
Kenya introduces Law to protect Contractors from Payment Delays
The Kenya Parliament is considering an amendment to the law which will protect contractors and suppliers to government entities from payment delays.
The proposed law, the Public Procurement and Asset Disposal Amendment Bill of 2020, will require county and national government procurements to be accompanied by a bank guarantee when a contract is awarded.
The proposed law will require national and county governments to issue bank guarantees, which will see the lenders pay contractors if governments default. Sponsored by Thika Town MP Patrick Wainaina, the Bill states “The national and county government shall make payments to the successful tenderer by way of a bank guarantee. The bank guarantee shall take effect after ninety days”.
According to Legislator Wainaina, the objective of the Bill is to remedy the imbalance that has existed between local and foreign contractors in accessing State contracts, with the former being disadvantaged due to their thin balance sheets.
Delayed payments has been cited in several studies as a major challenge to cashflow management in construction industries across Africa, with several contractors and suppliers being forced to close down their business and others forfeiting assets due to loan defaults caused by late payments.
The Public Procurement and Asset Disposal Amendment Bill of 2020 will also limit the price of contracts to within 15% of engineer estimates. “The successful tender price shall be within a range of fifteen per cent of the Engineers Estimate where applicable” states the Bill. This would prevent companies from setting high prices, stated Legislator Wainaina. Similarly, the caps will prevent underquoting, which could either result in substandard work or upward revision of the contract after awarding a tender, he said.
The amendment also requires international firms to source at least 4% of their materials from local suppliers to qualify for a government tender.
The Bill has already gone through the first reading, and members of the public have been invited to submit comments.
Photo: Entrance to Kenya Parliament Buildings, Nairobi (Vasile Pirnea | Dreamstime)
Related News:
- Construction of Mombasa Cruise Ship Terminal Nears Completion
- Kenya signs €70m funding agreements for Water & Sanitation project in Kisumu
- Kenya's plans for construction of Sh28bn Nairobi Railway City are on track
- Kenya awards €1.3b Highway PPP contract to French consortium
- Construction starts on 30-storey Praise Mall Towers in Meru, Kenya
Add a comment
ConstructAfrica welcomes lively debate, but will not publish comments that are threatening, libellous or abusive.