The legal landscape governing public procurement has shifted dramatically. In a landmark judgment, the High Court has abolished the mandatory financial deposits previously required to challenge government tender awards. This decision effectively dismantles one of the most imposing financial barriers confronting businesses in the public contract arena.
By declaring these specific provisions of the Public Procurement and Asset Disposal Act and the 2020 procurement regulations unconstitutional, the court has signaled a critical pivot toward equity. For years, the requirement to deposit substantial sums before a case could even be heard by the Public Procurement Administrative Review Board (PPARB) or the High Court served less as a regulatory filter and more as a financial gatekeeper.
Commercializing Access to Justice
The legal challenge, initiated by the Law Society of Kenya (LSK), laid bare the stark economic realities of the old system. Under the previous framework, aggrieved bidders were forced to deposit 15 percent of the tender value at the administrative review stage, alongside a three percent deposit for judicial reviews. When added to standard filing fees that could top Sh205,000, the entry price for justice became prohibitively expensive.
As the LSK rightly argued, this framework commercialized access to justice, tying a company’s right to a fair hearing directly to its liquidity. The High Court agreed, noting that because public procurement contracts frequently run into hundreds of millions or billions of shillings, these deposits scaled into impossibility. For instance, in a case involving a Sh1.39 billion tender for the Konza City Technopolis Development Authority, a bidder would have had to secure over Sh209 million just to have their dispute reviewed. Even though these deposits were technically refundable upon a successful appeal, the upfront capital requirement remained a structural disqualifier for most.
A Blow to Marginalized Contractors
The true casualty of the old deposit regime was the vibrant ecosystem of small and medium-sized enterprises (SMEs), as well as businesses spearheaded by women, youth, and persons with disabilities.
| Former Dispute Deposit Framework | Impact on Vulnerable Business Groups |
| Administrative Stage: 15% of tender value | Disproportionately locks out under-capitalized SMEs. |
| Judicial Review Stage: 3% of tender value | Creates secondary financial hurdles after initial losses. |
| Standard Filing Fees: Up to Sh205,000 | Compounds the baseline cost of entering a legal dispute. |
There is a glaring contradiction in a system that reserves a specific share of public contracts for constitutionally protected groups, yet erects financial barriers that prevent those same groups from defending their bids. The High Court highlighted this irony, pointing out that the rules locked out businesses based purely on financial capacity, completely ignoring the underlying merits of their legal claims.
The Proportionality Deficit: Efficiency vs. Fairness
In defense of the regulations, the National Treasury and the Attorney-General argued that the deposit framework was a deliberate policy choice designed to protect public resources. From their perspective, the rules were necessary to deter frivolous litigation that delays vital infrastructure projects and ties up state funds.
While the court acknowledged that preventing the abuse of procurement litigation is a valid public objective, it ultimately ruled that the financial thresholds failed the test of proportionality. A system that allows a wealthy corporation to clog the courts with a baseless claim while locked-out, financially strained businesses hold valid grievances does not rationally serve the public interest.
Furthermore, the ruling rightly pointed out that mechanisms to prevent abuse already exist. The PPARB is already legally equipped to dismiss frivolous cases, award costs, and enforce strict statutory timelines—all without requiring an astronomical upfront financial barrier.
Concluding Insight
This ruling is a vital course correction for the procurement ecosystem. True market competitiveness thrives when the rules of engagement are fair, transparent, and accessible to all participants, regardless of their balance sheet. By removing these mandatory financial deposits, the High Court has not opened the floodgates to chaos; rather, it has restored the constitutional promise of equal protection under the law, ensuring that merit—not capital—determines the outcome of public tender disputes.
Source Attribution
This commentary is based on original reporting by Joseph Wangui for Business Daily in the article, “Court abolishes mandatory deposits in tender disputes.”
