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FACTORS INFLUENCING INVESTORS’ PARTICIPATION
IN PUBLIC ROAD INFRASTRUCTURE PROJECTS IN
KENYA THROUGH PUBLIC PRIVATE PARTNERSHIP
FRAMEWORK
BY
ALI SAHAL IDRIS
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SUMMER 2020
i
FACTORS INFLUENCING INVESTORS’ PARTICIPATION IN PUBLIC ROAD
INFRASTRUCTURE PROJECTS IN KENYA THROUGH PUBLIC PRIVATE
PARTNERSHIP FRAMEWORK
BY
ALI SAHAL IDRIS
A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment
of the Requirement for the Degree of Master of Business Administration (MBA) -
Global
UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA
SUMMER 2020
ii
DECLARATION
I, the undersigned, declare that this Research Project is my original work and has not been
previously submitted for academic credit to any other college, institution, or university other
than this submission to the United State International University-Africa.
Signed: ________________________ Date: _____________________________
Ali Sahal Idris (Student ID: 660371)
This Research Project has been presented for examination with my approval as the Research
Supervisor.
Signed: ________________________ Date: _____________________________
Timothy Okech, PhD
Signed: ________________________ Date: _____________________________
Dean, Chandaria School of Business
iii
COPYRIGHT
© Copyright by Ali Idris, 2020
All rights reserved. No part of this proposal may be reproduced or transmitted in any form or
by any means, electronic, mechanical, including photocopying, recording or any information
storage without prior written permission from the author.
iv
ABSTRACT
The purpose of this study was to investigate the factors influencing private sector investors’
participation in public road infrastructure projects in Kenya through Public Private Partnership
framework. The study was guided by the following research questions: To what extent does
investor perception affect participation in the public private partnership projects in the roads
sector? To what extent does institutional capacity affect participation in the public private
partnership projects in the roads sector? Lastly, to what extent do procurement processes affect
participation in the public private partnership projects in the roads sector?
The study adopted a survey research design. The population of the study was the 192 road
projects that had been listed under the mandate of the Kenya National Highways Authority
(KeNHA) for the period 2007-2019. Using simple random sampling in determining the
participants in the survey, a sample size of 130 was selected for this study. The data collection
was done using survey questionnaires and the data collected was then analyzed using
descriptive and inferential statistical methods with the output of the analysis being presented
in the form of tables and figures.
Regarding research question one, the results show that a project’s financial feasibility, the
government’s political commitment and government policies, all had positive correlation with
investors’ participation in PPP road projects (Pearson Correlation, r = 0.614). This was
statistically significant at 5% (p =0.000). In terms of the second research question revealed that
the expertise of the investor, the investor’s technological capability and the financial capability
of the investor were significant to investors’ participation in PPP road projects (p = 0.000) at
5% level of statistical significance. Institutional capacity also positively affected investors’
participation in PPP road projects (Pearson Correlation, r = 0. 379), even though the level of
correlation remained low. The findings of the last research question were that the tendering
practices, the bidding and partner selection, and contract negotiation, were found to have a
slight positive influence on investors’ decision to participate in PPP road projects (Pearson
Correlation, r = 0. 496). Nonetheless, these findings remained significant (p= 0.000) at 5%
level of statistical significance.
v
On the basis of findings, it is concluded that private sector investors in the road sector in Kenya
have a weak perception on the viability of the proposed road PPP projects and have a low
confidence in the government’s political commitment towards PPPs. The study also concludes
that the capacity of the private sector players in the road sector in Kenya is still low to handle
large road infrastructure projects and a majority of the private sector players do not have the
internal technical and financial capacity to plan, negotiate, execute and manage such PPP
projects. The study further concludes that majority of investors feel that there is a lack of
transparency in the tendering and bidding processes which are plagued by conflict of interest,
meaning that selection and award of projects is driven by other external issues other than the
results of an open and competitive process. These gaps are therefore obstacles towards
investors’ participation in road PPP projects.
The study recommends concerted efforts at institutional level to enhance a common
understanding of the PPP concept, create sufficient awareness of PPP prospects among the
private actors, streamline the procurement procedures and legal framework surrounding PPP
road projects to boost private sector investors’ confidence. In addition, the study proposes
measures to build the financial capacity of private sector by developing local financial markets
in the country to boost the ability of financial institutions to fund road PPP projects. The study
further recommends the review of procurement practices around road PPP projects to improve
transparency of the bidder selection and proposes identifying an independent criterion to be
used in assessing the value-for-money for PPP projects. The study calls for information
symmetry in the procurement process for all interested stakeholders to reduce the chances of
favoritism and conflict of interest in bidder selection.
vi
ACKNOWLEDGEMENT
I sincerely appreciate and give thanks to my family, friends, faculty, and fellow students who
have supported and encouraged me in this academic journey. I particularly thank my research
supervisor for the tireless guidance and availability throughout this research study. I also thank
the management of the United States International University (USIU-A) for the academic
resources that were availed at my disposal to carry out this research.
vii
TABLE OF CONTENTS
DECLARATION.................................................................................................................... II
COPYRIGHT ........................................................................................................................ III
ABSTRACT ........................................................................................................................... IV
ACKNOWLEDGEMENT .................................................................................................... VI
TABLE OF CONTENTS ................................................................................................... VII
LIST OF TABLES ................................................................................................................ IX
LIST OF FIGURES ............................................................................................................... X
LIST OF ACRONYMS ........................................................................................................ XI
CHAPTER ONE ..................................................................................................................... 1
1.0 INTRODUCTION .................................................................................................... 1
1.1 Background of the Study ........................................................................................ 1
1.2 Statement of the Problem ....................................................................................... 5
1.3 Purpose of the Study ............................................................................................... 6
1.4 Research Questions................................................................................................. 6
1.5 Significance of the Study ........................................................................................ 6
1.6 Scope of the Study .................................................................................................. 7
1.7 Definition of Terms ................................................................................................ 7
1.8 Chapter Summary ................................................................................................... 8
CHAPTER TWO .................................................................................................................. 10
2.0 LITERATURE REVIEW ...................................................................................... 10
2.1 Introduction .......................................................................................................... 10
2.2 Investor Perception and Participation in PPP Projects ......................................... 10
2.3 Investor Capacity and Participation in PPP Projects ............................................ 15
2.4 Procurement Practices and Participation in PPP Projects .................................... 19
2.5 Chapter Summary ................................................................................................. 26
CHAPTER THREE .............................................................................................................. 27
3.0 RESEARCH METHODOLOGY .......................................................................... 27
3.1 Introduction .......................................................................................................... 27
3.2 Research Design ................................................................................................... 27
viii
3.3 Population and Sampling Design ......................................................................... 28
3.4 Data Collection Methods ...................................................................................... 30
3.5 Research Procedures ............................................................................................. 31
3.6 Data Analysis Methods ......................................................................................... 31
3.7 Chapter Summary ................................................................................................. 32
CHAPTER FOUR ................................................................................................................. 33
4.0 RESULTS AND FINDINGS .................................................................................. 33
4.1 Introduction .......................................................................................................... 33
4.2 Study Response and Respondents’ Background Information .............................. 33
4.3 Investor Perception and Participation in PPP Road Projects ................................ 38
4.4 Institutional Capacity and Participation in PPP Road Projects ............................ 44
4.5 Procurement Practices and Participation in PPP Projects .................................... 49
4.6 Investor Appetite for PPP Road Projects .............................................................. 55
4.7 Chapter Summary ................................................................................................. 55
CHAPTER FIVE .................................................................................................................. 57
5.0 DISCUSSION, CONCLUSION, AND RECOMMENDATIONS ...................... 57
5.1 Introduction .......................................................................................................... 57
5.2 Summary ............................................................................................................... 57
5.3 Discussion ............................................................................................................. 58
5.4 Conclusion ............................................................................................................ 64
5.5 Recommendation .................................................................................................. 66
REFERENCES ...................................................................................................................... 69
APPENDICES ....................................................................................................................... 83
Appendix I: Questionnaire ............................................................................................... 84
Appendix II: NACOSTI Research License ..................................................................... 90
Appendix III: USIU Research Letter ............................................................................... 91
Appendix IV: Letter of Introduction ............................................................................... 92
Appendix V: List of Road Projects .................................................................................. 93
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LIST OF TABLES
Table 4.1: Descriptive Findings on Investor Perception and Participation in Road PPP Projects
................................................................................................................................................. 40
Table 4.2: Correlation Between Investor Perception and Investor Participation .................... 42
Table 4.3: Regression Model Summary for Investor Perception ............................................ 43
Table 4.4: ANOVA for Investor Perception .......................................................................... 43
Table 4.5: Coefficients for Investor Perception ...................................................................... 44
Table 4.6: Institutional Capacity and Participation in Road PPP Projects ............................. 45
Table 4.7: Correlation Between Institutional Capacity and Investor Participation in Road PPP
Projects .................................................................................................................................... 47
Table 4.8: Regression Model Summary for Institutional Capacity ........................................ 48
Table 4.9: ANOVA for Institutional Capacity ........................................................................ 48
Table 4.10: Coefficients for Institutional Capacity ................................................................. 49
Table 4.11: Descriptive Statistics for Procurement Practices and Participation in Road PPP
Projects .................................................................................................................................... 51
Table 4.12: Correlation Between Procurement Practices and Investor Participation ............. 53
Table 4.13: Regression Model Summary for Procurement Practices ..................................... 53
Table 4.14: ANOVA for Procurement Practices .................................................................... 54
Table 4.15: Coefficients for Procurement Practices ............................................................... 54
Table 4.16: Level of Participation in Road PPP Projects ....................................................... 55
x
LIST OF FIGURES
Figure 4.1: Study Response Rate ............................................................................................ 34
Figure 4.2: Age Distribution of the Respondent Firms........................................................... 35
Figure 4.3: Workforce Size of the Respondent Firms ............................................................ 35
Figure 4.4: Scope of Operations of Respondent Firms ........................................................... 36
Figure 4.5: Respondent Firms’ Project Category ................................................................... 37
Figure 4.6: Figure 4.6: Primary Sources of Funding .............................................................. 37
Figure 4.7: Distribution of Major Lenders .............................................................................. 38
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LIST OF ACRONYMS
APIX The National Agency for the Promotion of Investments
CSF Critical Success Factors
DFID Department for International Development
EPC Engineering Procurement and Construction
KENHA Kenya National Highways Authority
KERRA Kenya Rural Roads Authority
KURA Kenya Urban Roads Authority
NPV Net Present Value
OECD Organization for Economic Co-operation and Development
PPIAF The Public Private Infrastructure Advisory Facility
PPP Public Private Partnership
RMLF Roads Maintenance Levy Fund (RMLF)
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Public infrastructure is a fundamental prerequisite for economic growth and development and
its provision is a key mandate of governments worldwide (Kamau, 2016). According to
Kaldany, George and Lovasio (2019), the world is facing a $15 trillion infrastructure gap by
2040. As a mitigation strategy, the previous decade has witnessed the growing popularity of
Public Private Partnership (PPP) projects, both in the developed and the developing economies
to bridge this growing infrastructure gap (Xiong, Chen, Wang, and Zhu, 2018).
Public private partnership (PPP) is a formal contractual relationship, which is typically medium
to long term, between the public and the private sectors whereby some of the services that fall
under the responsibility of the public sector are provided by the private sector, with clear
agreement on shared objectives for delivery of public infrastructure or services (World Bank,
2018). Song, Song, and Sun (2013) further define PPP as a procurement model to deliver public
infrastructure and/or service across various sectors such as transportation, water treatment,
energy, environment, health, and education. As such, the benefits of PPPs are all-
encompassing, both for the private sector and the public sector, including the public
consumers. As Nyabira (2019) reinforces, PPP has been hailed as the antidote for the perennial
insufficiency of public funds to finance infrastructure projects. Moreover, PPP has the potential
of providing these gains by creating a convergence for government participation and private
financing initiatives (Yuan, Guang, and Wang, 2012).
PPPs are gradually becoming prominent within the development of road infrastructure projects
as governments the world over become increasingly aware of the association between an
underdeveloped road network with sub-optimal economic performance and quality of life
(World Bank Report, 2017). As a result of this realization, governments are seeking alternative
paths to develop their road networks in the pursuit of meeting their social, political, and
economic needs. Kaldany, George and Lovasio (2019) argue that PPP engineered roads can
significantly reduce delivery time for goods, lower costs for consumers, and speed through the
2
exports that propel growth in an economy. Mbego (2019) also notes that governments are
opting for PPP projects as ideal road sector financing mechanism that could cushion them from
the effects of escalating public debts. Rheki (2017) further observes that some governments
have effected incentives measures to encourage participation of the private sector in PPPs
through tax exemptions and duty waivers on the importation of road construction equipment.
A recent global survey Service Works (2019) revealed insights into the factors driving
successful PPP contracts and the risk factors that can compromise long-term project success.
At a global level, 40% of respondents stated that they spend more than half of their time on
implementation phase. The trend increases significantly to over 60% in the most developed
PPP markets, such as Canada and the United Kingdom. Differences in contract interpretation
were noted by the largest proportion of respondents (58%), followed by poor contract
documentation (43%) and difficulties in achieving the performance level set out in the contract
(43%) as key factors that impeded success of PPP projects.
Akbari and Gholamreza (2019) in their study on the success factors of PPPs in Iran showed
that private sector capability had a direct effect on project success during the construction
period and government capability is very effective during the project operation stage. In China,
Liang and Wang (2019) reveal that the private sector has developed a sense of achieving a
long-term financial return, which might have indeterminate results on the benefits of end users.
The increasing trend of sustainability concerns in the PPP project performance measurement
is confirmed, and it is partially due to the central government’s “High-Quality Development”
initiatives.
Vimlesh and Nandkishor (2018) in their report on PPPs in India noted that when using the
traditional Engineering Procurement and Construction (EPC) method of procurement,
governments usually award contracts to the lowest bidder, which encourages parties to use
cost-cutting measures at the cost of quality-enhancing measures. This practice of awarding the
lowest bidders, makes it less likely for the contract to be awarded to the party that delivers
highest quality products. In addition, state-owned infrastructure utilities have suffered
problems such as low labor productivity, poor service quality, thefts, revenue shortages,
inadequate investments, and deteriorating equipment, which have all resulted in a shift towards
3
the use of PPP model. Kang, Mulaphong, Hwang, and Chang (2019) have indicated that there
are political, economic, legislative, financial, and management factors that have driven the
ongoing adoption and implementation of PPP projects in the context of developing countries.
Sanni (2016) demonstrated that more developmental projects could be delivered through PPP
if the government could focus on these main factors in the implementation process. The study
identified seven critical success factors for PPP as projects feedback, leadership focus, risk
allocation and economic policy, good governance and political support, short construction
period, favorable socio-economic factors, and delivering publicly needed service. Otairua,
Umar, and Zawawi (2014) determined the reasons for the slow adoption of the PPP
procurement strategy in Nigeria through a survey of construction professionals. It was found
that corruption in government was the major problem. Factor analysis further revealed five
factors namely government policy on infrastructure, lack of consensus among policy makers,
political instability, lack of understanding of the PPP concept, and high participation costs.
A study of PPPs in Ethiopia showed that the five important attractive factors for pursuing PPP
in the Ethiopian road sector were: ‘solve the problem of public sector budget restraint’,
‘facilitate creative and innovative approaches’, ‘save time in delivering the project’, ‘improve
maintainability’ and ‘enhance government integrated solution capacity’ (Debela, 2019). In
Sudan, Khair, Mohamed and Mohammad, (2018) conducted a management framework to
reduce delays in road construction projects. The finance competence factors group was found
to be the main contributor towards delays in road construction projects in Sudan. Some
effective ways were proposed to overcome delays due to financing via use of strategic public
and private partnerships for large-scale projects, introduction of bank financing schemes for
medium-scale projects, and community-based partnership for small-scale projects.
Salih and Mohamed (2015) illustrated that there were three significant factors that had the most
impact for implementing PPP projects in Sudan. These were establishing new opportunities
for private sector, the qualification of contractor and consultant, and PPP supporting in
accelerating projects development. In Uganda, Alinaitwe and Ayesiga (2018) analyzed the
factors that affected the success of PPP projects. A competitive procurement process, a well-
4
organized private sector, the availability of competent personnel to participate in PPP project
implementation, and good governance are the most important cross-cutting factors identified.
In the recent years, the government in Kenya has made PPPs a key element of its development
strategy as reiterated in the government’s push for a deeper private sector participation in
public investment programmes (DFID, 2015). Carter and Claros (2016) in their report on
benchmarking PPP procurements show that Kenya has put in place comprehensive policy
framework and legal mechanisms on PPPs as evidenced in the Vision 2030, the country’s
development blueprint. The Vision 2030 which is focused on Kenya becoming a middle-
income economy by 2030 has set out a 10% per annum GDP growth target, and to realize these
high growth rates the Government has emphasized the importance of enabling private sector
participation in infrastructure in Vision 2030. To demonstrate the commitment to PPPs, the
Government of Kenya enacted the PPP Act in 2013 which together with the PPP Regulations
provide a robust PPP framework that is largely supportive of the PPP projects and provide
clarity on the PPP procurement process (Olotch, 2017). A DFID report of 2015 shows that
there has been a steady growth in the quality and size of the pipeline of PPP projects in Kenya.
As at 2015, there were a total of 70 projects in the National Priority List of PPPs planned for
the period 2018-2020, out of which, USD 4.202 billion was for the road sector.
Additionally, Kenya has emerged in the top 10 in Sub-Sahara Africa according to a World
Bank Group report of 2017 that evaluated 82 countries globally looking at their capacity to
prepare, procure and manage PPP projects. Adetona (2018) reports that the Kenyan
government took a big step in improving its business environment with the launch of the
Public-Private Partnership (PPP) Disclosure Portal in 2018. The PPP disclosure portal is an
online tool that makes all non-confidential information relating to PPP contracts available to
the public and is aimed at improving transparency and accountability in PPPs (Mwangasha,
2018).
Regardless of the foregoing, a report by Flynn and Rao (2019) shows that African countries
are finding it difficult to lure private sector into infrastructure-based PPP projects. The report
indicates that only 4% of the projects have been successfully accomplished through joint
5
ownership of governments and the private sector with most funding coming from development
finance institutions.
1.2 Statement of the Problem
According to the government of Kenya 2018-2019 budget policy statement, the country had
an allocation of KES. 115.9 billion in the budget to fund ongoing road construction projects
while at the same time planning for alternative funding through Public Private Partnership
arrangements to attain the country’s Vision 2030 development plan (The National Treasury,
2018). To attain this goal, the Kenyan government has been actively engaged in seeking private
investors for mega road projects around the country as evidenced by the list of 80 projects in
the national priority list of PPP projects (The National Treasury, 2018). Despite a push by the
government for the private sector to be actively involved in cash-intensive road infrastructure
projects, the pace of uptake by the private sector is still sluggish seeing that to date only one
road project is listed among the PPP projects that have attained project financial close
according to the data on the Kenya PPP Unit website (PPP Unit, 2018). Following the adoption
of PPP by the government, Anyanzwa and Muchira (2018) noted that only twenty-six (26%)
of the projects have been completed under the public private partnership framework.
Public sector bureaucracies have been blamed for the slow implementation of infrastructure
projects in the country even as it emerges that intricate procedure for the government to
approve projects is among the reasons many private investors stay away from State projects
(Anyanzwa and Muchira, 2018). In Thuo (2018), public and private partners’ capacity
deficiencies have been identified as a barrier to PPPs actualization in Kenya. Chami (2015)
points out a positive correlation between funding PPP road projects and budget deficits,
procurement procedure, project financial feasibility and project schedules. Kamau (2016) notes
that there is evidence to show most of the financing of such infrastructure in Kenya has been
through the Exchequer, Roads Maintenance Levy Fund (RMLF) and through multilateral
financial institutions such as the World Bank and Africa Development Bank. This is sufficient
evidence that the participation of private investors in road development remains insignificantly
low.
6
There is increasing disquiet about the slow progress of delivering PPP road projects and despite
the policy measures and the push by government for the private sector to be actively involved
in public infrastructure projects in Kenya, there is very little to show as far as actual rolled out
PPP projects are concerned based on road PPP projects at financial close stage (PPP Unit,
2018). Kisero (2018) in an article in the Business Daily newspaper titled “Why PPP model has
not succeeded here” states that more than six years since Kenya introduced a PPP law complete
with a bureaucracy to spearhead and roll out projects, not a single project has reached financial
close. It is against this background therefore that the current study aims to establish the factors
that affect private investors’ participation in public road PPP projects in Kenya.
1.3 Purpose of the Study
The purpose of this study is to investigate the factors influencing private sector investors’
participation in public road infrastructure projects in Kenya through Public Private Partnership
framework.
1.4 Research Questions
1.4.1 To what extent does investor perception of public projects affect participation in the
public private partnership projects in the roads sector?
1.4.2 To what extent does institutional capacity affect participation in the public private
partnership projects in the roads sector?
1.4.3 To what extent do procurement processes affect participation in the public private
partnership projects in the roads sector?
1.5 Significance of the Study
1.5.1 Potential Investors in PPP Projects
This study investigates the barriers that were encountered by investors who have attempted to
invest in road infrastructure projects in Kenya through the PPP model. As such, other similar
local and international investors, with interests in this sector, would utilize the findings of this
study to gain insights on how they can overcome these challenges during their investment
7
planning and execution. This study would also be beneficial to banks, financial institutions,
multi-lateral agencies, and other financiers involved in lending to private sector investors with
investment interests in the roads sector in Kenya. The study would help in their risk allocation
process and the resultant financial structuring of investment transactions involving road PPP
projects in Kenya.
1.5.2 Policy Makers
The findings of the study would be particularly valuable to the relevant government of Kenya
agencies in the roads sector including the National Treasury, Kenya National Highways
Authority (KeNHA), Kenya Rural Roads Authority (KeRRA), and Kenya Urban Roads
Authority (KURA) in formulating policies and putting in place mechanisms that would foster
the success of PPPs in the roads sector.
1.5.3 Researchers and academicians
Future researchers and academicians could utilize the findings of this study as a basis for their
further studies around PPPs in Kenya in general and road infrastructure projects in particular.
The study would also be helpful in identifying areas for further research for scholars and
contribute to the general body of knowledge on PPPs in Kenya.
1.6 Scope of the Study
This study focuses on the private sector investors, both local and international, who are
undertaking or who have undertaken the 192 road projects under the mandate of the Kenya
National Highways Authority (KeNHA) for the period 2007-2019, and seeks to identify the
challenges they faced in taking up these projects. The study respondents will be those with
offices located in Kenya and the study will be conducted between January and March 2020.
1.7 Definition of Terms
1.7.1 Public Private Partnership
PPPs, which are locally defined under the Public Private Partnership Act 2013 (PPP Act), are
arrangements between a contracting authority and a private party under which the private entity
8
undertakes to perform a public function or provide a service on behalf of the contracting
authority and is generally liable for risks arising from the performances of the function in
accordance with the terms of the project.
1.7.2 Road Projects
Infrastructural Road projects refers to the construction and development of road infrastructure;
rural, urban, and highway through private sector and government arrangement (Srivastava,
2014).
1.7.3 Investor Perception
An independent evaluation and insight into the benefits and risks associated with undertaking
Public Private Partnership Road projects. In this case, the investor considers the value attached
to PPP road projects (Bhargavi, 2014).
1.7.4 Institutional Capacity
Road sector related Institutional Capacity refers to investment in people, institutions and
practices that will enable the firms and agencies involved in the construction and development
of roads, achieve their objectives with high efficiency (Langaas, Odeck and Bjørvig, 2015).
1.7.5 Procurement Processes
A series of procedures and steps adhered to by the investors in the road development. It also
entails the acquisition of necessary materials, approvals, until the commissioning of the project
and effecting of payments (Bode and Padhi, 2016).
1.8 Chapter Summary
This chapter contains the background information on public private partnership (PPP) projects
in general, with emphasis on the roads sector. The chapter started by highlighting the trend of
PPP investments globally and regionally as an alternative to the use of scarce public resources
in creating win-win opportunities for both the public sector and the private sector investors.
The chapter also noted the desire of the government of Kenya to encourage the funding of road
9
infrastructure projects by the private sector through PPPs and the significance of investments
in road infrastructure for general economic growth. The chapter further brings into focus the
problem statement which shows that despite government efforts in Kenya to initiate PPPs and
the global trend in PPP investments, there has been little success of PPP initiatives in the road
sector in Kenya so far. It then notes the purpose of this study which is to investigate the factors
influencing private sector investors’ participation in public road infrastructure projects in
Kenya through Public Private Partnership framework, the significance of this study, the scope
of study and concludes with the definition of key terms used in the background of the study.
The next chapter presents a compressive review of literature on factors influencing low
participation of investors in PPP projects. The third chapter provides the research methodology
followed by results and findings in chapter four and finally, discussion, conclusion, and
recommendations in chapter five.
10
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
The chapter presents the literature regarding the factors influencing investors’ participation in
the public private partnership projects. The literature is organized into three sections as
follows; the first section presents literature related to the effect of Investor Perception on the
participation level in the public private partnership projects. The second section divulges into
literature concerning the effect of institutional capacity on investors’ participation in the public
private partnership projects. The last section focuses on the effect of procurement practices on
investors’ participation in the in the public private partnership projects. The chapter closes with
a summary presenting a brief overview of the discussion.
2.2 Investor Perception and Participation in PPP Projects
The section discuses literature about investor perception and their participation in the public
private partnership projects. In the same vein, investor’s perception is assessed using three
factors: project financial feasibility, political commitment, and government policy towards the
intended project.
2.2.1 Project Financial Feasibility
According to Sarvari, Valipour, and Yahya (2019), financial and risk assessments of proposed
projects have become necessary for countries considering PPPs for infrastructure projects.
These assessments are essential to attracting private investors. Iqbal, Choudhry and
Holschemacher (2015) state that the principle behind risk management is to minimize
unfortunate effects by identifying and controlling threats and maximize). Nguyen, Mollik, and
Chih, (2018) identified critical risks in PPP toll road projects in Vietnam that affected the
projects’ financial viability. The study revealed risks either critically affecting toll road
projects’ financial viability in Vietnam, by inflating projects’ cash outflows or reducing
projects’ cash inflows in a commonly used net present value (NPV) analysis model. Eadie,
Tonar, and Millar (2013) argue that confidence in the PFI/PPP route had fallen due to the
11
recession and from the figures in the 2003 and 2008 reports indicated a negative trend in
perceptions of the route’s benefits.
Burger and Hawkesworth (2016) discuss how value for money is important both to the
government and the private investor. They argue that the choice between using a PPP or
traditional procurement should be simple: governments should prefer the method that creates
the most value for money. However, in practice the value-for-money objective is very often
blurred, and the choice between using a PPP and traditional infrastructure procurement may
be skewed by factors other than value for money. Research by Aslan and Duarte (2014) finds
that select countries that have taken the lead in PPP projects have also focused on sound
budgeting and accounting practices incorporating fiscal risks of all projects in the medium-
term and annual budgets. Credit enhancement through guarantees by Multilateral Development
Banks (MDBs) provide further assurance to private investors and cover any possibility of non-
fulfilment of sovereign guarantees, especially in emerging economies (Jet, 2018).
Budina, Polackova, and Irwin (2007) in their study concluded that economic stability,
institutional strengths, and soundness of legal and regulatory framework are crucial to the
success of PPP projects. On weighing on the benefits of PPP in road infrastructure. Flor (2018)
findings in construction risk in infrastructure project finance from EDHEC show that for a
large number of transport infrastructure PPP projects, (including roads), construction overruns
are significantly lower at 3.3 percent on average compared to public procurement projects,
with a 26.7 percent overrun average. There is no unlimited risk bearing– private firms (and
their lenders) will be cautious about accepting major risks beyond their control, such as
exchange rate risks/risk of existing assets. If they bear these risks, then their price for the
service will reflect this. Private firms will also want to know that the rules of the game are to
be respected by government as regards undertakings to increase tariffs/fair regulation, etc.
Private sector will also expect a significant level of control over operations if it is to accept
significant risks.
12
2.2.2 Political Commitment
Government support for PPP focuses on the extent to which national governments provide an
institutional framework that is either conducive or preventive for the introduction and diffusion
of PPPs within infrastructure (Koen, Ole Helby, and Murwantara, 2014). A report conducted
by Ruiz-Nunez, Fernanda, and Clive Harris (2016) reveal that payment guarantees comprise
91% of all indirect support provided by governments with revenue guarantees comprising only
7% of total indirect support. In India too, payment guarantees outweigh all other kinds of
guarantees. As noted above, a robust guarantee management system begins with designing
different types of guarantees. Through a number of case studies relating to government
finances of Indian states and other countries, Bhatia (2019) reveal that governments which
have checks and balances to issuance of guarantees and other forms of indirect support for PPP
projects are actually able to attract higher levels of PPP investment.
Osei-Kyei and Chan (2017) indicated that the three most critical factors in the success of PPPs
are the political support and acceptability for PPPs, government’s positive attitude towards
private sector investments and political stability. Węgrzyn (2016) reveals that public and
private parties do not share common perception of the PPP success. In general, the private
sector assigns lower values to the CSFs analyzed from the whole life perspective of a PPP
project. While seeking to respond to the question: Why is Senegal’s Dakar-Diamniadio toll
road, which opened on time and on budget in August 2013, so successful? Cartern (2015)
identifies political commitment as the key success driver. It was established that The
Government of Senegal set the project as a priority. The first driver on the road was the
President who paid the toll. However, the author cautions that political commitment alone is
not sufficient, it needs it needs to be turned into action by government agencies. Hence, the
Government of Senegal setup intra-agency coordinating committee. Furthermore, The
National Agency for the Promotion of Investments (APIX) oversaw the preparation of the
concession. The Public Private Infrastructure Advisory Facility (PPIAF) supported APIX with
technical assistance, including the design of a framework for the oversight of the project. Kwak
et al. (2009) argue that inadequate involvement and incapability of governments to manage
PPP projects lead to project failures in developing countries. Gibson and Davies, (2008) that
identified local political opposition as a barrier to PPPs in mature economies.
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2.2.3 Government Policy
A clear legal and regulatory framework is crucial to achieving a sustainable infrastructural
solution through PPP (World Bank, 2016). It is mandatory for any serious government to first
articulate its PPP policy before embarking on establishing a PPP framework (Cui, Hope, and
Liu, 2018). Thiago and Thiago (2019) recall that the creation of the public-private partnership
(PPP) model in Brazil dates to 2003, with the publication of the PPP Law for the State of Minas
Gerais (State Law No. 14,868/2003). Subsequently, in 2004, the PPP Law for the State of São
Paulo (State Law No. 11,688) and Federal Law No. 11,079 (the Federal PPP Law) were also
published reinforcing this type of partnership. The PPP legislation was born of the need to
attract private investment in infrastructure projects in Brazil in the following areas: water and
sewage, health and hospitals, administrative facilities and logistics, including roads, urban
mobility, underground transportation and transportation in general.
Dey, Rahman and Dey (2016) sought to find out the implementation of the Public Private
Partnership (PPP) projects in Bangladesh. One of the key findings of this study was that lack
of institutional and legal framework for PPP in Bangladesh, which hindered the successful
implementation of such projects in the country. Kang, Mulaphong, Hwang, and Chang (2019)
explored the factors that affect the adoption and implementation of projects in the context of
developing countries. The results indicated five broad categories of political, economic,
legislative, financial, and management requisites.
Osei-Kyei and Chan (2017) explored the critical risk factors of PPP projects in Ghana, and
their findings indicated that, generally, country-risk factors are more critical in Ghana than
project-specific risks. Essentially, country-risk factors are risks, which relate to the political,
legal, and economic conditions of PPP (Ameyaw, 2015). The key critical country-risk factors,
which need attention in Ghana, include corruption, political/public opposition, exchange, and
interest rate fluctuations, poor public decision-making, political interference, and project
approvals and permit delays. On the other hand, some project-specific risks which are critical
and also need consideration include construction cost overruns, delay in project completion,
change in market demand, delay in land acquisition, high financing cost, construction changes,
poor quality of workman-ship, tariff change, environmental risk, and in experienced private
partner. For the case of Ethiopia, Debela (2019) revealed that for effective implementation of
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PPP road projects, the government should ensure at least the presence of an enabling specific
PPP policy, well-organized and committed public agency, stable political and social
environment, favorable legal frameworks and good governance.
On 1st July 2015, the parliament of the Republic of Uganda passed the highly anticipated Public
Private Partnerships Bill; it was later assented to by the President of Uganda on 12th August
2015 (Ndandiko and Ibanda, 2016). The new law filled the gaping void for a legal framework
to regulate the development and implementation of PPPs in the country. Before the passing of
the new PPP's law, Uganda lacked a formative regulatory framework tailored to Public Private
Partnerships arrangements. Stakeholders would refer to the 2010 National PPP Framework
policy in conducting their operations. The PPP Unit's focus is to serve as the secretariat and
technical arm of the PPP Committee, which is mandated with assessing and approving PPP
projects in the country.
Li, Akintoye, Edwards, and Hardcastle (2005) established that identified lack of well-
established legal framework as one of barriers to PPPs project implementation. This indicates
that some governments in developing countries undertake PPPs without overall PPP policies,
which leads to ill-defined goals and a greater likelihood of problems with the projects
implementation. Bosire (2015) finds that all the counties in Kenya have PPP units which are
in line with the national governments initiative to encourage PPP funding for projects for
improving infrastructure levels across the counties. It also established that 70.73% of the
counties have in place PPP implementation guidelines which are instrumental in guiding the
process.
In Kenya, Muasya (2014) indicated that the ministry was very keen on quality services being
provided in set timeframes and within the set cost implications. The ministry is therefore
involved in PPP projects to help in the funding of required and necessary projects towards the
achievement of the vision 2030. The findings showed that the ministry had a team that forms
the committee responsible for these implementations. The results revealed that the ministry
had set procedures that had been laid down for implementation of PPP projects with the
ministry being responsible for the formulation and implementation. The results of the study
also found challenges such as; improper vetting procedures, political interests and interference,
15
political and socio-economic environment factors and internal vested interests are some of the
challenges encountered by the ministry in the implementation process a fact that fitted the
contextual argument.
2.3 Investor Capacity and Participation in PPP Projects
The public officials involved in PPP project teams need to have competencies to structure and
evaluate the project considering its financial, legal, and technical aspects. The areas of
expertise that they need to have in the five broad areas of project planning, financial, legal, and
technical and project management. However, the present study is limited to investor’s
expertise, investor’s technology capability, and the investor’s financial capability.
2.3.1 Investor Expertise
In the early stages of the process, the public sector should assess its institutional capacity to
act as a partner. Creating an entity to handle the partnerships, such as a redevelopment authority
or a quasigovernmental agency, may be necessary if such an agency does not exist. The public
partner needs to make sure it has the expertise to negotiate with the sophisticated private party
and the authority to retain the use of one or more consultants to assist in developing the
partnership. Jooste (2009) identifies organizations that enable PPP projects by supplementing
the necessary competencies. These organizations include private consultants, technical
specialists, non-governmental organizations, academic institutions, probity auditors, fairness
advisors, transaction advisors, PPP units, advocacy associations, and local, regional, and
multinational development agencies.
Devkar, Mahalingam and Kalidindi (2013) assessed the kinds of competencies that are
prevalent within ULBs in India, competencies that are often absent, strategies that are currently
used to bridge these competency gaps, and approaches that ULBs should follow in order to
create a more robust environment for PPPs. The case study analysis indicates that project
development competencies were supplemented through the engagement of PPP coordination
agencies. However, there were larger competency gaps around project governance.
Kamau (2016) indicate that most banks have limited participation in the road PPP projects in
Kenya. Out of the 71 PPP pipelines that were underway, none of the commercial banks
16
indicated as having participated in any activity. Knowledge about the PPP and opportunities
provided for the banking industry seems to be low. Those respondents with knowledge of the
annuity programme argued that the financing model was too complicated that it could lead to
increased non-performing loans. Okwaro, Chepkwony, and Boit (2017) found that the County
government of Uasin Gishu had not formulated policies and procedure on the implementation
of PPP procurement, thus has affected the adoption of PPP procurement; majority of the
investors have no confidence in the county procurement process which may have hindered
their interest in the adoption of PPP procurement; lack of confidence among the county
employees in PPP procurement decision making may have affected adoption of PPP
procurement negatively in the county.
2.3.2 Investor Technological Capability
Technological capability is a term that encompasses the system of activities, physical systems,
skills and knowledge bases, managerial systems of education and reward, and values that create
a special advantage for an organization or line of business (Nurazwa and Halim, 2019).
Technology is vital for road and infrastructure industry. As a result, technological innovation
is a key asset for strengthening competitiveness of a firm in construction industry. Quintana
(2017) posits that leveraging technology and innovation is essential to build capacity,
streamline programs, and further impact in successful public private partnerships (PPPs).
Technology can be leveraged in two ways: first using technical tools and platforms and second
using technical knowledge to ensure expertise and innovative practices are applied uniformly
and consistently to community investment strategies. Reichert and Zawislak (2014) seem to
hold a divergent perspective when they establish that technology alone cannot be used to assess
the competitiveness and positive performance of the firms. Based on 133 Brazilian firms, they
insist that there are other factors that impact firm competitiveness other than technology.
Kovalenko and Akhmetshin (2019) reports that experts and scientists agree that the use of
innovative materials becomes economically viable at the stage of construction and subsequent
operation of the road surface. It is new technologies that are designed to improve road safety
in our country of costly repairs. Since 2007 the use of macadam-mastic asphalt has begun to
cover roads, which has gained high popularity as a wear-resistant pavement material on roads
17
with a high degree of congestion, providing steady and increased flatness, roughness, cracking
resistance and adhesion during operation, reduces noise level from moving vehicles.
In the previous decade, many technological innovations have dominated the operations of road
construction industry (Lyovin, 2012). Since 2012, polymer-bitumen binder 60 has been used
as a binder in the composition of macadam-mastic asphalt concrete at the construction and
reconstruction of roads, which improves the performance properties of asphalt concrete and
extends the service life of the coating. Since 2014, the NOVACHIP technology has been
successfully applied, consisting in the installation of thin-layer coatings (wear layer) of a hot
bitumen-mineral mixture using a special paver for pre-applied bitumen-latex cationic
emulsion. This technology allows increasing the turnaround time of repair of the road and
improving the quality of the coating (evenness, noise absorption, coupling qualities).
Yates (2016) elucidates that the use of computerized expert system for construction
applications is on a growing spree. The existing examples include systems of to diagnose
vibration problems in rotating machinery and system to verify weld performance
qualifications. It is also predicted that the use of expert systems will probably be the most
important application of artificial intelligence techniques for construction over the next decade.
Vutsova (2014) argues that the role of technology in the public private partnership is to
eliminate the risks and weaknesses inherent in these projects. The problems involve: poor
infrastructure environment, lack of standards and quality processes, frequent cases of
reluctance to change and introduction of innovative solutions, and finally - a long and
cumbersome development.
2.3.3 Investor Financial Capability
Financial capability entails the inventors’ knowledge and skills to understand their own
financial strengths, projects needs along with utilizing the funds on available PPP projects
(Serido, Shim, and Tang, 2013). Bain (2009) and Regan, Smith, and Love (2011) opine that
international capital markets have experienced high levels of instability and adversely affected
the funding arrangements for social and economic infrastructure projects since 2008, leading
to limited availability of equity and debt capital and a higher cost of capital. Besides, the
market access has been difficult for both the public sector and the private sector, leading to
18
banks becoming the main source of funds for PPP projects (Bain, 2009). A study by KPMG
(2009) indicates that banks are unwilling to commit to lending terms for anything other than a
short period in some countries.
Experience and financial and technical capacity of the bidders should be included in pre-
qualification or qualification criteria when they exist and not be part of the bid evaluation
process. Criteria which are difficult to measure and allow for discretion, like quality of service
or safety, should be avoided. Rather, metrics and data collection requirements should be
specified in advance. Criteria or targets should be, whenever possible, pre-specified. If quality
targets differ across bids, such elements are difficult to evaluate and translate into cost
differences. Therefore, minimum quality requirements can be pre-specified as having to be met
by all the bidders, subject to ex-post verification.
In China, Zhu, and Chua (2018) reveal that political environment, economic environment,
shareholders’ credibility, financial market, legal system, public sector’s reliability, financial
structure, and regulatory framework were ranked as the top eight critical bankability criteria.
Despite all these lending preconditions, China had initiated 13,554 PPP projects costing 2,612
billion dollars until the end of June 2017 (Du, Wu, and Zhu, 2018). Sanni (2016) shows that
the five most important factors for PPP project success are economic viability of the project,
sound financial package, commitment and responsibility of public and private sectors,
thorough and realistic cost and benefit assessment, and good governance. Ye, Chong, and Shi
(2018) found that companies with more project experience, more political connections, and
higher profitability are more likely to be willing to participate in PPP projects.
Ojebode (2016) provides further evidence on constraints that are hindering the effectiveness
of PPP on affordable housing delivery in Nigeria. The study identifies, lack of regulation
guarantee, poor financial projections, poor feasibility assessments, poor communication,
inadequate financial resources, project cancellation and contract renegotiation etc. PPP needs
to develop a clear statement of objectives for affordable housing delivery, well-communicated
strategy, a clear institutional framework, independent oversight, sustainable financing
mechanisms and allow flexibility for implementation to mitigate these constraints. In addition
to providing the basis for more effective housing policy, the research develops a PPP model
19
for affordable housing delivery. In the Ghanaian context, Osei-Kyei, Chan, and Ayirebi (2017)
assert that the key issues that practitioners need to look at carefully in order to succeed include
transparency and competition, favorable legal framework, right project identification, capacity
building, extensive stakeholder engagement and appropriate risk allocation.
2.4 Procurement Practices and Participation in PPP Projects
Procurement means selection of the (highest ranked) bidder under a transparent, fair, and
accountable procurement system (United Nations Commission on International Trade Law,
2016) and signing a contract agreement with this partner. There are many factors that must be
considered when determining the best procurement approach for a given project, including
long-term costs, myriad uncertainties, risks both now and in the future, and complicated
funding and financing approaches (FHWA, 2012). In the current study, procurement is
assessed in the context of tendering practices employed in the PPP, the process of project
bidding and partner selection, and the effectiveness of contract negotiation during the
formulation of PPP agreements.
2.4.1 Tendering Practices
Tendering process takes various forms. The most common procedure is the open competitive
tendering, which involves the phases of a request for prequalification, prequalification,
invitation to tenders, tender evaluation and shortlisting, negotiation with shortlisted
tenders/bidders and selection of best bidding and award (Palcic, Palcic, and Reeves, 2019).
Even though calling for bidders to be prequalified and calling for tenders of qualified bidders
were simple tasks, Tiong and Alum (2017) have emphasized that there are three main phases
that can be distinguished in the tendering procedure of PPP, which are prequalification of
tenders, evaluation tenders, negotiation with preferred bidders, before PPP awarding.
Palcic, Palcic, and Reeves (2019) state that PPPs are often characterized by lengthy tendering
periods that have the potential to deter bidders for contracts and increase transaction costs.
They analyzed data on 877 PPP projects in seven countries and find considerable cross-country
variation in tendering periods in the United States. Using a duration analysis model, they found
that this variation persists even when we control for observable factors such as capital value.
The longest tendering periods were found in the housing, health and defense sectors and
20
tendering periods are positively related to project size. Indicators of institutional quality are
not found to be significant. However, these finds are contradicted by previous observation by
Khaderi (2019) who observes that most of the characteristics of the tender process will be the
same as in any public procurement process, but some stages and steps have specific aspects
and features. Hence, there are special considerations inherent to the complexities of PPPs.
However, all admit that a balance is needed so as not to endanger the legality of the process
and potentially suffer a challenge that may paralyze the process or require the government to
re-issue the tender.
Doni (2007) looked at three kinds of tendering procedures, which are the negotiation, the
auction, and the competitive negotiation procedure to provide contracting authorities with
guidelines to follow for designing PPP/PFI tenders. In the absence of consent between one
bidder and the public sector, the competitive negotiation will give a higher expected value to
the government compared to other methods. In Malaysia, Takim, Kharizamand and Rahman
(2009) and Shamsida and Ani Saifuza (2010) stated that the organizational structure of a
typical PPP in did not differ much from international best practice. The composition comprises
the government, the Special Purpose Vehicle (SPV), lenders, private investors, works
contractors, and facilities maintenance contractors. They further argued that the roles of the
parties in Malaysian PPP/PFI resembled their partners around the world.
2.4.2 Bidding and Partner Selection
This phase includes opening technical and financial bids and evaluating those bids in addition
to completing the financial model’s comparative (Fischer, 2012). The PPPCU then reviews the
Line Ministry’s financial model and compares it to the financial models of the bidders which
lead to the selection of the winning bidder (Norton Rose Fulbright, 2011). The bidding
processes differ depending on the nature and complexity of the project. There are two main
types of the PPP projects: concession projects and maintenance agreements, they define the
tender process since the first type requires large investments, complex or long activities
delegated to the private sector when maintenance contracts are not so complex and can be
signed on the basis of procurement rules for civil works.
21
For successful bidding, it is important to ensure competition and transparency. It will result in
choice of the partner that is able to deliver expected results at reasonable costs. If there is no
transparency, then the government might face such issues as protest that negatively affects the
project (Moszoro and Spiller, 2012). It is crucial to attract the best potential bidders who should
see benefits and feel rewarded for possible risks and protected by the existing regulations. In
addition, the country environment, and the commitment of government to accomplish the
project play a significant role in this case. Moreover, fair competition between bidders should
be supported by the means of providing information on the project and an evaluation procedure
which should not be biased. Furthermore, the rules of the game should be clear to the bidders
so that they understand the procurement process (PPIAF, 2009).
Casady, Flannery, and Geddes (2019) argues that PPP tendering periods in Canada are notably
shorter than in similar countries that have mature PPP markets, such as United Kingdom and
Ireland as observed from data on 160 PPP projects. From the analysis of the data on the PPP
tendering process duration, Casady et al. found that higher PPP contract values and greater risk
transfer were associated with longer tendering periods and that there were significant variations
in tendering periods across sectors. Other important success factors for PPPs identified from
the Canadian study include securing necessary approvals before commencing procurement,
creating specialized PPP procurement agencies, contract standardization, lower information
and design requirements, avoidance of additional bid stages, and the use of substantial
completion payments.
According to Marques (2010), one of the major advantages of PPPs is that in most situations
the government uses market prices (through bidding) to choose the private partner. These
savings provide the “value for money” for the project and are frequently the justification for
the PPP option. However, experience shows that failures of PPP contracts are often related to
the procurement procedure. In addition to transparency and fairness, which are essential in any
bidding process, thinking about appropriate procedures can reduce the likelihood of problems
arising in the future.
Marques (2010) adds that in a PPP, when selecting a private partner, a public tender is normally
compulsory, and the rule is to choose the most economically advantageous bid. When only one
22
criterion exists, usually the price (e.g. average tariff), the royalty paid, the level of subsidy, the
net present value (NPV), or the contract term, the winning bidder corresponds
straightforwardly to the bid which presents the lowest price, minimum subsidy, highest value
of royalty or net present value (NPV). However, when there are several criteria, the situation
is more complicated, and it is necessary to adopt a multi-criteria decision analysis to choose
the winner. In this case, the awarding authority should define the criteria (and eventually sub-
criteria) and the bid evaluation methodology before the tender call notice.
Zawawi (2017) conducted a case study on the Malaysian Public Private Partnership Unit, Unit
Kerjasama Awam Swasta (UKAS), to investigate the manner of competition incorporated
within PPP in Malaysia. Based on the empirical findings, in its effort to make the country’s
PPP programme a success, UKAS has been flexible in its implementation, with less emphasis
on incorporating competition within the procurement process. UKAS, however, still manages
to procure infrastructure using PPP for the reasons for adopting PPP. This result in
inconsistencies in UKAS governance on procurement process. Where the findings illustrate
that value for money can be achieved by other means, the researcher concludes that
competition involves more than achieving value for money; it can also be used as a procedural
barrier, hence achieving good governance.
Fischer (2012) elaborates the value of pre-qualification. He argues that pre-qualification is
needed to weed out firms that do not have the financial nor technical resources to carry out the
project. Responding to their questions distracts scarce qualified resources within government.
If they win the project, it will be delayed for years, before they can be taken away from the
project. Surety bonds can be used at different stages of the process, and they can exclude these
serious firms, as they will not obtain bank backing.
Jeppsen (2013) investigate how the public and private participants in the Danish PPP sector
perceive the relation between the choice of procurement procedure and PPPs and to what extent
the procurement procedure can be used as a an instrument that contributes to PPPs with higher
total welfare gains and lower total social costs. The analysis shows that central PPP aspects as
risk allocation and standardization are perceived differently from the perspective of the public
and the private sector. This difference might be explained by the different implied interest of
23
the actors. However, this could also indicate a conflict within the Danish PPP sector which is
interesting to investigate. In relation to procurement and PPP the findings indicate that the use
of competitive dialogue results in better final PPP offers compared to restricted procedure.
Olotch (2017) asserts that Kenya’s PPP framework is silent on the steps to be taken where a
procuring entity receives only one bid in response to a PPP tender. Would the bid be considered
non-responsive, thereby necessitating a fresh tender process? Should the procuring entity
proceed to carry out due diligence on the bidder, and award the tender if the bid meets the
tender requirements? How would the procuring entity ensure there is value for money?
Whichever the approach, the report aptly states: receiving a single bid may be problematic and
thus merits attention through the PPP regulatory framework.
2.4.3 Contract Negotiation
Managing PPP contracts differs from managing traditional government contracts. PPPs are
long term and complex, and contracts are necessarily incomplete that is, the requirements and
rules in all scenarios cannot be specified in the contract. Therefore, the management of PPP
contracts must be flexible in both available resources and skills to meet the whole-life
expectations of the contract. The aims of contract management for PPPs are to ensure dialogue
between the private and the public actors ensures that the project proposals are aligned with
expectation of the contracting authority (Berrone, Fageda, and Lluma, 2018).
Moving beyond the legal aspects of the contract, the process of negotiation also calls for
investigation. In PPPs, the private partner is often involved earlier in the decision-making
process, compared to traditional procurement (Klijn, 2010) and the contract is often more
extensive. The bundling of tasks entails that the contract often is negotiated with a consortium
or Special Purpose Vehicle (SPV), consisting of a number of private actors, which, by joining
expertise, can solve all the different tasks, integrated in the PPP (de Bettignies and Ross, 2010).
The drafting and negotiation of the contract is a complex and resource demanding process and
it is often argued that the private sector has an initial advantage as negotiation experience is
more established in the private sector (Parker and Figueira, 2010).
Amado (2012) notes that to enable the government to effectively manage the contract, certain
roles and responsibilities must be required of the private partner through the contract. It is very
24
important that the reporting system of the private partner complies with the government’s
requirements. In this context, the government will have clear policies and procedures with
respect to private partner reporting. These requirements must have been communicated in the
Tender Phase to ensure that the private partner has been given the opportunity to design and
implement a reporting process, and to allow for time to ensure that information management
systems are compliant with the needs of the government.
Contract signature or management of the contract signature process is more demanding for
both the public and private parties. According to Takim, Kharizamand and Rahman (2009) an
extended period is required to allow the private partner to prepare for signature, especially (in
some jurisdictions) the need to form an SPV that will sign the contract. It is essential that the
bidding process is transparent, clearly spelled out where the short-listed company is invited for
negotiation to get the project. But in Malaysia, the open tender is not fully applied, and there
are several companies which have already been awarded projects under the PPP procurement
without any competitive bidding (Khaderi and Aziz, 2010). It is crucial that open competitive
tender process is adapted to select the most qualified contractor based on their expertise and
experience.
According to APMG (2016), the risk of a challenge to the tender or award process is considered
higher in PPPs than in a conventional procurement. The procuring authority must have sound
preparation and procurement processes, and a legal team and relevant subject matter experts
prepared to handle potential challenges including the ability to resolve disputes in the interests
of moving the process forward. Problems may come after soft launch, or after award of the
contract. In Australia, Raisbeck et al. (2010) examined the issues of time and (capital) cost
performance by comparing actual and expected outcomes. They conclude that PPP
procurement delivers projects faster than TP and is between 11 and 31 per cent more cost-
efficient.
Using comparative approach, Habets (2010) makes several conclusions; in the UK PPP
projects offer an advantage in both time and costs, while in half of the projects, innovations
have taken place. On the other hand, are transaction costs high, mainly due to the long
tendering stage, which have also decreased potential benefits from competition. In Australia,
25
PPPs offer mainly a cost advantage as the projects offer a roughly similar time confidence level
as traditional procured projects, mainly due to the delays during the start-up of the project.
Negative outcome is the fact that innovations and design changes are very rare. These
outcomes are quite similar to the ones in the Netherlands. PPPs here are also subject to
extensive transactions costs during the tendering stage, offer too little possibilities for contract
changes leading to little use of innovations. Still these projects are expected to be delivered
with both cost and time advantages over traditional procured projects.
Dikmen and Birgonol (2006) about the importance of trust during contract negotiation. Trust
is reinforced through each partner’s realization of expected responsibilities. Reasonable
performance schedules for deliverables help document the commitments of parties and ensure
consistency in the implementation of the project. Partners can communicate more effectively
by building personal relationships with each other. According to Pelphrey (2015), formal and
informal forms of communication between entities create opportunities to build a more open
and trusting relationship. Parties must act honestly and in good faith and work under the
assumption that the other partners are doing the same. The practice of reciprocity also increases
the cooperative nature of the partnership. Finally, to overcome misperceptions and differences
impeding the emergence of trust, partners should work to understand the perspective and needs
of actors involved in the process. Hawkesworth and Burger (2011) opine that risk-sharing
arrangements uncovered ranged from deductible schemes to event mechanisms with the latter
employed quite frequently; hence, contract designers rely on ex post remedies to address risks
once an event, such as a change in law, occurs. Parametric analysis did not reveal any dominant
trends in risk allocation, but examination by the most active jurisdictions (Florida, Texas, and
Virginia) and source of risk (exogenous versus endogenous) illustrated that project context
influences risk allocation. Van Nguyen 2017 examines how Vietnamese laws should be
improved to facilitate successful PPP projects. It focuses on key PPP rules on project selection,
land acquisition, major entities in procurement, capital, and risk allocation of projects,
procurement procedures and dispute resolution. It was concluded that although PPP laws were
in force in Vietnam, there are many processes that could be improved.
26
2.5 Chapter Summary
The chapter focuses on the review of empirical findings concerning the factors influencing
participation or uptake of the private partnership projects. It emerges that PPP is influenced by
several factors among them: economic, political, social, cultural, and environmental factors.
The perception of investors is influenced by several factors. Financial viability, commitment
of the government, and government policy are key consideration for investors’ involvement in
the PPP. Secondly, institutional capacity of the investor as manifested in the technical
expertise, financial capability, and technological capability must match the needs and
requirements for undertaking the PPP projects. Lastly, procurement procedures and practices,
their flexibility and rigidity determine whether the investor takes up the PPP projects. In this
case, the tendering process, bidding process, and contract negotiation, all inform the final
decision by the investor to participate in the PPP. The proceeding chapter presents the
methodology and research strategy that the study shall embrace.
The following chapter describes the research methodology used in the study, followed by
results and findings in chapter four and finally, conclusion and recommendations in chapter
five.
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CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter therefore presents the research methodology to be used in the study. It starts with
the research design and the target population of the study, followed by the proposed sampling
design, and the data collection methods to be used in the study. The chapter also presents the
research procedures expected to be adopted and will conclude with the data analysis methods.
3.2 Research Design
Research design is defined as a framework for the generation of evidence that is chosen to
answer the research question in which the investigator is interested (Bryman, 2016). It is a
framework for the collection and analysis of data. Kothari and Garg (2014) describes research
design as the conceptual structure within which research would be conducted and aims to
provide for the collection of relevant evidence with minimal expenditure of effort, time, and
money. Research design may be categorized into the three main categories of descriptive
research, exploratory research, and causal research (Creswell and Poth, 2016). A Descriptive
research aims to describe a population, situation or phenomenon accurately and systematically
using any of the three main methods of case studies, observation, and surveys, to investigate
one or more variables. (Trochim, 2020). The descriptive research design was used in the study
in explaining the factors that influenced private sector investors’ participation in public road
infrastructure projects in Kenya through Public Private Partnership framework.
The method of descriptive research chose in this study is survey research design which
involves procedures in which the researcher administer brief interviews and discussions to a
sample or to the entire population to describe the attitudes, opinions, behaviors, or
characteristics of the population (Creswell and Poth, 2016). Surveys may be done through
questionnaires or interviews to collect data and statistically analyze the data to describe trends
abouts responses to questions and to test research questions or hypothesis. Survey design can
collect data from a large number of respondents and numerous questions can be asked about a
28
subject giving extensive flexibility in data analysis (Saudners, Lewis and Thornhill, 2019). In
this study, the use of questionnaire was employed which is a series of written questions where
the participants choses answers to the questions and supplies basic personal or demographic
information. To this end, survey questionnaires can be administered to the participants through
a variety of ways, such as through questionnaires sent via e-mail or fax, or can be administered
through the Internet (Roopa and Satya, 2012).
3.3 Population and Sampling Design
3.3.1 Population
Population refers to an aggregate or totality of all the objects, subjects or members that conform
to a set of specifications (Polit and Hungler 2013). Ary, Jacobs, Sorensen and Razavieh (2010)
defined population as all members of any well-defined class of people, events, or objects. The
target population for this study consists of the private sector investors, both local and
international, who are undertaking or who have undertaken the 192 road projects under the
mandate of the Kenya National Highways Authority (KeNHA) for the period 2007-2019. The
selection of road projects under KeNHA is based on the fact that this is the government of
Kenya road agency that is responsible for the development, management, rehabilitation and
maintenance of all roads classified under Class A, B and C totaling 18,101 kilometers as
outlined in KeNHA Strategic Plan 2018/19–2022/23. These are roads linking the international,
national, and provincial centers (KeNHA, 2018). The period used in the study of 2007-2019 is
from the date the KeNHA was established to the current government financial period. The
complete listing of such road projects numbering 192 roads has been obtained from data
available on KeNHA’s website.
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
Sampling frame is the listing of all units in the population from which the sample will be
selected (Kothari and Garg, 2014). The sampling frame is defined by specific criteria and is
different from the population, which is every individual case that could be included in the study
29
(David and Sutton, 2016). Sampling is a specific principle used to select members of
population to be included in the study (Saunders, Lewis, and Thornhill, 2016). The sampling
frame for this study is the list of all the road projects under the mandate of Kenya National
Highways Authority for the period 2007-2019. This list totals to 192 road projects in three
different phases of production: Completed, On-Going, and Planned. The duration under study
is the twelve-year period covering 2007-2019 which is from the date of establishment of
KeNHA to current financial year. The sampling frame was sourced from the Kenya National
Highways Authority website.
3.3.2.2 Sampling Technique
Sampling design is a definite plan, which is determined before any data is collected, for
obtaining a sample from a given population (Kothari and Garg, 2014). Kothari and Garg (2014)
categorize samples broadly as being either probability samples or non-probability samples. In
this categorization, probability samples are those in which each element has a known
probability of being included in the sample as opposed to non-probability samples which do
not allow the researcher to determine the probability of inclusion. According to Kothari and
Garg (2014), probability samples can be carried out by way of: simple random sampling;
systematic sampling; stratified sampling; and cluster or area sampling. He goes on to state that
non-probability sampling can be done through convenience sampling; judgement sampling;
and quota sampling.
In this study, simple random probability sampling was used to select the sample. This allowed
for an equal chance of selection to every one of the 192 road projects in the population. From
the population of 192, the road projects will be listed and assigned numbers starting from
number 1 to number 192. Once the sample size was determined based on the sample size
calculation formula, random numbers totaling to the sample size was generated through
random numbers table. Thereafter, each number in the population corresponding to the random
numbers was selected.
30
3.3.2.3 Sample Size
A sample is the segment or subset of the population that is selected for investigation (Bryman,
2016). The sample size is therefore the number of units or elements that is selected for study
and is determined by the sampling technique and the size of the population.
The sample size for this study will be selected using the Yamane (1973) Formula. In the
formula, a 95% confidence level and P of .5 are assumed for the equation. The sample size
based on this formula was 130.
n = N / (1 + Ne2)
Where:
n = corrected sample size, N = population size, and e = Margin of error (MoE), e = 0.05 based
on the research condition.
With the study population of 192 and margin of error at 5%, the sample size would therefore
be:
n = 192 / [1 + 185*(0.05) *2]
n = 129.72972
n = 130 Road Project Investors
3.4 Data Collection Methods
There are two main traditional methods of data collection that are used in the quantitative
research, namely, self-completion surveys also known as social survey or questionnaire survey,
and structured interview (David and Sutton, 2016).
This study collected primary data using a structured questionnaire. The questionnaire
comprised of four sections. The first sections sought to capture demographic details of the
respondents. The second section focused on the effect of investor perception, the third on the
effect of institutional capacity, and the fourth and last section was on the effect of procurement
process as a factor of investor participation in public private partnership road projects in Kenya.
31
The questionnaire was administered directly to the respondents through drop and pick method
and this will give a control over the research process. This made data collected both reliable
and authoritative. The questionnaire had a combination of open ended and close ended
questions aimed at addressing the study objectives. The responses on the questionnaire were
based on a Five Point Likert Scale where 1- Strongly Disagree and 5- Strongly Agree.
3.5 Research Procedures
The study employed various research procedures to ensure that data collected was reliable and
valid. These research procedures included seeking a letter of introduction which facilitated the
application of research permit, pilot testing, self-administration of the questionnaires and
ethical considerations. Pilot testing was undertaken to ensure validity of data collected. After
the development of the questionnaire and data collection sheet, a pilot test was conducted to
test whether there are any errors and the data collected from the data collection instruments
was sufficient for data analysis and addressing the research objectives. Pilot testing was
undertaken with 10 respondents. and by use of Cronbach’s Alpha in SPSS a reliability analysis
was done to evaluate internal consistency of the variables. Findings of the pilot study informed
the refinement of the data collection instruments to ensure valid data is. Since all the variables
were reliable (α>0.7) the questionnaires were distributed to the respondents. To ensure a high
response self-administration of the questionnaire was done. The researcher administered the
questionnaire to the respondents and ample time was awarded for the respondent to complete.
3.6 Data Analysis Methods
Data analysis refers to the running of various statistical tests to infer findings and results from
the tests (Cooper and Schindler, 2014). Data collected was inspected for completeness and
errors. Errors and gaps identified was edited to ensure completeness in the data. Complete data
was coded and keyed into SPSS vs 22 for statistical analysis. Analysis of data was done for
descriptive statistics such as means, standard deviations and frequency distributions. This aid
in description of trends and patterns in the data. To infer relationships, Pearson’s correlation
and regression analysis was conducted using SPSS vs 22.
32
3.7 Chapter Summary
This chapter has highlighted the meaning of research methodology and shows that this is the
approach and rules by which the data for the study was collected, analyzed, and interpreted in
order to answer the research questions. The chapter shows that the key aspects of research
methodology are the research design, which is the structure and framework for undertaking the
research and the identification of the target population for the study. Specifically, the chapter
presents the research design used in the study as survey research design and identifies the
population of the study as the PPP road projects that have been listed in the pipeline by the
Ministry of Transport and Infrastructure. The chapter further describes the sample frame,
sampling technique and sample size for the study. The target population of the study is
identified as 192 road projects with a sample selected of 130. The chapter concludes by
presenting the data collection method using questionnaires and analysis using both descriptive
and inferential statistics. The next chapter presents the findings and results of the study and
finally discussion, conclusion, and recommendations in chapter five.
33
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
The chapter presents the results and findings of the study to investigate and analyze the factors
influencing private sector investors’ participation in public road infrastructure projects in
Kenya through Public Private Partnership framework. The results on each of the study
objectives are analyzed through descriptive and inferential statistics, with the findings being
presented in form of tables, figures, and charts.
4.2 Study Response and Respondents’ Background Information
The study established background profiles of the respondent firms either currently engaged or
with a potential to engage in road PPP projects in Kenya. The information collected on
respondents included the age of the firm, the size of the workforce, the geographical scope of
the firm’s operation, the road project category, the source of funding for road projects, and the
major lender to the investor.
4.2.1 Study Response Rate
The study recorded a response rate of 63%, with 82 questionnaires receiving responses, out of
the total 130 questionnaires administered as shown in Figure 4.1 below. According to
Finchman (2018), a response rate of 60% and above would be sufficient for a research study
and consequently, this research study has proceeded with the data analysis based on the 63%
response received.
34
Figure 4.1: Study Response Rate
4.2.2 Age Distribution of the Respondent Firms
The findings revealed that a majority of the respondents were firms established 6-10 years ago
at 36%, followed by firms established less than 5 years ago at 35%, firms established 11-15
years ago at 17%, and lastly those established more than 20 years ago at 4%. This age profile
of the respondents illustrates that a majority of the current players in the road sector in Kenya
have been in the road construction industry for more than 6 years, with a total of 65% of the
respondent firms being in the age bracket of 6 years or more. This denotes a high level of
maturity for the firms and adds confidence to the firms’ reliability on giving credible and
comprehensive information on the dynamics of the road construction sector in the Kenya. The
firms’ age distribution characteristics are summarized in Figure 4.2.
63%
37%
Study Response Rate
Response Rate Non-Responses
35
Figure 4.1: Age Distribution of the Respondent Firms
4.2.3 Workforce Size of the Respondent Firms
The study established the size of the workforce for the respondent firms with the assumption
that that firms with significant number of employees may have a higher experience and
accumulated knowledge that portends higher level of participation in PPP related projects. The
study showed that the majority of the firms surveyed had a workforce of less than 30 employees
at 51%, followed by firms with 30-59 employees at 25%, firms with 60-89 employees at 13%,
and with the least number of respondent firms being those with more than 90 employees, at
12%. The percentage distribution of respondent firms based on the size of the workforce is
illustrated in Figure 4.3.
Figure 4.2: Workforce Size of the Respondent Firms
35%
36%
17%
4%8%
Age of the Firm
Less Than 5 Years 6-10 Years 11-15 Years 16-20 Years Above 20 Years
Less than 30
employees
30-59
employees
60- 89
employees
More than 90
51%
25%13% 12%
Workforce Size
36
4.2.4 Scope of Operations of Respondent Firms
The study revealed that majority of the private sector investors surveyed in this study were
Kenyan or locally based at 59%, followed by those whose road construction operations are
within East Africa at 28%, with 9% having presence in Africa, and only 4% of the respondent
firms had global operations. Figure 4.4 indicates the distribution of geographical operation of
respondent firms involved in road sector in Kenya.
Figure 4.3: Scope of Operations of Respondent Firms
4.2.5 Road Project Category
The road project categories are classified based on the existing Kenya government road
category classification. A majority of the respondent firms, at 32%, indicated that they were
involved in the construction of Category A International Trunk Roads, followed by 24% for
Category C Primary Roads, 21% for Category D Secondary Roads, 15% for Category B
National Roads (B1, B3, & B8) and 9% for Special Purpose Roads. Figure 4.5 illustrates the
distribution of respondent firms based on the road project categories.
59%28%
9% 4%
Scope of Operation
Kenya East Africa Africa The Rest of the World
37
Figure 4.4: Respondent Firms’ Project Category
4.2.6 Source of Funding of Road Projects
The nature and availability of funding sources is a critical aspect in the ability of private sector
investors to participate in road PPP projects due to the capital-intensive nature of road PPP
projects. In this study, a majority of the respondent firms, at 73%, sourced their funding for
road construction projects locally, 15% of the firms sourced their funds from regional markets
while 12% of the firms sourced funding from international markets as reflected in Figure 4.6.
Figure 4.5: Primary Sources of Funding
32%15%
24% 21%9%
Project Category Distribution
Local Financing
Market
Regional
Financing
Market
International
Financing
Market
73%
15% 12%
Primary Sources of Funding
38
4.2.7 Major Lenders to Investors
The study findings showed the distribution of the major lenders to the investors in the road
construction sector to be as follows: Commercial Banks (61%), Development Banks (15%),
Pension Funds (14%), and Insurance Companies (11%). The role of development banks in
private sector financing has emerged in the wake of realization of sustainable development
goals, enhancing access to capital among PPP private investors as well as focusing on
providing technical assistance in matters of road and infrastructure development in the growing
economies (World Bank, 2018). Figure 4.7 illustrates the distribution of the major lenders of
the respondent firms.
Figure 4.6: Distribution of Major Lenders
4.3 Investor Perception and Participation in PPP Road Projects
The first research question in the study analyzed the extent to which investor perception of
public projects affects investors’ participation in the PPP road projects. The results from the
survey on respondent firms have been analyzed and presented using descriptive statistics
(mean, standard deviation, and percentages) as well as inferential (correlation and regression
analyses).
Commercial Bank
Development Bank
Pension Funds
Insurance Companies
61%
15%
14%
11%
Distribution of Major Lenders
39
4.3.1 Descriptive Statistics on Investor Perception
A descriptive analysis is the first step utilized in the study and has helped to describe the
relevant aspects of investor perception, providing a detailed information on each relevant
variable. The analysis of the different variables in this study has been done using SPSS Version
24.0 software. The descriptive statistics shows the percentages, mean and standard deviation
of the different variables used in the study. The findings demonstrate that investors perceived
that the appropriate risk assessment on PPP road projects was done to a low extent at 40%. In
addition, the study also showed that 36% of respondent investors perceived that the parties in
the PPP road project provided for detailed cost/benefits assessment. The study further showed
that to a very low extent, investors perceived that the capital markets, including the banking
institutions, had remained open to investment in road PPP projects. The study also showed
that 43% of the respondents perceived that increased political risks surrounding the PPP road
projects would result in a decrease in the Internal Rate of Return (IRR) on road projects. The
study has also revealed that a good number of investors at 41% perceived that the PPP road
projects reflected achievement for Value for Money (VFM) to both the public and the private
partner.
The study showed that to a lesser extent, 37%, investors perceived that the government had
been proactive in compensating landowners and communities affected by road PPP projects.
Moreover, 38% of the participants maintained neutrality when asked whether the government
was clear on its position in the implementation of the PPP road projects. Again, a good number
of respondents at 48%, remained neutral when asked whether the political regimes in the
country had remained stable for the last ten years. 53% of the participants surveyed indicated
that either the national government or the county government provided for sound guarantees
towards all PPP road projects. To a lower extent, 33% of the respondents agreed that the
government was actively involved in the road PPP project’s life cycle. To a great extent, 24%
of the participants agreed that there was weak sectorial public bidding legation, all PPP road
projects were anchored on the 2013 PPP Act. To a low extent, 44% of the respondents indicated
that there was strong sectorial public bidding legislation in all the PPP road projects.
Additionally, to a low extent, 38% of the participants indicated all the contract-bidding
procedures in PPP road projects are standardized. 47% of the respondents perceived a low
40
extent on the 2013 PPP Act’s clarity on government’s position and its objectives. However,
48% of the respondent acknowledged that to a great extent, with the appropriate support
mechanisms in place, the 2013 PPP Act had made it easier for public-private collaboration in
road projects.
Table 4.1: Descriptive Findings on Investor Perception and Participation in Road PPP
Projects
Investor Perception and
Participation in PPP Road
Projects
Very
Low
Extent
(%)
Low
Extent
(%)
Neutral
(%)
Great
Extent
(%)
Very
Great
Extent
(%)
Mean
StDev
Risk allocation on PPP road
projects is done in a more
appropriate manner.
15 40 33 10 3 2.99 0.77
The PPP road project parties
provide for detailed cost/benefits
assessment
11 32 36 16 5 3.31 0.82
The capital market including
banking institutions has remained
open to investment.
26 36 28 9 1 2.72 0.81
If the perceived political risks
increase, the expected Internal
Rate of Return (IRR) will decrease
1 6 28 43 23 4.62 0.96
The PPP road projects reflect
achievement for Value for Money
(VFM) to both the public and the
private partner.
1 9 30 41 19 4.49 0.94
The government has been
proactive in compensating
landowners and communities
within the project vicinity.
11 37 34 17 1 3.19 0.78
The government is less clear on its
position in the implementation of
the PPP road projects.
3 14 38 34 11 4.12 0.92
The political regimes have
remained stable for the last ten
years.
0 17 48 32 4 3.94 0.94
The state/county provides for
sound guarantees towards all PPP
road projects.
19 53 24 4 0 2.56 0.66
The government is actively
involved in the project life cycle.
22 33 27 15 3 2.97 0.82
41
Investor Perception and
Participation in PPP Road
Projects
Very
Low
Extent
(%)
Low
Extent
(%)
Neutral
(%)
Great
Extent
(%)
Very
Great
Extent
(%)
Mean
StDev
There is weak sectorial public
bidding legation, all PPP road
projects are anchored on the 2013
PPP Act.
4 32 24 24 16 3.75 0.81
There is strong sectorial public
bidding legislation in all the PPP
road projects.
13 44 32 7 4 2.98 0.73
All the contract-bidding
procedures in PPP road projects
are standardized.
13 38 31 17 1 3.12 0.78
The 2013 PPP Act is clear on
government’s position and its
objectives.
5 47 41 4 4 3.10 0.71
With the appropriate support
mechanisms in place, the 2013 PPP
Act has made it easier for public-
private collaboration in road
projects.
8 9 29 39 15 4.18 0.95
KEY: StDev-Standard Deviation
4.3.2 Correlation Analysis Between Investor Perception and Investor Participation in
PPP
The study used Pearson correlation to get the linear relationship between the various
independent and dependent variables. The independent variable is the variable that influences
the other, while the dependent variable is the one that is influenced. The correlation coefficient
indicates whether there is a linear relationship between two variables and whether the two
variables have a causal relationship. Pearson’s correlation is designated by (r) and it
symbolizes the correlation coefficient, which ranges between +1 to -1. The positive or negative
sign signifies the direction of the relationship while the statistical significance levels were
determined at alpha = 0.05 or alpha = 0.01.
The independent variables for this study were the investor perception which was correlated
with their consequent participation in PPP road projects, which was the dependent variable, to
find out if there was any relationship, association or correlation between investors’ perception
42
on these issues highlighted and their consequent participation in PPP road projects.
Additionally, the study established the sign of the coefficient indicating direction and
magnitude of the linear relationship as recommended by Orodho (2005). The findings are
presented in Table 4.2.
As indicated in Table 4.2 below, the study established that investors’ perceptions have an
overall positive correlation with participation in the PPP road projects, with Pearson’s
coefficient of r = 0.614 and was significant (p =0.000) at alpha = 0.005 level of significance.
This implies that investors’ perceptions have a linear relationship with the level of participation
in the PPP road projects and that for each unit increase in investor perception, the chances of
a private sector investor participating in PPP road projects increased by 61.4%.
Table 4.2: Correlations Between Investor Perception and Investor Participation
Correlations
Investor
Perception
Investor
Participation
Investor Perception
Pearson Correlation 1 .614**
Sig. (2-tailed) .000
N 82 82
Investor Participation
Pearson Correlation .614** 1
Sig. (2-tailed) .000
N 82 82
**. Correlation is significant at the 0.01 level (2-tailed).
4.3.3 Regression Analysis on Investor Perception Against Participation in PPP Projects
The research defined the long run relationship and formulated the test of significance on the
long run parameters(s). The study used Binary Logistic Regression analysis to determine the
linear statistical relationship between the independent and dependent variables for this
research. The output of the regression model for investor perception alongside its respective
probability value(s) is shown in Table 4.3. The coefficient of determination R-Square of 0.377
implies that 37.7% of the change in participation in PPP road projects was associated with
variation in investors’ perceptions, holding all other factors constant.
43
Table 4.3: Regression Model Summary for Investor Perception
Model Summaryb
Model R
R
Squar
e
Adjuste
d R
Square
Std.
Error of
the
Estimat
e
Change Statistics
Durbin
-
Watson
R
Square
Chang
e
F
Chang
e
df
1
df
2
Sig. F
Chang
e
1 .614
a .377 .369 .37987 .377 48.442 1 80 .000 1.797
a. Predictors: (Constant), Investor Perception
b. Dependent Variable: Investor Participation
Table 4.4 shows the Analysis of Variance (ANOVA) performed at 5% level of significance
which indicates that the variable investor perception had significant effect on investor level of
participation in PPPs. This implies that the regression model was a significant predictor of
investors’ participation PPP road projects.
Table 4.4: ANOVA for Investor Perception
ANOVAa
Model Sum of
Squares df Mean Square F Sig.
1
Regression 6.990 1 6.990 48.442 .000b
Residual 11.544 80 .144
Total 18.534 81
a. Dependent Variable: Investor Participation
b. Predictors: (Constant), Investor Perception
The normalized long run estimated co-integration results are shown in the following regression
equation:
Y = 1.33 + 0.597X1
Where: Y = Investor Participation
X1 = Investor Perception
This long-run equation shows that investor participation in PPP road projects is dependent on
investor perception.
44
Table 4.5: Coefficients for Investor Perception
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients t Sig.
95.0% Confidence
Interval for B
B Std.
Error Beta
Lower
Bound
Upper
Bound
1
(Constant) 1.333 .279 4.778 .000 .778 1.888
Investor
Perception .597 .086 .614 6.960 .000 .426 .767
a. Dependent Variable: Investor Participation
4.4 Institutional Capacity and Participation in PPP Road Projects
The second research question in the study analyzed the responses from the survey on the extent
to which institutional capacity affects participation in PPP road projects in the country. This
has been done and presented using descriptive statistics (mean, standard deviation, and
percentages) as well as inferential (correlation and regression analyses).
4.4.1 Descriptive Statistics on Institutional Capacity
The second research question of this study aimed at assessing the influence of investor’s
capacity on the level of participation in PPP Road Projects. Majority of the participants, 43%
remained neutral when asked whether their firms had established a fully equipped PPP team.
Nonetheless, to a very great extent 43% of the participants opined that their firms were yet to
establish a PPP team. To very low extent, participants indicated that the current public
governance permitted proper coordination among concerned road project PPP entities. To a
great extent, 29% of the respondents indicated their firms depended on external consultants for
technical capacity involving PPP road projects. In addition, 43% agreed to a great extent that
their firm had invested in experienced and highly technical expertise to undertake PPP projects.
33% of the participants, to a low extent indicated that the borrowing rate in the financial market
is sustainable in undertaking PPP road projects. 57% of the participants to a great extent agreed
that non-availability of affordable debt in the market made it difficult to participate in PPP road
projects. Half of the respondents admitted to great extent that whenever perceived political
45
risks increased, the insurance premium for private investors would increase. 52% of the
participants agreed to a very great extent that the availability of a budget plan enabled the
private investor to have better control of cost overruns in a project. 33% of the participants
indicated that to a low extent that the firm could access funding from foreign markets for PPP
road projects. 43% of the participants agreed to a low extent that the financial statements
regarding PPP road projects were published online through a working website platform while
38% of the respondents deemed to a low extent that all the necessary technological equipment
necessary for road PPP projects were available locally. 44% of the participants indicated that
to great extent, at times they were compelled to import special equipment for high quality road
construction. 54% of the participants, to very great extent indicated that the firm leveraged on
technology to facilitate knowledge sharing among PPP road project stakeholders. Lastly, to
very great extent, 54% of the participants indicated that their firms relied on technology in
making appropriate designs for roads that suited client needs.
Table 4.6: Institutional Capacity and Participation in Road PPP Projects
Variables
Very
Low
Extent
Low
Extent Neutral
Great
Extent
Very
Great
Extent
Mean StDev
The organization has a fully
equipped PPP team.
5 12 43 36 4 3.98 1.05
The organization is yet to establish
a PPP team.
1 4 31 43 21 4.62 0.97
The current public governance
permits proper coordination among
concerned road project PPP entities.
30.1 37 24.7 5.5 2.8 2.61 0.80
The organization depends on
external consultants for technical
capacity involving PPP road
projects.
5.1 8.9 29.1 29.1 27.8 4.46 0.95
The organization has invested in
experienced and highly technical
expertise to undertake PPP projects.
3.8 5.1 25.6 42.3 23.1 4.58 0.97
The borrowing rate in the financial
market is sustainable in undertaking
PPP road projects.
13 32.5 33.8 19.5 1.3 3.22 0.82
Non-availability of affordable debt
in the market makes it difficult to
implement PPP road projects.
0 0 16.2 56.8 27 4.01 0.99
46
Variables
Very
Low
Extent
Low
Extent Neutral
Great
Extent
Very
Great
Extent
Mean StDev
If the perceived political risks
increase, the insurance premium
will increase.
3.8 0 20 50 26.3 4.82 0.99
Availability of budget plan
enables the private partner to have
better control of cost overruns
0 1.3 5.2 41.6 51.9 5.42 0.97
The firm can access funding from
foreign markets for PPP road
projects.
21.8 33.3 32.1 10.3 2.6 2.91 0.82
All our financial statements
regarding PPP road projects are
published online through a working
website platform.
13.9 43 39.2 2.5 1.3 2.85 0.74
All the necessary technological
equipment are available locally
18.8 37.5 35 8.8 0 2.85 0.79
At times we are compelled to import
special equipment for high quality
road construction.
1.3 6.7 29.3 44 18.7 4.54 0.96
The firm leverages on technology to
facilitate knowledge sharing among
PPP road project stakeholders
0.0 0.0 3.8 41.8 54.4 4.50 0.98
The firm relies on technology to
make appropriate geometric design
for roads that suit client needs.
0 0 6.3 40 53.8 5.46 0.98
KEY: StDev-Standard Deviation
4.4.2 Correlations Between Institutional Capacity and Participation in Road Projects
The study used Pearson correlation to get the linear relationship between the various
independent and dependent variables. The independent variable is the variable that influences
the other, while the dependent variable is the one that is influenced. The correlation coefficient
indicates whether there is a linear relationship between two variables and whether the two
variables have a causal relationship. Pearson’s correlation is designated by (r) and it
symbolizes the correlation coefficient, which ranges between +1 to -1. The positive or negative
sign signifies the direction of the relationship while the statistical significance levels were
determined at alpha = 0.05 or alpha = 0.01.
47
For the second research question in the study, the institutional capacity was correlated with the
resultant participation in PPP road projects, which was the dependent variable, to find out if
there was any relationship, association or correlation between the variables. Further, the study
established the sign of the coefficient indicating direction and magnitude of the linear
relationship as recommended by Orodho (2005). The findings are presented in Table 4.7.
As indicated in Table 4.7, it was established that investors’ institutional capacity has a positive
correlation with their consequent level of participation in PPP road projects with a Pearson’s
coefficient of r = 0.379 and that this relationship was significant (p =0.000) at alpha = 0.005
level of significance. This implies that institutional capacity has a linear relationship with the
level of participation in the PPP road projects and that for each unit increase in institutional
capacity, the chances of participating in PPP road projects increased by 37.9%.
Table 4.7: Correlation Between Institutional Capacity and Investor Participation in
Road PPP Projects
Correlations
Investor
Participation
Institutional
Capacity
Investor Participation
Pearson Correlation 1 .379**
Sig. (2-tailed) .000
N 82 82
Institutional Capacity
Pearson Correlation .379** 1
Sig. (2-tailed) .000
N 82 82
**. Correlation is significant at the 0.01 level (2-tailed).
4.4.3 Regression Analysis of Institutional Capacity and Participation in PPP Road
Projects
The research defined the long run relationship and formulated the test of significance on the
long run parameters(s). The study used Binary Logistic Regression analysis to determine the
linear statistical relationship between the independent and dependent variables for this
research. The output of the regression model for institutional capacity alongside its respective
probability value(s) is reported in Table 4.8. As can be seen in Table 4.8, the variable
48
institutional capacity had a significant effect on the level of investor participation in PPP road
projects. The coefficient of determination R-Square implies that 14.3% of the change in the
level of participation in PPP road projects was associated with variation in institutional
capacity, holding all other factors constant.
Table 4.8: Regression Model Summary for Institutional Capacity
Model Summaryb
Model R
R
Squar
e
Adjuste
d R
Square
Std.
Error of
the
Estimat
e
Change Statistics
Durbin
-
Watson
R
Square
Chang
e
F
Chang
e
df
1
df
2
Sig. F
Chang
e
1 .379
a .143 .133 .44548 .143 13.394 1 80 .000 1.621
a. Predictors: (Constant), Institutional Capacity
b. Dependent Variable: Investor Participation
Table 4.9 shows the Analysis of Variance (ANOVA) performed at 5% level of significance
which indicates that the variable institutional capacity had significant effect on the investors
level of participation. This implies that the regression model for institutional capacity was a
significant predictor of the level of investors’ participation PPP road projects.
Table 4.9: ANOVA for Institutional Capacity
ANOVAa
Model Sum of
Squares df Mean Square F Sig.
1
Regression 2.658 1 2.658 13.394 .000b
Residual 15.876 80 .198
Total 18.534 81
a. Dependent Variable: Investor Participation
b. Predictors: (Constant), Institutional Capacity
49
The normalized long run estimated co-integration results are shown in the following regression
equation:
Y = 1.951 + 0.412X1
Where: Y = Investor Participation
X1 = Institutional Capacity
This long-run equation shows that the level of investor participation in PPP road projects is
dependent on institutional capacity of the investors.
Table 4.10: Coefficients for Institutional Capacity
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients t Sig.
95.0% Confidence
Interval for B
B Std.
Error Beta
Lower
Bound
Upper
Bound
1
(Constant) 1.951 .359 5.439 .000 1.237 2.665
Institutional
Capacity .412 .113 .379 3.660 .000 .188 .636
a. Dependent Variable: Investor Participation
4.5 Procurement Practices and Participation in PPP Projects
The third research question in the study analyzed the extent to which procurement processes
affect investors’ participation in the PPP road projects. The results from the survey on
respondent firms have been analyzed and presented using descriptive statistics (mean, standard
deviation, and percentages) as well as inferential (correlation and regression analyses).
4.5.1 Descriptive Statistics on Procurement Practices
The third research objective focused on evaluating the effectiveness of procurement practices
in facilitating investor participation in road PPP projects. 26% of the respondents indicated a
low extent of confidence in the tender evaluation process. 45% of the participants showed to a
very great extent their lack of confidence in the tender evaluation process. Furthermore,
majority of the respondents disagreed with the extent to which the PPP project partner bidding
50
process was transparent to all the stakeholders, with 34% indicating a very low extent and 26%
indicating a low extent. In addition, 47% of the participants indicated that to a great extent
there were some opaque practices in the partner bidding selection. On a positive note, 44% of
the participants revealed that to a great extent, the main information regarding tender
advertisement was made public through publications and online platforms. On the other hand,
36% of the participants revealed that the bidder selection was, to a low extent, solely dependent
on competitive exercise. 51% of the survey participants indicated that single sourcing was, to
a great extent, rampant in the selection of PPP projects. Majority of the participants disagreed
that instances of bribery were less prevalent during partner selection, with 47% indicating they
agreed with the statement to a low extent. 44% of the respondents agreed to a very great extent
that subversion of due process in the award and execution of PPP road projects. In addition,
46% of the participants indicated that to great extent, conflict of interest often arose during
bidder selection. Majority of the respondents, at 33%, were neutral on whether all contracts are
made public to the parties of interest. In addition, 46% of the participants were neutral on
whether the contracts were only restricted to the government and the selected bidder. Similarly,
40% of the participants remained neutral on whether there was room for renegotiation of PPP
road projects. Further, 37% of the respondents were neutral on whether contractual terms were
less explicit and some of the information needed further elaboration. Ultimately, 51% of the
participants agreed to a great extent that terms relating to payment mechanisms and distribution
of risks and benefits were well elaborated.
The detailed findings on the third research question on the effect of procurement practices are
presented in Table 4.11.
51
Table 4.11: Descriptive Statistics for Procurement Practices and Participation in Road
PPP Projects
Variable
Very
Low
Extent
Low
Extent Neutral
Great
Extent
Very
Great
Extent
Mean StDev
I have high confidence in the
tender evaluation process. 1.2 25.6 45.1 11 17.1 2.44 0.81
I have little confidence in the
tender evaluation process. 12.2 2.4 40.2 2.4 45.1 3.66 0.93
Partner bidding process is
transparent to all the
stakeholders.
34 26 11 22 7 2.33 0.72
There are some opaque practices
in the partner bidding selection. 0 9 29.5 47.4 14.1 3.67 0.83
Main information regarding
tender advertisement is made
public through publications and
online platforms.
0 3.8 23.1 43.6 29.5 3.99 0.83
Bidder selection is solely
dependent on competitive
exercise.
16.3 36.3 33.8 11.3 2.5 2.48 0.98
Single sourcing is rampant in the
PPP projects. 1.3 2.6 15.4 51.3 29.5 4.05 0.82
Instances of bribery are less
prevalent during partner
selection.
17.9 47.4 33.3 1.3 0 2.18 0.73
Subversion of due process in the
award and execution of PPP
road projects is common.
3.7 0 9.9 42 44.4 3.58 0.72
Conflict of interest often arises
during bidder selection. 1.3 3.9 17.1 46.1 31.6 4.03 0.88
All contracts are made public to
the parties of interest. 10 28.8 33.8 20 7.5 2.86 1.09
Contracts are only restricted to
the government and the selected
bidder.
1.2 13.6 45.7 30.9 8.6 3.32 0.86
There is room for renegotiation
of PPP road projects. 11.1 19.8 39.5 22.2 7.4 2.95 1.08
Contractual terms are less
explicit and some of the
information needs further
elaboration.
8.9 13.9 36.7 27.8 12.7 3.96 0.88
Terms relating to payment
mechanisms and distribution of 2.5 2.5 17.7 50.6 26.6 3.22 1.12
52
Variable
Very
Low
Extent
Low
Extent Neutral
Great
Extent
Very
Great
Extent
Mean StDev
risks/benefits are well
elaborated.
KEY: StDev-Standard Deviation
4.5.2 Correlations Between Procurement Practices and Investor Participation
The study used Pearson correlation to get the linear relationship between the various
independent and dependent variables. The independent variable is the variable that influences
the other, while the dependent variable is the one that is influenced. The correlation coefficient
indicates whether there is a linear relationship between two variables and whether the two
variables have a causal relationship. Pearson’s correlation is designated by (r) and it
symbolizes the correlation coefficient, which ranges between +1 to -1. The positive or negative
sign signifies the direction of the relationship while the statistical significance levels were
determined at alpha = 0.05 or alpha = 0.01.
The study’s third research question on the effect of procurement practices was correlated with
the investors’ level of participation in PPP road projects, which was the dependent variable, to
find out if there was any relationship, association or correlation between the variables. Further,
the study established the sign of the coefficient indicating direction and magnitude of the linear
relationship as recommended by Orodho (2005). The findings are presented in Table 4.12.
As indicated in Table 4.12 below, the study established that the procurement practices have a
positive correlation with the level of investors’ participation in PPP road projects with a
Pearson’s coefficient of r = 0.496 and this correlation was significant (p =0.000) at alpha 0.005
level of significance. This implies that procurement practices have a linear relationship with
the level of participation in the PPP road projects and that for each unit increase in procurement
practice variable, the chances of participating in PPP road projects increased by 49.6%.
53
Table 4.12: Correlation Between Procurement Practices and Investor Participation
Correlations
Investor
Participation
Procurement
Practices
Investor Participation
Pearson Correlation 1 .496**
Sig. (2-tailed) .000
N 82 82
Procurement Practices
Pearson Correlation .496** 1
Sig. (2-tailed) .000
N 82 82
**. Correlation is significant at the 0.01 level (2-tailed).
4.5.3 Regression Analysis of Procurement Practices Against Participation in PPP
Road Projects
The research defined the long run relationship and formulated the test of significance on the
long run parameters(s). The study used Binary Logistic Regression analysis to determine the
linear statistical relationship between the independent and dependent variables for this
research. The output of the regression model for procurement practices alongside its respective
probability value(s) is reported in Table 4.13. As can be seen in Table 4.13, the variable
procurement practices had a significant effect on the level of investor participation in PPP road
projects. The coefficient of determination R-Square of 0.246 implies that 24.6% of the change
in the level of participation in PPP road projects was associated with variation in procurement
practices, holding all other factors constant.
Table 4.13: Regression Model Summary for Procurement Practices
Model Summaryb
Model R
R
Squar
e
Adjuste
d R
Square
Std.
Error of
the
Estimat
e
Change Statistics
Durbin
-
Watson
R
Square
Chang
e
F
Chang
e
df
1
df
2
Sig. F
Chang
e
1 .496
a .246 .237 .41790 .246 26.131 1 80 .000 1.707
a. Predictors: (Constant), Procurement Practices
b. Dependent Variable: Investor Participation
54
Table 4.14 shows the Analysis of Variance (ANOVA) performed at 5% level of significance
which indicates that the variable procurement practices had significant effect on investor
participation. This implies that the regression model for procurement practices was a
significant predictor of the level of investors’ participation PPP road projects.
Table 4.14: ANOVA for Procurement Practices
ANOVAa
Model Sum of
Squares df Mean Square F Sig.
1
Regression 4.563 1 4.563 26.131 .000b
Residual 13.971 80 .175
Total 18.534 81
a. Dependent Variable: Investor Participation
b. Predictors: (Constant), Procurement Practices
The normalized long run estimated co-integration results are shown in the following regression
equation:
Y = 1.729 + 0.492X1
Where: Y = Investor Participation
X1 = Procurement Practices
This long-run equation shows that investor participation in PPP road projects is dependent on
procurement practices.
Table 4.15: Coefficients for Procurement Practices
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients t Sig.
95.0% Confidence
Interval for B
B Std.
Error Beta
Lower
Bound
Upper
Bound
1
(Constant) 1.729 .301 5.735 .000 1.129 2.329
Procurement
Practices .492 .096 .496 5.112 .000 .300 .683
a. Dependent Variable: Investor Participation
55
4.6 Investor Appetite for PPP Road Projects
The study also sought to establish the level of private sector investors’ participation in existing
PPP road projects in the country through a survey on a number of statements. The study
revealed that to great extent (36%), the road projects have been a true reflection of value for
money. 34% of the study respondents remained neutral when asked whether the satisfaction
level of the public towards completed PPP road projects was encouraging. 36% of respondents
surveyed disagreed that the progress completion rate for the PPP road projects was high.
Another, 36% of the respondents were neutral on whether the qualified rate of road project
quality was high. In addition, 41% of the respondents remained neutral when asked whether
the investment profit rate was motivating.
Table 4.16: Level of Participation in Road PPP Projects
Investor Appetite for PPP
Road Projects
Very
Low
Extent
Low
Extent Neutral
Great
Extent
Very
Great
Extent
Mean StDev
Road Projects’ are a true
reflection of value for money 1.3 8.8 36.3 36.3 17.5 4.40 0.95
The satisfaction level of the
public towards completed PPP
road projects is encouraging
7.8 26 33.8 27.3 5.2 3.61 0.85
The progress completion rate for
the PPP road projects is high. 13.4 36.1 30.9 2.1 82.5 7.31 1.10
The qualified rate of road project
quality is high. 3.8 17.9 35.9 32.1 10.3 3.99 0.90
The investment profit rate is
motivating. 12.3 27.2 40.7 17.3 2.5 3.30 0.85
KEY: StDev-Standard Deviation
4.7 Chapter Summary
The chapter presented the results and findings of the study to investigate and analyze the factors
affecting private sector investors’ participation in public road infrastructure projects in Kenya
through Public Private Partnership framework. The research results showed that investor
perception has a significant impact on investors’ decision to participate in PPP road projects.
In addition, the capacity of the investor had a significant influence on the level of participation
in PPP road projects. The research findings further revealed that procurement practices had a
56
positive and significant influence on the level of participation in PPP road projects. The next
chapter being the final chapter, presents the discussion of the findings, conclusion, and
recommendations arising from the study.
57
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSION, AND RECOMMENDATIONS
5.1 Introduction
This chapter presents the summary of the results and findings of the study and discusses these
findings in the context of the existing literature on the subject. In addition, the chapter makes
conclusions of the study based on each of the study research questions. The chapter further
makes recommendations for improvements on the status of investor participation in PPP road
projects as well as recommendation for further studies.
5.2 Summary
The purpose of the study was to investigate and analyze the factors affecting private sector
investors’ participation in public road infrastructure projects in Kenya through Public Private
Partnership framework. The study was guided by the following research questions: To what
extent does investor perception affect participation in the public private partnership projects in
the roads sector? To what extent does institutional capacity affect participation in the public
private partnership projects in the roads sector? Lastly, to what extent do procurement
processes affect participation in the public private partnership projects in the roads sector?
The study adopted a survey research design. The population of the study was the 192 road
projects that had been listed under the mandate of the Kenya National Highways Authority
(KeNHA) for the period 2007-2019. Using simple random sampling in determining the
participants in the survey, a sample size of 130 was selected for this study. The data collection
was done using survey questionnaires and the data collected was then analyzed using
descriptive and inferential statistical methods with the output of the analysis being presented
in the form of tables and figures. The study was a survey targeting a population of 130 projects
listed in the pipeline by the Kenya National Highways Authority (KeNHA). Simple random
sampling was employed in establishing the survey participants. For data analysis, descriptive
statistics and inferential statistics were conducted. Analysis output was presented in the form
of tables and figures.
58
The first research question sought to answer the extent to which investor perception affected
participation in the public private partnership projects in the roads sector. The findings from
the first research question show that a project’s financial feasibility, the government’s political
commitment and government policies, all had positive correlation with investors’ participation
in PPP road projects (Pearson Correlation, r = 0.614). With a significance level at 5% (p
=0.000), the regression model results showed that investor perception variables had positive
and significant influence on the level of investor participation in road PPP projects.
The second research question focused on assessing the extent to which institutional capacity
of the investor affected the level of participation in PPP road projects. The findings on the
second research question revealed that the expertise of the investor, the investor’s
technological capability and the financial capability of the investor had a significant influence
on investor participation in PPP road projects with a (p = 0.000) 5% level of statistical
significance. As a result, institutional capacity therefore positively affected investors’
participation in PPP road projects, even though the level of correlation remained low (Pearson
Correlation, r = 0. 379).
The last research question of this study inquired into the influence of procurement practices on
investors’ decision to participate in PPP road projects. The findings of the last research
question were that the tendering practices, the bidding and partner selection, and contract
negotiation, were all found to have a slight positive influence on investors’ decision to
participate in PPP road projects (Pearson Correlation, r = 0. 496). Nonetheless, these findings
remained significant (p= 0.000) at 5% level of statistical significance, meaning that
procurement practices had a positive and significant influence on the level of investor
participation in road PPP projects.
5.3 Discussion
5.3.1 Investor Perception and Participation in PPP Road Projects
The study findings revealed that investor perception on PPP road projects had a positive and
significant effect on the level of participation in PPP road projects. The findings implied that
project financial feasibility, political commitment, government policy all had a positive
59
correlation with participation in PPP road projects (Pearson Correlation, r = 0.614). The
variables were found to be significant (p =0.000) at 5% significance level. Consequently, with
all other factors held constant, an increase in investor perception factors is expected to result
in an increase in private sector investors’ level of participation in PPP road projects. These
results are in line with studies by Chileshe, Njau, Kibichii, and Macharia (2020) who indicated
that perceptions on political stability and viability of the projects are highly valued by the
private sector in assessing whether or not to participate in PPP projects. In their findings,
factors such as acceptance and support given by the community, project feasibility, laws,
regulations and guidelines put in place, availability of a financial market and having a well-
organized and committed public agency, were the highly ranked critical success factors (CSFs)
in PPP projects. In addition, Chileshe et al (2020) also conclude that poor planning from public
and private sectors in managing PPP projects can lead to ineffective PPP project
implementation. They conclude that the private sector is motivated by quick profits, which
suggests that the sector is more attracted to invest in short-term projects that generate quick
returns rather than investing in transportation infrastructure whose returns are long-term and
associated with high risks. It is therefore necessary that both the public sector and private sector
parties understand their roles and responsibilities in the PPP project to achieve value for money
(VFM).
The study result is also in agreement with previous observations by Kenya Bankers Association
(2016) that infrastructure, especially transportation, projects are structurally exposed to market
risk. Certainly, below-estimate demand in road PPP projects may be the result of errors in
project preparation such as a defective cost-benefit analysis, inaccurate traffic projections,
unaffordable tariffs or may derive from factors such as unfavorable government action,
external factors, among others. Hashim (2017) further revealed that the asset risk in PPP
projects is among the challenges particularly where the risk is associated with the design and
construction. Nevertheless, the poor planning in designing and maintaining the assets at the
early stage of PPP projects will affect the operational phase. Bengesi, Mwesiga, and Mrema
(2016) also suggested that beyond the understanding of the concept of PPP, the investor
perceptions on political stability and the viability of the project in question may count more
towards private sector investor attraction to long term PPP projects which are typically
associated with huge capital investment and high risks.
60
The findings in this study on the effect of investor perceptions on project financial feasibility
also support findings by Lop, Ismail, & Isa (2017) that low level of end users’ satisfaction will
demonstrate the real situation of PPP project’s performance. One of the primary concerns that
investors have is inaccuracy of the data that leads to wrong projections as well as cost and
benefit analyses, thereby causing demand risk on the part of the investor and compromising
project sustainability. The government has also been slow in decision making towards potential
PPP projects. This is possibly attributed to lack of proper mechanism to transfer calculated risk
to the private sector. Another aspect of financial capability is the cost of capital which should
take into account the appropriate level of base tariff. Ideally, the internal rate of return (IRR)
of a project should be equal to its cost of capital. If the IRR is greater than the cost of capital,
the investor makes excess profit, while if IRR is less than the cost of capital, the investor loses
money. Pricing should thus ideally be set at levels that allow fair rates of return on investment
to cover the cost of financing and to meet contractual obligations (United Nations Economic
and Social Commission for Asia and the Pacific, 2009).
The high number of pending or incomplete projects also gives credence to investors’ low
perception on the financial feasibility of PPP road projects. In Kenya, for instance, the
Government is facing the uphill task of clearing a backlog of road projects that have been
delayed and it is estimated that it will take 10 years and an additional KShs.650 billion in
budgetary allocations to complete the delayed ongoing projects (Owino 2020). Mwende (2019)
further asserts that the time and cost overruns on projects are deliberately orchestrated by
corrupt public officials who ensure that timelines are breached through delayed payments,
which allows contractors to ask for compensation for the delays originating from the
government. Patil, Gupta, Desai, and Sajane (2013) identify five important causes of
construction delays in transportation infrastructure projects namely; land acquisition,
environmental impact assessment, financial closure, change orders by the client, and poor site
management and supervision by the contractor.
Furthermore, the outcome of this study’s research question on the investor perception resonates
well with Debel (2019) who revealed that for effective implementation of PPP road projects,
the government should ensure at least the presence of an enabling specific PPP policy, well
organized and committed public agency, stable political and social environment, favorable
61
legal frameworks and good governance. However, the study findings contradict with
conclusions drawn by Minjie (2012) in a study on health PPPs which indicate that there was a
strong governance for health PPP projects the ministry was committed to PPP projects goals.
5.3.2 Institutional Capacity and Participation in PPP Road Projects
The study findings from the research question on institutional capacity of private sectors
investor in road projects in Kenya revealed that the institutional capacity of the investors which
was assessed through variables such as financial, technical, marketing, management
capabilities, play a significant role in predicting the likelihood of private sector investors
participating in road PPP projects. The research findings in this study show that the investor
expertise, technical capability, and financial capability have a positive and significant effect
on participation in PPP projects. These study findings on investor expertise are closely linked
to the Agrawal (2010) assertion that a strong and capable project team is crucial for the success
of PPP project implementation. The findings can also be related to findings that the efficiency
of PPP project success is directly impacted by the shortage of staff in monitoring the projects
performance as revealed by Bannan (2012). This is further supported by studies on
implementing PPP projects as discussed by Carrillo (2006) that conclude that different level
of experience between individuals from private concessionaires and public sectors also
contributed to the poor projects implementation.
The findings on the technical capability of the private sector investors is also associated with
the level of dependency of the private sector party on the government agencies. This is
supported by Carrillo (2006) who shows evidence that private concessionaires whose project
teams are highly dependent on the government, despite the project being private sector driven,
are not capable of successful implementing PPP projects. Unfortunately, in the local context,
many firms within the construction sector struggle with deficiency in various capability
endowments. Thus, the research findings on institutional capacity supports the argument by
Lop, Ismail, Isa, and Khalil (2017) who identified eight factors contributing to poor project
performance. These include institutional capacity factors namely; lack of competency among
staff or person in charge of the PPP, service delivery failure, lack of strategy in assessing
performance, lack of monitoring, lack of experience and understanding of PPP among
62
stakeholders, and poor management. Further studies supporting the research findings on the
effect of institutional capacity on the level of participation in PPP projects show that inadequate
capacity by the investor can act as a cause of project delays; resulting in time and cost overruns
in infrastructure projects (Deeppa and Krishnamurthy, 2014). These findings by Deeppa and
Krishnamurthy (2014) manage to group these institutional capacity factors into contractor
related factors, professional management related factors, material related factors, labour and
equipment, government related factors, external factors, project related factors, owner related
factors, contractual responsibilities, and design and documentation factors. Other institutional
capacity factors affecting the ability of private sector investors to undertake successful PPPs
include inadequate negotiation skills among those engaged in negotiation of PPP contracts and
the lack of a PPP coordination team (Msafiri, 2015).
The research findings on institutional capacity of investors is further supported by assessments
of the financial capability of private sector investors in less developed capital markets who
mainly depend on commercial banks and similar lenders in the industry (Kamau, 2016). The
possibility of commercial banks forming a consortium to fund such projects is disrupted by the
varying views of each potential partner. Typically, banks examine the feasibility of projects
based on the available information. A positive evaluation of one of the banks may not
necessarily match with that of another bank due to variation on priorities. In assessing the
financial capability as far as collateral is involved, Nifula (2009) reports that for PPP projects,
in contrast with other commercial lending agreements that pledge property or assets in case of
default, the project lenders will instead seek to secure “step-in” rights to use the assets in order
to continue to operate the utility until its debt obligations have been repaid. This sort of
potential constraint on management is not present, or is limited, in other forms of corporate
lending and is another consideration for the internal financial sustainability of a PPP.
The financial capability of private sector investors is further affected by the financial capacity
of government institutions tasked with overseeing implementation of PPP projects which are
often under-funded as demonstrated through the Kenya government 2019/2020 financial year
budgetary allocations which show that as of January 2019 there were pending bills totaling
KES. 36.8 billion (Owino, 2020). In addition, (Wanzala, 2019) reports that the KES. 65 billion
allocated by the Kenya government for road projects for the fiscal year ended June 2019 was
63
far much lower than the KES. 94.8 billion required to complete the proposed road works,
including land compensation. Owino (2020) further reports that it will take at least 10 years
and a further KES. 650 billion in budgetary allocations to complete the pending road projects.
5.3.3 Procurement Practices and Participation in PPP Projects
The study findings also assessed the relation between procurement practices and the level of
investor participation in road PPP projects. Procurement is probably the most critical aspect
and perhaps the most demanding phase of PPP project, other than the actual implementation
of the road project. The study revealed that tendering process, bidding process and bidder
selection, and contract negotiation process as critical factors for consideration by private sector
investors in their decision to participate in PPP road projects. The analysis established a
positive and significant relationship between procurement practices and the level of investor
participation in PPP projects. The study echoes the findings by Subaizah and Azzahra (2014)
that factors such as lengthy delays in negotiations, lack of government guidelines and
procedures on PPP, higher charge to direct users, delays because of political debate and
confusion over government objectives and evaluation criteria as the top five constraints for
adopting PPP in Malaysia. The study findings are also in line with other research conclusions
by Agrawal (2010) that in poorly regulated PPP markets, procurement is highly characterized
by high opaqueness, lengthy procedures, corruption and rent seeking behavior, among other
factors which weaken the private investors’ confidence in PPP projects. Dolla and Laishra
(2019) have shown that despite the dire need for MSW services in India, the stakeholders
perceived that the MSW services procured through the PPP mode had unfavorable results such
as failed projects, high transaction costs, and over-exploitation by the private sector. They
attributed this negativity to inappropriate procurement process.
The study results are also supported by the findings from a study by Dabarera, Perera, and
Rodrigo (2019) on road construction PPP in Sri Lanka which found that the public procurement
process was too bureaucratic and opened up an avenue for corrupt transactions by some
dishonest public officials, who normally inflate costs. Their study showed that lack of
transparency on PPP contracts, creating an avenue for corrupt transactions by some dishonest
public officials. Chami (2015) also revealed that it was also clear that there was a positive
64
correlation between funding PPP road projects and procurement procedure, financial
feasibility, funding PPP road projects and project schedules. The findings from this study
reveal that the fundamental justification for adopting PPP would significantly reduce the
upfront costs for the government in providing and maintaining public facilities and that it
allows for improvement in the public facilities and services because PPP encourages
innovation by the private sector. Where established procurement procedures have not been
followed there may be an opportunity for interested parties such as other disappointed bidders
to challenge the award of the project in the courts. Some countries also have freedom of
information laws that require details of the winning bid be available and so an awarding
authority may be required to disclose any post bid amendments to the contract that have been
made.
However, the study findings contradict with conclusions drawn from India by Nallathiga,
Shaikh, Shaikh, and Sheik (2017) that there was a greater convergence across the different
procurement methods and that there was greater consensus among project stakeholder on the
critical success/ failure factors of road PPP projects. Sobják (2018) further observes that
potential private investors in public-private infrastructure projects in Sub-Saharan Africa do
not regard the tender process as the highest corruption risk. Rather, they are highly concerned
about the transparency environment of the project origination (project appraisal, selection,
design, and budgeting), because misconduct at this initial phase gives leeway for corruption at
later project stages. This therefore concludes that project origination may be more important
than the traditional focus on promoting procurement reform.
5.4 Conclusion
5.4.1 Investor Perception and Participation in PPP Road Projects
The private sector investors in the road sector in Kenya have a weak perception on the viability
of the road PPP projects proposed by the government. In addition, the investors have a low
confidence towards the government’s level of political commitment in carrying out effective
partnering with the private sector in road PPP projects. The investors further perceive that there
are gaps in the adequacy of the existing government policies that are aimed in promoting road
65
PPPs. Despite the acknowledgement that PPP is essentially a new approach to risk allocation
in public road infrastructure development, investors still hold a low perception towards the
current model, resulting in the evidently low participation of the private sector in road PPP
projects.
5.4.2 Institutional Capacity and Participation in PPP Road Projects
The study concludes capacity of the private sector players in the road sector in Kenya is still
low to handle large road infrastructure projects. Such projects typically require highly
specialized technical and project management skills and with huge capital requirements.
Majority of the private sector players in the road sector do not have the internal technical
capacity to plan, negotiate, execute and manage such PPP projects which also run over long
periods, as compared to the traditional government funded projects. The investors also do not
have a dedicated PPP project management team. In addition, one of the biggest hinderances to
investor participation in road PPP projects in Kenya is the financial capacity of the investors,
with a very limited access to funded sources for such ventures locally. Therefore, most PPP
projects are undertaken by foreign based investors leaving locals for sub-contracting
opportunities.
5.4.3 Procurement Practices and Participation in PPP Projects
The study concludes that there was a lack of transparency in the tendering and bidding
processes, which is a major obstacle towards investors’ participation in PPP road projects.
There is poor planning in the contract preparation and negotiation process which is affected by
delays that impedes the successful implementation of the planned PPP projects. Most investors
are of the opinion that the procurement processes are plagued by conflict of interest and that
selection and award of projects is driven by other external issues other than the results of the
open and competitive process. Consequently, there are instances where entities with limited
capacities are awarded tenders and this directly affects value for money for the pursued project.
However, most of the investors agreed that information on the pipeline of PPP projects and
other tender information was easily accessible by all interested parties.
66
5.5 Recommendation
5.5.1 Recommendation for Improvement
5.5.1.1 Investor Perception and Participation in PPP Road Projects
In view of the findings, this study calls for concerted efforts at institutional level to enhance a
common understanding of the PPP concept, create sufficient awareness of PPP prospects
among the private sector investors, and streamline the procedures and legal framework
surrounding PPP projects to boost private investors’ confidence. There is an urgent need to
review existing government policies and regulations on PPP, in particular, the PPP Act and
other current legal obstacles, to bring about an alignment of the interests of the public and
private sector. This should be aimed to result in appropriate risk-reward allocation between the
public sector and potential private investors in PPP projects.
There is also need to carry out early stage assessment of the viability of proposed projects
through a thorough feasibility studies and financial modelling which factors in the long-term
financing implications of a PPP project. This may be done by the government dedicating a
special fund to finance the early stage project viability studies so that only projects that are
considered attractive for partnership with private sector investors are then pushed forward the
next stage of procurement to promote the uptake of such projects by private investors.
Ultimately, there should be clear measures taken by government to support local private
investors in the road sector which will show a strong government commitment to actualize
infrastructure PPP projects. This would best be done by facilitating to close a few pilot projects
with local investors that can act as the blueprint for future road sector PPP projects.
5.5.1.2 Institutional Capacity and Participation in PPP Road Projects
There is need to strengthen the institutional capacity of both the public sector players and
private investors in the road sector for effective PPP implementation. This can be done by
building the financial capacity of potential investors through measures to develop the local
financial markets in the country to boost the ability of financial institutions to fund road PPP
projects. The government may utilize credit enhancement programs for lenders funding PPP
67
projects and may also use legislative measures that promote flexibility of financial markets to
raise funds for such infrastructure projects. This will provide opportunities for the private
investors to engage in PPP at competitive and even subsidized funding cost.
In addition, the technical capacity of local investors may be improved by making it mandatory
for foreign investors in the road infrastructure sector to have minimum percentage of local
content by forming consortia with local partners in bidding for PPP projects. This facilitates
knowledge transfer and the building of technical and project management capacity for local
players in the road sector. Besides this, the government agencies such as the Construction
Authority, KeNHA and other stakeholders should conduct multi-stakeholder seminars and
training workshops on PPP for local private sector.
5.5.1.3 Procurement Practices and Participation in PPP Projects
The procurement practices around road PPP projects should be reviewed to improve
transparency of the bidder selection criteria. This selection criteria should be available to all
interested parties in advance of the bidding process. A critical component of this criteria would
be a cost-benefit analysis report which identifies a public sector comparator for all road PPP
projects which shows the value of an equivalent project undertaken through normal
government funded procurement process so that the investor selection is based on the
additional value brought about by the PPP option. This ensures there is an independent criterion
to assess value-for-money for PPP projects.
The procurement process timeliness including contract negotiations and signoffs of all relevant
government approvals should be enshrined in regulations to avoid unnecessary delays
occasioned by public officials. This allows private investors and public agencies to prepare in
advance and commit resources within the well-planned timelines. In addition, the central
repository on PPP should be kept well updated, timely, and easily accessible to all the
stakeholders. Information on all selected bidders and their qualifications for the project
awarded should also be published in accessible platforms for public scrutiny. This ensures that
there is information symmetry for all interested stakeholders and reduces the chances of
favoritism and conflict of interest in bidder selection.
68
5.5.2 Recommendation for Further Study
The study was limited to road projects under the management of the Kenya National Highway
Authority (KeNHA). It is necessary to conduct other studies that evaluate the uptake of PPP in
urban and rural road projects. Additionally, the county governments in Kenya are also
mandated to undertake PPP projects. It is therefore recommended to assess the effectiveness
of road PPP adoption in various counties across the country. Lastly, a comparative study should
be undertaken in other sub-Saharan Africa countries which have reported success stories in
road PPPs to identify the factors behind their successful experience with PPP funded road
projects.
69
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83
APPENDICES
84
Appendix I: Questionnaire
SECTION I: DEMOGRAPHIC FACTORS
Kindly fill out your company information in the spaces below. Please tick only one response
for each question.
1. Age of the company (Years): Less Than 5 [ ] 6-10 [ ] 11-15 [ ] 16-20 [ ] Above 20 [ ]
2. Number of Employees: Less than 30 [ ] 30-59 [ ] 60- 89 [ ] more than 90 [ ]
3. Scope of company’s operations: Kenya [ ] East Africa [ ] Africa [ ] Global [ ]
4. Road Project Category: International Trunk (A) [ ] National (B1, B3, & B8) [ ]
Primary (C) [ ] Secondary (D) [ ] Special Purpose Roads [ ] Other [ ]
5. Source of Financing: Local Market [ ] Regional Market [ ] International market [ ]
6. Form of financing: Equity [ ] Debt [ ] Equity & Debt [ ]
7. Major Lender: Commercial Banks [ ] Development Banks [ ] Pension Funds [ ]
Insurance Companies [ ] Other [ ]
SECTION II: INVESTOR PERCEPTION AND PARTICIPATION IN THE PUBLIC
PRIVATE PARTNERSHIP
Indicate the extent to which your perception of each of the factors below affected your decision
to participate or not to participate in the PPP road projects. Use a scale of 1-5, where 1 =
very low extent, 2 = low extent, 3 = neutral, 4 = great extent, 5 = very great extent.
85
Project Financial Viability
FV1 Risk allocation on PPP road projects is done in a more
appropriate manner.
1 2 3 4 5
FV2 The PPP road project parties provide for detailed
cost/benefits assessment
1 2 3 4 5
FV3 The capital market including banking institutions has
remained open to investment.
1 2 3 4 5
FV4 If the perceived political risks increase, the expected
Internal Rate of Return (IRR) will increase.
1 2 3 4 5
FV5 The PPP road projects reflect achievement for Value for
Money (VFM) to both the public and the private partner.
1 2 3 4 5
Political Commitment
PC1 The government has been proactive in compensating
landowners and communities within the project vicinity.
1 2 3 4 5
PC2 The government is less clear on its position in the
implementation of the PPP road projects.
1 2 3 4 5
PC3 The political regimes have remained stable for the last ten
years.
1 2 3 4 5
PC4 The state/county provides for sound guarantees towards all
PPP road projects.
1 2 3 4 5
PC5 The government is actively involved in the project life
cycle.
1 2 3 4 5
Government Policy
GP1 There is weak sectorial public bidding legation, all PPP road
projects are anchored on the 2013 PPP Act.
1 2 3 4 5
GP2 There is strong sectorial public bidding legislation in all the
PPP road projects.
1 2 3 4 5
86
GP3 All the contract bidding procedures in PPP road projects are
standardized.
1 2 3 4 5
GP4 The 2013 PPP Act is clear on government’s position and its
objectives.
1 2 3 4 5
GP5 With the appropriate support mechanisms in place,
The 2013 has made it easier for public-private collaboration
in road projects.
1 2 3 4 5
SECTION III: INSTITUTIONAL CAPACITY AND PARTICIPATION IN THE
PUBLIC PRIVATE PARTNERSHIP
Indicate the extent to which each of the following aspects of institutional capacity affected
your decision to participate or not to participate in the PPP road projects. Use a scale of 1-5,
where 1 = very low extent, 2 = low extent, 3 = neutral, 4 = great extent, 5 = very great
extent.
Investor Expertise
IE1 The organization has a fully equipped PPP unit. 1 2 3 4 5
EI2 The organization is yet to establish a PPP unit. 1 2 3 4 5
EI3 The current public governance permits proper coordination
among concerned road project PPP entities.
1 2 3 4 5
EI4 The organization depends on external consultants for
technical capacity involving PPP road projects.
1 2 3 4 5
EI5 The organization has invested in experienced and highly
technical expertise to undertake PPP projects.
1 2 3 4 5
87
Financial Capability
FC1 The borrowing rate in the financial market is sustainable in
undertaking PPP road projects.
1 2 3 4 5
FC2 Non-availability of affordable debt in the market makes it
difficult to implement PPP road projects.
1 2 3 4 5
FC3 If the perceived political risks increase, the insurance
premium will increase.
1 2 3 4 5
FC4 Availability of budget plan enables the private partner
to have better control of cost overruns
1 2 3 4 5
FC5 The firm can access funding from foreign markets for PPP
road projects.
1 2 3 4 5
Technological Capability
TC1 All our financial statements regarding PPP road projects are
published online through a working website platform.
1 2 3 4 5
TC2 All the necessary technological equipment are available
locally
1 2 3 4 5
TC3 At times we are compelled to import special equipment for
high quality road construction.
1 2 3 4 5
TC4 The firm leverages on technology to facilitate knowledge
sharing among PPP road project stakeholders
1 2 3 4 5
TC5 The firm relies on technology to make appropriate geometric
design for roads that suit client needs.
1 2 3 4 5
88
SECTION IV: PROCUREMENT PRACTICES AND PARTICIPATION IN THE
PUBLIC PRIVATE PARTNERSHIP
Indicate the extent to which each of the following aspects of the procurement practices affected
your decision to participate or not to participate in the PPP road projects. Use a scale of 1-5,
where 1 = very low extent, 2 = low extent, 3 = neutral, 4 = great extent, 5 = very great
extent.
Tendering Practices
TP1 I have high confidence in the tender evaluation process. 1 2 3 4 5
TP2 I have little confidence in the tender evaluation process. 1 2 3 4 5
TP3 Partner bidding process is transparent to all the
stakeholders.
1 2 3 4 5
TP4 There are some opaque practices in the partner bidding
selection.
1 2 3 4 5
TP5 Main information regarding tender advertisement is made
public through publications and online platforms.
1 2 3 4 5
Bidder Selection
BS1 Bidder selection is solely dependent on competitive
exercise.
1 2 3 4 5
BS2 Single sourcing is rampant in the PPP projects. 1 2 3 4 5
BS3 Instances of bribery are less prevalent during partner
selection.
1 2 3 4 5
BS4 Subversion of due process in the award and execution of
PPP road projects.
1 2 3 4 5
BS5 Conflict of interest often arises during bidder selection. 1 2 3 4 5
89
Contractual Negotiation
CN1 All contracts are made public to the parties of interest. 1 2 3 4 5
CN2 Contracts are only restricted to the government and the
selected bidder.
1 2 3 4 5
CN3 There is room for renegotiation of PPP road projects. 1 2 3 4 5
CN4 Contractual terms are less explicit and some of the
information needs further elaboration.
1 2 3 4 5
CN5 Terms relating to payment mechanisms and distribution of
risks/benefits are well elaborated.
1 2 3 4 5
SECTION V: LEVEL OF INVESTOR PARTICIPATION IN PPP
Indicate the extent to which you agree with the following aspects of the level of participation
and the success of the PPP road projects in Kenya. Use a scale of 1-5, where 1 = very low
extent, 2 = low extent, 3 = neutral, 4 = great extent, 5 = very great extent.
Investor Participation in PPP
IP1 Road Projects’ are a true reflection of value for money 1 2 3 4 5
IP2 The satisfaction level of the public towards completed PPP
road projects is encouraging
1 2 3 4 5
IP3 The progress completion rate for the PPP road projects is
high.
1 2 3 4 5
IP4 The qualified rate of road project quality is high. 1 2 3 4 5
IP5 The investment profit rate is motivating. 1 2 3 4 5
90
Appendix II: NACOSTI Research License
91
Appendix III: USIU Research Letter
92
Appendix IV: Letter of Introduction
Date
Address
Dear Respondent,
RE: Research Questionnaire
I am a student at the United States International University Africa (USIU-Africa) pursuing a
Master of Business Administration degree. As part of the course work, I am conducting a
research titled “Factors Affecting Investors’ Participation in Road Infrastructure through
Public Private Partnership Framework in Kenya”.
As an organization that is involved in the road construction sector, the findings of this research
will be of interest to your organization and would help enhance the organization’s future
involvement in road sector PPP projects. Your voluntary participation in this research will
therefore go a long way in helping this outcome.
In this regard, kindly take a few minutes to complete the attached questionnaire with accurate
information that will be used solely for this research while observing utmost confidentiality.
The findings of the study will be also be shared with your organization at the end of the
research.
Your assistance is in this project is highly valued and appreciated.
Yours faithfully,
Ali Idris
Research Student
93
Appendix V: List of Road Projects
Project Title Length (Km) Project Value
1 Magumu - Njambini Road 22 820,320,126
2 Rumuruti - Mararal Road (phase I) 35 3,989,211,846
3 Londiani-Fort Tenan-Muhoroni Road 63 5,468,960,786
4 Maumau - Ruambwa - Nyadorera - Siaya
Road 31 2,596,902,092
5 Mbita cause way Bridge 1 1,065,976,165
6 Kehancha-Suna - Masara Road 68 5,903,140,601
7 Marsarbit- Turbi Road 122 -
8 Turbi - Moyale Road 121 14,046,896,920
9 Timboroa - Eldoret Road 76 5,434,860,652
10 Athi River - Namanga Road including
Namanga One Stop Border Post 135 9,012,901,788
11 Jn. A109 (Changamwe round about) - Moi
International Airport Access Road & Port
Reitz Road
6 5,897,089,231
12 NCTIP: Rehabilitation of Njoro Turnoff -
Timboroa Road 84 6,077,153,674
13 NCTIP: Rehabiliation of Nyamasaria -
Kisian Road 22 8,140,437,887
14 KTSSP: Rehabilitation Kisumu -
Kakamega Road 47 9,219,020,496
15 KTSSP: Rehabilitation Webuye - Kitale
Road 58 5,908,571,071
16 KTSSP: Rehabilitation MajiyaChumvi -
Bachuma Gate Road 53 5,798,508,016
17 MPARD Package 1: Miritini- Mwache
Road including Kipevu Link Road 10 18,756,435,483
18 Mariakani - Kaloleni - Kilifi Road: Phase I
& II 54 4,203,590,934
19 Thua Bridge 1 652,586,968
20 Sotik - Ndanai Road 20 2,149,591,972
21 Ndanai - Gorgor Road 13 1,100,714,249
22 Enjinja - Bumala Road 37 2,356,506,338
23 Rangala-Siaya-Bondo Road 42 1,793,573,075
24 Homa Bay-Mbita Road 41 4,106,551,858
25 Ndori- Ng'iya&Kogelo Access Road 20 1,532,719,990
26 RodiKopany - Ndhiwa - Karungu Road 50 1,344,076,590
27 Ena-Ishiara - Chiakariga Road 57 3,298,061,109
94
Project Title Length (Km) Project Value
28 Thika - Magumu Road 85 1,304,912,086
29 Lomut - Lokori Road – Design 100 38,541,000
30 Lanet- Ndundori Road 30 1,148,837,797
31 Merille- Marsarbit Road 121 5,793,916,618
32 Mwatate - Taveta Road 99 2,256,667,327
33 Eldoret - Webuye Road 60 2,310,244,146
34 Webuye - Malaba Road 59 2,165,717,280
35 Kapsoit - Sondu Road – Design 34 69,984,300
36 EATTFP: One Stop Border Post at Taveta
Border Crossing-DFID N/A 178,928,335
37 Kitui Turn Off- Mwingi- Garissa Road –
Design 300 141,017,300
38 NCTIP: Rehabiliation of Mau Summit -
Kericho Road (B1) 58 4,668,839,660
39 NCTIP: Rehabiliation of Kericho -
Nyamasaria Road 76 6,968,218,886
40 NCTIP: Rehabiliation of Kisumu-Airport-
Kisian Road 9 3,556,343,009
41 NCTIP: Rehabiliation of Machakos
Turnoff - JKIA Road 33 2,743,293,266
42 Kisian -Busia Road – Design 95 98,670,227
43 Modika - Nuno Road (phase II) 12 1,491,606,238
44 LAPSSET Garissa-Isiolo Road – Design 263 29,411,434
45 LAPSSET Lamu - Garissa Road – Design 305 35,346,101
46 Ndori-Owimbi 22 700,002,484
47 Owimbi - Luanda Kotieno 26 1,049,472,915
48 Kisii - Chemosit (C21) 72 465,748,822
49 Emergency Maintenance of Kisumu –
Kakamega N/a 355,433,874
50 Wakor Bridge N/a 172,722,966
51 Wargadud–Bambo 42 659,360,000
52 Ngewa - Kibichoi - Jn D397 (Ichaweri)
(RUIRU) Road – Design 50 55,000,000
53 Nginyang - Lokori - Lokichar Road –
Design 200 74,000,000
54 Stand Khisa-Khumsalaba Road -
EATTFP: Construction of Axle Load
Stations at Mariakani NA 559,669,074
56 EATTFP: Construction of Axle Load
Stations at Athi River N/A 406,578,765
95
Project Title Length (Km) Project Value
57 EATTFP: Busia OBP N/A 293,491,748
58 KTSSP: Mombasa Northern Bypass –
Design 38 -
59 KTSSP: Nakuru-Nyahururu-Nyeri -
Marua– Design 170
NCTIP: NBI URBAN TOLL
CONCESSIONING
60 N/A 120,480,360
61 NCTIP: ASSORTED EQUIPMENT-
MATERIALS DEPARTMENT N/A 67,940,001
62 NCTIP: Rehabiliation of Sultan Hamud -
Machakos Turnoff Road (A109) 55 4,869,594,403
63 NCTIP: Construction of Road Over Rail at
Makutano 2 582,774,315
64 Emergency Restoration of Public Assets at
Kisumu N/A 128,626,629
65 Emergency Restoration of Public Assets
Homa Bay &Oyugis N/A 95,801,364
66 Leseru-Kitale (B2/A1) (Lot No. 1) 60 429,657,181
67 Mariakani–Kilifi 450,000,000
68 Kanyonyo-Embu 108,000,000
69 Mwabungu - Mamba (c108) 50,000,000
70 Ndenderu-Banana-Kanungo 50,000,000
71 Sagana - Kutus-Kianjiru 80,000,000
72 Karen Roundabout 3 695,229,299
73 Muranga-Sagana - Marua (A2) 800,000,000
74 EATTFP: One Stop Border Post at Isebania
Border Crossing N/A 165,938,799
75 Nairobi Southern Bypass 26 10,997,431,030
76 Wajir - Buna –Moyale 205,854,445
77 Chepterit - Baraton University - Kimondi
Road 12 1,779,541,653
78 EATTFP: One Stop Border Post at
Lungalunga Border Crossing N/A 199,170,192
79 Naivasha–Njabini
80 Kangundo-Mwala
81 Road over rail bridge along Mau Summit -
Timboroa Road
82 Dundori-Olkalau-Njambini 614,920
83 Kendu Bay-Homa Bay Road 38
96
Project Title Length (Km) Project Value
84 Nairobi - Thika Highway Improvement
Project Lot 1 & 2 27 15,950,835,648
85 Nairobi - Thika Highway Improvement
Project Lot 3 24 1,439,970,518
86 Emali- Oloitoktok Road 3,589,395,155
87 Isiolo - Merille Road 120 49,472,500
88 Kangema - Gacharage Road 35 4,467,528,083
89 Northern Corridor Rehabilitation-III N/a
90 Moiben - Kapcherop–Kitale
91 Loruk - Barpelo Road 62 6,442,295,046
92 KTSSP: Technical Support Programmes N/a 85,000,000
93 Oljororok - Ndundori Road 35 2,359,865,914
94 Chebilat - Ikonge - Chabera Road 45 3,352,376,396
95 KTSSP: Interchanges at Nyahururu, Njoro,
& Mau Summit Turnoffs N/A 907,212,442
96 Chiakariga - Meru Road 56 5,143,165,666
97 EATTFP: One Stop Border Post at Malaba
Border Crossing N/A 169,811,274
98 Voi - Mwatate - Wundanyi (phase I&II)
Road 45 3,395,448,358
99 Bambo–Rhamu 59 878,898,778
100 KTSSP: Access roads to HQ (Barabara)
and EASA N/A 51,840,000
101 KTSSP: HQ Complex for the Road
subsector Instituitions (Barabara Plaza) 3 4,118,605,891
102 NUTRIP: Capacity building and Technical
Assistance Programme N/a 150,000,000
103 SS-EARTTDFP Capacity building and
Technical Assistance Programme N/a 3,400,000,000
104 Jn A1 (Makutano) - Todonyang Road
(C47) – Design 187 280,000,000
105 Kenol - Muranga - Sagana Road
(C71/C73)– Design 45 164,857,840
106 Support to Road Sector: Capacity Building
Component N/a
107 LAPSSET Isiolo - Nginyang Road –
Design 330 178,198,572
108 KTSSP: Malindi-Madogo-Garissa– Design 330 280,797,868
109 KTSSP: Nakuru-Loruk-Marich Pass –
Design 280 270,533,738
97
Project Title Length (Km) Project Value
110 KTSSP: Lake Victoria Ring Road – Design 450 335,000,552
111 NETIP: Lot 1_Isiolo – Kula Mawe 77 94,510,967
112 NETIP: Lot 2_Kula Mawe–Modogashe 113 74,222,398
113 NETIP: Lot 3_Modogashe –Samatar 90 245,508,411
114 NETIP: Lot 4_Wajir – Wargetut 119 109,988,532
115 NETIP: Lot 6_Wargetut – Elwak 56 101,841,805
116 NETIP: Lot 7_Elwak - Rhamu 142 100,000,000
117 Kutus -Kerugoya -Karatina Road 702,856,828
118 KTSSP: Rehabilitation Kakamega -
Webuye Road 40 4,595,344,294
119 Road Reserves Mapping, protection &
Network Management N/a 550,000,000
120 Development Projects Monitoring and
Evaluation, P&E, Quality Assurance &
Safety Audits
N/a 550,000,000
121 Elwak–Wargadud 60 704,099,750
122 Nuno - Modogashe Road Project 135 8,638,797,574
123 KTSSP: Construction of Kisumu Boys -
Mambo Leo Road 5 3,170,394,481
124 Narok - Sekenani Road (C12) 75 2,214,834,126
125 Installation of Automatic Trafficc counters
and Classifiers and development of
Highway Traffic Database
N/A 585,904,016
126 Kitale -Endebes - Suam Road 45 5,997,717,511
127 Changamwe-Magongo - KwaJomvu
(A109L) Road dualling 4 2,420,327,530
128 Garsen - Witu - Lamu Road(C112) 135 11,006,148,294
129 Dualling of Mombasa –Mariakani 11 10,338,947,803
130 Wei Wei Bridge N/a 500,000,000
131 Mpard Package 3 - Mteza – Kibundani
Section 7 5,000,000,000
132 NUTRIP: James Gichuru junction – Rironi
(Uhuru Highway) (26 km) 26 23,478,371,181
133 KTSSP: DuallingAthi River - Machakos
Turnoff Road 21 10,314,694,165
134 KTSSP: Interchange at KerichoJn B1/C23 N/A 1,007,993,814
135 KTSSP: Interchange at Ahero Turnoff (Jn
A1/B1) N/A 348,072,108
136 SS-EARTTDFP: Upgrading of Kalobeiyei
River — Nadapal (88 km) road section 88 1,690,000,000
98
Project Title Length (Km) Project Value
137 SS-EARTTDFP: Upgrading of Lokitaung
Junction to Kalobeiyei River (80 km) road
section
80 1,750,000,000
138 SS-EARTTDFP: Upgrading of Lokitaung
Junction to Lodwar (80 km) road section 80 1,786,704,730
139 SS-EARTTDFP: Replacement of Kainuk
Bridge N/A 329,260,690
140 SS-EARTTDFP: Upgrading of Lodwar-
Loichangamatak (50 km) road section 50 1,361,992,326
141 Malaba–Busia 28 986,360,266
142 Kitale-Morpus (A1) (Lot No. 2) 65 531,265,894
143 MorpusJunc b4- Marich Pass (A1) (Lot no.
3) 32 308,743,512
144 Marich Pass - Kainuk (KWS Gate) Lot 4 40 526,370,976
145 KWS Gate - Kalemingorok (A1) (lot No. 5) 37 452,860,526
146 Kalemingorok - Lokichar (jn C46/A1) (Lot
No. 6) 33 498,358,098
147 Lokichar (JN A1/C46) - Amosing (C46)
(Lot No. 7) 36 835,779,557
148 Nyaru–Iten 64 2,466,639,639
149 Dhohoye Bridge on Kisian–Usenge N/A 1,200,000,000
150 Ugunja-Ukwala-Ruambwa (C92) 27 1,372,951,628
151 Mau Narok - Kisiriri (B18) 34 1,232,217,429
152 Ruiru – Githunguri - Uplands (C560) 47 4,167,691,617
153 Posta (Naibor) – Kisima–Maralal 65 2,932,425,645
154 Marigat Bridge N/a 950,000,000
155 Endau Bridge N/a 950,000,000
156 Lomut Bridge N/a 500,000,000
157 Dualling of Eldoret Town N/a 18,200,000,000
Isebania - Mukuyu - Kisii - Ahero Road
(A1) Lot 1 & 2
158 170 28,726,650,000
159 Kibwezi - Mutomo - Kitui Road (B7) 192 19,994,154,918
160 MPARD Package 2 - Mwache – Tsunza –
Mteza 9 25,000,000,000
161 Dualling of Nairobi - Nakuru Road (Land
Acquisition) 180 49,250,000,000
162 Kitale - Morpus (KFW) 68
163 Dualling of Mombasa - Nairobi Road
(Land Acquisition) 450 39,100,000,000
164 EXIM: Nairobi Western Bypass 17 19,900,000,000
99
Project Title Length (Km) Project Value
165 Dualling of Nakuru - Mau Summit Road
(Land Acquisition) 175 6,200,000,000
166 Bomas - OngataRongai - Kiserian Road
Dualling– Design 17 100,000,000
167 NUTRIP: Kisumu Northern Bypass Road
(9km) 9 2,245,009,781
168 SS-EARTTDFP: Upgrading of
Loichangamatak - Lokichar (40 km) road
section
40 5,210,000,000
169 Maralal - North Horr Road (C77) – Design 320 103,000,000
170 North Horr - Marsabit Road (C82) –
Design 185 325,000,000
171 Dualling of Mombasa - Mariakani Road
(Lot 2: KwaJomvu - Mariakani) 30 1,000,000,000
172 Eldoret Town Bypass Road 35 11,557,686,237
173 Mombasa Gate Bridge (Likoni Bridge) N/a 500,000,000
174 DuallingMeru Town Roads - (B66/A9) 200,000,000
175 DuallingThika - Kenol - Marua (A2-R) 96 200,000,000
176 Bypass Rds Development Project (Nbi
greater southern, Nbi Western, Aberdare
ranges)
100,000,000
177 NUTRIP: Southern Bypass junction-James
Gichuru road junction (Mombasa road -
Uhuru Highway) (12km)
12 1,174,267,739
178 NUTRIP: JKIA junction-Southern Bypass
junction and ICD Access Roads (Mombasa
Road) (8km)
8 974,267,739
179 Dualling Muthaiga - Kiambu (C32) Design 25 200,000,000
180 Muthaiga - Kiambu - Ngewa Bypass (B30)
Design 62 200,000,000
181 Athi River – Machakos Turnoff Phase 1A 300,000,000
182 Malaba One Stop Border Post 400,000,000
183 Busia One Stop Border Post 400,000,000
184 BRT on Thika Road to KNH
(Superhighway) 8,000,000,000
185 Annuity Programmes 4,000,000,000
186 Construction of 3 interchanges at Nakuru 2,700,000,000
187 JKIA – Likoni Road – James Gichuru 18 65,000,000,000
188 Malindi – Mombasa – Lunga lunga
(B8/A14)-Phase 1: Mombasa-Mtwapa 13 45,000,000,000
100
Project Title Length (Km) Project Value
189 Dualling of Kenol - Sagana –Marua 84 30,000,000,000
190 Upgrading of Loichangamatak – Lokichar
40 50,000,000,000
191 OljoOrok - Dundori (B20) 35 1,900,000,000
192 Mombasa - Mariakani Contract 2: Kwa 30
Jomvu - Mariakani (A8) 28,209,069,850
