurement plan typically includes the following elements:

a) Introduction and Background

- Overview of the organization and its strategic objectives.

- Legal and regulatory framework governing the procurement process.

b) Procurement Objectives

- Specific objectives of the procurement plan, such as ensuring timely delivery of goods and

services, achieving value for money, and promoting local participation.

c) Procurement Requirements

- Detailed list of goods, works, and services to be procured.

- Specifications and technical requirements for each procurement item.

d) Procurement Methods

- Description of the procurement methods to be used (e.g., open tendering, restricted

tendering, direct procurement, request for proposals).

- Justification for the chosen procurement methods, especially for methods other than open

tendering.

e) Timelines

- Detailed schedule of procurement activities, including:

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 - Preparation of tender documents.

- Advertisement of tenders.

- Submission and evaluation of bids.

- Award of contracts.

- Delivery of goods, works, or services

f) Estimated Costs

- Estimated costs for each procurement item.

- Source of funding (e.g., government budget, donor funds).

g) Stakeholder Involvement

- Identification of key stakeholders involved in the procurement process.

- Roles and responsibilities of each stakeholder.

h) Risk Management

- Identification of potential risks in the procurement process.

- Mitigation strategies for each identified risk.

i) Sustainability Considerations

- Measures to ensure that procurement activities are environmentally sustainable.

- Promotion of local content and participation of marginalized groups.

j) Monitoring and Evaluation

- Mechanisms for monitoring and evaluating the implementation of the procurement plan.

- Key performance indicators (KPIs) to measure the success of procurement activities.

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k) Approval and Review Process

- Process for approval of the procurement plan by the relevant authorities.

- Procedures for reviewing and updating the procurement plan as needed.

4. Legal and Regulatory Framework

The PPADA 2015 and its regulations provide specific requirements for the preparation and

implementation of procurement plans. Key provisions include:

a) Mandatory Preparation of Procurement Plans

- Section 53 of the PPADA 2015 requires all procuring entities to prepare and implement

procurement plans.

b) Approval of Procurement Plans

- The procurement plan must be approved by the relevant authority, such as the Accounting

Officer or the Head of the Procuring Entity.

c) Alignment with Budget

- The procurement plan must be aligned with the organization's budget and approved by the

relevant budget authority.

d) Public Participation

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 - The PPADA 2015 emphasizes the importance of public participation in the procurement

process. The procurement plan should include mechanisms for engaging stakeholders and

promoting transparency.

e) Reporting and Accountability

- Procuring entities are required to submit periodic reports on the implementation of the

procurement plan to the Public Procurement Regulatory Authority (PPRA).

5. Benefits of a Procurement Plan

a) Improved Planning and Coordination

- The procurement plan ensures that all procurement activities are well-coordinated and

aligned with the organization's objectives.

b) Enhanced Transparency and Accountability

- By detailing procurement activities in advance, the plan promotes transparency and

accountability in the use of public funds.

c) Efficient Resource Allocation

- The plan helps in the efficient allocation of resources, ensuring that funds are used

effectively and efficiently.

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d) Timely Delivery of Goods and Services

- A well-prepared procurement plan ensures that goods, works, and services are delivered

on time, avoiding delays and cost overruns.

e) Risk Mitigation

- The plan identifies potential risks and outlines mitigation strategies, reducing the

likelihood of procurement-related issues.

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10. Cost Reimbursement & Cost-Plus Percentage Fee Contracts

Merits and Demerits of Cost Reimbursement Contracts

Merits:

1. Flexibility: Ideal for projects where the scope is not fully defined at the outset, allowing for

adjustments as the project progresses.

2. Transparency: All costs are documented and reimbursed, ensuring accountability.

3. Risk Sharing: The client bears the cost risk, which can be beneficial for contractors who

may otherwise avoid high-risk projects.

4. Early Start: Projects can commence quickly without detailed initial cost estimates.

Demerits

1. Cost Uncertainty: The final project cost is unknown at the start, which can lead to budget

overruns.

2. Limited Cost Control: Contractors may lack incentive to control costs since they are

reimbursed for all expenses.

3. Administrative Burden: Requires detailed record-keeping and auditing to ensure costs are

legitimate.

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Situations Most Likely to Be Used:

- Research and development projects.

- Emergency construction projects where speed is critical.

- Projects with uncertain scope or high complexity.

11. Merits and Demerits of Cost-Plus Percentage Fee Contracts

Merits:

2. Contractor Motivation: Contractors are incentivized to complete the project as their fee is a

percentage of the costs.

3. Flexibility: Suitable for projects with evolving requirements.

Demerits:

1. Cost Inflation: Contractors may inflate costs to increase their fee.

2. Lack of Cost Control: Clients may face higher costs due to the percentage fee structure.

3. Conflict of Interest: Contractors may prioritize higher costs over efficiency.

Situations Most Likely to Be Used:

- Small-scale projects with limited complexity.

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- Projects where trust between the client and contractor is high.

12. Cost-Plus Fixed-Fee Contracts

Potential Challenges

1. Fee Negotiation: Determining a fair fixed fee can be challenging.

2. Cost Overruns: The client bears the risk of cost overruns, which can lead to disputes.

3. Limited Incentive for Efficiency: Contractors may not be motivated to complete the project

quickly or cost-effectively.

4. Administrative Complexity: Requires detailed cost tracking and auditing.

13. Discretionary Procurement Systems

1. Partnering

- Definition: A collaborative approach where all parties work together to achieve shared

goals.

- Organizational Structure:

- Client: Provides funding and objectives.

- Contractor: Executes the project.

- Consultants: Provide expertise.

- Stakeholders: Include end-users and community representatives.

- Merits: Improved communication, reduced disputes, and shared risk.

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- Demerits: Requires high levels of trust and collaboration.

2. Alliancing

- Definition: A long-term relationship between multiple organizations to deliver a project.

- Organizational Structure:

- Alliance Board: Oversees the project.

- Alliance Manager: Coordinates activities.

- Partners: Include contractors, consultants, and suppliers.

- Merits: Shared risk, innovation, and long-term collaboration.

- Demerits: Complex to manage and requires alignment of goals.

3. Joint Venture

- Definition: A temporary partnership between two or more parties to execute a project.

- Organizational Structure:

- Joint Venture Board: Comprises representatives from each party.

- Project Manager: Manages day-to-day operations.

- Parties: Share resources and risks.

- Merits: Access to additional resources and expertise.

- Demerits: Potential for conflicts and profit-sharing disputes.

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4. New Engineering Contract (NEC)

- Definition: A family of contracts designed to promote collaboration and flexibility.

- Organizational Structure:

- Client: Defines project objectives.

- Contractor: Executes the work.

- Project Manager: Oversees the contract.

- Merits: Clear risk allocation, flexibility, and focus on collaboration.

- Demerits: Requires skilled management and can be complex.

14.Procurement System for a Project

Adopted Procurement System: Partnering

- Parties Involved:

- Client: Provides funding and objectives.

- Contractor: Executes the project.

- Consultants: Provide design and technical expertise.

- Stakeholders: Include end-users and community representatives.

Roles of the Parties

- Client: Defines project goals and provides funding.

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-Contractor: Manages construction and ensures quality.

- Consultants: Offer technical advice and design solutions.

- Stakeholders: Provide input and feedback.

Key Points Considered in Design

- Collaboration: Ensures all parties work towards common goals.

- Risk Sharing: Reduces individual risk exposure.

- Communication: Promotes transparency and reduces disputes.

Merits

- Improved communication and collaboration.

- Reduced disputes and delays.

- Shared risk and rewards.

Demerits

- Requires high levels of trust and commitment.

- Can be time-consuming to establish.

Case Study: Kenya’s Thika Superhighway

- Procurement System: Partnering was used to deliver the Thika Superhighway, a major

infrastructure project in Kenya.

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- Outcome: The project was completed on time and within budget, demonstrating the

effectiveness of partnering in large-scale projects.

Public-Private Partnerships (PPP) Procurement System

Overview of PPP

- **Definition: A long-term contract between a public entity and a private party to deliver

public infrastructure or services.

- PPP Act 2013 (Revised 2021): Provides the legal framework for PPPs in Kenya, including

risk allocation, procurement processes, and dispute resolution.

Merits of PPP

1. Efficiency: Private sector expertise can lead to more efficient project delivery.

2. Risk Sharing: Risks are allocated to the party best able to manage them.

3. Innovation: Private sector innovation can improve project outcomes.

4. Funding: PPPs can provide additional funding sources for public projects.

Demerits of PPP

1. Complexity: PPP contracts can be complex and time-consuming to negotiate.

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2. Cost: Private financing may be more expensive than public funding.

3. Accountability: Reduced public control over project delivery.

Case Study: Mombasa-Nairobi Standard Gauge Railway (SGR)**

- Procurement System: PPP was used to deliver the SGR, a major infrastructure project in

Kenya.

- Outcome: The project was completed on time and has significantly improved transportation

between Mombasa and Nairobi.

References

- Kenya PPP Act 2013 (Revised 2021).

- Case Study: Thika Superhighway, Kenya.

- Case Study: Mombasa-Nairobi Standard Gauge Railway, Kenya.

- Construction Procurement Systems: A Guide to Best Practice.

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