Regulator seeks to bar foreign firms from State projects below Sh5 billion

Construction of an overpass road interchange in Kisumu being done by a Chinese company Synohydro. Photo/FILE 

By KIARIE NJOROGE, gkiarie@ke.nationmedia.com

In Summary

• Changes are meant to protect local jobs and curb repatriation of profits companies.

Foreign contractors will be barred from bidding government tenders whose values are less than Sh5 billion in the latest attempts by the National Construction Authority (NCA) to increase the participation of local firms in multi-billion-shillings State contracts.

The authority is preparing regulations in partnership with the Public Procurement Oversight Authority (PPOA) to raise the minimum limit for foreign contractors from Sh750 million for road projects and Sh500 million for housing.

 

The shift is expected to hit Chinese firms the hardest at a time when the Lands secretary Charity Ngilu has published regulations that will require foreign contractors to reserve 30 per cent of their work or stake to local firms.

NCA board chairman Steve Oundo said that the changes are meant to protect local jobs and curb repatriation of profits by the foreign companies that are increasingly snapping construction works.

“What has limited us to Sh1 billion is the PPOA regulations which set the minimum value for works. We are trying to petition them to raise this amount to Sh5 billion,” he said.

“We shouldn’t be having taxpayers’ money repatriated to other countries when it could be retained in the country. We therefore have to raise capacity from within.”

The authority is also seeking to raise the registration fees for foreign contractors from the current $3,000 (Sh261,000) to Sh870, 000.

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But this is unlikely to be a hindrance for the foreign firms bidding for multi-billion shilling tenders. Local contractors will also be required to arrange for a performance guarantees equivalent to two per cent of the contract value from the current five per cent.

A performance guarantee or bond is an insurance taken by a contractor that assures some payment to the owner of works in the event that a project is left incomplete or from poor workmanship.

Official data indicates that construction works worth Sh343 billion were registered with the government last year, up from Sh289 billion in 2012 and Sh247 billion in 2011.

The restrictions are expected to boost Kenyan firms and help in transferring skills.

The regulations require contractors to seek approval from the NCA before employing expatriates, which will be done only when the skills are not available locally.

The rules will mostly affect China whose State corporations have been undertaking projects funded by Beijing and negotiated under government-to-government pacts.

The government in 2012 issued proposals seeking to restrict foreign-owned firms to 70 per cent of State-funded contracts, but shielded international companies in deals negotiated between States.