Public agencies are staring at financial sanctions after failing to enforce a new statutory levy on payments made to suppliers and contractors, a lapse that could cost taxpayers millions of shillings.
The exposure follows findings that several government entities did not deduct or remit the Public Procurement Capacity Building Levy to the Public Procurement Regulatory Authority, even after disbursing hundreds of millions of shillings to contractors in the year to June 2025. The levy, rolled out by the National Treasury in late 2023, requires all procuring entities to withhold 0.03 percent of a contract’s value and forward it to the PPRA.
In theory, the measure should channel as much as Sh750 million, money previously retained by suppliers, to the procurement regulator to fund training and capacity-building for procurement officers. In practice, recent audit reports suggest compliance has been patchy at best. Officials at the PPRA admit the authority has struggled to collect the levy.
Auditor-General Nancy Gathungu has singled out four public universities for breaching the law. At Garissa University, management failed to deduct the levy despite spending Sh307.36 million on goods, works and services, denying the PPRA Sh92,209. Turkana University College was flagged for not remitting Sh42,381 from payments totalling Sh141.27 million, while Meru University could not demonstrate compliance with the levy order despite entering into procurement contracts. Chuka University was also cited for failing to remit Sh3,868.
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The Public Procurement Capacity Building Levy Order of 2023 mandates that the charge be applied to all procurement contracts at 0.03 percent of the signed value. The funds are intended to support training, technical assistance and mentoring within the public procurement and asset disposal system, with the aim of improving value for money and service quality.
Under the rules, agencies must deduct the levy at the point of payment and remit it to the PPRA by the 20th day of the following month. For the year ending June 2025 alone, the regulator was projected to collect more than Sh200 million from development-related contracts, after national and county governments rolled out projects worth Sh669.56 billion. The gap between the law on paper and its enforcement, however, is now uncomfortably clear.
