Suppliers hit with new training levy for all contracts

The Public Procurement Regulatory Authority (PPRA) has directed ministries, state departments, and agencies to deduct a new training levy from contracts with suppliers.

This directive follows the introduction of a new law, which came into effect on September 1, 2024.

According to the PPRA's Director General Patrick Wanjuki, agencies are to collect 0.03 per cent of the contract value as a training levy.

"The Levy Order, 2023 shall apply to all signed contracts resulting from all procurement proceedings initiated from 1st September 2024," he said in a public notice.

For example, a contract worth Sh1 billion will incur an additional Sh300,000 levy, in addition to taxes.

The Authority also clarified that "The Levy Order, 2023 shall also apply to any contract extensions, renewals and/or variations made from 1st September 2024."

The levy applies to long-term contracts where local service orders and purchase orders are raised.

However, contracts fully funded by development partners or donors are exempt from this levy.

PPRA noted that procuring entities are required to remit the levy to the authority through the eCitizen payment platform every 20th day of a new month.

Given that the government issues contracts worth around Sh300 billion annually, the authority could collect up to Sh90 million each year.

Entities that fail to remit the levy will face a penalty of five per cent of the outstanding amount for each month it remains unpaid.

"All procuring entities shall file monthly returns by the 20th day of the subsequent month on all levy amounts deducted and remitted to the Authority through the Public Procurement Information Portal (tenders.go.ke)," the notice reads further.

In addition, PPRA has urged all stakeholders including procuring entities, suppliers, contractors, and consultants to take note of the commencement of the levy order.

The regulator plans to conduct public forums on the implementation of these rules.

The collected funds will be used to train public procurement and asset disposal officers "through mentoring, training, and technical assistance."

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According to the order, "The purpose of the levy shall be to provide funds for the development of capacity through training, technical support and mentoring of the persons involved in public procurement and asset disposal,"

The aim is to enhance public service quality and ensure value for money in public procurement.

Local purchase and service orders will be treated as contracts for the purpose of this levy.

"A procuring entity shall deduct the levy from the contract value at the time of making payments for such contracts," reads the notice further.

State agencies and public bodies under the PPRA are required to remit these funds to the authority or its authorized agents.

In addition, PPRA has noted budgetary constraints, receiving Sh370 million annually against a requirement of about Sh1 billion.

If agencies fail to remit the levy, it will be considered a civil debt, "recoverable summarily by the director general or a person duly authorised by the director general."

The new regulations are part of tougher measures recently introduced by the PPRA, which has also warned companies about paying inadequate wages to their workers.