Public Private Partnerships in Kenya: How Foreign Developers Win and Structure a Project

Public private partnerships in Kenya are governed by the Public Private Partnerships Act (Cap. 430), which replaced the 2013 Act with effect from 23 December 2021. For a foreign developer, the Act answers practical questions that decide whether a project is worth pursuing: which route leads to a contract, what it costs to get there, who approves what, how the project company can be owned, and where a dispute goes. This guide maps those points from the Act itself and complements our guide to affordable housing PPPs for foreign developers.

The routes into public private partnerships in Kenya, and when the Act applies

The Public Private Partnerships Act applies to every project agreement for the financing, design, construction, rehabilitation, operation, equipping or maintenance of a project undertaken as a PPP (section 4(1)). Section 4(2) disapplies the Public Procurement and Asset Disposal Act to a PPP, but section 4(3) says that Act does not apply where all the money for the project comes from the private party and does apply where there is counterpart funding that includes public funds. A developer that expects any public money in the structure should plan for both regimes.

Section 37 lists four procurement methods: direct procurement, privately-initiated proposals, competitive bidding and restricted bidding. Direct procurement is available only on listed grounds, such as intellectual property rights, limited suppliers, exclusive rights, urgency, or strategic advantages linked to national interest or bilateral cooperation (section 38). Competitive bidding starts with a request for qualification after the feasibility report is approved (section 46), and restricted bidding is allowed in limited cases such as complex works where competition is confined to prequalified tenderers (section 45).

Privately-initiated proposals: fees, timelines and unrecovered costs

A private party may submit a privately-initiated proposal to a contracting authority (section 40). The authority may consider it only if, among other things, the project aligns with national infrastructure priorities, offers value for money, can be delivered at a fair market price and supports the transfer of risk from the public sector. The proposal must include a financial model in open format, a risk allocation and a justification for not using open competitive procurement (section 40(3)). The proponent pays a non-refundable review fee into the PPP Project Facilitation Fund, set at 0.5 per cent of the estimated project cost or USD 50,000, whichever is lower, and the fee creates no obligation on the authority or the Directorate (section 40(6) and (7)). The Cabinet Secretary may prescribe by Gazette notice when submissions may be made (section 40(5)). We did not find such a notice, but a National Treasury circular dated 24 April 2025 on public disclosure of privately-initiated proposals now applies in practice, so check the Directorate’s current guidance before preparing one.

The disclosure step has real consequences. In a 2025 notice on the A8 road project, the Kenya National Highways Authority said it had published disclosure under the Act and that circular, that the PPP Committee had approved two proposals to proceed to project development under section 43(1), and that a third proposal arrived during a 21-day stand-still period and was put through due diligence and evaluation. The notice also refers to restricted tendering under section 44(4) if several proposals proceed. A proponent should expect its proposal to become public and to meet competition.

Before evaluation the Directorate must run due diligence (section 41). It checks that the proponent has not been debarred, is not corrupt, is not insolvent, is tax-compliant in every jurisdiction where it has a local tax presence and in its home country, is not in default on social security and employment contributions, and that neither it nor its directors have a criminal conviction for professional conduct in the past five years.

Evaluation should finish within ninety days, and the PPP Committee then decides within fourteen working days whether the project proceeds to project development (section 42). Approval creates no obligation on the Government (section 42(9)). Project development must be completed within six months, extendable by the Directorate, and covers the feasibility, risk and impact studies (section 43). Section 43(7) sets the cost rules for a project development agreement. If the project is awarded to the proponent there is no compensation; if it is awarded to someone else, then in our reading the proponent’s development costs are paid by the winner at financial close; and if the project does not progress, the Government has no compensation liability.

If the Committee approves procurement by direct negotiation, the negotiations must be finalised within six months or they are terminated (section 44(2) and (3)). Where the authority opts for open tender instead, reimbursement of the proponent’s costs is discretionary and capped at 0.5 per cent of the estimated project cost (section 44(5)). Budget for development spend that may never be recovered.

Consortia, the project company and equity lock-ins

A bidder may respond as a consortium (section 47). A consortium bid must be accompanied by a notarised binding agreement among its members and appoint a lead member, and each member is bound jointly and severally by the project agreement (section 53). The authority must disqualify a consortium that dismisses or loses its lead member without an eligible replacement.

After the agreement is signed, the authority and the successful bidder establish a project company under the Companies Act (section 68). A public entity may hold a minority stake. The directors may not wind up the company, alter its legal structure or reduce its share capital without the authority’s written approval. A majority shareholder may not transfer shares or permit dilution of its majority stake before the authority issues a certificate accepting the quality of the project. A transfer that changes control of the project company is invalid without the authority’s written approval, and shares may be pledged only to finance the project. A restructuring to secure equity needs the Cabinet Secretary’s approval and must not change the debt and equity split or dilute the lead member’s majority. Investors planning exits should negotiate around these limits from the start.

Two further points affect timing. Only the accounting officer of the contracting authority may sign the project agreement (section 24). A private party that does not start the project within twelve months of signing faces termination without liability for the authority or Government (section 61).

The project agreement in public private partnerships in Kenya: term, economics and risk

Section 21(2) caps a PPP arrangement at thirty years, while the Second Schedule lists seventeen arrangement types with their own limits. Some suit developers. Under Develop-Operate-and-Transfer, the private party may develop adjoining property, which remains its property in perpetuity, in return for transferring the infrastructure facility within thirty years. The Schedule also lists joint ventures where the authority contributes land, and a land swap. The build-own-operate-transfer entry refers to a longer agreed period, so check which limit applies.

Section 70(2) requires every project agreement to include a revenue-sharing mechanism once revenue meets and exceeds the negotiated target return. The Third Schedule sets minimum contract terms, including lender step-in rights, risk allocation for change in law and force majeure, early termination events, compensation events, performance securities, local content and dispute resolution. Project agreements are subject to the laws of Kenya and any contrary provision is void (section 71(1)), but the parties may agree to arbitration or other non-judicial dispute resolution. Amendments and waivers need Committee and Attorney-General approval (section 72).

Some costs are statutory. The Directorate imposes a success fee of up to one per cent of total project cost on a private party that reaches financial close, and transaction advisory and other recoverable development costs are recoverable in full from the party that signs the agreement (section 29). The independent expert who manages the agreement is also a project cost borne by the private party (section 73(3)). Government support measures, such as letters of support and credit or partial risk guarantees, are available only to lower political risk premiums or underwrite approved commercial risks (section 28). Section 83 requires priority for Kenyan services and locally manufactured supplies, local technology transfer and compliance with other local content rules.

Disputes, petitions and compliance risk

A person aggrieved by a decision of the Directorate, the Committee or a contracting authority on a tender process or project agreement may petition the Petition Committee within seven days, and the Committee must decide within twenty-eight days. An appeal lies to the High Court within fourteen days of the Committee’s decision (section 75). A bidder disqualified at prequalification has fourteen days to object (section 49). Those periods are short, so have counsel ready. A cancelled tender attracts no compensation for bidders (section 62).

The Act also has teeth. Offences include undue influence on evaluators, divulging confidential information and fraud. A natural person faces a fine of up to two million shillings or up to five years’ imprisonment, and a body corporate a fine of up to ten million shillings, plus debarment from PPP projects, and a project agreement can be voidable at the Directorate’s option (section 84). Public officers may not participate in tenders directly or through relatives, associates or controlled companies (section 85), and the corruption offences and recovery provisions of the Anti-Corruption and Economic Crimes Act apply (section 87). A foreign developer should therefore have a documented anti-bribery programme before it bids. See our guides to anti-bribery procedures for foreign subsidiaries and conflicts of interest and gifts.