A new Public Private Partnership Bill, 2021 has been proposed by the Kenya National Treasury in an attempt to amend the Public Private Partnership Act, 2013. The new Bill is aimed at curing the deficiencies in the 2013 Act from the perspective of the investor. The changes have been brought about in order to ensure that the project process is clearer with tentative timelines through reducing the number of oversight approvals; expanded procurement options and a process for unsolicited proposals which is investor friendly. It also creates a better institutional framework through the establishment of the Public Private Partnership Directorate as well as the project implementation teams being put in place.
If the said Bill is passed, it shall provide more options for the investor by introducing a more streamlined approval process.
The significant proposed changes include:
- Administration Changes
In an attempt to streamline the regulatory framework for public private partnerships, a few administration changes have been suggested in the new Bill. Previously, there existed a Public Private Partnership Committee that worked hand in hand with the Public Private Partnership Unit. The committees mandate under the 2013 Act was hands on and ensured that project agreements were in line with the provisions of the Act guided the selection, ranking and prioritization of projects.
The main change that is seen is the establishment of the Directorate of Public Private Partnerships.
The Directorate is said to have replaced the Public Private Partnership Unit with its functions clearly defined and headed by the Director General. Its role entails supporting contracting authorities with oversight and technical support as well as assessing whether the contracting authorities have met the required threshold in terms of technical expertise. It is compulsory for the Directorate to be involved in every stage of process. The major amendment that has been made which will in turn save on time in terms of the approval processes is the removal of the Public Private Partnership Node and the Project Appraisal Team. In the 2013 Act, nodes are defined to mean a Public Private partnership Node established by a contracting authority that intends to enter into a public private partnership arrangement with a private party. Some of the major functions of the nodes include identifying, screening and prioritizing projects based on the guidelines issued by the Committee; preparing and appraising each project agreement to ensure its legal, regulatory, social, economic and commercial viability; ensuring that the parties to a project agreement comply with the provisions of the law; undertaking the tendering process in accordance with the law; monitoring the implementation of a project agreement entered into with the contracting authority; liaising with all the key stakeholders during the project cycle and ensuring the transfer of assets at the expiry or early termination of a project agreement is consistent with the terms and conditions of the project agreement.
The roles have in turn been integrated into the roles that the involved parties play particularly the contracting authority. Parties are therefore required to work hand in hand with the directorate particularly in order to enable it to monitor the implementation of the project agreement; liaise with the key stakeholders during the project cycle; ensuring that each project has complied with all the legal, regulatory, social, economic and commercial regulations put in place. The new Bill proposes that the representatives of the directorate and experts within the contracting authority form a project implementation team in order to ease in the delivery of specific projects.
A clear -cut line has also been drawn in terms of the role of the Public Private Partnership Committee being on policies and oversight as well as approving feasibility studies and approving privately initiated proposals while the Directorate monitors contingent liabilities and accounting and budgetary issues related to Public Private Partnerships in conjunction with relevant government departments. The Public Private Partnership Nodes that have been demolished have now paved way for a more centralized approach in that expertise is now based in one central place. This enhances accessibility. Previously, nodes comprised of staff such as legal, financial and technical procurement who were tasked with the mandate of ensuring they identified, prioritized and appraised projects while undertaking the tendering process
- Direct Procurement
Despite direct procurement not being a preferred method of procurement, the new Bill has proposed the introduction of the direct procurement but where various conditions are satisfied. The conditions include:
- The private party possesses the intellectual property rights to the key approaches or technologies required for the project;
- The works or services are only available from a limited number of private parties;
- A particular private party has exclusive rights in respect of the works or services, and no reasonable alternative or substitute is available;
- The contracting authority determines that there are operational and strategic advantages and or reasons linked to particular private parties on the basis of national interest, bilateral or international cooperation, or external trade;
- The direct engagement of a private party shall significantly lower the cost of delivering the works or services on the basis of the project’s qualifying for funding on such terms as the Government shall approve without such outcomes becoming part of the public debt;
- There is an urgent need for the works or services, and any other procurement method is impractical; Provided that the circumstances giving rise to the urgency were not foreseeable by the contracting authority or the result of dilatory conduct by the contracting authority;
- The contracting authority, having procured goods, equipment, technology or services from a private party, determines that additional supplies shall be procured from that private party for reasons of standardization or because of the need for compatibility with existing goods, equipment, technology or services, taking into account the —
- Effectiveness of the original procurement in meeting the needs of the contracting authority
- Limited size of the proposed procurement in relation to the original procurement;
- Reasonableness of the price and the unsuitability of alternatives to the goods or services in question;
- The works or services are procured from a public entity: Provided that the acquisition price shall be fair and reasonable and compare well with known prices of works or services in the circumstances.
- Procurement Method
The Bill has introduced a new element to the procurement method by introducing the Privately- initiated investment proposals. The Act, 2013 provided for the direct procurement and competitive bidding which have been retained in the Bill but introduced the privately- initiated proposals. The Bill has also provided clear timelines for the various processes including the period which the bids must be evaluated and the process in which various bidders can appeal.
- Other Changes
The other changes that have been seen include the introduction of timelines within which a project ought to be completed. This begins by the introduction of the definition of ‘financial close’ which is defined as the date when all conditions precedent required to be met to achieve first draw down on Senior Debt under a project agreement are met, as specified under a project agreement.
In addition, the Bill has introduced Public Private Partnership projects by County governments. It provides that the County governments can enter into the agreements with private parties so long as they are responsible for the administration of the overall project development cycle. It is however required to liaise with the Directorate during each phase of the project by submitting to it all feasibility studies prepared. Each County government is also required to obtain the approval of the respective county assembly before undertaking the project. Further to the approvals the County government requires, the Bill provides that if the County government requires the support of the National government, it shall not undertake the project or enter into a project agreement before obtaining written approval from the Cabinet Secretary.
The Bill further introduces a number of structures such as Public Private joint ventures and strategic partnerships. This is done in an attempt to broaden the scope of Public Private Partnerships which in turn increases the roles of the Directorate and creating the need for more resources.
In conclusion, the said changes are seen to be investor friendly and in as much as the Bill may still have some loopholes it is a step in the right direction considering the hit both the private and public sector have taken due to the pandemic. If the Bill is passed, it will see both sectors recovering and attract more foreign investors with time as the changes are investor friendly.
Please note that this article must not be construed as legal advice and for further information regarding Public Private Partnerships and professional advice thereto, kindly do not hesitate to contact us at [email protected] or visiting our offices on 8th Floor, CMS Africa House, Nairobi or on 3rd Floor, Ritah Plaza, in Kakamega.