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Reprieve for SMEs as President Signs New Bill

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Small businesses of Kenya are to score big as the president signed a Bill that paves way for local companies to compete with multinationals in bidding for large government tenders.

The Public Procurement and Asset Disposal (Amendment) Bill, 2020, sponsored by Thika Member of Parliament, Patrick Wainana, was assented to by the President on Thursday, July 7.

According to Wainaina, this will prevent companies such as those in the construction sector from setting high prices that are above the market rate, the caps will prevent underquoting, which could either result in substandard work or upward revision of the contract after awarding a tender.

Part of the new law read, “The successful tender price shall be within a range of fifteen percent of the Engineers Estimate where applicable.”

As a new law, this now opens the door for Small and Medium Enterprises (SMEs) to expand their operations as it requires all foreign companies which secure government tenders to a source not less than 40 percent of their supplies from local contractors.

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Initially, multinationals were required to source at least 20 percent of their supplies from within the local market.

SMEs are to benefit largely since the Bill also increases the amount for tenders where Kenyan citizens are given exclusive preference from Ksh500 million to Ksh20 billion.

There have been incidences of overcharging in government tenders, Bill also sought to address cases of construction companies overcharging the government for tenders as it limits the price of contracts to within 15 percent of engineer estimates.

With the Bill in place, SMEs will, henceforth, chart a path for maintenance and strengthening of their supply chains to ensure there are no disruptions in the future even in cases of global crisis.

In an aim to safeguard startups, both the national and county governments will now be mandated to offer payment guarantees upon awarding tenders which will see suppliers and contractors collect their payments from the bank within 90 days in case the government fails to settle payments on time.

“The national and county government shall make payments to the successful tenderer by way of a bank guarantee. The bank guarantee shall take effect after ninety days,” reads the Bill.

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