| Country: Kenya |
| Sector: Education/ accommodation |
| Name of Project: Kenyatta University (KU) Hostel Accommodation Project |
| Contracting agency: KU |
| Agency type: Autonomous Institution. The University has its own Act, can raise resources and enter into agreements |
| Contract term: 30 years |
| Construction period: 2 years |
| Bid Parameter: Technical qualification; Financial: Lowest present value of rental income |
| Total cost of project: Estimated $50 million (first bid received was for $37 million, although it had to be cancelled subsequently and is under re-bid) |
| Total Population served: minimum 10000 |
| Per unit cost: $5000 |
| Basic specifications: Basic specifications were set by KU to prevent over engineering, and ensure that the infrastructure provided is basic and sufficient (the benchmark level used is the current accommodation provided by KU) |
| Stage of project: Retendering - RFP. The first tender had to be cancelled after bids were received and the preferred bidder identified due to conflict of interest issues: the CEO of the lead firm in the consortium was appointed the Chancellor of the Kenyatta University. The new proposals were expected to be received on 9th May 2014 |
| Time taken for processing project from concept to contract execution: 18 months |
| Local or foreign investor: Consortia led by local investors, but each consortium has a foreign partner. |
| Applicable legislation: PPP Act of Kenya 2013 |
| Approving authority: PPP Steering Committee, National Treasury, Kenya; there is three-stage approval process with the first approval at concept stage, the second approval at feasibility analysis stage prior to procurement and the third approval post-bid |
| Is the approval process the same as for other projects: Yes |
| Role of Private Party: Design, finance, construct, operate and maintain project |
| Role of Public Authority: Monitor contract according to performance standards, collect rentals on behalf of the private party at a fee. |
| Financing: Remains to be seen after bid is finalized the second time around |
| Payment Mechanism: Rentals are collected periodically by the KU, 2% service fee is retained and 98% is paid to the private party |
| Tariff: Tariff cap is set by the KU during procurement in the RFP; however, the tariff is set by the private party with provision for reset at five year intervals; |
| Comparison to existing rates: The tariff cap has been set at an average of Ksh.6000 (different rates for undergraduate and post graduate accommodation); this is comparable to rental rates charged by private hostels near the University. Government sponsored students pay a lower rate of about Ksh3700. |
| Government Support: Land for the project has been provided by KU free of cost; 80% occupancy guarantee has been given by KU. |
| Advantages as compared to current services availed by students: The contract has performance standards and will be regulated by the KU unlike private accommodation, which tends to be unregulated; while the average rental cap for the PPP accommodation is higher at 6000 KS as compared to the cost of service provided by KU at 3700 KS, it is lower than the cost of service provided by fully private providers outside KU, which tends to be between 8000-10000 KS; in addition, the commute will be removed for students who will shift to the PPP accommodation and result in additional savings; in addition, living on campus will be safer than living in private accommodation outside, and students will also have access to University facilities at all hours of the day e.g., Libraries, health and recreation facilities. |
| Contingent liabilities created: Contingent liabilities are created for government (Education Department); if KU is unable to ensure 80% occupancy and needs to pay up and cannot do so from own budget/ existing budgetary provisions by government to KU, government may need to pay up. |
| Risks: Private rental market around KU may reduce rates drastically and students may prefer to stay in private accommodation in such an eventuality |
| Level of risk: Perceived to be low due to other advantages of staying on campus enumerated above, and since the current demand at 70000 units far outstrips the 10000 units being constructed under this project |
| Key risk mitigating features: Cost, security, performance standards superior to off campus accommodation available to students; surrounding off-campus area popularly perceived to be poor in safety and security. |
| Factors affecting decisions on the size of project or population serviced by the project: The project was structured with 10000 accommodation units unlike other hostel accommodation projects that tend to be smaller; this was done in order to bring down the per unit costs and the rental (a) closer to current KU rentals and (b) lower than private rentals for similar accommodation |
| Lessons learned: • Where local investors are involved, there could be conflict of interest issues on several grounds. In the RFP documents it is important to highlight that bidders should not have relationships with clients that would jeopardize their chance of accepting an award if they are successful. On learning of any issues of conflict consult with relevant parties and authorities to ensure the right decisions are made. Vet the bidding firms and their management to ensure high integrity will be maintained since knowledge of good practices might be low at local level. • From the onset it is important that the client sets up a working committee dedicated to the project and where possible the committee should have relevant knowledge and expertise in project related disciplines e.g., in the current project Architects and Quantity Surveyors had a major role to play in evaluating construction designs and technology in use and the client had in house professionals qualified in both fields and who were on the project committee • Projects can be made viable with appropriate increase in number of consumers served as in this case |