Introduction to public financePublic finance is the study of the role of the government in the economy. It is the definitive branch of Economics which assesses the Government revenue and Government expenditure of the Public Authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones. The proper role of government provides a starting point for the analysis of public finance. In theory, under certain circumstances, private markets will allocate goods and services among individuals efficiently (in the sense that no waste occurs and that individual tastes are matching with the economy's productive abilities.Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation and expenditure management (resource utilization) are the essential components of a public financial management system. Public Finance Management (PFM) basically deals with all aspects of resource mobilization and expenditure management in government. Just as managing finances is a critical function of management in any organization, similarly public finance management is an essential part of the governance process. Public finance management includes resource mobilization, prioritization of programmes, the budgetary process, efficient management of resources and exercising controls. Rising aspirations of people are placing more demands on financial resources. At the same time, the emphasis of the citizenry is on value for money, thus making public finance management increasingly vital.The public sectorBy the term public sector we mean that part of the national economy for which the government has some direct responsibility. It includes both central and local government, public corporations and other public enterprise activities. Economists are interested in the behaviour of the public sector because the governments decision affects individuals and institutions in many different ways. The most important decisions are concerned with public spending, taxation etc.Why do we need a public sector?In the national economy, the market mechanism cannot perform all those functions required to attain an efficient and equitable allocation of resources. The following are the reasons why the public sector is necessary:1. To promote competitionThe claim that the price system leads to an efficient use of resources depends on the condition that, there should be competition in the markets for both resources and finished goods. This means that there should not be restrictions on entry of firms to the industry and those consumers and producers should have complete information about the market conditions.To promote competition and eliminate monopoly, the government measures such as taxes, subsidies and rules and regulations may be used.2. To ensure provision of goods not provided by the private sector adequately e.g. defence.3. To tackle externalitiesConnected with market failure are problems of externalities e.g. noise and pollution which require public action. The private sector only cares for profits and not welfare for the future generation.4. To enforce contracts.To make the market mechanism work, government rules and regulations are required to enforce contracts entered into between buyers and sellers of goods and services.5. To redistribute income and wealthGiven that the governments objective is to maximum social welfare, public policy may be required in the attempt to achieve a more equitable distribution of income and wealth.6. To promote macroeconomic objectivesPublic policy may be required in market economies where the price system is prone to high unemployment, inflation, and balance of payment problems. In such economies, governments are concerned to implement policies designed to achieve a high level of employment, a low rate of inflation, a satisfactory balance of payments position, a desired rate for economic growth and balanced regional development.Private and Public FinanceThe main similarity between the two is that both need resources and that both seek to obtain maximum result from their resources. However, there are a number of differences between them: An individual adjusted his expenditure to his income while the government adjusts income to expenditure. For an individual, there is a definite period over which the accounts must be balanced but the government tries to balance its budget in the course of the year. Individuals do not tell their neighbours how they acquire incomes but the government does not hide its source of income. There is no internal borrowing for individuals and borrowing is always external but for the government borrowing is both internal and external. An individual earns his income but the government obtains income from other peoples income i.e. taxes. A prudent individual must spend less than he earns i.e. must have a surplus budget but for the government, it need not be so.The Fiscal PolicyFiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors. A fiscal policy can also be defined as government policies towards taxation, public spending and public sector borrowing.Objectives of fiscal policy To maintain fair distribution of National income To achieve desirable consumption levels To raise employment level Maintenance of economic stability. To increase the rate of economic growth.Public finance should be used as an instrument for the achievement of certain economic and social objectives. Before Keynes, the concern of public finance was the raising of government revenue. Keynes however, made changes in the scope and nature of public finance by emphasizing that public finance is meant to help in achieving certain social and economic objectives and finance some essential economic activities. Keynes underlined the fact that taxation and government expenditure policies are the main variables that affect the level of income and employment. He indicated that during depression: The government can eliminate it by: Increasing its expenditure on public works to raise the level of income and employment in the country. Reducing taxes so that peoples disposable incomes increase. As it increases, they save more and invest more, thereby increase incomes and employment. When there is inflation in the economy then the government may reduce inflation by; Reducing its expenditure and Increasing taxes so that purchasing power is withdrawn from the people. This is the working of fiscal policy, which is a government policy that uses the tools of government expenditure and taxes to regulate the economy.The instrument of fiscal policy can be summarized as: a) Public expenditureThis is spending made by the government of a country on collective needs and wants such provision of infrastructure. Government at all levels (National, regional and local) need to raise revenue from a variety of sources to finance public sector expenditures. b) Public revenueThis is the income realised by the government for purposes of financing government activities in a financial year. Governments across the world earn public revenue from the following main sources that are: tax revenue, non tax revenue and capital receipts.c) Public borrowingPublic borrowing is when the government has to borrow some money from the public to cover its budgetary expenses, especially when there is a difference between government receipts and spending. Borrowing is done by selling securities or by lending from banks and this is usually considered as a good indication of the financial well-being of a country.Role of public finance in a developing countryIn a developing country, the government must play a very active role in promoting economic development, and public finance is the instrument, which the government must use. The reasons why the government should take a leading role in a developing economy are: To fully exploit the varied natural resources which may be beyond the capacity of resources of the private sector. To bring in the technical knowhow that is lacking in the private sector. To promote capital formation. Low savings limits capital formation among individuals.BudgetA budget is a financial plan or statement covering receipts and expenditure outlets.In a situation whereby the government expenditure is greater than revenue this is known as a deficit budget while if the government revenue is greater than government expenditure is known as a surplus budget .When govt expenditure and revenue are equal it is known as a balanced budget. Budget may be two kinds namely capital budget and revenue budget. Revenue budget is related to the normal income and expenditure items while capital budget relates to budget development projects.In revenue budget the main source of the revenue comprise: Custom and excise duty Income and corporation tax Income from state property and fines Administration collection of taxes by KRA

The main sources of capital budget are: Loans and grants obtained by the government. The loans are obtained from Breton wood IMF and WB AFD. The grant are received from friendly countries

The main expenditure of capital budget involves Development project Establishment of New industries and agricultural project Budget prepared and presented by finance minister before the parliament for changes in taxation.Currently there are nine budget sections:1. Agriculture and rural development2. education3. physical infrastructure4. public administration5. public safety law and order6. general economic service7. National security 8. Health9. information and communication technology (ICT)

Budget execution Once the budget has been read it is debated in the parliament where the appropriation bill is used for approval purposes. The appropriate bill authorized by the government is used to establish the current development. The treasure issues exchange to the lying monists to enable them to spend.Budget policyBudgetary policies are measured designed to achieve clearly the defined budgetary objectives, given that budget are annual plans designed by the government to achieve the economic growth, equitable distribution of wealth income in a country. There is a major means by which government regulates the economy. The government uses both fiscal and monetary instrument /policies to achieve budgetary and fiscal instrument in achieving the budgetary objectives.TaxationTaxes are compulsory transfers of money from individuals, groups or institutions to the government, and which may be direct or indirect. Direct taxes are levied on income, wealth or spending power. Indirect taxes on the other hand are levied on goods and services. It may be applied ad valoven (i.e. as a % of value) at a specific rate i.e.; so much per unit sold or a flat rate i.e.; Lump sum, which does not vary with the value or quantity of the goods and services.Purpose of TaxationThe main purpose of taxation is to raise revenue. Taxation is also an important instrument of economic policy as follows:i. The use of custom duties protects home industries from being out competed by foreign industries.ii. Graduated tax payments affect distribution of income.iii. Heavy taxes on wines and spirits are meant to curb consumption of alcohol etc. However, tax is not the sole source of government revenue. Other sources of government revenue include:a. Borrowing in form of government stocks.b. Sale of Treasury billsc. National savings e.g. national savings certificates, premiums savings etc.Types of taxes Proportional taxHere, the percentage of income paid as tax remains constant as incomes rises. Progressive taxIn this type of tax, the percentage of income paid as tax increases as income rises i.e. the average rate of tax increases with an increase in income. Regressive taxIn this type of tax, the percentage of income paid as tax decreases as income rises.Principles of TaxationIn his book, The Wealth of Nations, Adam Smith stated four principles of taxation whichhe called the canons of taxation. These were:1. Canon of equalityModern economists have subjected this principle to two interpretations i.e. the benefit principle and the ability-to-pay principle. The benefit principle states that the amount of tax paid by an individual should be directly related to the benefits that the individual derives from government expenditure. The ability-to-pay principle states that taxes should be imposed on people according to what they can afford to pay.2. Canon of certaintyThis principle states that the tax which each individual is bound to pay should be certain and not arbitrary. The time of payment, the mode of payment, the amount to be paid ought all to be clear and plain to the contributor and any other person.3. Canon of ConvenienceThis principle states that the methods, manner and time of tax payment should be convenient to the taxpayer.4. Canon of EconomyThis states that the cost of tax collection in relation to the tax-yield should be minimal i.e. the tax yield should be far and above the tax collection expenses.Other principles of TaxationModern economists have added more principles of taxation. These are;a. Simplicity i.e. a system of taxation should be simple, plain and intelligible. Otherwise there will be confusion and even corruption.b. ElasticityA system of tax ought to respond automatically to changes in the communitys wealth, population and needs.c. EquityA system of taxation ought to distribute the tax burden on the community as equitably as possible. Horizontal equity is achieved when taxpayers with similar circumstances and incomes pay the same taxes, while vertical equity is achieved when taxpayers with dissimilar circumstances and incomes pay taxes according to their different abilities to pay.d. ProductivityA tax system should produce a high net yield of revenue but not so high as to discourage the source of that revenue i.e. tax should not act as a deterrent to effort.e. VarietyThe tax system ought to be diversified. This is because reliance on just a few taxes is risky.Direct and indirect taxesWhen the payment of a tax brings the taxpayer directly into contact with the tax collector, the tax is said to be direct. An indirect tax is one whose payment does not involve the taxpayer coming directly into contact with the tax collector. Instead the tax is paid indirectly through an intermediary who acts as a tax gatherer for the government.Advantages of direct taxes1. Attaining vertical equityDirect taxes can be applied in such a way as to redistribute wealth and income equally. This can be done by applying successively higher tax rates to higher income groups to achieve a degree of progressivity in the tax system.2. Low tax avoidanceSince people generally have to earn a living, then they normally incur an unavoidable tax liability when income is earned. Therefore, tax avoidance is low in the case of direct taxes.3. RevenueThe yield from personal taxation is fairly certain and can be calculated reasonably accurately in advance. Taxpayers make annual returns of income to revenue authorities so that statistics can be compiled. From these statistics, the yield from personal taxation can be worked out.4. Equality of sacrifice.Direct taxes are usually assessed in accordance with a graded scale so that the rate of taxation rises in relation to income. These taxes therefore make for equality of sacrifice on the part of taxpayers.5. EconomicalThe cost of collection is low since they are collected at source in most cases.Disadvantages of Direct taxes1. Deterrent to workA high rate of personal taxation may cause people to work less. A progressive rate of tax means that over a certain income, people prefer to have leisure then extra earnings because the government takes a high proportion of the income.2. Deterrent to savingsA high rate of personal taxation may reduce consumers ability to save since it leaves them with less money to spend. This might lead to a reduction in savings by people who are determined to maintain their present level of expenditure.3. Deterrent to enterpriseCorporation tax for example is tax on the profits of companies and such a tax may affect the enterprise. If a business fails, the government offers no form of compensation. In other words therefore, the government gains from the success of a business and loses nothing from its failure. As a result, enterprise may be controlled and economic progress hindered.4. Evasion possibleThe assesses can submit a false return of income and thus evade the tax. Many people do not pay the tax by concealing their incomes.Advantages of Indirect Taxes1. Freedom of choiceWhereas direct taxes reduces the earners disposable income, an increase in indirect tax leaves the earnings unaltered and therefore the individual can choose whether to buy the taxed goods or not.2. Voluntary paymentPayment of indirect taxes is voluntary in the sense that consumers can choose to avoid expenditures on taxed goods and services. For instance, if a person does not smoke or drink alcohol, then he does not pay tax on these items.3. Means of reaching the poorIt is a sound principle that every person should pay something to the government, however little. The poor do not pay direct taxes and therefore they can only be reached through indirect taxes.4. AdministrationIndirect taxes offer certain administrative advantages e.g. they are easy to administer and collect than direct taxes. They are also more difficult to evade them direct taxes.5. SelectivityIndirect taxes may be applied selectively to achieve particular objectives. For instance, they can be used as an instrument of checking the consumption of harmful goods e.g. tobacco, wine, beer etc by heavily taxing them.Disadvantages1. RegressiveIndirect taxes are regressive in the sense that, they fall more heavily on people with low incomes than those with high incomes. This is because the poor spend a large proportion of their income on buying goods and services than the rich.2. Uncertain in yieldThe yield from indirect tax is uncertain unless necessities are taxed. This is because if a good is not purchased then the question of tax payment does not arise.3. Cost of livingAn increase in indirect taxes raises the retail prices of goods and hence the cost of living.4. UneconomicalIndirect taxes are not economical from the taxpayers point of view since he may pay more than the amount actually received by the state.NB; Considering the respective advantages and disadvantages of the two systems, it is usually considered that it would not be advisable to raise all the revenue required by one method alone, but that the revenue should be raised by a combination of both forms of taxation.Essentials of a good tax systemA good tax system should be composed of taxes that conform to the main canons of taxation. The system as a whole should be equitable i.e. its burden should fall on the broadest shoulders. It should be economical so that the work of collection is done as cheaply as possible. It should not hamper the development of trade and industry. It should assist the economic development of the country. The government should be certain of its revenue. This means that the tax should be based on comprehensive and up-to-date statistical information so that accurate forecasting is made possible. It should be simple, financially adequate and elastic so that it can correspond to the new needs of the state i.e. it should not be rigid. It should be as much broad-based as possible i.e. there should be diversity in the tax system. It should be efficient from the administrative point of view i.e. it should be simple to administer. There should be little scope for tax evasion and chances of corruption should be minimized. It should be a harmonious whole i.e. it should be truly a system and not a mere collection of isolated taxes. Every tax should fit in properly in the system as a whole so that it is part of a system.Public procurementProcurement is the acquisition of goods, services or works from an external source. It is favourable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality, quantity, time, and location. Corporations and public bodies often define processes intended to promote fair and open competition for their business while minimizing exposure to fraud and collusion.Public procurement is the process by which public entities contract for acquisition or supply of goods, services or works. Public procurement provides a comprehensive analysis of legal and policy frameworks that underpin the regulation of public and utilities purchasing practices. The importance of such frameworks is paramount not only for the successful functioning of the common market, but mostly for the conceptual direction of the public sector of the country in its attempts to deliver services to the public in a more effective and efficient way.Public entities include a company owned by government, company carrying out functions which would have been performed by government, institution which the government has the controlling interest. Public procurement occurs when a public organization uses public resources to buy goods and services such as hiring or obtaining for any other contractual means of goods, construction works or service. Public funds are drawn from state or government budgets or local authority budgets, foreign loans, grants and money raised by the government for various undertakings.Objectives of public procurement Ensure public organisations get value for money Enhance transparency and accountability Ensure efficiency and effectiveness Promote competition and ensures that competitors are treated fairly by use of competitive procurement methods Promotes integrity and fairness of procurement procedures Restore public confidence in procurement process Build public trust to stakeholders Facilitate promotion of local industry and economic development To ensure that goods and service are obtained at the right price, right quality, right quantity, from right source and delivered at the right place.Public procurement reforms in KenyaReforms means to put or change into an improved form or condition; to amend or improve by change. Public procurement in Kenya has undergone different reforms during pre- and post independence. As at 1959 the country had a defined form of procurement and supplies set up. In the same year the central tender board (CTB) was established through a treasury circular. The board did not have any formal structures until 1961 when the treasury defined its composition through yet another circular. The government provided all the funds to various ministries to perfect procurement activities. In 1960 the treasury for the purpose of providing common user services to the government issued the ministry of works stores and services funds regulations. The other procurement and supplies units which had been established in the ministry of works were market research, Inspection of material unit and central tender unit. The board was responsible for procurement and awards and had three sections namely: Local, overseas purchases and country wide contracts.At pre-independence the government organisations were small and therefore the procurement and supplies was centralised and divided into countrywide contract and overseas purchases. At independence the supplies services was centralised under ministry of works. The services covered purchasing/storage as distinct functions spearheaded by chief purchasing officer and chief storekeeper respectively. In 1978 the government issued procurement supplies guide to be used alongside east Africa manual. However this attribute achieved little in terms of stemming the rampant abuse of public procurement funds.The importance of central tender board was reiterated in the treasury circular of 1985 which elevated membership to level of deputy secretary. This eventually culminated to the restructuring of 1989 when the membership was raised to the level of parliament secretary and chairmanship of private secretary being the financial secretary. The reforms got rid of central tender board in 2001 when its duties and responsibilities were devolved to the procurement entities. In the same year the government established exchequer and audit (Public Procurement) functions. This in turn paved way to introduction of public procurement directorate and the public procurement complaint review and appeals board. Due to massive corruption and manipulation of procurement procedures the government in conjunction with the World Bank initiated a process of reviewing procurement laws and as at 2001 regulations could still be circumvented through acts and omissions of it being rigged by public and private sector operatives. A task force was formed between government, developing partners and private sector to undertake the procurement initiates and a bill was drafted an attribute that paved way to enactment of the public procurement and disposal act of 2005 that became operational in 1st January 2007with the gazettment of the act. Today this is the legal framework that provides efficient system for procurement of goods, services, works and disposal of stores and equipments in the country.Regulation of Public Procurement Public procurement is regulated by various bodies:1. Public Procurement Oversight Authority (PPOA)It was established under section 8 of the Public Procurement and Disposal Act, 2005 as a corporate body. Its headed by the Director General (who is the Chief Executive Officer), assisted by two Directors. Function of the Authority To monitor the public procurement system and report on the overall functioning and present to minister such reports and recommendations for improvement as the director general consider as advisable. To assist in the implementation and operation of public procurement system by; -Preparing and distributing manuals and standard document to be used in connection with procurement by public entities. -Providing advice and assistance to procuring entities -Developing, promoting and support the training and professional development and support the training and professional development of persons involved in procurement. - Issuing written directions to procuring entities with respect to procurement including the conduct of procurement proceeding and the dissemination of information on procurement. - Ensuring that procuring entities engage procurement professional in their procurement units To ensure that the procurement procedures established under the act are complied with To initiate public procurement policy and propose amendments to the act and regulations. The Authority is headed by a director general who is the Chief Executive Officer responsible for its direction and management. He is appointed by the advisory board with the approval of parliament. Normally his term is of 5 years and may be renewable for another five years.To be appointed as the director general, (a) A person must have a university degree in commerce, business administration, economics, engineering or a related field from a recognized university.(b) Have professional qualification in supply management from a reputable organization.(c) Have experience in management (d) Be of an outstanding character, honesty and of high integrity. Reasons for the termination of the director general Incompetence Inability to perform by reason of mental or physical infirmity Convicted of an offence under the penal code, or this act or an offence involving dishonesty If involved in a corrupt transaction or Acts If you are adjudged bankrupt If you hold another public office or deployed for any other work or business (especially due to conflict of interests) Responsibility of the director general The Director General is responsible for the preparations and making all the estimates of revenue and expenditure to the advisory board for approval. These expenditures should provide for the; Payment of salaries, allowances and other charges in respect of the staff of the authority The payment of pensions gratuities and other charges in respect of former staff of the authority The proper maintenance of building and ground of the authority and replacement of equipment of other property. Payment of allowances and expenses of advisory board The funds of the authority consist of:- Money appropriated by parliament for the purposes of running the authority Loans or grants received by the authority for its activities. Revenue or fees collected for services tendered by the authority. Capacity building levy

2. Public procurement oversight advisory board This was established under section 21 of the act as an incorporated body and it consists of nine members appointed by the minister and approved by parliament. The director general is also a member acting as the secretary. The organizations that nominate members are: Institute of Certified Public Accountants (ICPAK) Institute of Engineers of Kenya Kenya National Chambers of Commerce & Industry Federation of Master Builders Kenya Institute of Management Kenya Association of Management Kenya Association of Manufacturers Law Society of Kenya (LSK) Marketing Society of Kenya Architectural Association of Kenya Institute of Surveyors of Kenya Federation of Kenya Employers The Central Organization of Trade Unions NB: The minister in this case is minister of finance. Functions of advisory board a) To advice the authority, generally on the exercises of its powers and performance its functions b) To approve the estimates of the revenue and expenditure of the authority. c) To recommend the appointment and termination of the director general. 3. The public procurement administrative review board The public procurement administrative review board is established under section 25 of public procurement and disposal act of Kenya. The public procurement review, complaints and appeal board established under the exchequer and audit (Public Procurement) regulations, 2001 is continued under this act as the public procurement administrative review board. The composition and membership of the review board should be in accordance with the regulations. The authority provides administrative services to the review board. An independent person from the private sector appointed by the Minister of Finance heads the board. The other members of the board are the permanent secretary (Treasury), the solicitor-general, the permanent secretary (Provincial Administration) and three members appointed from business and professional associations. The board has legal power to arbitrate by declaring the legal rules or principles that govern the subject matter of a complaint, restraining the procurement entities from further action, annulling in whole or in part an unlawful procurement act and revising an unlawful decision by the procuring entity. The board can also order procurement proceedings to be terminated. Since its inception in 2002, the private sector-led Procurement Appeals Board has cancelled contracts it deemed illegal or unprocedural. A number of firms whose contracts have been cancelled have moved to the courts to challenge the tribunal decisions. These cases have given procurement in Kenya a fairly positive image.Functions of the appeal board:The establishment of the appeal board provides the stakeholders with a forum to present the complaints which have been made by them to effect that the public tenders have not been awarded fairly. Candidates should forward complaints as directed by the regulations. Section 45 of the regulations make it an offence for a member of a procuring entity and appeals board to accept any inducement for award or refuse to award a tender. It also makes it an offence for any candidate to offer any inducement to a member of the said institutions. Such offence will result in severe punishment including imprisonment and dismissal from the office as applicable.Organization of public sector procurementInternal organization of public entities relating to procurementA public entity shall establish procedures to provide for the making of decisions relating to procurement. All procurement shall be: Within the approved budget of the procuring entity, therefore no entity should commence any procedures until it satisfied that sufficient funds have been set aside in its budget to meet the obligations of the resulting contract (this helps in curbing the common practice of stalled projects) and the pending bills owed to the government. All procurement shall be planned by the entity concerned through the annual procurement plan. Procurement is undertaken by procuring entity as per the threshold matrix. Procurement should be handled by different officers in respect of procurement initiation, processing and receipt of goods, works or services. Responsibilities of a procurement entity A procuring entity shall establish a procurement unit. The roles of the accounting officer The accounting officer for a public entity other than a local authority is a person appointed by the Permanent secretary to treasury. If there is no such a person the chief executive officer of the public entity is responsible for ensuring that the entity complies with the act, regulations and any other direction of the authority with respect to each of its procurement. He should ensure that the procurement entity establishes a procurement unit. In addition he is also responsible and ensures that the procurement entity establishes a tender committee and a procurement committee. He should also ensure that procurement plans are prepared He is also responsible for signing contracts for the procurement and disposal activities on behalf of procuring entity and is responsible for contracts entered into. Ensuring that procuring entity properly documents procurement proceedings and manages records. Employees, board and committee member as well as contractors supplies and consultants are also required to comply with the provisions of the acts. Responsibilities of user department The user department shall be responsible for:- Initiating procurement and disposal requirements and forwarding them to the procurement unit. Participating in the evaluation of tenders, proposals and quotations. Reporting any departure from the terms and conditions of the contract to the procuring unit/department. Forwarding details of any required variation of contract to the procurement unit for consideration and actions. Maintaining and archiving records of contract management Preparing any reports required for submission to the procurement unit, procurement committee, tender committee or accounting officer. Undertaking conformity assessment of supplied goods, works and services with the specification of the contract document Preparation technical specification and submitting the same to the procurement unit. Ensuring the issuance of goods, works and services received notes Assisting in the preparation of procurement and disposal plans Making clarification on tender requirements for quotations and any other as it is required Function of a procuring unit Maintain and update annually standing lists of registered tenderers required by the procuring entity and liaise with the authorities in respect with authoritys register of suppliers and procuring agents. Prepare, publish and distribute procurement and disposal opportunities including, invitations to tender, pre-qualifications documents and invitations for expressions of interests. Co-ordinate the receiving and opening of tender documents. Maintain and safeguard procurement and disposal documents and records Submit shortlisted and lists of pre-qualified tenderers to the procurement committee or tendering committee for approval. Issue procurement and disposal documents to candidates, Propose the membership of the evaluation committee to accounting officer for approval. Coordinate the evaluation of tenders, quotations and proposals. Prepare and publish notices of award and notices of tender acceptance. Prepare contract documents in line with award decision Prepare and issue rejection and debriefing letters Prepare contract variations and modifications to documents. To maintain, recommend a negotiating team for appointment by accounting offices where negotiations are allowed and participate in such negotiations. Maintain, archive document and records of the procurement and disposal activities for the required period of time (Usually Six years). Provide information as required for any petition or investigation under the review procedures. Implement the decision of the procurement, tenders and disposal committee including co-ordinating all activities of these committees. To act as a secretariat to the tender, procurement and disposal committee. Liaise with authority and other bodies on matters relation to procurement and disposal Monitor contract management by the user departments to ensure implementation of contracts in accordance to terms and conditions of the contract. Report any significant departures from the terms and conditions of the contract to the head of the procurement entity. Prepare consolidated procurement and plans Advice procuring entity on aggregation of procurement to promote economies of scale. Coordinate internal monitoring and evaluation of the supply chain function Carry out periodic market surveys to inform the placing of orders or adjudication by the relevant a ward committee. To conduct periodic and annual stock taking To certify the invoices and payment vouchers to suppliers Approve the extension of the tenders validity period Verify that the available stock levels warrant initiating a procurement process. Procurement entities Procurement entity should prepare a procurement plan for each financial year as part of their annual budget preparation process. The annual procurement plan shall be integrated with the applicable budget process and based on an indicative or approved budget. Heads of department shall submit the plan to the accounting officer at least 30 days before closing of the financial year. Content of the procurement plan The consolidated annual procurement plan shall be prepared by the procurement unit and approved by the head of the procuring entity and where applicable by the Board of Directors.The annual procurement plan of each procurement entity must include:- A detailed / breakdown of goods, work or services required. a) A schedule of the planned delivery, implementation or completion dates for all goods, woks or services required b) An indication and justification for whether it shall be procured within a single year period to under a multi-year management. c) An indication of which items can be aggregated for procurement as a single package or for procurement through any applicable arrangement for common user items. d) An indication of which item can be packaged into lots. e) An estimate of the value of each package of goods, works or services required and a indication of the budget available and sources of funding. f) An indication of the appropriate procurement methods for each procurement requirement. Employees board and committee members as well as the contracts suppliers and consultants are also required to comply with the provisions of the PPDA and its regulations. The annual plot plan of each procurement entity must include:- Tender committeeFor purposes of decision making the procuring entities shall establish tender committee This tender committee shall have a secretary who is a procurement professional in-charge of the procurement unit.Functions of tender committee Review, verify and ascertain that all procurement and disposal has been undertaken in accordance with the Act and regulation and the terms set out in the in the tender documents Approve the selection of the successful tender or the proposals Award procurement contracts in accordance with the threshold To ensure that funds are available for the procurement under consideration To ensure that procuring entity does not pay in excess of prevailing market rates prices. Review and prove the use of lots, where packaging into lots has been proposed. Review the selection of the procurement method and where a procurement method other than open tender has been proposed to ensure that the adoption of the other procurement method is in accordance with the Act, regulations and any other guidelines stipulated by the authority. Approve the list of persons qualified to submit proposals Approve the person to be given request for quotations Approve the list of tenderers in cases of restricted tendering Approve negotiations Approve the amendment of contracts previously awarded by the tender committee To understand any other duty of function. Employees, members of the board or committee members of a public entity as well as the contract suppliers and consultants are required to comply with the provisions of the PPDA and its regulations. The accounting officer may use the procurement unit or tender committee of other procuring entity provided that the said entities carry out their procurement in accordance with the PPDA and the regulations. The authorities have power to transfer procuring responsibilities of a procuring entity to another procuring entity or procuring agent in the event of delay or in such other instances as my be prescribed.A procurement agent may be appointed by a procuring entity on competitive basis to carry out such procurement proceedings. These agents must be pre-qualified agreed with the authority and are also required to comply with the act and with the regulation. Procurement committee A procuring entity shall establish a procurement committee The procurement committee shall be responsible for procurement below the threshold of the tender committee set out in the first scheduleThe procuring committee shall be composed of: a) An officer delegated by the head of the procuring entity or the accounting officer who shall serve as the chair man of the committeeb) The finance officer or an officer carrying out related functions.c) Three other members appointed by the head of the procuring entity or the accounting officer. The secretary of the procurement committee is person appointed by the head of the procuring unit. This person should be a member/staff of the procuring unit.Evaluation committeeFor each procurement within the threshold of the tender committee, the procuring entity shall establish an evaluation committee for the purposes of carrying out the technical and financial evaluation of the tenders or proposals. An evaluation committee shall a) A separate financial evaluation committee and a separate technical evaluation committee.b) A combined financial and technical evaluation committee.An evaluation committee shall consist of a chairman and at least two other members all appointed by the accounting officer or the head of the procuring entity upon recommendation by the procurement unit.The technical committee shall be responsible for a) Technical evaluation of the tenders and proposals received. They should strictly adhere to the compliance and evaluation criteria set out in the tender documents.b) They should perform the technical evaluation with all due diligence and within a period of thirty days after the opening of the tender documents. Each member of the evaluation committee shall evaluate independently from the other members of the committee before sharing his/her analysis, questions and evaluation including his/her rating of (how he has rated the tenders /proposals) with the other members of the technical committee.The financial evaluation committee shall be responsible for: a) The financial evaluation of the tenders or proposals received .This should be in strict adherence to the compliance and evaluation criteria set out in the tender documents or request for proposals.b) They should perform the evaluation with all due diligence and within five days from the time of completion of the technical evaluation.Note that the members of the evaluation committee should not get into direct communication with any of the tenderers participating in the tender and proposals that such evaluation committee is considering. An evaluation committee shall prepare a report on the analysis of the tenders and the final ratings assigned to each tender and submit the report to the tender committee.Inspection and acceptance committeeA procuring entity shall establish an inspection and acceptance committee.They are responsible for Inspecting and where necessary test the goods received. Inspect and review the goods works or services in order to ensure compliance with the terms and specification of the contract. Accept or reject on behalf of the procuring entity the delivered good works and services. Ensure that correct quantities are received Ensure that the good, works and services have been delivered or completed on time or that any delay has been noted. Ensure that all the required manuals or documented have been received Issue interim or completion certificates or good received notes as appropriate and in accordance with the contract.Transfer of procuring authority A procuring entity may transfer the procuring authority to another procuring entity or agent only in the following circumstances:a) Where the authority is of the view that the procuring entity lacks the capability to comply with the Act, regulations or directions given by the authority due to its size or capability.b) Where the accounting officer or the head of the procuring entity decides that it would be more economical or efficient to transfer the function and request the authority to do so.The accounting officer of the procuring entity that has transferred the procurement function shall remain accountable for all the decisions taken by the procuring entity to which the function has been transferred.The accounting officer of the two entities shall agree on: a) any function that may be excluded from the transfer arrangement b) the mechanism for implementation of the procurement and disposal requirementsc) reporting and monitoring procedures and responsibilitiesd) any limitation or exceptions to the transfer e) Any costs to be paid.Note: that the transfer agreement shall be made in writing by the heads /accounting officers of the two entities.Procuring agents For an agent to be recognized he/she shall pay a fee of 20,000 to the authority. The fee is payable once.The procurement entity shall:a) Meet the cost of the services offered by the procuring agentb) Prepare the terms of reference for the procuring agent assignment in accordance with the provision of the act and regulations.c) Be responsible for the actions and performance of the procuring agent.A procuring entity shall not contract out both the procurement function and the contract management function to the same agent The functions of the accounting officer, procurement committee or tender committee shall not be contracted out.Procurement planning and strategy development in public sectorProcurement planning is the process used by companies or institutions to plan purchasing activities for a specific period of time. The process is commonly completed during the budgeting process. Each year, departments are required to request budget for staff, expenses and purchases. Procurement Planning is important because: It helps to decide what to buy, when and from what sources. It allows planners to determine if expectations are realistic; particularly the expectations of the requesting entities, which usually expect their requirements met on short notice and over a shorter period than the application of the corresponding procurement method allows. It is an opportunity for all stakeholders involved in the processes to meet in order to discuss particular procurement requirements. These stakeholders could be the requesting entity, end users, procurement department, technical experts, and even vendors to give relevant inputs on specific requirements. It permits the creation of a procurement strategy for procuring each requirement that will be included in the procurement plan. Such strategy includes a market survey and determining the applicable procurement method given the requirement and the circumstances. Planners can estimate the time required to complete the procurement process and award contract for each requirement. This is valuable information as it serves to confirm if the requirement can be fulfilled within the period expected, or required, by the requesting entity. The need for technical expertise to develop technical specifications and/or scope of work for certain requirements can be assessed, especially where in-house technical capacity is not available or is non-existent. Planners can assess feasibility of combining or dividing procurement requirements into different contract packages.The Procurement Plan is the product of the procurement planning process. It can be developed for a particular requirement, a specific project, or for a number of requirements for one or many entities in the public or private sectors.Planning for significant procurementActivity one: Identify the total expenditure on an item/category and its degree of difficulty of securing supply is necessary to determine what category the goods and services belong. As part of the corporate procurement planning process all of the departments/agencys purchases are identified and the total expenditure on individual or groups of goods and services is determined. Goods and services that are purchased in any of the high relative expenditure or difficult to secure supply categories are considered significant purchases.Activity two: Purchasing objectives for the significant purchase need to be established in accordance with the corporate procurement plan. Based on the information gathered from analysing supply markets and supplier and internal demand for goods and services, issues and problems may be identified which can be addressed. From this list of issues and problems specific objectives can be formulated. For example, it may be revealed that there are limited sources for a highly technical product that is critical to a departments/agencys service delivery. The purchasing objective, therefore, is to secure a continuous supply of that product. An example of a key strategy is to work with local suppliers that have capability in the area to develop alternative products that will meet the agencys needs. Another example may be that analysis of a suppliers performance records reveal that the department has been dissatisfied with the quality of a delivered product. The purchasing objective therefore may be to improve the suppliers performance. Objectives identified in each plan for a significant purchase need to be consistent with the corporate procurement plan. Objectives define the desired outcomes, the budget and resources available and the timeframe for completion.Activity three: Information gathering consists of collecting and analysing two types of information:a) Demand analysis- defining or refining the departments agency agencys requirement which considers whether the goods or service is necessary and if the specifications accurately reflect the demand. A thorough understanding of demand involves examining; the outcome required, how internal users have the same needs, whether the demand is fluctuating, seasonal, one-off, critical, non critical or stable.b) Analysing supply markets is a technique used to identify market characteristics for specific goods or services and provides information that assists procurement planning. In order to develop strategies to meet the objectives of the purchase it is necessary to develop an appropriate understanding of the supply market and the departments/agencys position in that market. This activity should be conducted in conjunction with demand analysis. By researching a supply market, purchasers are able to find useful information to better understand the market. This information helps to develop procurement strategies that may reduce expenditure, manage risk and advance government priorities. To develop an understanding of a supply market, research and analysis in the following areas is involved: The number of suppliers and their respective market share (market structure) Substitute or alternative goods or services The degree and type of competition between suppliers The nature and quality of supply chain The departments/agencys value as customer Environmental factors affecting the supply marketActivity four: Based on the information collected, potential buying strategies are identified and evaluated. Information such as historical spend patterns, suppliers used, cost centre spend as a proportion of total spend, demand and supply market analysis need to be considered in order to develop an effective purchasing strategy (and make good purchasing decisions). Involve or obtain information from all stakeholders in the purchase. Buying strategies need to be developed and evaluated consistent with the objectives to be achieved. Typical strategies that could be pursued in this category include: Automation of transaction processing through efficient interfaces with suppliers. Such electronic ordering and transaction processing can deliver considerable savings. Effective use of management information which can identify opportunities to improve supplier arrangements for the benefit of the government. Negotiating for improved service level from suppliers (example inventory management services, extended warranties). Regionalising supply in this category under centralised arrangements may provide better access and service t the local level. Focussing the development of purchasing expertise on understanding the nature of demand patterns, the strategies of suppliers and tactics for getting the best deal from the market.Activity five: Identifying the preferred purchasing strategy involves planning approaches to the market. This involves selecting the purchasing method(for example, public invitation to offer, selective invitation to offer, direct negotiations, multi- stage processes) and may also include pre-purchase activities. The best approach to the market will depend on the departments/agencys objectives, demand requirements and the supply market characteristics. The purchasing strategy will consist of two main areas, firstly the best approach to the market and secondly how to manage the internal demand and transaction elements of the purchase. Activity six: Specifying performance measures involves identifying performance indicators and measures that determine if the purchasing objectives were met. Measuring encourages individuals and organisations to behave in a positive way to achieve targets. It is a basis of control and a means for determining the future allocation of resources. The department/agency may also be able to use good results as a public relations tool to reward suppliers good performance. Performance measures need to be set against the purchasing objectives and strategies of a particular purchase. In developing measures, consider what outcome is being sought. A purchasing strategy may be deemed successful if key performance indicators are met. Key performance indicators need to be measurable, achievable, relevant and within the control of the supplier and the departments/agencys management information capabilities. The key parameters which can be used as degree of performance in purchasing comprise: Competitiveness of the supplier in terms of price, quality provision, order fulfilment rate, lead time, reliability and dependability of the supplier. Performance indicators that may be considered for this category of goods and services include the following: Level of negotiated purchase price reductions Cost reduction by identification of a new supplier Cost reduction by using alternative goods or service Cost reduction due to purchasing initiatives such as standing offer arrangements, managed supply and distribution or post-offer negotiation Negotiated savings/improvements in the total cost of operation, including reduced resources required to purchase or reduced transactions costs. Value of negotiated additional benefits Value derived from improvements in payment systems Value of improved warranties Savings due to reduced stock holdings Savings due to improved waste management, recycling or disposal (if environmental performance measures).General procurement procedures/methodsi) Open tenderingThis is Bidding process that is open to all qualified bidders and where the sealed bids are opened usually in public for scrutiny and are chosen on the basis of price and other technical attributes like quality, quantity, source, time etc. It is also called competitive tender or public tender. The invitation to tender and tender documents must be in English if it based on international tendering. If the procuring entity is required to advertise the invitation to tender under section 54(2), the procuring entity shall also advertise the invitation in one or more English-language newspapers or other publications that together have sufficient circulation outside Kenya to allow effective competition for the procurement. The technical requirements must, to the extent compatible with requirements under Kenyan law, be based on international standards or standards widely used in international trade. A person submitting a tender may, in quoting prices, or providing security use a currency that is widely used in international trade and that the tender documents specifically allow to be used. Any general and specific conditions to which the contract will be subject must be of a kind generally used in international tendering.Tendering processTender is an invitation for offers/proposals from willing and able bidders. It should be sealed and ought to be delivered before or at the specified time for it to be valid. The essence of inviting bids from suppliers in the market is to encourage a high degree of competitiveness for the goods/service to be purchased. Tender Process (or "Invitation to Tender" process) is a method by which suppliers are selected for the provision of products and services to an organization. The process involves creating a suite of Tender Documents to manage the supplier selection process. The Tender Documents help the organization to select the best possible supplier available, and include documents such as the "Statement of Work", "Request for Information" and "Request for Proposal". The tendering processes should be based on the open national tender (ONT) specified by the government of Kenya under the public procurement and disposal act, 2005. There are three (3) exceptions to the Tendering Process these being: Sole Source Justification Emergency Purchases Sole Source Justification By Reason Of Compatibility Exception one: Sole Source Justification:A sole source purchase is one where the specifications of the product/service, limit its purchase to the only known source of supply. A brief statement attached to the purchase requisition form which states the reason(s) for the specifications (s) and why an alternative (s) is not acceptable is required.End users should be aware that although the item may not be tendered to multiple vendors, supply management may still issue a Request for proposal or Request for Bid to the particular Vendor in order that contract can be established.Exception two: Emergency Purchases:An Emergency Purchase is classified as a procurement which is needed to "protect life and property, prevent substantial economic loss, and/or prevent the interruption of essential services". At the discretion of the purchasing officer, or major contracts officer, legitimate emergency requirements may be excluded from the Tendering Process. Exception three: Sole Source Justification By Reason Of Compatibility:Products which can be integrated legitimacies the procurement function to source a material in question from a sole source. A brief written request is normally forwarded to Supply Management outlining the need for compatibility.The following general principles are involved in calling tenders, clients must: Conduct tendering honestly and fairly to all parties by treating all parties in the same manner Comply with all statutory obligations, including trade practices and consumer affairs legislation Refrain from seeking or submitting tenders without an intention to proceed Have regard to the cost of bidding and seek to constrain such cost Apply the same conditions of tendering for each tenderer and avoid any practice which gives one party an improper advantage over another Refrain from practices such as collusion on tenders Be prepared to attest to the probity of the process, including that related to issues concerning collusive practices and conflict of interest, by statutory declaration Produce tender documents that specify the principals requirements clearly to allow tenderers to accurately price the works. Open national tendering process1) Preparation of tender documents: This is the most difficult and important step in the procurement process. The tender documents are the principal means of communication to the bidders and form the basis for the preparation of the bids and their subsequent evaluation. The preparation should be done by experienced and competent staff. The following issues of concern in this step should be addressed amicably:a) The bidding documents should furnish all information necessary for a prospective bidder to prepare a bid for the goods and works to be provided. They should generally include an invitation to bid, instruction to bidders, form of the bid, general and special conditions of the contract, technical specifications, list of goods, bill of material, drawings etc.b) The biding documents should clearly define the scope of the work to be performed, the goods to be supplied, the rights and obligations of the procuring agency or supplier, the function and authority of the one engaged to supervise and administer the contract.c) The bidding documents should set forth clearly and precisely the work to be carried out, the location of the work, the goods to be supplied, the place of delivery or installation, the schedule for delivery or completion and the warranty and maintenance requirements as well as any other pertinent terms and conditions.d) The bidding documents should also define the tests, standards and methods that will be used to judge the conformity of the product or service provided.2) Advertising, pre-qualification and issuance of tender document:a) Advertisement and notification: Normally the supplier should be notified in a timely manner in order to get the opportunity to bid. This is attribute is facilitated by transmitting copies of the invitation to bid to the prospective suppliers. Advertisement to bid should also be advertised in at least two Daily News papers of general circulation in a country. The tender advertisement should contain the following essential information: basic outline of requirement/specification, closing date and time, clause stating that late, incomplete or incorrectly submitted tenders will not be considered, details of the location of the tender box for submission of tender, details of where tender documentation can be obtained, the decision of the management committee on the awarding of a tender is final.b) Pre-qualification of bidders: This is normally advisable for large or complex contract to ensure in advance of bidding that invitations are sought from capable firms in the market. The pre qualification should entirely be based on cross checking the capacity, experience, track record of the supplier as well as the financial clout of the supplier.3) Bid preparation: The bids should comprise; validity of bids and bid bonds or guarantee, conditions of the contract, clarity of the biding documents, standards, use of brand names, expenditure under the contracts, pricing currency of the bids, currency of payment and maintenance value, payment terms price adjustment clauses, advance payments, guarantees, performance bonds/ retention money and insurance.4) Receipt and opening of the bids: Once the set time for bid submission elapses the tendering committee can now resume the opening of the bids. The bids which are submitted after the expiry of the set time are normally rejected. The procuring entity shall ensure that the place where tenders/bids must be submitted is open and accessible and shall provide, in that place, a tender box that complies with the prescribed requirements. The bids can be opened in public or through invitation of suppliers representatives. 5) Bids evaluation, recommendation and review of award: Ideally the bids are evaluated from the basis of technical aspect as well as the financial aspects. Technical aspects comprise issues of quality, quantity, financial clout of the supplier, the capacity of the supplier to perform, legality to operate as a supplier or service provider etc. Financial aspect focuses the competitive price of the bidders. Generally evaluating of bids, reviewing the recommended award with the appropriate authorities forms the bottom line of the procurement process. Before the expiry of the period during which tenders must remain valid, the procuring entity shall notify the person submitting the successful tender that his tender has been accepted as well as the ones which were not successful. After the finalization of the contract with the winning bidder, the bidder is given a leeway to execute the contract as per the terms and conditions put in place. Open international tendering:This entails invitation of bids across the global arena. It occurs when the local market does not have effective competition or does not have the goods/services supposed to be purchased by the procurement entity. The invitation to tender and tender documents must be in English. If the procuring entity is required to advertise the invitation to tender under section 54 (2), the procuring entity shall also advertise the invitation to tender in one or more English-Language newspapers or other publications that, together, have sufficient circulation outside Kenya to allow effective competition for the procurement. The technical requirements must, to the extent be compatible with requirements under Kenyan law, be based on international standards or standards widely used in international trade. A person submitting a tender may, in quoting prices or providing security, use a currency that is widely used in international trade and that the tender documents specifically allow to be used and any general and specific conditions to which the contract will be subject must be of a kind generally used in international tendering.Evaluation and award of tendersBasically tenders are evaluated on the basis of technical aspect as well as financial aspect. A minimum percentage is given out as a base of either accepting the bid or rejecting the bid. The technical aspect is the first consideration and all proposals are evaluated from this position. The chosen bids enter the second appraisal based on the financial considerations. The competitive bidder normally gets the award. The successful tenderer and unsuccessful tenderers are informed on the award decision on writing, simultaneously and individually. The contracting officer shall make a contract award within the time for acceptance specified in the bid or an extensionto that responsible bidder whose bid, conforming to the invitation, will be most advantageous to the Government, considering only price and the price-related factors included in the invitation. Award shall not be made until all required approvals have been obtained.ii) Restricted tenderingA procuring entity may use restricted tendering if the following conditions are satisfied: Competition for contract , because of the complex or specialized nature of goods, works or services is limited to prequalified contractors: The time and cost required to examine and evaluate a large number of tenders would be disproportionate to the value of the goods, works or services to be procured There is only a few known suppliers of the goods, works or services as may be prescribed in the regulationsiii) Direct procurementA procuring entity may use direct procurement as allowed under subsection (2), (3) or (3) as long as the purpose is not to avoid competition.A procuring entity may use direct procurement if the following are satisfied: There is only one person who can supply the goods, works or services being procured There is no reasonable alternative or substitute for the goods, works or services There is an urgent need for the goods, works or services being procured Because of the urgency the other available methods are impractical The circumstances that gave rise to the urgency were not foreseeable and were not the result of dilatory conduct on the part of the procuring entity

The following procedure in line with direct procurement shall apply: The procuring entity may negotiate with a person for the supply of goods, works or services being procured Section 47 shall not apply to an amendment to a pre-existing contract if the amendment is for the purpose of carrying out a direct procurement allowed under section 74(4) The procuring entity shall not use direct procurement in a discriminatory manner The resulting contract must be in writing and signed by both parties iv) Request for proposalsSection 78 to 86 set out the procedure for a procurement using a request for proposals.A procuring entity may use a request for proposal for a procurement if? The procurement is of services or a combination of goods and services The services to be procured are advisory or otherwise of a predominately intellectual naturev) Request for quotationsA procuring entity may use a request for quotations for procurement if: The procurement is for goods that are readily available and for which there is an established market The estimated value of the goods being procured is less than or equal to the prescribed maximum value for using requests for quotationsvi) Procedure for low-value procurementsA procurement entity may use a low value procurement procedure if The estimated value of the goods, works or services being procured are less than or equal to the prescribed maximum value for that low-value procurement procedure Any other prescribed conditions for the use of the low-value procurement procedure are satisfiedvii) Specially permitted procurement procedure:A procurement entity may use a procurement procedure specially permitted by the authority which may include concessioning and design competition.Basic rules in public procurement Choice of procurement procedure:For each procurement, the procuring entity shall use open tendering as the mainstream method based on acquisition of goods, services or work. A procuring entity may use restricted tendering or direct procurement as an alternative procurement procedure only if, before using that procedure, the procuring entity obtains the written approval of its tender committee and records in writing the reasons for using the alternative procedure. No procuring entity may structure procurement as two or more procurements for the purpose of avoiding the use of a procurement procedure. Any person who contravenes the provisions of this section shall be guilty of an offence.

Qualification to be awarded contract:A person is qualified to be awarded a contract for procurement only if the person satisfies the following criteria: The person has the necessary qualifications, capability, experience, resources, equipment and facilities to provide what is procured The person has the legal capacity to enter into a contract for the procurement The person is not insolvent, in receivership, bankrupt or in the process of being wound up and is not the subject of legal proceedings relating to the foregoing The person is not debarred from participating in procurement proceedings

Limitation on contracts with employees:Except as expressly allowed under the regulations, a procuring entity shall not enter into a contract for procurement with: An employee of the procuring entity or a member of a board or committee of the procuring entity A minister, public servant or a member of a board or committee of the Government or any department of the Government or a person appointed to any position by the president or a minister Specific requirements:The procuring entity shall prepare specific requirements relating to the goods, works or services being procured that are clear, that give a correct and complete description of what is to be procured and that allow for fair and open competition among those who may wish to participate in the procurement proceedings. A procurement entity may, at any time terminate procurement proceedings without entering into a contract. The procurement entity shall give prompt notice of a termination to each person who submitted a tender, proposal or quotation or if direct procurement was being used, to each person with whom the procuring entity was negotiating. Form of communications: If the procurement procedure used is open or restricted tendering or a request for proposals, communications between the procuring entity and a person seeking a contract for the procurement shall be in writing. Participation in procurement:Except in such instances as may be prescribed, a procurement entity shall permit persons to participate in the procurement process without regard to a persons citizenship or nationality Corrupt practice:No person, agent or employee shall be involved in any corrupt practice in any procurement proceeding. Fraudulent practice:No person shall be involved in a fraudulent practice in any procurement proceeding Collusion:No person shall collude or attempt to collude with any other person Conflict of interests:An employee or agent of the procuring entity or a member of aboard or committee of the procuring entity who has a conflict of interest with respect to procurement shall not take part in the procurement proceedings and shall not after a procurement contract has been entered into, take part in any decision relating to the procurement or contract. Confidentiality:During or after procurement proceedings, no procuring entity and no employee or agent of the procuring entity or member of a board or committee of the procuring entity shall disclose the following: Information relating to a procurement who disclosure would impede law enforcement or whose disclosure would be in the public interest Information relating to a procurement who disclosure would prejudice legitimate commercial interests or inhibit fair competition Information relating to the evaluation, comparison or clarification of tenders, proposals or quotations Contents of tenders, proposals or quotations Procurement records:A procurement entity shall keep records for each procurement for at least six years after resulting contract was entered into or if no contract resulted, after the procurement proceedings were terminated. Administration review of procurement proceedingsRequest for a review:Subject to the provisions of this part, any person who claims to have suffered or to risk suffering, loss or damage due to the breach of a duty imposed on a procuring entity by this act or regulations, may seek administrative review as in such manner as may be prescribed. Upon receiving a request for a review, the procuring entity shall suspend the procurement proceedings and the secretary of the review board shall notify the procuring entity of the pending review and the suspension of the procurement proceedings in such manner as may be prescribed in regulations.Dismissal of frivolous requestsThe review board may dismiss a request for a review if the review board is of the opinion that the request is frivolous or vexatious or was made solely for the purpose of delaying the procurement proceedings or the procurement.Parties to the review:The parties to the review are: The person who requested the review The procurement entity If procuring entity has notified a person that the persons tender, proposal or quotation was successful that person Such other persons as the review board may determineCompletion of review:The review board shall complete its review within thirty days after receiving the request for the review.Powers of review board:Upon completing a review the review board may do any one or more of the following: Annul anything the procuring entity has done in the procurement proceedings, including annulling the procurement proceedings in their entirety. Give directions to the procuring entity with the respect to anything to be done or redone in the procurement proceedings Substitute the decision of the review board for any decision of the procuring entity in the procurement proceedings Order the payment of costs as between parties to the review.Right to review:The right to request a review under this part is in addition to any other legal remedy a person may have. A decision made by the review board shall be final and binding on the parties. Any party to the review aggrieved by the decision of the review board may appeal to the high court and the decision of the high court shall be final. A procuring entity which disobeys the decision of the review board or the high court shall be in breach of this act and any action by procuring entity contrary to the decision of the review board or the high court shall be null and void.Authority powers to ensure compliance:A public entity shall provide the authority with such information relating to the procurement as the director general may require in writing. The director general may order an investigation of procurement proceedings for the purpose of determining whether there has been a breach of this act, the regulations or any directions of the authority. An investigator shall be conducted by an investigator appointed for the purpose by the director general. For the purpose of carrying out an investigation of procurement proceedings an investigator has the following powers: The investigator shall have access to all books, records, returns and other documents of the procuring entity or a person who participated in the procurement proceedings including electronic documents The investigator may remove or make copies of any documents the investigator has access to under paragraph The investigator may require any of the following to provide explanations, information and assistance An employee or official of the procuring entity An employee or official of a person who participated in the procurement proceedings.After completing his investigation an investigator shall prepare a report and give a copy of the report to the director general and prepare a summary of the investigators findings and recommendations and give a copy of the summary to the procuring entity and to the Kenya Anti Corrupt Commission established under the Anti Corruption and economic crimes Act, 2001. If after considering the report of an investigator the director general is satisfied that there has been a breach of this Act, the regulations or any directions of the authority, the director general may by order do any one or more of the following: Direct the procuring entity to take such actions as necessary to rectify the contravention Cancel the procurement contract if any Terminate the procurement proceedingsDisposal of stores and equipment:This part applies with respect to the disposal of stores and equipment of a public entity that are unserviceable, obsolete or surplus. A public entity shall ensure that this act the regulations and any directions of the authority are complied with respect to each of its disposals to which this part applies. The accounting officer of a public entity shall be primarily responsible for ensuring that the public entity fulfils its obligations under subsections. Each employee of a public entity and each member of a board or committee of the public entity shall ensure within the areas of responsibility of the employee or member that this Act, the regulations and any directions of the authority are complied with. A public entity shall establish a disposal committee in accordance with the regulations for the purpose of recommending the best method of disposing of unserviceable, obsolete or surplus stores or equipment. The employee in charge of unserviceable, obsolete or surplus stores or equipment shall bring the matter to the attention of the disposal committee. An employee shall comply with subsection (1) within a reasonable time after the stores or equipment become unserviceable, obsolete or surplus. The disposal committee shall recommend to the accounting officer a method of disposing of the stores and equipment which may include any of the following: Transfer to another public entity or part of a public entity with or without financial adjustment Sale by public tender Sale by public auction Destruction or dumping Within the prescribed time period after receiving the recommendations of the disposal committee the accounting officer shall give the committee a written notice as to whether the accounting officer accepts or rejects the recommendations of the committee. Fraudulent procurements and ethical considerations in public sector settingProcurement fraud can be defined as dishonestly obtaining an advantage, avoiding an obligation or causing a loss to public property or various means during procurement process by public servants, contractors or any other person involved in the procurement. An example is the kickback, whereby a dishonest agent of the supplier pays a dishonest agent of the purchaser to select the supplier's bid, often at an inflated price. Procurement is a function that is particularly vulnerable to fraud. Evans states that fraud is not necessary restricted to those with the title procurement officer but may involve anyone in direct contact with suppliers; including engineers, production managers, sales and computer staff. Examples of supplies-related fraud

Buyer/supplier collusion leading to approval for payment of fictitious charges Presentation of false invoices Re-presentation of genuine invoices that have not been cancelled at the time the initial cheque was signed for second payment Abstraction of tenders or arranging for the lowest tender to come from a desired source Omission of credit notes for goods returned to the supplier Premature scrapping of assets in return for a kickback from a scrap dealer Computer-based frauds which take advantages of inadequate controls or limited understanding of information technology on the part of senior management Pricing inflictions in order to get commission Ghost suppliers- Goods exist on paper only Ordering goods for personal usePrevention of fraudThe prevention of fraud in relation to supplies depends on sound internal control, internal and external auditing and the detection of give away signs.Frauds in working environment can be prevented through the following ways:a) Ensuring a separation between recording and custodian duties.b) Only specified employees should have the power to requisition goods and then only up to an authorised limit which increases with the level of authority. The existence of a separate purchasing department or function considerably strengthens internal control by ensuring that user departments are prevented from ordering items without the order first being independently vetted.c) The requisitioning department can act as a check on the purchasing since every order placed should be traceable to a requisitiond) Goods inward should be received in specially designated areas. Control is best established at the gate or entrance. The receipt of all goods should be recorded. Goods received notes (GRN), where used should be serially numbered to reduce the danger of introducing false documents and copies should be sent to the purchasing and finance departmentse) While it may be unrealistic to check all invoices presented for payment, a sample should be examined on a random basis. f) Provision of internal controls in respect of computers-classified as systems development and control, organisational controls and procedural controlsg) Provision of internal and external spot auditingh) Use of ethical code as companys culture of honesty and leadershipi) Separation of the buyer (Purchaser) from the one who receives the goodsGive-away signsGive-away signs of fraud include the following: Unfolded invoices that have not come through the post Too many orders to one supplier other than those where single sourcing arrangement apply Loss of supporting documentation New suppliers continually facing entry obstacles Excessive supplier hospitality to selected staff Sudden unexplained affluence Unwillingness of employees to take holidays or accept transfer or promotion to other workEthics in ProcurementEthics(also known as moral philosophy) is a branch of philosophy which seeks to address questions about morality; that is, about concepts such as good and bad, right and wrong, justice, and virtue. Ethics can also be defined as rules or standards governing the conduct of a person or the members of a profession e.g. procurement function.Ethical standardsThe Code of Ethics and standard of Professional Conduct are the ethical cornerstone of many companies across the globe. They areessential to companys mission to lead the global investment profession and critical to maintaining the public's trust in the financial markets.The procurement ethical standards are: All business must be conducted in the best interests of the State, avoiding any situation which may impinge, or might be deemed to impinge, on impartiality; Public money must be spent efficiently and effectively and in accordance with Government policies; Agencies must purchase without favour or prejudice and maximise value in all transactions; Agencies must maintain confidentiality in all dealings; and Government buyers involved in procurement must decline gifts, gratuities, or any other benefits which may influence, or might be deemed to influence, equity or impartiality.Importance of ethics in business and purchasingA business that lacks ethical principles is bound to fail sooner or later. According to International ethical business registry, there has been a dramatic increase in the ethical expectation of business and professionals over the last decade. Increasingly, customers, clients and employees are deliberately seeking out those who define the basic ground of ethics in day to day activities.Ethics is important in purchasing for the following reasons Purchasing staff are the representatives of their organisation in dealing with suppliers Sound ethical conduct in dealing with suppliers is essential to the creation of long-term relationships and the establishment of supplier goodwill Purchasing staff are probably more exposed to the temptation to act unethically than most of other employees It is impossible to claim professional status for purchasing without reference to a consideration of its ethical aspects Ethical standards reduces excuses for fraudPrinciples and guidelines in ethical behaviourIndividuals acting in a professional capacity take on an additional burden of ethical responsibility. For example, professional associations have codes of ethics that prescribe required behaviour within the context of a professional practice such as procurement, medicine, law, accounting, or engineering. These written codes provide rules of conduct and standards of behaviour based on the principles of Professional Ethics which include: Impartiality or objectivity Openness; objectivity Confidentiality Due diligence/duty of care Fidelity to professional responsibilities Avoiding potential or apparent conflict of interestDeveloping an ethical culture in purchasing and supplies:Ethical culture in purchasing and supplies can be sustained and enhanced through the following distinct activities: Develop open, transparent and direct long-term stable relationships with suppliers rather than relying on arms length contracting and licensing agreements. Avoid the attraction of searching for the cheapest labour and goods at the expense of social and environmental responsibility. Avoid frequently changing suppliers- this undermines their commitment to long term progress on labour standards. Develop a reasonable and agreed time frame for suppliers to meet standards as specified in the companys ethical purchasing strategy or code. Avoid cutting and running from high risk suppliers-engage suppliers to improve conditions on an incremental basis. Promote positive supplier and contractor relationships by according supplier representatives courteous, fair and ethical treatment Conduct business in good faith; demanding honesty and ethical practises from all participants in the purchasing process. Know and subscribe the stipulated purchasing rules and remain alert to the legal ramifications of purchasing decisions. Factors that influence unethical behaviour: Poor remuneration Peer influence Lack of awareness in regard to ethical issues Pressure to meet unrealistic business objectives and deadlines Poor supervision Job stressImpact of frau