MPs have proposed radical changes to strengthen the regulation and oversight of public-private partnership (PPP) projects to weed out corruption.
A new Bill proposes the establishment of a powerful 10-member committee that will manage PPPs in all stages, including deciding projects that government agencies can enter into and rejecting those deemed unnecessary.
Terminate project deals
The committee will also approve feasibility studies, approve negotiated contract terms and privately-initiated proposals, as well as cancel procurements, and vary or terminate project agreements.
It will constitute the principal secretaries of Treasury, department of planning, department of industrialisation, a representative of the Transport and Infrastructure Cabinet Secretary, the Solicitor-General, an appointee of the Council of Governors, three people (not public officers) appointed by Treasury CS, and the Director-General (the secretary).
“The committee shall be responsible for formulating policies on PPPs, overseeing the implementation of PPP contracts and monitoring the implementation of this Act, including the sustainability of contingent liabilities that may be incurred by a contracting authority for projects approved under the Act,” the Bill states.
It proposes the establishment of the Directorate of PPPs to be headed by a Director-General.
The directorate will be responsible for originating, guiding and coordinating the selection, ranking and prioritisation of projects within the public budget framework, lead contracting authorities in project structuring, procurement, tender evaluation, contract negotiation and deal closure.
“A contracting authority shall implement the directions of the Directorate at every stage of a project. Where a project involves more than one contracting authority, the Directorate shall designate one of the contracting authorities to be the lead contracting authority,” the Bill proposes.
It also proposes that a contracting authority (government institution or county government) has a duty to submit its annual and other periodic reports on implementation of projects to the directorate and follow guidelines in prioritising, screening and identifying programmes.
“In the performance of its duties, a contracting authority shall report to the Directorate and implement the recommendations of the Directorate, comply with the guidelines issued by the Directorate and submit such information as may be required by the Directorate or Committee,” the Bill states.
The directorate will determine the duration of a PPP agreement and extend the tenure of a project agreement on approval by the committee and the Attorney-General.
Proposed project list
The Bill requires national government agencies to prepare lists of projects they intend to undertake on priority basis for approval by the directorate.
“The directorate may reject any project included in a proposed project list and shall specify the reasons for such refusal in writing,” it states.
In regards to conducting due diligence before engaging a private player, it requires contracting authorities to confirm the private entity’s financial capacity to undertake the project and the relevant experience and expertise before execution of the project agreement.
“A contracting authority shall, under the direction of the Directorate, undertake a feasibility study of the project it intends to implement under this Act in order to determine the viability of the project,” the Bill states.
Kenya has, since the introduction of PPP Act in 2013, incurred millions of shillings in losses after government agencies entering into partnership with private players they had little or no due diligence on, only for them to run bankrupt on the way.
The most notable case includes the construction of Itare Dam in Nakuru County, which collapsed years ago after the contracted firm went insolvent, and the multibillion-shilling Standard Gauge Railway (SGR) project, which the Court of Appeal ruled was procured illegally.
It faulted how the feasibility was conducted, noting that the World Bank had blacklisted China Road and Bridge Corporation (CRBC) for engaging in corruption.
The Bill places the Directorate at the centre of procurement of projects to avoid such scenarios.
“The Directorate, in co-ordination with the contracting authority, shall, before commencing an evaluation of a privately-initiated proposal, conduct due diligence to confirm that the private party is not insolvent, under receivership or bankrupt and its affairs are not being administered by a court or judicial officer, its business activities have not been suspended, and it is not subject to any current legal proceedings,” it states.
The committee may make a determination on whether a project meets the public interest suitability, feasibility and affordability criteria.
“The committee may, on the recommendations of the contracting authority, and any independent reviews or advice that the Committee may solicit in that regard, make a determination that the project does not meet public PPP suitability criteria and give guidance on alternative methods by which the project may be implemented or the project does not meet any of the relevant criteria and should be abandoned,” the Bill states.
County governments are required to liaise with the directorate at every phase of a PPP project, including obtaining written approval to undertake the project from the committee and Treasury CS. “Each county government shall submit to the Directorate all feasibility studies.”
The committee will be financed through the establishment of a PPP Project Facilitation Fund, whose source of money will be from grants, gifts, donations, levies/tariffs that are imposed on a project, success fees paid by a project company (1 per cent of the project value) and appropriations-in-aid.