REVIEW OF THE PUBLIC PRIVATE PARTNERSHIP(AMENDMENT) BILL, 2021
Introduction
The Public Private Partnership (Amendment) Bill, 2021 (the “Bill”) is sponsored by Amos Kimunya, Leader of Majority Party. The Bill went through the third reading on 30th June 2021 before the National Assembly and it is Bill no. 6 of 2021.
The principal purpose and objective of the Bill is to provide for the participation of the private sector in the financing, construction, development, operation or maintenance of infrastructure or development project through public private partnerships; to streamline the regulatory framework for public private partnerships; to repeal the Public Private Partnerships Act 2013 and for connected purposes.
The Bill seeks to introduce substantial number of amendments to the principal Act, Public Private Partnership Act, 2013 such as; to streamline the regulatory framework for Public Private Partnerships (PPP), enhance efficiency in the PPP process through reducing the number of oversight approvals and proposing timelines on key project processes and stages. The bill also seeks to seal the existing gaps in the current Act of 2013.
In this article, we highlight some notable proposed amendments to the Principal Act brought about by the Bill.
Notable Proposals
The Bill provides for the establishment of the PPP Committee whose functions slightly differ from the one under the current Act. Some of the functions of the PPP Committee under the Bill include formulating policies on public private partnerships, overseeing the implementation of PPP contracts and approving negotiated PP contracts.
The Bill replaces the PPP unit which was established under the Act to provide technical, financial and legal expertise to the Committee and the PPP nodes. With the Directorate of Public Private Partnerships, which shall be the lead institution in the implementation of PPP project. The Directorate will also be in charge of originating, guiding and coordinating the selection, ranking and prioritization of PPP projects and overseeing project appraisal and development activities of contracting authorities.
This proposal is beneficial as it will centralize the PPP processes and function. Equally, the establishment of a Directorate with greater responsibilities is likely to enhance efficiency and result in better coordination overall, particularly given the complexity of PPP procurement. Interestingly, a Director-General of the PPP Directorate was appointed earlier this year, possibly in anticipation of the enactment of the new PPP law as captured by Louise Mathu.
Project Agreements
The Bill proposes the establishment of project companies by the contracting authorities and private parties to undertake public private partnership projects. It also provides for the preparation and amendment or variation of project agreement entered into by parties in relation to a project. Further, the Bill also provides for the implementation and management of a project as well as the establishment of a Petition Committee to determine petitions and complaints in relation to a project.
The PPP Bill also proposes to do away with PPP Nodes that was established under the principal Act to act on behalf of a contracting authority and prepare project agreements to be entered into between a contracting authority and private entity. The PPP Node currently reports to the contracting authority. However, the Bill propose that the contracting authority to directly report to the Directorate.
The Bill makes it mandatory for the publication, in at atleast two newspapers of national circulation, of the details of a executed project agreement regarding a PPP. It is our view that this proposal will enhance the principles of public participation, access to information in the procurement and award of PPP projects. It is worthy to note that this is not provided for under the principal Act.
Public Private Partnerships Procurement Methods
Under the principal Act, there are two procurement methods for PPPs: Competitive Bidding and Privately-Initiate Proposals (PIPs). PPIs are the subject of much scrutiny due to the concerns of lack of transparency and lack of objectivity associated with the tendering process. The Bill tries to cub the above shortcoming by settings out clearly circumstances in which PIPs are to be initiated such as if the project is aligned with national infrastructure priorities and meets a demonstrated societal need and the project provide value for money.
The Bill proposes additional procurement methods for PPPs such as direct procurement but reserves this method for exceptional circumstances such as where the works or services are only available from a limited number of private parties, when there is urgent need and where direct procurement shall significantly lower the cost of the project. Lastly, the Bill specifies projects that qualify for direct procurement as projects linked to specific parties on account of national interest or external trade. However, this kind of method may also be misused given the procurement scandals that have rocked our country in the past.
The Bill provides for the applicable procedure and establishment of various committee for procurement process. For instance, the applicable procedure during the prequalification of bidders and the establishment of prequalification of bidders. The Bill provides for the establishment of prequalification committees by a contracting authority for this purpose. It also provides for the constitution of constitution dialogues. Further, it provides for the manner in which the evaluation of bids, negotiations and approval process are to be carried out, the establishment of a project company by a bidder for the carrying out of a project and also provides the manner in which a tender may be cancelled and the publication of information on the results of a tender process.
Local Content
One of the Proposal by Bill is to make it mandatory for PPPs to give priority to local services or content. The Bill attempt to define the term Local content as the added value brought to the Kenyan economy from PPPs by way of local distribution of accruing benefits including through the procurement of locally available workforce, services and supplies and systematic development of national capacity and capabilities.
Once the Bill is enacted the PPP committee, on advice of the Directorate, will issue guidelines, standards and practices notes on the application of local content for effective implementation and operationalization. However, the implementation of this provision may be difficult to achieve.
Implementation of PPPs by county governments.
The significant change to the framework of PPPs under the Bill is the entering into PPP agreements between county governments and private entities, and providing more provisions for the implementation of PPPs by County government. Where county governments intend to undertake a public private partnership project, it shall obtain approval of the County Assembly before embarking on a PP project, as well as obtaining the written approval to undertake the project from the PPP Committee and Cabinet Secretary in charge of finance where the project would require a government support measure; or exceeds the fiscal ability of the county.
The essence of these proposal can be summed up by saying that the Bill is laudable for bringing into focus the role that county governments can play in the PPP framework, as envisioned under the constitution.
Fee payable
The Bill gives the Directorate the power to impose a mandatory success fee of not more than one percent of the total project cost, payable into the Public Private Partnership Facilitation (“the Fund”), on a private entity that achieved financial close on a project. Financial close, unlike in the Act, is defined under the Bill to mean the date when all conditions precedent requires to be met to achieve first drawdown on senior debt under a project agreement are met.
Under the Principal Act, it is not mandatory for the private entity to pay the success fee. For Privately-Initiated Proposals, the Bill introduces a non-refundable review fee payable into the fund by the private entity. the fee is to be calculated at zero. One can say the changes may discourage investors as they would have to part with the fees or otherwise face a penalty.
Conclusion
The Bill is likely to create a conducive business environment that will possibly foster Kenya in achieving its developmental growth. The Bill is a good progress, noting that the journey of a thousand miles begins with a single step.
By Dennis Kachero
We promise to keep you updated on any developments regarding the Bill as it goes through the legislative processes in the parliament. Meanwhile, for any inquiries relating to the Public Private Partnership (Amendment) Bill, 2021, contact us on info@mmsadvocates.co.ke or kachero@mmsadvocsates.co.ke
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