FACULTYOF ENGINEERING AND BUILT ENVIRONMENT

SCHOOL OF CONSTRUCTION AND PROPERTY STUDIES

DEPARTMENT OF CONSTRUCTION ECONOMICS AND MANAGEMENT

BACHELOR OF QUANTITY SURVEYING

YEAR 4, SEMESTER 1

UNIT: PROCUREMENT STUDIES

STUDENT DETAILS:

NAME: NJOROGE HUMPHREY MBUGUA

REG NO: EFCN/00039/2021

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Contents

1.0 Discuss the procurement methods permitted in Public Procurement and Asset disposal act 2015. .... 3

2.0 Discuss all the Public- Private Partnerships procurement method ........................................................ 5

3.0 Discuss procurement plan, its purposes and its contents in the context of public procurement and

asset disposal act 2015 and regulations. ..................................................................................................... 6

4.0 Discuss the merits and demerits of ditto and situation most likely to be used; Cost reimbursement &

Cost-plus percentage fee ............................................................................................................................ 10

5.0 Discuss the merits and demerits of ditto and situation most likely to be used; Potential challenges of

using a cost-plus fixed-fee contract ............................................................................................................ 11

6.0 Discuss the following discretionary procurement systems with well annotated organization

structures for each ...................................................................................................................................... 13

1. Partnering ...................................................................................................................................... 14

2. Alliancing ....................................................................................................................................... 15

3. Joint Venture (JV) ........................................................................................................................ 16

4. New Engineering Contract (NEC) ............................................................................................... 17

8.0 Discuss Public Private Partnerships procurement system (See PPP ACT 2013 REVISED 2021) ............ 23

Key Elements of the PPP Procurement System ............................................................................. 23

Organizational Structure for PPP Procurement in Kenya ........................................................... 24

PPP Procurement Process under the Act........................................................................................ 25

Benefits of PPP in Kenya .................................................................................................................. 28

Challenges of PPP in Kenya ............................................................................................................. 28

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9.0 REFERENCES: ......................................................................................................................................... 29

1.0 Discuss the procurement methods permitted in Public Procurement

and Asset disposal act 2015.

 Open tendering: This is the most common and competitive procurement

method where any qualified supplier or contractor can submit a bid.

The process is advertised publicly, and the contract is awarded to the bidder who

meets all requirements and offers the best value for money. It is the default

method unless specific conditions justify the use of alternative methods.

 Two-Stage Tendering: This method is used for complex procurements,

particularly for large infrastructure projects. In the first stage, the procuring

entity invites tenders without fully specifying the technical aspects of the works,

leaving room for discussions and negotiations. In the second stage, tenders are

refined to account for specific requirements. This helps in achieving better

solutions for complex projects.

 Design competition: This method focuses on procuring designs through

competition among potential providers.

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  Restricted Tendering: This method is used when the procurement entity

determines that only certain suppliers or contractors are capable of providing

the required goods or services.

The process is open only to a prequalified group of suppliers or contractors who

meet specific criteria set by the procuring entity. It is used in cases where there’s

a limited number of suppliers or for highly specialized services.

 Direct Procurement: This method involves the procurement of goods, services or

work from a single supplier or contractor without a competitive tendering

process. It is used in specific situations, such as emergencies, or where only one

supplier is able to meet the requirements due to technical reasons. This method

require justification and approval from the relevant authorities.

 Request for Quotations (RFQ): This method is used for low-value procurements,

where the procurement entity solicits quotations from a number of suppliers. It

is simpler than the tendering process and is typically used for routine or low-cost

purchases. It is often used for goods or services with a lower contract value.

 Electronic Reverse Auction: This is used when procuring standardized goods and

services. In this method, suppliers submit bid online, with prices decreasing in

real-time. The supplier who offers the lowest price at the close of the auction is

awarded the contract.

 Framework Agreements: This procurement method is used when a public entity

requires goods and services regularly over a certain period. A framework

agreement is a contract between a supplier and the procuring entity that sets

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 terms, conditions, and prices for future orders. The entity can issue specific

orders under the framework agreement without having to go through a tender

process each time.

 Request for Proposals (RFP): This method is employed when the procuring

entity seeks to procure services or solution that may require professional

expertise and innovation. Instead of simply comparing prices, an RFP considers

other factors such as technical approach, qualifications, and expertise.

2.0 Discuss all the Public- Private Partnerships procurement method

 Direct Procurement: This allows the public sector to directly engage a private

partner without going through a competitive bidding process. This method is

typically used in exceptional circumstances where the project or service required

can only be delivered by a single entity or where there are urgent needs. It can

also be used in specific cases like when there is an emergency or when only one

supplier is capable of providing the required goods or services.

 Privately-Initiated Proposals: This refer to a situation where a private entity

proposes a project to the government or a public entity, offering to develop,

finance, and operate a public asset or service. The proposal is then subjected to

a review process to determine if it meets the criteria set by the government, and

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 if the government accepts it, the private partner can be invited to negotiate the

terms of the project.

 Competitive Bidding: This is the standard procurement method for PPPs under

the act. In this process, the public entity issues an open call for bids or tenders,

inviting multiple private companies to submit proposals for a project. The private

sector companies then compete to win the contract based on various factors

such as cost, quality, experience, and technical capabilities.

 Restricted Bidding: This is a procurement method in which only a limited

number of private sector participants are invited to submit bids. This methods is

used when there is a need to limit the pool of potential bidders due to factors

like the specialized nature of the project or the limited number of qualified

providers.

3.0 Discuss procurement plan, its purposes and its contents in the context of public

procurement and asset disposal act 2015 and regulations.

A procurement plan is a crucial part of the annual budget preparation process for a

procuring entity. The plan is prepared for each financial year and can also be prepared

as a multi-year plan, which should be integrated into the medium-term budgetary

expenditure framework. The procurement plan outlines the intended procurements for

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 the year, detailing the good, services, and works to be procured, along with the

timelines and budget estimates.

Purposes of a Procurement Plan:

 A primary purpose of procurement planning is to achieve cost savings through advanced

planning, scheduling, and bulk purchasing.

 Procurement plans also promote efficient business operations and increased value for

money.

 In the public sector, procurement planning is an opportunity to review the entire

procurement process, ensuring sound judgments and good decision-making, ultimately

facilitating successful project implementation for goods, works, and services.

 Procurement plans help allocate scarce financial resources to meet priority public

services before less essential needs, due to funding being insufficient to meet all

requirements.

 Publication of realistic annual procurement plans enables the private sector to respond

more effectively to government requirements and specifications.

 They provide a checklist for the approval of procurements by Tender Committees and

monitoring of procurement activity.

 Procurement plans also link procurement activities to the overall business strategy and

objectives of the ministry/project and the national budget.

 They allow a procuring entity to evaluate the entire procurement process.

 They enable the private sector to respond to the requirements and specifications of the

government more effectively.

Contents of a Procurement Plan: A procurement plan should include the following:

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  A detailed breakdown of the required goods, works, or services.

 The source of funding.

 An indication of items or sections of the works that can be aggregated for procurement as

a single package.

 An estimate of the value of each procurement package of works, with the source of

funding.

 The procurement method to be used.

 Details of any committed or planned procurement expenditure under existing multi-year

contracts.

 Timelines for critical stages of the delivery or implementation program.

 A schedule of planned delivery, implementation, or completion dates for all goods, works

or services.

 An indication of whether procurement will occur within a single-year period or under a

multi-year arrangement.

 An indication of which items may be aggregated for procurement as a single package or

through applicable arrangements for common-user items.

 An indication of which items should be packaged into lots.

 The budget available.

 Where transfer of responsibilities is justified, the optimal period for such transfer.

 The estimated cost for procurement of items, including insurance, clearing and

forwarding, demurrage charges, warehousing, advertisement and all other incidental

costs.

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In addition to these requirements:

 Procurement plans for county governments must indicate a minimum 20% budgetary

allocation for preferences and reservations for resident tenderers of the county.

 The plan should be prepared using the format specified in the Third Schedule.

 A procuring entity should not split or structure its contracts to avoid the use of a specific

procurement procedure, except when unbundling categories is allowed.

 Procuring entities should also consider market survey prices, insurance, demurrage, the

prevailing inflation rate, and regional price differentials when making procurement

decisions.

 The Head of the user department is responsible for submitting an annual departmental

procurement plan to the accounting officer.

 The consolidated annual procurement plan should be prepared by the accounting officer

of the procuring entity.

 The plan must be approved by the Cabinet Secretary, or county executive committee

member for finance, or responsible for that entity.

 A quarterly report on the implementation of the annual procurement plan should be

prepared and submitted to the Cabinet Secretary or county executive committee member

for finance.

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4.0 Discuss the merits and demerits of ditto and situation most likely to

be used; Cost reimbursement & Cost-plus percentage fee

Cost Reimbursement Contracts

In a cost reimbursement contract, the contractor is paid for the actual costs of labor, plant, and

materials.

Additionally, the contractor receives an agreed fee to cover management, overheads and profit.

These contracts are also sometimes referred to as ‘Cost Plus’ contracts.

Cost reimbursement contracts are used when the amount of work is indeterminate

Cost-Plus Percentage Fee

In a cost-plus percentage fee contract, the contractor's fee is directly related to the prime cost,

usually as a flat rate percentage, though it can also be a sliding scale.

A key disadvantage is that the contractor has no real incentive to work efficiently.

This type of contract is best considered when requirements are particularly indeterminate pre-

contract.

The contractor's profit is a percentage of the actual costs.

Merits of Cost-Plus Percentage Fee.

 The source material does not explicitly list the merits of a cost-plus percentage fee

contract, but it is implied that they are most useful when requirements are indeterminate.

 It also implies that there are benefits for the contractor, as they are paid a percentage of

actual costs, and they do not lose profit margins regardless of how much costs fluctuate

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Demerits of Cost-Plus Percentage Fee

 A significant demerit is that the contractor has no real incentive to work at maximum

efficiency.

 The contractor may spend more than is necessary or appropriate, to increase their profit

margin.

 The client bears more financial risk with this type of contract, as they are liable for all

cost increases.

Situations Most Likely to be used

 Cost-plus percentage fee contracts are most likely to be considered where the

requirements are particularly indeterminate pre-contract

 .

 They can be useful in the early stages of project development when there are a lot of

moving parts

5.0 Discuss the merits and demerits of ditto and situation most likely to

be used; Potential challenges of using a cost-plus fixed-fee contract

Cost-Plus Fixed-Fee Contracts

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In a cost-plus fixed-fee contract, the contractor is paid the actual costs for materials, labor, and

overhead.

Additionally, the contractor receives a fixed fee, which is an amount agreed upon by both the

client and the contractor.

This type of contract is appropriate when the amount and type of work are largely foreseeable.

The contractor's profit is a fixed amount, which depends on how much is left after expenses.

Cost-plus fixed-fee contracts encourage contractors to complete a job before the specified

deadline in order to maximize their profit.

Merits of Cost-Plus Fixed-Fee Contracts

 A key merit of a cost-plus fixed-fee contract is that it protects profit margins for the

contractor.

 Cost-plus fixed-fee contracts also make procurement simpler.

 They can lead to higher-quality deliverables.

 These contracts are effective in the early stages of project development when there are a

lot of moving parts.

 They allow you to explore and adjust the scope, unlike firm-fixed-price contracts.

 CPFF contracts foster better communication between clients and contractors, especially

when both parties must work closely to guarantee contract performance.

 A cost-plus fixed-fee contract clearly defines allowable costs and other allocations, which

will help avoid disagreements over financial disbursement.

 The contractor has an incentive to work efficiently so as to remain within the agreed fee.

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Demerits of Cost-Plus Fixed-Fee Contracts

 Since the fixed fee is predetermined, contractors will have to enforce stringent cost

controls to eke out a profit, which may lead to subcontracting to less competent

companies.

 Change orders or even price changes can derail the project until both parties renegotiate a

new price, and if an impasse occurs, the project could get stuck in limbo.

 Determining an appropriate contractor’s cost percentage can be complex. You need to

balance between fair compensation and the actual cost of the project.

Situations Most Likely to be used

 Cost-plus fixed-fee contracts are appropriate provided that the amount and type of work

is largely foreseeable.

 They can be useful in the early stages of project development when there are a lot of

moving parts.

6.0 Discuss the following discretionary procurement systems with well

annotated organization structures for each.

Partnering

Alliancing

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 Joint venture

New engineering contract

1. Partnering

Partnering is a procurement system where two or more parties (such as contractors and clients)

work collaboratively to achieve shared goals. The emphasis is on creating a long-term

relationship and establishing trust between parties rather than focusing on adversarial

contracting.

Organizational Structure for Partnering:

The structure typically includes:

 Client/Owner: The party funding and commissioning the project.

 Main Contractor: The entity responsible for delivering the project (construction or

service).

 Subcontractors: Specialized suppliers providing specific services or products.

 Project Manager: A third-party mediator who facilitates communication and ensures

that the project adheres to agreed terms.

 Consultants: Engineers, architects, and other experts that advise on technical matters.

A typical partnering arrangement includes:

 Core Team: A collaborative team comprising representatives from each partner (client,

contractor, subcontractor).

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  Steering Group: A high-level group to oversee the strategic direction and ensure long-

term objectives are met.

The structure encourages open communication, shared risk, and mutual problem-solving.

2. Alliancing

An alliancing procurement system involves creating a formal collaboration between parties with

shared risks and rewards. Unlike partnering, alliancing focuses more on aligning the interests of

all parties toward a single, common goal, usually with a focus on shared financial incentives or

penalties for performance.

Organizational Structure for Alliancing:

The organizational structure typically involves:

 Alliance Participants: These could include the client, main contractor, and various key

suppliers.

 Alliance Board: A governance body representing each of the parties, responsible for

making key decisions and managing the overall direction of the project.

 Project Team: A group of individuals from the alliance participants tasked with the day-

to-day execution of the project. This includes:

o Project Manager: Oversees the project execution.

o Design and Technical Leads: Key figures from each party’s technical team.

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  Risk Management Team: A dedicated team that identifies, monitors, and mitigates risks

that arise throughout the project.

 Financial Controller: Ensures all parties are aware of the project budget, and that shared

incentives or penalties are properly calculated and managed.

In an alliancing structure, the key difference from partnering is the alignment of financial

incentives, such as the sharing of savings or overruns based on project performance.

3. Joint Venture (JV)

A joint venture (JV) is a formal business arrangement where two or more parties come together

to form a separate legal entity to undertake a project. The parties in the joint venture share

resources, risks, and rewards, but they maintain their own legal identity outside of the JV.

Organizational Structure for Joint Venture:

 Joint Venture Entity: The JV itself operates as a separate legal entity, typically with its

own leadership structure.

o Board of Directors: Comprised of representatives from each partner

organization, responsible for the strategic direction of the JV.

o Managing Director/CEO: Appointed from one of the parties or an independent

individual to lead the JV.

o Operational and Support Teams: Staff dedicated to project execution, who may

come from any of the participating organizations.

 Partners/Shareholders: Each party in the JV retains its own internal structure but also

has a stake in the JV entity.

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  Legal and Financial Advisors: External advisors who guide the JV through legal

complexities, regulations, and financial matters.

In a JV, control is shared, and the risks and rewards are proportionate to the contribution of each

partner.

4. New Engineering Contract (NEC)

The New Engineering Contract (NEC) is a family of contracts widely used in construction and

engineering projects. The NEC focuses on collaboration, clear roles, and responsibilities, and

emphasizes risk management and early resolution of issues.

Organizational Structure for NEC:

The structure of an NEC-based procurement system includes several key roles, all of which are

critical to the collaborative nature of NEC contracts:

 Client/Employer: The party commissioning the project.

 Contractor: The main party responsible for delivering the project.

 Project Manager: A third-party who manages the contract and ensures compliance with

the terms, including handling any disputes or deviations.

 Supervisor: A role that oversees the contractor's work on behalf of the client, ensuring it

aligns with specifications and quality standards.

 Contract Administrator: Often responsible for administrative aspects, including cost

control and contract compliance.

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  Quantity Surveyor/Cost Consultant: Ensures that the financial aspects are well-

managed, with close monitoring of costs and time.

7.0 Using organization structure/procurement system showing all parties

involved in your project and their relationships. Discuss the above

procurement system you have adopt for your project, the roles of the parties

justifying (key points you Considered in your design, merits and demerits,

why should you use it, give case study-similar one used in Kenya or outside

World) why it’s the best. Do thorough research and have appropriate

references

Hypothetical Project: A new hospital building

Chosen Procurement System: Design and Construct

A Design and Construct procurement system might be suitable for this project. This approach

allows a single contractor to manage both the design and construction phases of the project

. This system can be used when a building is functional, simple, and when a single organization

is required to take responsibility for both design and construction. The design and construct is

useful when a program can be accelerated by overlapping design and construction activities,

which may be beneficial to a large project like building a hospital.

Organizational Structure

A basic relationship in design and construct projects.

 Client: The client initiates the project and defines the requirements.

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  Design-Construct Contractor: This single entity is responsible for both design and

construction.

 Subcontractors: The Design-Construct contractor sub-lets the design and construction

work to subcontractors and suppliers.

 Scope Designer (Consultants): The client may engage consultants to produce initial scope

designs to inform the bidding process.

 Designer (Full Design): Under the design and construct approach, the contractor may

complete the design with their own design team or through subcontractors.

A simplified, high-level structure for this project would therefore be:

 Client (e.g., Hospital Trust)

 Design-Construct Contractor (selected through tender)

 Scope designer

 Subcontractor (Design)

 Subcontractor(s) (Construction)

Roles of the Parties

Client:

 Defines the overall project requirements and functional needs.

 Specifies performance criteria and standards.

 Provides a brief for the scope design, either directly or through consultants.

 Appoints a design-construct contractor and agrees on a contract price.

 Inspects and approves the completed work.

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Design-Construct Contractor:

 Takes responsibility for both the design and construction of the project.

 Manages all design work and obtains required statutory approvals.

 Subcontracts various design and construction activities.

 Ensures project completion on time and within the agreed cost.

 Handles investigations of site and subsoil conditions.

Scope Designer (Consultants):

The client may engage consultants to produce initial scope designs, typically involving

functional or essential aesthetic details, and specifications.

This design becomes the basis for inviting tenders from contractors

Subcontractors:

 Carry out specific design or construction tasks delegated by the main contractor.

 Work to meet the main contractor's requirements.

Key Points Considered in Design

 Single Point of Responsibility: The design-construct approach ensures a single point of

responsibility, which reduces the need for the client to manage multiple contracts.

 Price Certainty: The project aims to have price certainty as specified in the client's brief.

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  Overlapping Design and Construction: This approach enables the overlap of design and

construction activities, potentially reducing project time.

 Constructability: The contractor’s input into the design phase can improve

constructability

Merits of Design and Construct:

 Reduced Client Effort: The client deals with one firm for both design and construction,

simplifying the process.

 Price Certainty: A contract price is usually agreed upon before construction.

 Time Savings: Overlapping design and construction phases can shorten the project

timeline.

 Improved Constructability: The contractor’s early involvement in design can improve

how the project is built.

 Responsibility: A single organization is responsible for the project, reducing potential

claims due to late information.

Demerits of Design and Construct

 Difficulties in Briefing: The client may face challenges in preparing a comprehensive

brief that will meet their needs.

 Cost of Changes: Changes in the client's requirements can be costly.

 Difficult Bid Comparison: Evaluating bids can be difficult since each design will be

different, which may lead to varying project programs and prices.

 Limited Design Control: The client has less control over the detailed design.

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  Limited Design Liability: Design liability is limited to the standard contracts available.

Why Choose This System the Design and Construct system is appropriate for this project due to

the following:

 Functional Building: A hospital is primarily a functional building, which suits the design-

construct approach.

 Need for Speed: The ability to overlap design and construction phases aligns with a need

for efficiency in hospital construction.

 Single Responsibility: It is preferable to have a single entity responsible for the design

and construction process.

 Price Certainty: The client wants to ensure price certainty prior to construction

Case Study

A comparable project using a design and construct approach is the construction of the Aga Khan

University Hospital in Nairobi, Kenya. The project involved a single contractor taking

responsibility for the detailed design, construction, and commissioning of the hospital expansion.

This approach facilitated a streamlined process, reduced the overall project duration, and ensured

clear accountability. The focus was on delivering a functional and efficient healthcare facility,

aligning well with the design and construct approach. This hospital is located in Kenya.

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8.0 Discuss Public Private Partnerships procurement system (See PPP

ACT 2013 REVISED 2021)

Key Elements of the PPP Procurement System

1. Legal Framework:

o The PPP Act, 2013 (Revised 2021) governs how public-private partnerships are

established in Kenya, providing a framework that ensures transparency,

accountability, and efficiency.

o The Act defines the legal and regulatory roles of government entities and private

sector participants in the development and management of PPP projects.

2. Key Objectives of the PPP Act:

o Improve Public Service Delivery: Through the combination of public resources

and private expertise, PPPs are meant to provide high-quality infrastructure and

services.

o Encourage Private Sector Investment: By involving the private sector, the

government aims to increase investments in infrastructure, reduce financial

burdens, and promote innovation in service delivery.

o Risk Sharing: One of the key advantages of PPPs is the ability to share risks

between the public and private sectors, allowing for efficient allocation of risks

based on each party's strengths.

3. PPP Project Phases:

o Preparation Phase: This includes identifying suitable projects for PPP,

conducting feasibility studies, securing approvals, and preparing documentation.

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 o Procurement Phase: Involves the selection process of private partners through

competitive bidding or negotiated procedures, ensuring fairness and transparency.

o Execution Phase: The execution of the project after the partnership agreement is

signed. This includes the development, financing, operation, and maintenance of

the project.

o Post-Completion Phase: The final phase where the public sector manages the

transfer of the project (if applicable) or ongoing performance assessments.

Organizational Structure for PPP Procurement in Kenya

1. PPP Unit:

o The PPP Unit within the National Treasury and Planning is the central

coordinating body for PPP projects in Kenya. It is responsible for the overall

policy direction, guidance, and support in project preparation, procurement, and

implementation.

o The Unit is tasked with developing PPP guidelines, offering technical support to

government agencies, and ensuring that all projects comply with the PPP Act.

2. PPP Steering Committee:

o This committee plays a key role in the oversight of PPP projects and ensures

compliance with legal and procedural standards. The committee includes senior

government officials and stakeholders from various ministries or sectors.

o Its role includes evaluating project feasibility, approving the structure of the

partnership, and reviewing the terms and conditions of contracts before

implementation.

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 3. Public Sector (Government Entity/Contracting Authority):

o The Contracting Authority (a government agency or department) is responsible

for initiating and managing PPP projects. This could include a ministry, county

government, or public body that seeks to partner with the private sector.

o The government entity leads the preparation of project proposals, identifies the

scope, and negotiates the terms of the partnership.

4. Private Sector Partner:

o The Private Partner is typically a company, consortium, or investor with the

expertise, capital, and resources to design, finance, construct, and operate the

infrastructure or service. This entity enters into a partnership with the public

sector under agreed terms.

o The private partner often bears significant risks, such as construction risk,

operational risk, and financial risk.

5. Other Stakeholders:

o Regulators: Government regulators may oversee specific sectors (e.g., energy,

transport, water), ensuring that the private partner adheres to industry standards

and regulations.

o Financial Institutions: Banks and other financial institutions provide financing

for PPP projects, especially in large-scale infrastructure projects where upfront

capital is needed.

o Legal and Technical Advisors: Experts who assist both the public and private

sectors in drafting contracts, conducting feasibility studies, and evaluating risks.

PPP Procurement Process under the Act

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 1. Identification of Projects:

o The government identifies projects that are suitable for PPP arrangements.

Projects are selected based on their potential to improve public service delivery,

economic returns, and feasibility for private sector involvement.

2. Feasibility Study:

o A comprehensive feasibility study is conducted to assess the technical, financial,

social, and environmental aspects of the proposed project. The study also analyzes

the risks, value for money, and expected outcomes.

o The findings of the feasibility study are crucial for determining the project's

viability and identifying the most appropriate PPP model (e.g., Build-Operate-

Transfer [BOT], Design-Build-Finance-Operate [DBFO]).

3. Competitive Bidding:

o Public Advertisement: Once a project is deemed feasible, a public advertisement

is issued to invite private sector bidders. This ensures competition and

transparency.

o Bid Evaluation: A panel assesses proposals based on a detailed evaluation

matrix, considering technical capability, financial strength, and the ability to meet

project objectives.

o Selection of Preferred Bidder: The bidder with the most favorable terms (i.e.,

offering the best value for money) is selected as the preferred private partner.

4. PPP Agreement:

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 o Contract Negotiation: Once a preferred bidder is selected, the government

negotiates the terms of the PPP agreement, which includes risk allocation,

payment mechanisms, timelines, and penalties for non-performance.

o Contract Signing: After successful negotiation, the public and private parties

sign a legally binding contract, formalizing the partnership.

5. Project Implementation and Monitoring:

o During the implementation phase, the private partner is responsible for financing,

construction, and operation of the project as outlined in the contract.

o The public sector monitors the performance of the private partner, ensuring

compliance with agreed terms, project milestones, and service delivery standards.

o Independent Monitoring: The government may engage independent monitoring

bodies to oversee contract compliance, financial management, and service

delivery.

Key Models of PPP in Kenya

The PPP Act identifies several models under which public-private partnerships may operate,

including:

1. Build-Operate-Transfer (BOT):

o The private partner designs, builds, finances, and operates the infrastructure, and

at the end of a specified period, transfers the asset to the government.

2. Design-Build-Finance-Operate (DBFO):

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 o The private partner designs, builds, finances, and operates the infrastructure, but

ownership may remain with the public sector. The private partner may receive a

payment from the government based on performance metrics.

3. Operation & Maintenance (O&M):

o The private sector operates and maintains the infrastructure built by the public

sector or another private entity.

4. Lease and Transfer:

o The private partner leases an existing public asset, operates and maintains it for a

set period, and eventually transfers it back to the government.

Benefits of PPP in Kenya

 Infrastructure Development: Accelerates the development of critical infrastructure

projects that are needed for economic growth.

 Financial Efficiency: Private financing reduces the immediate fiscal burden on the

government.

 Innovation and Expertise: Private partners bring in specialized knowledge, technology,

and innovation, improving project delivery and operational efficiency.

 Risk Sharing: Risks are shared between the public and private sectors, with each party

taking on the risks it can best manage.

Challenges of PPP in Kenya

 Complexity and Delays: The procurement process can be lengthy and complex,

involving multiple stages of negotiation, evaluation, and approval.

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  Political Risks: Changes in government policies or leadership can affect the long-term

stability of PPP agreements.

 Financial Risks: There may be concerns over the ability of private investors to secure

financing or meet agreed performance standards.

 Public Perception: There may be skepticism regarding private sector involvement in

public service delivery, especially if projects face delays or fail to meet expectations.

9.0 REFERENCES:

1. Public Procurement and Asset Disposal act 2015

2. Public Private Partnerships Act 2013, Revised 2021

3. Relevant lecture notes.

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