In 2017, the World Bank published a report entitled Benchmarking Public Private Partnerships (World Bank Report) following the review of legislation and practices of eighty-two (82) countries (including Kenya). The objective of the World Bank Report was to give empirically based authoritative guidance on Public Private Partnerships (PPPs). This comparative analysis was conducted under the framework of the four (4) main areas of a PPP cycle being preparation, procurement, contract management and approach to unsolicited proposals (USPs).
World Bank Report
The World Bank Report assesses the relative performance of each country against a maximum score of a hundred (100) in each area. Kenya was assessed to have achieved above average scores of sixty seven (67) in the area of preparation of PPP’s, sixty five (65) in procurement and fifty two (52) in the area of contract management. Before popping the champagne bottle, it should be borne in mind that there is a paucity of PPP projects (according to the PPP Unit there are only seven (7) on-going PPP projects with a rather suspicious list of past projects) even though we have had the law on PPPs in our books for many years beginning with regulations under the Public Procurement and Asset Disposal Act and since 2013, a fully-fledged Act- the Public Private Partnership Act, 2013 (the Act).
Without making a fetish of the numbers (which admittedly are somewhat arbitrary), rather tellingly, by the World Bank’s ratings, South Africa significantly outperformed Kenya in each of these areas while some of our neighbours were ranked better in some aspects. For example, for procurement Tanzania was assessed at eighty (80) while for management Uganda scored sixty eight (68).
But such raw numbers teach us nothing. The real value of the World Bank Report, despite the inherent difficulties of lack of thorough analysis given such a high sample size and the inherent difficulties in comparing politically and economically diverse countries, is its provocative value. The results present an opportunity for identifying potential trouble-spots in our legislative landscape and for reflection as to whether we can do better.
One such area is USPs, also referred to as Privately Initiated Proposals (PIPs), flagged as the area of most concern and least progress earning against what the authors of the World Bank Report viewed as good practice. The principal weakness of our system of USP/PIPs, which we apparently share only with Vietnam, is the absence of a competitive
procuring procedure. A USP presents the rather unique form of PPPs as it is where the private party initiates the process.
Unlike procured PPPs for which there is a comprehensive regulatory framework under the Act – see generally sections 29 to 57 – with competition at its heart, the law on USPs/PPPs is much less extensive. The sum total of this is to be found in section 61:
“(1) A contracting authority may consider a privately initiated investment proposal for a project and procure the construction or development of a project or the performance of a service by negotiation without subjecting the proposal to a competitive procurement process where — (a) there is an urgent need for continuity in the construction, development, maintenance or operation of a facility or provision of a service and engaging in the competitive procurement process would be impractical: Provided that the circumstances giving rise to the risk of disruption were not foreseeable by the contracting authority or the result of an unreasonable failure to act by the contracting authority;
(b) the costs relating to the intellectual property in relation to the proposed design of the project is substantial;
(c) there exists only one person or firm capable of undertaking the project, maintaining the facility or providing the service or such person or firm has exclusive rights over the use of the intellectual property, trade secrets or other exclusive rights necessary for the construction, operation or maintenance of the facility or provision of the service; or
(d) there exists any of the circumstance as the Cabinet Secretary may prescribe.
(2) A contracting authority shall, before commencing negotiations with a private party under this section—
(a) prescribe a criteria against which the outcome of negotiations shall be evaluated;
(b) submit the proposal to the unit for consideration and recommendation; (c) upon obtaining the recommendations of the unit, apply for and obtain approval from the Committee to negotiate the contract; and
(d) conduct the negotiations and award the tender in accordance with the prescribed process in the regulations to this Act.
(3) A contracting authority shall not consider a project for procurement under this section unless it is satisfied that—
(a) the project shall provide value for money;
(b) the project shall be affordable; and
(c) the appropriate risks are transferred to the private party
The Act provides for three (3) circumstances under which USPs/PIPs are possible, with seemingly unguided discretions conferred on a member of the executive to increase. As is clear, all the circumstances are situations where the legislature has decided competition is not feasible or possible. This appears to be something that the blunderbuss one-size fits all criteria adopted by the World Bank does not take into account. USPs are an exception to the norm and save for the rather anomalous discretion given to the Cabinet Secretary to expand them, they are restricted to situations in which competition is not a practical alternative. It is therefore difficult to follow the argument that our system should be faulted for the absence of competition. Of note is that according to the PPP Unit, four (4) of the seventy (70) PPP projects currently underway are USPs.
Perhaps a more valid criticism is why the availability of opportunities for PPPs should be so restricted for if the public can benefit from private sector finance in so many areas that were previously the exclusive reserve for the public. Surely, ideas and innovations on those areas should be equally welcomed. The concern should be how to ensure that this is not abused which is where competition becomes relevant and the World Bank Report is useful. Both of our neighbours, Tanzania and Uganda scored higher on USPs but that is only because of the rather arbitrary three-part criteria adopted by World Bank for assessment.
The Bangladeshi Perspective
While not as high scoring, lessons can be drawn from Bangladesh which has a broader regulation. Bangladesh’s primary legislation does not restrict the areas in which USPs are available but there is the subject of extensive subsidiary legislation, though we should add that we have not considered their enforcement.
Some of the salient guidelines are set out below:
Non-Mandatory Nature of Concept Note and/or Unsolicited Proposal
The guidelines ensure that the Government is not obligated to consider and accept a Concept Note and is not prohibited from using the asset that is the subject of the Concept Note in a conventional Government Project.
Process for Submission of a Concept Note and Sector Policy Review
The guidelines establish a framework through which the Original Proponent of a Concept Note submits the same to the Contracting Authority while keeping the PPP Authority and Applicable Line Ministry in copy. This provides for a forum for discussion to clarify the scope of the Concept Note and ensure that the project is aligned with sector development plans and is likely to deliver a positive socio-economic benefit. There is a requirement for endorsement by the Applicable Line Ministry where the Concept Note is successful as well as provision for rejection and resubmission with Applicable Line Ministry feedback.
Assessment of Eligibility of the Concept Note and the PPP Project Proposal
This process provides for detailed assessment and a screening criteria through the Applicable Line Ministry, which formally submits the endorsed Concept Note and the PPP Project Proposal to the PPP Authority for processing of the same and in principal approval and makes provision for the PPP Authority to use of its own resources or seek professional support from qualified consultants in conducting its assessment. The PPP Authority may also contact the Contracting Authority, the Applicable Line Ministry and other relevant Government agencies to get more clarity on the Project.
A cursory reading of the guidelines suggests that the Government of Bangladesh has identified some of the possible exceptions and loopholes that may be created by a non-exhaustive statutory provision on USPs, the most notable of which is the provision that ensures that notwithstanding the submission of a USP, the contracting authority is not precluded from applying a project concept on a conventional project or what may be termed a solicited proposal. In addition, the fact that the guidelines make provisions and give a leeway for the use of external consultants by the Bangladeshi PPP Authority (the equivalent of the Kenyan PPP Unit) and allows it to seek support from appropriate sector line ministry resources when making its assessment gives the USP process further legitimacy and competitive justification on procedure.
The provisions of the Bangladeshi USP guidelines therefore serve as guideposts should we go the way of USPs. One only needs to take a look at the model of USP guidelines in Bangladesh to identify that a gaping hole and possibility of USP proponent litigation against the Government of Kenya and contracting authorities is real where the waters are muddied between solicited proposal tendering and a USP proposal in a situation where a project that formed the basis of a previous USP is later subjected to the conventional tendering process for solicited proposals.
Quite apart from protection of the contracting authority, the existence of USP guidelines would also ensure that the legitimacy of the USP process is not easily called into a question once a contract is awarded to a private entity, especially where a framework exists to ensure that the USP process itself was fair, competitive and received a nod of approval from sector consultants and specialists.
If Kenya decides to open up the circumstances in which USPs should be available, there will be need for guidelines and regulation of USPs in order to protect both the private contracting entity as well as the contracting authority. While the World Bank Report has noted that in developing economies the lack of USP regulations may be a consequence of an express desire of the public sector not to use USP procurement, it suggests that the subject may not have been considered.