An Act of Parliament to provide for prompt payment for the supply of goods, works or services.
| PROPOSED PROVISION FOR AMENDMENT | PROPOSED AMENDMENT | OUR COMMENTS |
|---|---|---|
| Clause 2 Interpretation | “amount due” means the principal sum owing based on a commercial transaction, including the applicable taxes, duties, levies or charges specified in the invoice, or provided for in the contract and relating to the said transaction. | The Bill adds a definition that stipulates the amount to be paid to the supplier in exchange for goods, works or services. |
| “due date” means the date on which a payment is to be paid to a supplier from a procuring entity. | This ensures that the procuring entity makes payments on the agreed date. This is an attempt by the Bill to prevent instances of delayed payments. | |
“prescribed payment date” means in relation to a commercial contract: a. the date on which payment is due under the terms of any written contract for the supply of goods, works or services, or b. where there is no written contract or the written contract does not provide for the date of payment, ninety days after: i. receipt by the purchaser of an invoice for the amount due, where the invoice is received after the completion of works or completed delivery of the goods or provision services; ii. the completion of works, delivery of the goods or provision of services, where the completion or delivery is made at the time of or after receipt by the purchaser of an invoice; or iii. such lesser number of days as the Cabinet Secretary may, by notice in the Gazette under section 11(2), prescribe. | Regulation 150 (1) of the Public Procurement and Asset Disposal Regulations, 2020 (“the PPADR”) provides a period of sixty days for prompt payment of performed contracts. The ninety-day period proposed in the bill is therefore more than the period stipulated in the PPADR. We propose that the ninety-day period be reduced to sixty days to prevent complacency and ensure prompt payment for services, work or goods supplied, and also to align with the timelines provided under the PPADR. |
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| Clause 3 Application | This Act shall apply to payment due for goods, works, and services procured by private entities, the national government, county governments and any other entity specified as a public entity under section 2 of the Public Procurement and Asset Disposal Act. | We propose the removal of private entities from this clause. This is because the Bill seems to concern itself with payment by public procuring entities and not private ones, whilst delayed payments by private entities are governed under the Competition Act. |
| Clause 4 Prompt payment of accounts | A procuring entity shall pay to a supplier payment for the delivery of goods, works or services on the due date. A procuring entity who fails to pay a supplier by the due date shall, unless otherwise agreed to and subject to sections 5 and 6, pay the full contract price and an interest to the supplier in accordance with this section on the amount due under the contract for the supply of goods, works, or services. A procuring entity shall pay an interest under this Act for the period beginning on the day after the due date and ending on the date on which the payment of the amount due is made. For purposes of subsection (3), payment shall be taken to have been made when: a. the full amount due is received by the supplier; b. the full amount due is credited by, on behalf of, or at the direction of, the procuring entity to an account nominated by the supplier; or c. the full supplier is put in a position by the procuring entity to be able, by the supplier’s own actions, to credit the amount due to such an account. An interest shall not be waived by the supplier and shall be included with the amount due for the supply of goods, works or services without demand for its payment being made by the supplier. | This clause provides for payment of interest in the event a procuring entity fails to pay the supplier on the due date. The interest will be paid in addition to the full contract price. This clause provides for the consequences of not paying the supplier on the due date. Alternatively, this clause should incorporate the use of an e-procurement platform like the Integrated Financial Management Information System (“IFMIS”). Usage of an e-procurement platform results in fewer missing orders, less order duplication and overall greater efficiency. |
| Clause 5 Priority payments | Notwithstanding the provisions of section 4, a procuring entity shall give priority to the payment of any outstanding debts for the supply of goods and services to the procuring entity. In determining which debts shall be given priority under subsection (1), a procuring entity shall have regard to the dates upon which payment fell due and shall pay debts on the basis of first-in, first-out. | We propose addition of a sub-clause making it an offence if an accounting officer fails to make payments to a supplier on a first-in, first-out basis. |
| Clause 6 Return of invoice | A procuring entity who disputes an invoice may, within fourteen days of receipt of the invoice: a. return the invoice to the supplier; and b. specify, in writing, any defects in the invoice and require the supplier to correct the defects. A supplier who receives an invoice from a procuring entity under subsection (1) shall, within fourteen days, deliver a corrected invoice to the procuring entity. Interest shall accrue upon the expiration of fourteen days after the receipt by the procuring entity of a corrected invoice or after the prescribed payment date, whichever is the later. | The clause has not catered for a situation where the procurement entity disputes the amended invoice. For example, a dispute involving whether goods were supplied to the procurement entity. The Bill should therefore establish an independent body that has power to hear and determine such disputes within a reasonable period. Furthermore, the decision of the independent body shall be final. This prevents continuous litigation of the matter which may result in delayed payments. |
| Clause 7 Interest | Where a supplier has fulfilled all contractual and legal obligations relating to the supply of goods, services or works and a procuring entity fails to pay for the goods, works, or services by the due date the procuring entity shall pay to the supplier interest on the amount due under the respective contract. The maximum interest rate chargeable under subsection (1) shall be based on the base rate set and published by the Central Bank of Kenya. | Payment of interest seeks to compensate the supplier for delay caused in payment of the contract price. This is a welcome move. However, this move is not practicable. For example, the national government has several debts making it difficult for a supplier to enforce the payment of interest. As a result of this, several suppliers are yet to be paid by the Government for work done or services provided. Furthermore, we propose the addition of a sub-clause providing for interest to stop accruing once it’s equal to the full contract price. This approach will be similar to the in duplum rule found in section 44A of the Banking Act. |
| Clause 8 Fair dealing | A supplier and a procuring entity shall, at all times, deal with each other fairly and lawfully. | We propose that this clause be amended to expressly outlaw unfair dealings by making the same an offence. The clause should contain the following information: a. examples of unfair dealings; and b. any supplier or procuring entity who engages in unfair dealings commits an offence. |
| Clause 9 Declaration of pending payments | A person who wishes to enter into a contract for the supply of goods, works or services with a national or county government entity shall make a declaration to the accounting officer of the entity on any pending payments owed to a small or micro enterprise. Declaration of pending payments. A declaration under subsection (1) shall be made in writing and shall include: a. details on when the outstanding payment fell due; b. reasons for the delay in payment; and c. any agreements entered into between the supplier and the procuring entity for the settlement of the outstanding payment. | We propose the addition of a sub-clause making it an offence if a supplier makes a misleading or false declaration under this clause. |
| Clause 10 Offences | Where a supplier has delivered an invoice to the procuring entity and the accounting officer of the procuring entity negligently, maliciously or without reasonable cause fails to: a. return the invoice as provided for under section 6 of this Act; or b. pay the amount due by the due date; or c. pay the interest due, commits an offence and is liable, on conviction, to a fine not exceeding five million shillings or to imprisonment for a term not exceeding five years or to both. | We propose the name of the clause be amended to “offences by an accounting officer”. This clause ensures that an accounting officer diligently performs his/her duties in a manner that complies with the provisions of this bill. |