Executive summary

The Public Procurement Regulatory Authority (PPRA) issued a circular on 30 August 2024 that established 1 September 2024 as the commencement date for a new levy in Kenya. The levy applies to all signed contracts resulting from procurement proceedings initiated from 1 September 2024, and any contract extensions, renewals and/or variations made from 1 September 2024. The levy should be declared online via the eCitizen platform.

Background

The Cabinet Secretary to the National Treasury and Economic Planning issued the Public Procurement Capacity Building Levy Order, 2023 (the order) on 6 November 2023 in Legal Notice No. 206. The order imposes a levy at the rate of 0.03% of the value of the signed contract, exclusive of all applicable taxes. It seeks to provide funds for the development of capacity through training, technical support and mentoring of persons involved in public procurement and asset disposal.

Detailed discussion

The order provides the imposition of a levy on suppliers to public institutions. It applies on all procurement contracts signed between the supplier and a procuring entity. For multi-year contracts, the levy is based on the total contract price and deducted progressively (i.e., the levy will be deducted as and when each component of the contract is completed and billed by the service provider).

Local purchase orders and local service orders are also deemed to be contracts for purposes of the levy. However, contracts that are financed by development partners are exempt from the levy.

A "procuring entity" means a public entity making a procurement or asset disposal to which the Public Procurement and Asset Disposal Act (PPADA) applies. A "public entity" includes:

1. The national government or any organ or department of the national government
2. A county government or any organ or department of a county government
3. The judiciary and the courts
4. Commissions established under the Constitution
5. Independent offices established under the Constitution
6. A state corporation within the meaning of the State Corporations Act (Cap. 446)
7. The Central Bank of Kenya established under the Constitution
8. A public school within the meaning of the Basic Education Act, 2013 (No. 14 of 2013)
9. A public university within the meaning of the Universities Act, 2012 (No. 42 of 2012)
10. A city or urban area established under the Urban Areas and Cities Act, 2011 (No. 13 of 2011)
11. A company owned by a public entity
12. A county service delivery coordination unit under the National Government Co-ordination Act, 2013 (No. 1 of 2013)
13. A constituency established under the Constitution
14. A Kenyan diplomatic mission under the state department responsible for foreign affairs
15. A pension fund for a public entity
16. A body that uses public assets in any form of contractual undertaking, including public-private partnership
17. A body in which the national or county government has controlling interest
18. A college or other educational institution maintained or assisted out of public funds
19. An entity prescribed as a public entity for the purpose of the order
20. Any other entity, prescribed class of public entities or particular public entities that uses public money for purposes of procurement or any other entity as declared under sections 4 and 5 of the Public Finance Management Act, 2012 (No. 18 of 2012)

Compliance requirements, offences and penalties

A procuring entity is required to deduct and remit the levy to the PPRA or its authorized agent not later than day 20 of the month following deduction. A person who fails to comply with the provisions will be liable for a penalty equal to 5% of the unpaid funds for every month the levy remains unpaid. Non-remittance shall be deemed to be a civil debt recoverable by the PPRA or a person duly authorized by the PPRA.

The PPRA may wholly or partially waive penalties upon recommendation from the Public Procurement Regulatory Board and excess levy payments will be treated as prepayments for future dues.

Procuring entities must maintain monthly records using a prescribed form and submit these records via the Public Procurement Information Records portal.

Next steps

Procuring entities and suppliers should familiarize themselves with the order and take the levy into consideration in their contracting agreements.