challenges facing implementation of public procurement...

Challenges Facing Implementation of Public Procurement

Regulations in Public Institutions in Kenya: A Case of

Nairobi City County Government

1Jackson NJOROGE & Edith NGUGI

2

1M.Sc Scholar (Procurement & Logistics), Jomo Kenyatta University of Agriculture and

Technology, Kenya 2 Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya

ABSTRACT

The main objective of this study was to determine challenges facing implementation of public

procurement regulations in Kenya. Regulated public procurement plays a very vital role to the economy

of Kenya. However, a report by Rapid Response Initiative (RRI) (2014) established that though most of

the public procurement reforms have been achieved and procurement policies and institutions are in

place, the level of implementation of such policies by the county governments is still low. This study

therefore sought to determine the effect of funding, staff competence, government leadership and

enforcement on the implementation of public procurement regulations in Kenya.. The study adopts

descriptive research design. The target population was Nairobi City County Government with a workforce

of 15,000 employees. The study adopted stratified random sampling in selecting only participants that

were directly involved in the implementation of public procurement regulations in Nairobi County

Government. The population was sub divided into clusters to help in selecting sample size that is

representative of the population. A total of (69) employee from procurement department of Nairobi

County Government was therefore incorporated as the sample. The key findings were that inadequate

funding contributes more to the implementation of public procurement regulations in Kenyafollowed by

staff competence. The study concludes that implementation of public procurement policies in public

institutions today is tailored around enough funding and effective use of the available financial resources.

The study also recommends that implementation of public procurement regulations in public institutions

in Kenya to be successful, human resources function of public institutions and the PPOA must ensure

there are capacity development initiatives across government (central and local).

Keywords: public procurement regulations, staff competence, funding, government leadership,

enforcement

INTRODUCTION

Worldwide, public procurement has become an issue of public attention and debate, and has been

subjected to reforms, restructuring, rules and regulations. World Bank, (2004) define public procurement

as the acquisition of goods, services and works by a procuring entity using public funds. According to

Roodhooft and Abbeele (2012), public bodies have always been big purchasers, dealing with huge

budgets.

World Bank (2004), also reiterated that public procurement represents 18.42% of the world GDP.

Although several developing countries have taken steps to reform their public procurement systems, the

process is still shrouded by secrecy, inefficiency, corruption and undercutting. In all these cases, huge

amounts of resources are wasted (Odhiambo & Kamau, 2013). In developing countries, public

procurement is increasingly recognized as essential in service delivery (Hunja, 2011), and it accounts for

a high proportion of total expenditure.

International Journal of Business & Law Research 4(4):1-11, Oct.-Dec., 2016

© SEAHI PUBLICATIONS, 2016 www.seahipaj.org ISSN: 2360-8986

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Globally, adoption and regulation of public expenditure has quickly gained momentum. Procurement is

the acquisition of goods, services or works from an external source (Jason, 2014). In state run institutions,

governments across the globe continue to establish procurement systems to manage public expenditures.

Capone (2010) opines the widespread regulation of public procurement to realized benefits in cutting

costs and undertaking purchases competitively thus thereby improving the quality and value for the

money.

In the African context, McGinity (2014) explains that the current regimes establishments of procurement

regulations are based on the rationale that a regulated public expenditure is the cornerstone to effective

and efficient public service delivery and satisfaction. This view is shared by Ohkubo (2012) that explains

that unregulated public expenditure is a fodder to procurement frauds which mint millions of shillings

from public coffers hence leading to unrests.

In South Africa, the government through the ministry of education has developed a basic financial manual

for schools. This provides the regulations that should be followed by schools in their procurement process

(Western Cape Education Department). In Uganda, the Public Procurement and Disposal of Assets

Authority (PPDAA) was formed under the Public Procurement and Disposal Act (PPDA) of 2003. The

PPDAA provide guidelines and regulations in public procurement of all public entities including schools

and colleges (Eyaa, 2011). In Tanzania, the Public Procurement Act No 3 of 2001 became effective on

first July, 2001. The act provides a comprehensive coverage of all regulatory aspect critical to public

procurements including schools (Eyaa, 2011).

In Kenya, public procurement has surely evolved from the annals where the public expenditure was rarely

regulated to independent procurement structures and regulating bodies. Migai (2010) gives credit to

public procurement reforms and regulations in Kenya to competitiveness and transparency in acquisition

of government services and goods, wider stakeholders consultations, improved processes and procedures,

improved accountability, elimination of collusion and corruption among supply agents and eradication of

non-value added purchasing methods.

Regulations in public sector in Kenya have also opened space for equity where small medium enterprises

are also considered and given priority in matters of public tenders. According to Okore (2011), a public

procurement regulation has opened a platform for equitable competition in allocation and supply of

government tenders. Indeed effectively regulated public procurement system is a source for both citizens

and public institutions benefits but this comes with some challenges.

Statement of the problem

Regulated public procurement plays a very vital role to the economy. In Kenya, procurement reforms

through enactment of procurement laws and establishment of watchdog body such as Public Procurement

Oversight Authority (PPOA) has improved transparency, accountability and achievement of value for

money in public expenditures (Migai, 2010).

Despite this important role procurement regulations play in safeguarding public interests in public

expenditures in public institutions in Kenya, a report by Rapid Response Initiative (RRI) (2014)

established that though most of the public procurement reforms have been achieved and procurement

policies and institutions are in place, the level of implementation of such policies by the county

governments was still low. RRI report is supported by PPOA (2014) procurement review of public

institutions and counties report that established that based on a rating scale of 1> 10, many county

governments ratings on the implementation of public procurement regulations fell between 3>5 out of 10.

This poses a problem of slow implementation of public procurement regulations than a desired rating of

any figure above 5 in relation to the rating scale established by the RRI report

From the above information, it is evident that there has not been impetus to implement public

procurement regulations in public institutions. This leaves a research gap that has necessitated this study

since the public procurement regulations were established to counter some of the problems that were

rampant before the regulations were established but to date procurement within the public sector still

faces some challenges. To achieve the intended objectives, the study will seek to answer the following

questions: How can the Public Procurement regulations be implemented at more robust speed in public

institutions? What are the current challenges of the that are affecting the existing regulations?

Njoroge & Ngugi….. ..Int. J. Business & Law Research 4(4):1-11, 2016

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This is serious considering that procurement regulations are as good as dead if they are not being

implemented. In fact according to Juma (2010) the benefits of cost savings, competitiveness, transparency

and value for money are only achieved when public institutions fully implement and operationalize

procurement regulations otherwise the initiative is meaningless. It is based on the aforementioned that this

study seeks to answer the research gap; what are the challenges facing implementation of public

procurement regulations in Nairobi City County Government?

Objectives of the Study

The main objective of this research study is to determine challenges facing implementation of public

procurement regulations in Kenya.

These are the specific objectives this study sought to fulfill.

1. To determine effect of funding on implementation of public procurement regulations in Kenya.

2. To assess the effect of staff competence on implementation of public procurement regulations in

Kenya.

3. To examine the effect of government leadership on implementation of public procurement

regulations in Kenya.

4. To ascertain the effect of enforcement of implementation of public procurement regulations in

Kenya.

Research Questions

These are the research questions this study seeks to fulfill.

1. To what extent does funding affect implementation of public procurement regulations in Kenya?

2. To what extent does staff competence affect implementation of public procurement regulations in

Kenya?

3. To what extent does government leadership affect implementation of public procurement regulations

in Kenya?

4. To what extent does enforcement affect implementation of public procurement regulations in Kenya?

Scope of the Study

This study was limited to challenges facing implementation of public procurement regulations in Kenya.

Precisely, the study sought to examine the effect of funding, staff competence, government leadership and

enforcement of implementation of public procurement regulations in Kenya. These variables were chosen

because they were common factors that might have an impediment to implementation of policy in Kenya.

The target population was Nairobi City County Government. The study was undertaken in a period of five

months from February 2016 to June 2016.

CONCEPTUAL FRAMEWORK

A conceptual framework is a chart that explains the main things to be studied in conception. It provides

the idea on establishing the relationship between the dependent and independent variables. It provides the

primary model that provides the basis on deciding on the research question, objectives and methodology

to be followed in order to solve the phenomenon under investigation (Kothari, 2004). See figure 1.


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Independent Variables Dependent Variable

Fig. 1. Conceptual Framework

Effective implementation of public procurement regulations in public institutions in Kenya depends on

strategic procurement planning in carrying out procurement activities, well trained and competent staff,

zero political interference and maximum policy enforcement

Funding

Increased funding by government for procurement policy implementation and innovation in procurement

best practices can also lead to streamlined procurement operations among public procurement in Kenya.

In recent forums it has been discussed that increased public procurement funding can enhance innovation

policy on both national and county levels of government (Aho, 2006). This theme is consistent with

research in the private sector that has shown how value chain activities affect innovation. This is due to,

the gain gotten in the procurement process in value chain, activities which are aimed at getting greater

product quality and innovation which have greater impact in terms of value for money by tax payers

(Prajogo, 2008).

Staff Competence

Having the necessary skills for procurement staff and experience to carry out procurements effectively

has been a prime concern for stakeholders in implementing public procurement regulations (Ondiek,

2013). Staff competencies influence procurement performance and increased output in procurement

operations can be enhanced through increased training and capacity building of procurement practitioners

in public institutions in Kenya and subsequent improvement in procurement operations. Competencies

procurement staff affect performance both on departmental and organizational level as they are carry out

duties in a professional manner and reduces wastage of resources (Ogot, 2010).

These challenges happen despite the legal framework that informs purchasing and disposal in the civil

service being firmly in place. “The use of the law as a regulatory mechanism may be overestimated, laws

alone do not achieve anything and it depends on how they are implemented” (Arrowsmith, 2009). The

study sought to unravel the challenges that are inherent in the process of implementation of the PPDA

2005 with a view of making policy recommendations that will mitigate the problem, and define the role of

the Act more explicitly, while assessing its effectiveness in shaping competitive procurement and

disposal. This in turn will lead to a high level of compliance.

Funding

Procurement department budgeting

Budgeting of allocated funds

Staff Competence

Education levels

Awareness of regulations

Government leadership

Resource allocation adjustments

Supporting procurement bodies to execute their

mandate within the confines of the law

Enforcement

PPOA training and raising awareness

Ensuring accountability of procurement

professionals

Implementation of Public

Procurement Regulations in Public

Institutions in Kenya

Government

Commitment

Allocation of resources

Technical Capacity of

implementers


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Government leadership

Government leadership in spearheading best practices in public procurement has been slow leading to

good and services supplied to the government institutions being more expensive compared to the

prevailing market rates leading to overspending (Ondiek 2013). Goods and works of inferior

specifications have been delivered and accepted. Indeed, in some cases no goods have been delivered at

all but payment has been made all the same. Other challenges associated with compliance with the Act

include: deliberate splitting of contracts to fit certain ceilings in order to defeat set thresholds, failure to

provide bidding firms with full and accurate tender information, failure to advertise, “safety valve”

advertising, failure in complying with advertising rules, inclusion of discriminatory requirements in

contract bidding documents, political interference with the tendering process and lack of adherence to set

thresholds. These challenges defeat the purpose of the Act and render; integrity, fairness, transparency,

value for money, maximization of economy and public confidence unattainable. It has been reported that

the, “Public Works Minister has cited the Procurement Act as a hurdle to the implementation of the

Economic Stimulus Package (ESP). (Ondiek, 2013)

Enforcement

Enforcement of public procurement regulations has been boosted by PPOA through development of

standard tender documents for goods, works and services. Open tenders accounted for an almost

equivalent though slightly higher proportion of the total procurement spend than restricted tenders,

followed by quotations. Thus placing open tenders somewhat closer to its intended status as the default

procurement method. Despite these findings, assessment confirmed the trend of relying excessively on

procurements through request for tenders (Ondiek, 2013).

METHODOLOGY

Research Design

Research design is the outline, plan or scheme that is used to generate answers to the research problem

(Cooper & Schindler, 2003). The study adopted a descriptive research design in order to provide a

framework to examine current conditions, trends and status of events. Descriptive research design was

more investigative and focused on a particular variable factor. It is analytical, often singles out a variable

factor or individual subject and goes into details and describing them. According to Cooper and Schindler

(2003), such a study is concerned with finding out who, what, when, where and how of the relevant

phenomena. Descriptive design was therefore the most appropriate design for the study.

Target Population

Peil (2003) defines a target population as an entire group of people, events, or things of interest to a

researcher for analysis. The target population incorporated the top county officers, senior county officers

and staff working in the procurement department in Nairobi City County Government which totaled to

225 personnel. The company staff is categorized as middle level management and operational level of

management which includes procurement officers.

Sample and Sampling Technique

A sample size of 30% of population was selected to participate in the study. This was supported by

Mugenda and Mugenda (2003) that explains that 30% of the population incorporated as sample size is

representative enough to reflect true and accurate outcome of a study.

Table 1. Sampling and sampling frame

Category Target Population Sample Size (30%

of Target

Population)

Percentage

Top County Officers 25 8 12

Senior County Officers 95 29 42

Procurement Department 105 32 46

Total 225 69 100


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Data Processing and Presentation

Data collected from the field was processed through data cleaning / editing to detect and correct errors

and omissions, missing values, then categorized and coded into categories, themes and patterns for further

analysis. The researcher used inferential and descriptive statistics for further analysis. The qualitative data

was analyzed for themes. Statistical Package for Social Sciences (version19) was used to analyze the

frequency and percentages.

The results were presented in tables and charts. Further interpretation of the findings was done in

narrative form.

A multivariate regression model was applied to determine the relative importance of each of the four

variables in relation to the study.

The regression model was as follows:

Y= β0+ β1 X1+ β2 X2+ β3 X3+ β4 X4+α

Where Y is the dependent variable (Implementation of public procurement regulations), β0 is the

regression coefficient, β1, β2, β3 and β4 are the slopes of the regression equation, X1 is the funding

independent variable, X2 is staff competence independent variable, X3 is government leadership

independent variable and X4 is the enforcement independent variable, while α is an error term normally

distributed about a mean of 0 and for purposes of computation, the α is assumed to be 0.

RESULTS AND DISCUSSION

The objective of the study was to determine challenges facing implementation of public procurement

regulations in public institutions. This study, adopted a descriptive study design

The key findings were that inadequate funding contributes more to the poor implementation of public

procurement regulations in public institutions followed by staff competence.

They study also revealed that majority agreed that staff competence influenced implementation of public

procurement regulations while minority disagreed. The findings showed that staff competency as an

important human resource tool that is often used within public sector to guide human resource practices

such as selection, assessment, career management, employee development and performance appraisal”.

Additionally the study found out that majority of the respondents were in agreement that government

leadership affects implementation of public procurement regulations in public institutions while the

minority disagreed.

Moreover the study found out that majority of the respondents were in agreement while disagreed. The

findings argued that the threat of legal sanctions is essential to regulatory compliance and that

enforcement action has a cumulative effect on the consciousness of regulated companies and it reminds

companies and individuals that violators will be punished and to check their own compliance programs

Inferential Statistics

Correlation Analysis

Correlation analysis was conducted to find out how inadequate funding, staff competence, government

leadership and enforcement are correlated with implementation of public procurement regulations in

public institutions. Funding has a positive correlation at 0.184 and a p=0.015<0.05 with implementation

of public procurement regulations, staff competence has a positive correlation at 0.214 and p=0.023<0.05

with the implementation of public procurement regulations, government leadership has a positive

correlation at 0.107 and a p= 0.012<0.05 with the implementation of public procurement regulations

while enforcement has a positive correlation at 0.153 and a p= 0.027<0.05 with implementation of public

procurement regulations.


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Table 2. Correlation analysis

Multiple Regression Analysis

A linear multiple regression analysis was conducted so as to test the relationship among variables

(independent) on the challenges facing implementation of public procurement regulations in public

institutions. The researcher applied the statistical package for social sciences (SPSS) to code, enter and

compute the measurements of the multiple regressions for the study.

Table 3. Multiple Regression Analysis

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .898a .806 .801 .19758

Coefficient of determination explains the extent to which changes in the dependent variable can be

explained by the change in the independent variables or the percentage of variation in the dependent

variable (implementation of public procurement regulations) that is explained by all the four independent

variables (funding, staff competence, government leadership and enforcement)

Imple

men

tati

on

o

f

pu

bli

c p

rocu

rem

ent

reg

ula

tio

ns

Inad

equ

ate

fun

din

g

Sta

ff c

om

pet

ence

Go

ver

nm

ent

lead

ersh

ip

En

forc

emen

t

Implementation

of public

procurement

regulations

Pearson

Correlation

1

Sig. (2-tailed)

Inadequate

funding

Pearson

Correlation

.184 1

Sig. (2-tailed) .016

Staff competence Pearson

Correlation

.214 .201 1

Sig. (2-tailed) .024 .032

Government

leadership

Pearson

Correlation

.107 .180 .184 1

Sig. (2-tailed) .013 .005 .051

Enforcement Pearson

Correlation

.153 .056 .238 .107 1

Sig. (2-tailed) .026 .016 .011 .023


Ok

Table 4. ANOVA

Model Sum of Squares df Mean Square F Sig.

1 Regression 11.007 4 2.752 3.804 .006b

Residual 78.853 54 .723

Total 89.860 58

The significance value is .006 which is less than 0.05 thus the model is statistically significant in

predicting inadequate funding, staff competence, government leadership and enforcement. The F critical

at 5% level of significance is 2.4473. Since F calculated (value =3.804) is greater than the F critical, this

shows that the overall model is significant.

The coefficients of the multiple regression model were shown as below

Table 5. The coefficients of the multiple regression model

Model Unstandardized

Coefficients

Standardized

Coefficients

t Sig.

B Std. Error Beta

1 (Constant) 2.396 .850 .085 6.345 .000

Staff competence .254 .059 .008 1.907 .017

Enforcement .108 .090 .290 1.094 .029

Inadequate funding .437 .138 .162 3.167 .002

Government

leadership

.242 .137 .085 1.767 .021

All the variables were significant as their P-values were less than 0.05. At 5% level of significance and

89% level of confidence; Inadequate funding showed a 0.002 level of significant; Staff competence

showed a 0.017 level of significant; Government leadership showed a 0.021 level of significant,

Enforcement showed a 0.029 level of significant

The P value show the level of significance of each variable, from the p-value of all variable were less than

0.05 this is an indication that they were statistically significant. The study further revealed that there was

positive relationship between inadequate funding, Staff competence, Government leadership and

Enforcement and implementation of public procurement regulations in public institutions.

CONCLUSIONS

From the findings, the study found that funding, Staff competence, Government leadership and

Enforcement had a significant impact on the implementation of public procurement regulations in Kenya.

The study established that there was strong relationship between implementation of public procurement

regulations in public institutions and inadequate funding, Staff competence, Government leadership,

Enforcement.

The study concludes that implementation of public procurement policies in public institutions today is

tailored around enough funding and effective use of the available financial resources which is seen in the

context of adaptive actors’ vis-à-vis a dominant environment determining their chances of survival and

growth

The study further concludes that in developing countries like Kenya; one ofthe major obstacles to the

procurement system is ministerial interference with the tender process where ministers intervene and

influence tender awards.

The study concludes that enforcement action and increased penalties lead to greater levels of compliance

with laws. Corruption among government procurement officials in developing countries such as

Bangladesh, India, Sri Lanka, Kenya and Venezuela have been linked to a weak enforcement of the rule

of law.


Ok

RECOMMENDATIONS

From the findings, the study found that funding, Staff competence, Government leadership and

Enforcement had a significant impact on the implementation of public procurement regulations in Kenya.

The study established that there was strong relationship between implementation of public procurement

regulations in public institutions and inadequate funding, Staff competence, Government leadership,

Enforcement.

The study concludes that implementation of public procurement policies in public institutions today is

tailored around enough funding and effective use of the available financial resources which is seen in the

context of adaptive actors’ vis-à-vis a dominant environment determining their chances of survival and

growth

The study further concludes that in developing countries like Kenya; one ofthe major obstacles to the

procurement system is ministerial interference with the tender process where ministersintervene and

influence tender awards.

The study concludes that enforcement action and increased penalties lead to greater levels of compliance

with laws. Corruption among government procurement officials in developing countries such as

Bangladesh, India, Sri Lanka, Kenya and Venezuela have been linked to a weak enforcement of the rule

of law.

This study established that record management positively affects procurement performance to a large

extent. The study recommends that public institutions in Kenya should be well provided with financial

resources in order to operate more efficiently

The study also recommends the enforcement of procurement laws in order to improve compliance.

Enforcement action leads to greater levels of compliance with laws.

The study also recommends that for implementation of public procurement regulations in public

institutions in Kenya to be successful, human resources function of public institutions and the PPOA must

ensure there are capacity development initiatives across government (central and local). In addition, the

process of developing a comprehensive capacity building strategy, including a training program must be

encouraged.

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