Factors Affecting Effective Participation of Micro and Small Enterprises in Public Procurement in Kenya

Abstract

This study sought to investigate the challenges to effective participation of micro and small enterprises (MSEs)in public procurement market in Kenya. It sought to establish how MSEs’ capability, information accessibility, access to finance and competitive environment pose challenges to MSEs’ participation in public procurement market in Kenya. The study was guided by Schumpeter’s Theory of Innovation, Theory of Social Change, Sociological Theories, Family Orientation Theory, Hayekian Knowledge Problem (HKP), Resource Based Theory, Theory of Perfect Competition, Decision Theory, and Contingency Theory. This study was a descriptive survey design. The population of the study was the 2 million MSEs in the entire country and the target population was 519,385 MSEs in Nairobi County. The owner-managers of MSEs were the unit of analysis and were targeted for information because they are likely to be the decision makers in these businesses and are actively involved in their day to day operations. The study also sought the opinion of the public procuring entities through their chief procurement officers/managers. 384 MSE owner-mangers and 15 chief procurement officers/managers were sampled. Questionnaires and interview schedules were used to collect data from the field.Quantitative and qualitative data gathered were coded and analyzed using Statistical Package for Social Sciences (SPSS) computer software. Descriptive statistics were used to analyze the data which was presented in frequency tables, percentages, bar graphs and pie-charts. ANOVA was used to analyze the degree of relationship between the variables in the study and hypotheses testing. The study established that a majority of MSEs are not trained in procurement/supply chain management. Access to tender information was found to be irregular limiting MSEs’ chances of participating in public tenders. Most effective medium of communication was found to be social media, newspaper adverts, personal referrals, own network and radio advertisement in a descending order. Language of communication used in tender documents was found to pose a challenge. Government and private funding opportunities were inaccessible due to numerous stringent conditions. Other factors include: favouritism, nepotism, clanism, tribalism, complicity among fund officials, inadequate information about available funding opportunities, and political differences. Majority of MSEs were found not compete favourably with established enterprises since many lack the necessary financial support to invest in modern technologies, advertise their products and services and provide quality services demanded by the government. MSEs were found to be fragmented, disorganized and lack change management skills to outmanoeuvre established players in the market. Laws and policies which govern public procurement in Kenya were found to be technical, elitist, hard to follow and difficult to implement leading to low participation of MSEs in public procurement market. The study has confirmed that regulation and policy frameworks influences MSE capability, access to information, financial accessibility, the environment in which businesses operate and the level of competition which businesses encounter in the market place. Regression analysis findings indicated that there is correlation between the predictor variables (capability, information accessibility, access to finance, and competitive environment)and response variable.