Government tenders will now come with an extra financial obligation to contractors after the state enforced a new levy.
Contractors supplying goods and services to both national and county governments, will from September 1, be required to remit the levy.
According to a notice issued by the Public Procurement Regulatory Authority, the levy will apply to all procurement contracts signed from September 1, 2024, including extensions, renewals, and variations.
This regulatory shift introduces a 0.03 per cent levy on the total value of signed contracts, excluding applicable taxes, meaning that even small suppliers may find themselves in the mix.
“The Levy Order, 2023; provides that there shall be paid a Levy by a supplier on all procurement contracts signed between the supplier and a procuring entity, at the rate of zero point zero three per centum (0.03%) of the value of the signed contract, exclusive of applicable taxes,” reads the notice.
The directive will equally apply to contracts that are long term in nature (Term Contracts) where Local Service Orders (LSOs) or Local Purchase Orders (LPOs) are raised as and when orders are made.
The contractors and government suppliers will be required to remit the Levy amounts to the Authority through the eCitizen payment platform by the 20th day of the subsequent month.
The procurement agency says that failure to honour this will attract a penalty of 5 per cent of the outstanding levy amounts, which will apply for each and every month the levy amount 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,” said PPRA.
Contractors and suppliers who land government tenders for Sh1 million will be required to pay Sh300 in the new levy.
The government has made it clear that this levy will apply across the board, from short-term projects to multi-year contracts.
The move comes just a month after the authority moved to streamline public tendering with the adoption of a new procurement platform that will be used for the publication of contract awards and tender notices by procuring entities.
Treasury introduced this levy last year under the guise of a “capacity building levy,” aiming to bolster public procurement systems.
The Public Procurement and Information Portal, which tracks procurement activities, shows that 7,554 contracts have already been entered into by both national and county governments.
However, this figure only scratches the surface, as not all tenders and contracts are published on the portal. Last fiscal year, state entities entered into 20,763 contracts, up from 11,579 the previous year.
