The value of tenders awarded by the national and county governments in the financial year to June 2024 dropped to a three-year low of Sh204.05 billion amid a cash crunch that forced them to slow down on procurement.
This is based on official data from the Public Procurement Information Portal (PPIP), which shows that the value of the tenders awarded fell by Sh7.49 billion from Sh211.55 billion worth of tenders in the year to June 2023.
The value of tenders awarded in 2023/24 period is the lowest in three years and less than half of the Sh567.4 billion worth of tenders dished out to contractors in the year to June 2022.
Entities owned by the national and county governments have recently been forced to slow down on procurement amid an austerity push by the National Treasury as part of easing the cash crunch bedeviling the exchequer.
The austerity push, which is more pronounced at the national government, is set to continue this year, potentially setting the stage for a further drop in the value of tenders.
“State corporations are required to entrench prudent financial management practices in their planning and enhance cost control measures with the aim of delivering services in the most cost-effective manner,” Treasury Cabinet Secretary John Mbadi says in a circular on the budget cycle for the 2025/26 year.
The dip in the value of tenders shows that the two levels of government went for low-value deals given that the number of tenders awarded increased by 4,613 to 27,886 in the year to June 2024. In the year to June 2023, contractors bagged 12,303 tenders.
The National Treasury has, over the past two years, directed public entities to slow down on procurement as mounting debt servicing obligations continue to gobble the revenues collected.
For example, in the year to June 2024, the Treasury spent 68.3 percent of the revenue collected, or Sh1.56 trillion to pay debt, with other items like procurement, development projects and payment of salaries competing for the remaining funds.
There is also a directive barring the entities from floating fresh tenders unless they settle outstanding arrears in a bid to ease the cash flow woes facing the private sector.
This (reduced procurement) has in turn hit the private sector, which for years has enjoyed lucrative business in supplying goods and delivering services to a host of entities at the national and county governments.
Non-core items such as seminars, training and travel have been hardest hit by the Treasury’s cost-cutting directive.
Besides the fall in the value and tenders from the government, the private sector is also grappling with a spike in pending bills for goods and services provided to the two levels of government.
Pending bills by the national government stood at Sh528.4 billion in September last year from Sh486.9 billion six months earlier, while those of the counties stood at Sh194.01 billion from Sh152.37 billion in the same period.
