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 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 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
Local preference
Micro-enterprises
Preference
Region
Reservations
Small enterprises
Target group
Youth
5

Application/Target Group
Small enterprises

Micro enterprises

Disadvantaged groups

Citizen contractors

Local contractors; and

Citizen contractors in Joint Venture or SubContracting 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
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
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 subcontracting arrangements with citizens

Regions

Constituencies

Local authorities

Counties

Threshold applicable when using CDF and LATF funds

Local Reservations

Applicable




to:-

Constituencies;
Local authorities; and
Counties.

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

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%
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

Groups

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 a

register of SMEs and disadvantaged groups

PEs shall integrate schemes in procurement
plans and submit the relevant part to PPOA
within 60 days after commencement of the F/Y.

All procurement awards where preference or
reservations schemes are applied must be
reported to PPOA on quarterly basis

Monitoring of Compliance Contd.

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

An enterprise owned by youth, women and persons with
disability shall be a legal entity registered with the
relevant government body.

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

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

Monitoring of Compliance Contd.

Prompt payments for performed contracts through electronic media

and shall not delay beyond 30 days.
Where delay is inevitable, a PE shall make at least 30% part
payment and shall give a written explanation for the delay to the
enterprise.
Where delay of payments for works performed are likely to happen,
a PE may facilitate invoice discounting arrangements with a
financial institution for the purpose advancing credit to the
affected enterprises.
For the purposes of ensuring sustainable promotion of local
industry, A PE in its tenders documents shall have a mandatory
requirement for preliminary evaluation for all foreign tenderers
participating in international tenders to source at least 40% of their
supplies from citizen contractors prior to submitting a tender.