factors affecting supplier contract negotiations strategies in public sector in kenya

In this case study we will discuss about business management and below are the summaries point:- Negotiation is a crucial aspect of professional purchasing. Negotiation involves dealing with a single issue or multiple issues and can be conducted between individuals representing different interests, including intra-organizational negotiation. Effective negotiation involves communication, planning, reviewing, and analyzing. Successful negotiation results in both parties gaining and exchanging value for value. The pre-negotiation phase is a crucial component of the negotiation process. Purchasing and procurement are often used interchangeably, but they differ in scope. Purchasing refers to buying materials and associated activities, while procurement refers to supplier selection and evaluation, quality control, and forward buying. Procurement aims to provide an uninterrupted flow of materials, supplies, and services required to operate the organization and achieve objectives at the lowest possible level of administrative costs. To achieve procurement objectives, organizations need to be proactive, develop well-organized procurement departments, and join forces with other departments. For retail organizations, procurement is a backbone for business success, and performance can be based on the availability of goods and services.    

FACTORS AFFECTING SUPPLIER CONTRACT NEGOTIATIONS
STRATEGIES IN PUBLIC SECTOR IN KENYA; CASE STUDY OF RURAL
ELECTRIFICATION AUTHORITY
BY
ROSE MWIKALI KIMEU
BBM/2088/19
RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE
REQUIREMENT FOR THE AWARD OF BACHELOR DEGREE IN BUSINESS
MANAGEMENT MOI UNIVERSITY
MAY 2022

DECLARATION
I declare that this research project is my original work and has not been previously
published or submitted elsewhere for award of a degree. I also declare that this research
project contains no material written or published by other people except where due
reference is made and Research Data duly acknowledged.
ROSE MWIKALI KIMEU Reg. No. BBM/2088/19
Signed……………………….. Date…………………………
This research project has been submitted for review with the approval of my project
supervisor.
Dr. Robert Odunga
Signed…………………………. Date………………………
ii

DEDICATION
To my parents, fellow classmates and friends who have already made this proposal have a
positive outcome.
iii

ACKNOWLEDGEMENT
I wish to acknowledge my supervisor, Dr Robert Odunga for his guidance, brilliant
ideas and valuable support he offered throughout the period of writing this project.
Special thanks goes to my colleagues and Moi University fraternity for the necessary
skills, competencies and facilities.
My special gratitude goes to my parents for their encouragement and sacrifice
throughout all my academic endeavors, and for teaching me how to walk, run and
smile.
Above all, I devote my whole hearted thanks to the Almighty God for the wisdom,
knowledge and guidance throughout my life.
Thank you all and God bless you.
iv

ABSTRACT
The purpose of the study was to determine the factors affecting contract negotiation in
the public sector with specific reference to Rural Electrification Authority. The specific
objectives of the study was to establish how quality, product specification, government
policy, lead time and ethical issues affect contract negotiation in the public sector. The
study used descriptive research design where the target population was 118 employees
and stratified random sampling technique was used to derive sample size of 59
respondents which represents 50% of the target population. Questionnaires was used to
collect data which was analyzed quantitatively and qualitatively where quantitative data
were analyzed and presented inform of tables and figures while qualitative data was
analyzed and presented in form of context analysis or evaluation of text materials.
According to the study findings majority of the respondents indicated that quality,
product specification, government policy, lead time and ethical issues duly affect
contract negotiation in the public sector, 60% of the total respondents on quality, 80%
on product specification, 56% on government policy, 72% on lead time and 78% on
ethical issues were of the opinion that it affects contract negotiation in the public sector.
It was recommended that organization should put major emphasis on quality during
negotiation of contracts in procurement by following the three steps to quality which
are; leadership, modern quality technology and organizational commitment,
organization should basically describe items, their dimensions, performance or any
other relevant characteristics in sufficient detail to ensure it was suitable in all aspects
for which it is intended. There is also need to have effective government policy of all
services in procurement which would be followed to avoid ineffective procurement
procedures being experience by the public sector. It was further recommended that
organization should encourage their department to get more information that is needed
as pertains to lead time so as to avoid unnecessary delays additionally business ethics
should highly be maintained to uphold the integrity of conducting business and
professional values. The beneficiaries of the study was the management of Rural
Electrification Authority, Government of Kenya and Other Researchers.
v

TABLE OF CONTENTS
DECLARATION..............................................................................................................ii
DEDICATION................................................................................................................iii
ACKNOWLEDGEMENT...............................................................................................iv
ABSTRACT.....................................................................................................................v
CHAPTER ONE...............................................................................................................1
INTRODUCTION OF THE STUDY...............................................................................1
1.1 Introduction............................................................................................................1
1.2 Background of the Study............................................................................................1
1.2.1 Profile of Rural Electrification Authority (REA)...........................................4
1.3 Statement of the Problem............................................................................................5
1.4 Objectives of the Study..........................................................................................5
1.4.1 General Objective...........................................................................................5
1.4.2 Specific Objectives..............................................................................................5
1.5 Research Questions................................................................................................6
1.6 Significance of the Study......................................................................................6
1.6.1 Rural Electrification Authority Management.................................................6
1.6.2 Government of Kenya..........................................................................................6
1.6.3 Other Researchers................................................................................................6
1.7 Limitations of the Study.............................................................................................7
1.7.1 Confidentiality.....................................................................................................7
1.8 Scope of the Study......................................................................................................7
CHAPTER TWO..............................................................................................................8
LITERATURE REVIEW.................................................................................................8
2.1 Introduction............................................................................................................8
2.2 Review of Theoretical Literature...........................................................................8
2.2.1 Quality.................................................................................................................8
2.2.2 Product Specification.........................................................................................14
2.2.3 Government Policy............................................................................................16
2.2.4 Lead Time..........................................................................................................19
2.2.5 Ethical Issues.....................................................................................................22
2.3 Review of Critical Literature....................................................................................24
2.4 Summary...................................................................................................................27
2.5 Conceptual Framework.............................................................................................29
CHAPTER THREE........................................................................................................31
RESEARCH DESIGN AND METHODOLOGY..........................................................31
3.1 Introduction...............................................................................................................31
3.2 Study Design.............................................................................................................31
3.3 Target Population......................................................................................................31
3.4 Sampling Design.......................................................................................................32
3.5 Data Collection Methods..........................................................................................32
3.5.3 Validity and Reliability of Research Instruments............................................33
3.7 Research Ethics.........................................................................................................33
CHAPTER FOUR..........................................................................................................35
DATA ANALYSIS, PRESENTATION AND INTERPRETETION OF THE
FINDINGS......................................................................................................................35
4.1 Introduction...............................................................................................................35
4.2 Presentation of Findings...........................................................................................35
4.2.1 Response Rate....................................................................................................35
4.2.2 Gender Analysis.................................................................................................36
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4.2.3 Age Representation............................................................................................37
4.2.4 Highest Level of Education...............................................................................38
4.2.5 Working Experience..........................................................................................39
4.2.6 Quality...............................................................................................................40
4.2.7 Quality...............................................................................................................41
4.2.8 Product Specification.........................................................................................42
4.2.9 Product Specification.........................................................................................43
4.2.10 Government Policy..........................................................................................44
4.2.11 Government Policy..........................................................................................45
4.2.12 Lead Time........................................................................................................46
4.2.13 Lead Time........................................................................................................47
4.2.14 Ethical Issues...................................................................................................48
4.2.15 Ethical Issues...................................................................................................49
4.3 Summary of Data Analysis.......................................................................................50
4.3.1 General Information...........................................................................................50
CHAPTER FIVE............................................................................................................52
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.........52
5.1 Introduction...............................................................................................................52
5.2 Summary of Findings...............................................................................................52
5.2.1 How does quality affect contract negotiation in the public sector?...................52
5.2.2 What is the effect of product specification on contract negotiation in the public
sector?.........................................................................................................................52
5.3.3 How does government policy affect contract negotiation in the public sector?52
5.2.4 What is the effect of lead time on contract negotiation in the public sector?....52
5.2.5 How do ethical issues affect contract negotiation in the public sector?............53
5.3 Conclusions...............................................................................................................53
5.4 Recommendations.....................................................................................................54
5.5 Suggestion for Further Study....................................................................................55
REFERENCES...............................................................................................................56
APPENDICES................................................................................................................58
Appendix I: Letter of Introduction.................................................................................58
APPENDIX II: QUESTIONNAIRE...............................................................................59
APPENDIX 2 - WORKING PLAN...............................................................................63
APPENDIX 3: BUDGET...............................................................................................64
vii

LIST OF TABLES
Table 3.1 Target Population ...............................................................................31
Table 3.2 Sample Size .........................................................................................32
Table 4.1 Response Rate ....................................................................................35
Table 4.2 Gender of the Respondents..................................................................36
Table 4.3 Age of Respondents ............................................................................37
Table 4.4 Highest Level of Education.................................................................38
Table 4.5 Working Experience............................................................................39
Table 4.6 Effects of Quality on Contract Negotiation.........................................40
Table 4.7 Extent of Quality on Contract Negotiation .........................................41
Table 4.8 Effect of Product Specification on Contract Negotiation....................42
Table 4.9 Extent of Product Specification on Contract Negotiation ...................43
Table 4.10 Effect of Government Policy on Contract Negotiation........................44
Table 4.11 Extent of Government Policy on Contract Negotiation.......................45
Table 4.12 Effects of Lead Time on Contract Negotiation....................................46
Table 4.13 Extent of Lead Time on Contract Negotiation.....................................47
Table 4.14 Effects of Ethical Issues on Contract Negotiation...............................48
Table 4.15 Extent of Ethical Issues on Contract Negotiation................................49
viii

LIST OF FIGURES
Figure 2.1 Conceptual Framework........................................................................29
Figure 4.1 Response Rate ....................................................................................35
Figure 4.2 Gender of the Respondents..................................................................36
Figure 4.3 Age of Respondents ............................................................................37
Figure 4.4 Highest Level of Education.................................................................38
Figure 4.5 Working Experience............................................................................39
Figure 4.6 Effects of Quality on Contract Negotiation.........................................40
Figure 4.7 Extent of Quality on Contract Negotiation .........................................41
Figure 4.8 Effect of Product Specification on Contract Negotiation....................42
Figure 4.9 Extent of Product Specification on Contract Negotiation ...................43
Figure 4.10 Effect of Government Policy on Contract Negotiation........................44
Figure 4.11 Extent of Government Policy on Contract Negotiation.......................45
Figure 4.12 Effects of Lead Time on Contract Negotiation....................................46
Figure 4.13 Extent of Lead Time on Contract Negotiation.....................................47
Figure 4.14 Effects of Ethical Issues on Contract Negotiation...............................48
Figure 4.15 Extent of Ethical Issues on Contract Negotiation................................49
ix

LIST OF ABBREVIATIONS
DPSM Degree in Purchasing and Supplies
MU Moi University
NRB Nairobi
REA Rural Electrification Authority
x

OPERATIONAL DEFINITION OF TERMS
Ethical Issues It refers to the respect for the confidentiality of
information, among members of staff in the course of
their work.
Government Policy A policy is a typically described as a principle or rule to
guide decisions and achieve rational outcomes.
Lead Time This is the duration of time taken between ordering and
delivering of products ordered.
Product Specification It is basically a description of that item, its dimensions,
performance or other relevant characteristics in sufficient
detail to ensure that it was suitable in all aspects for
which it is intended.
Quality It is defined as the efficient production of goods and
services that meet customer specifications and basic
needs.
xi

CHAPTER ONE
INTRODUCTION OF THE STUDY
1.1 Introduction
This chapter covers the background of the study, the statement of the problem, the
objectives, significance, scope and limitations of the study.
1.2 Background of the Study
Negotiation is one of the most important as well as one of the most interesting parts of
professional purchasing. It is generally accepted that a key competence in a
purchasing executive is an ability to negotiate. Negotiation may involve dealing with
a single issue or many. They may be conducted on a one – to- one basis or between
terms of negotiators representing different interests, and may be conducted over the
telephone in a matter of minutes, or take many months to compete. It is also worth
mentoring that negotiations are not necessarily confirmed to the buyer – seller
relationship, many purchasing negotiations take place on an intra – organizational
basis, involving the reconciliation of the views of supplier staff and colleagues. There
have been many attempts to define negotiation, for example ‘to offer with others in
order to reach a compromise or agreement (Clifford, 2008).
Kenneth (2006) defines negotiation as the process by which we search for terms to
obtain what we want from somebody who wants something from us. It is perhaps
worth mentioning that negotiation has two other meanings, not closely related to its
‘bargaining’ connotation. Negotiation may be employed by a manner or nugatory to
mean something like ‘finding a way, where as a banker might comply the term to
mean’ exchange for value. Negotiations depend on communication. It occurs between
individual acting either for themselves or representation of organization groups.
Therefore negotiation can be considered an element of human behavior. To be fully
effective in contract assignment negotiation must be utilized in its broadest context as
a decision making process. In this content negotiation is a process of planning,
reviewing and analyzing used by a buyer and a seller to reach an acceptable
agreement that includes all aspects of business transactions not just price.
In a successful negotiation, both parties gain best offer more than one party with more
than the other. It is also believed that persons, in the roles of negotiations are required
to communicate positions, make demands and conclusions, respond to changing
1

signals and arrive at outcome. A recurring finding of our own work is that the major
source of difficulty for negotiators is inadequate management of the pre - negotiation
phase. The implication of this finding include the fact that most mortgaged believes
they would have achieved better results, had they prepared more effectively. To an
American negotiation is the last troublesome method of setting disputes. Negotiation
may be exploratory and serve to formulate viewpoints and areas of agreements or
contention. Therefore they said that the success of negotiations depend on whether,
the issue is negotiable (that is you can sell your car but not your child), the negotiators
are interested in not only taking but also in giving. Are wising to compromise and are
able to exchange value for value (Jessop, 2005).
The old say the wheels of diplomacy often turn on the grease of ambiguity. It is better
to enter into negotiation without self-improved limitation ready to seize any
advantage that is offered. Third parties involved in a negotiation do trust each other.
Indeed the handling of other peoples mistrust is the skilled negotiations stock in trade.
I doubt whether there would negotiators if the committees’ conditions were the pre
requisites to success.
The term purchasing and procurement are often used interchangeably, although they
do differ in scope. Purchasing generally refers to the actual buying of materials and
those activities associated with the buying process. The process itself is less
transactional-oriented, depends on the implementation of good information system,
and focuses on closer supplier relations with fewer suppliers while considering
sources from around the world. Among the primary procurement activities that
influence the ability of the firm to achieve its objectives are supplier selection and
evaluation, quality control, and forward buying. In the acquisition process, perhaps
the most important activity is selecting the best supplier from among a number of
potential vendors. The buying process is complex because of variety of factors that
must be considered when making such a decision. The process includes both the
decision and decision influencers, which combine to form the decision-making unit
(Farmer, 2005).
2

Procurement like any other department has its objectives which include to provide
uninterrupted flow of materials, supplies, and services required to operate the
organization, keep inventory investment and loss at minimum, maintain and improve
quality, find or develop competent suppliers, standardize, where possible, the items
bought, purchase required items and services at the lowest total cost, improve the
organization’s competitive position, achieve harmonious, productive working
relationships with other functional areas within the organization, accomplish the
procurement objectives at the lowest possible level of administrative costs. To most
retail organizations, procurement forms the backbone of their business success. They
need to have concern in its day-to-day activities and know who does what (Baily,
2005).
According to Baily (2005) procurement means to acquire the right quantity of
material, at the right time, in the right quantity, from the right source, at the right
price. For an organization to achieve this, it has to be proactive in the sense that it
develops a well-organized procurement department, which can select the right source
or supplier, analyze the market price, check on suppliers lead times and have
information of the quality of the products. For more efficiency, purchasing
department has to join efforts with other departments. It has to get information from
marketing department on price issues and customers preferences. The finance
department on the other hand need to effect payment to suppliers for a continual
supply of goods and services and the human resource department need to train the
staff and employ qualified purchasing personnel, those with purchasing knowledge.
From a general point of view many organizations whose main activity is retailing,
their performance can be based on the availability of stock they are offering based on
varieties and quality. In the past, most organizations used to depend on the finance
department for the purchase of inventory who had little knowledge on the field.
Presently many of these organizations have realized the need to have an independent
department concerned with buying of goods and services hence introduction of
purchasing department. Organizations can measure the economic and social
importance of the retail industry in various ways; one way is to measure its share of
national output. A standard measure of output in a country is gross domestic product
(GPD). Another way is the use of standard industrial classification (SIC) which
3

divides the economy into different major industry groups, one of which is retailing. A
firm belongs to the retailing industry if it is most important activity is retailing,
measured in terms of sales. In addition, use of monetary contribution of retailing
through the total net output or value added of all the firms in the industry is another
measurement tool. This represents the wages paid and the profits earned in the
business and the total sales or gross output of retailers minus taxes, such as VAT, and
spending on goods and services they buy-in. However, the more usual way of
describing retailing is by the level of retail activity, which is given by the gross sales
(or turnover) of retailers and is another indicator of the economic and social
importance of the industry (Baily, 2005).
1.2.1 Profile of Rural Electrification Authority (REA)
The Rural Electrification Authority was established under Section 66 of the Energy
Act, 2006 (No 12 of 2006) as a body corporate. It was created in order to accelerate
the pace of rural electrification in the country, a function which was previously
undertaken by the Ministry of Energy. Their Mandate is to accelerate the pace of rural
electrification in order to promote sustainable socio-economic development. Under
the Energy Act, REA is mandated to undertake the following functions: Managing the
Rural /electrification Programme Fund, Developing and updating the rural
electrification master plan, Promoting the use of renewable energy sources including
small hydros, wind, solar, biomass, geothermal, hybrid systems and oil fired
components taking into account specific needs of certain areas including the potential
for using electricity for irrigation and in support of off-farm income generating
activities. Implementing and sourcing of additional funds for the rural electrification
programme and Managing of the delineation, tendering and award of contracts for
licences and permits for rural electrification. Their Vision is to be the provider of
quality and affordable electricity to all in the rural areas while their Mission is to
efficiently provide high quality and affordable electricity connectivity in all rural
areas and to achieve high standards of customer service through advancing
community participation to ensure long term sustainability and socio-economic
development and their Motto being Lighting up rural Kenya.
4

1.3 Statement of the Problem
Over the years, contract negotiation process relied on written document that addressed
the relevant issues, terms, rights and obligations between two or more parties to the
contract. Unfortunately, many contract negotiations experience a lot of challenges that
ultimately come back to haunt them when a disagreement arises over how the contract
should be interpreted or performed. Apparently, most public sector organizations
failure to define the negotiation strategy in advance has resulted into ineffective
negotiation outcome since the involved parties cannot effectively negotiate if the
purpose of negotiation process is not clearly defined.
In the Kenyan context, most public sector organizations often neglect the important
aspect of establishing objectives, points of contention and the impact the constraints
will have in the long run. Mullins (2004) asserts that is advisable for organizations to
study the other parties involved in the negotiation of contracts to get an insight on the
important context before laying out the final draft.
Before parties agree on the terms of contract negotiation, Mullins (2004) further
stipulates that it is crucial for public sector organizations to properly define the parties
to a contract to ensure that they are liable when performing obligations of the contract
in the event that the contract is breached and clarity is extremely important when
negotiating and drafting contracts. In the low end of public sectors organizations,
similar research based on the same problem has not addressed the matter largely. The
study therefore sought to determine factors affecting contract negotiation in the public
sector and address gaps that have not been tackled over the years.
1.4 Objectives of the Study
1.4.1 General Objective
The general objective was to establish factors affecting contract negotiation in the
public sector with specific reference to Rural Electrification Authority.
1.4.2 Specific Objectives
i. To assess the effect of quality on contract negotiation in the public sector.
ii. To establish the effect of product specification on contract negotiation in the
public sector.
5

iii. To examine the effect of government policy on contract negotiation in the
public sector.
iv. To determine extent to which lead time affect contract negotiation in the
public sector.
v. To assess the effect of ethical issues on contract negotiation in the public
sector.
1.5 Research Questions
The following research questions will guide the study:
i. How does quality affect contract negotiation in the public sector?
ii. What is the effect of product specification on contract negotiation in the public
sector?
iii. How does government policy affect contract negotiation in the public sector?
iv. What is the effect of lead time on contract negotiation in the public sector?
v. How do ethical issues affect contract negotiation in the public sector?
1.6 Significance of the Study
1.6.1 Rural Electrification Authority Management
The findings of the study was useful to the Rural Electrification Authority
management, to avoid the shortcomings that might arise due to concern put on
procurement department. The management of the organization was able to utilize the
findings to streamline the procurement department. This will help mitigate the
challenges associated with the contract negotiation in the public sector.
1.6.2 Government of Kenya
The government will also gain tremendously if it utilizes the findings and
recommendations in the formulation of effective strategic policies.
1.6.3 Other Researchers
Researchers will also gain by utilizing this study to widen up their study area and
hence increase their knowledge. The study will also provide an impetus for an in
depth understanding of the study phenomena. This will then enhance their review
process.
6

1.7 Limitations of the Study
1.7.1 Confidentiality
Confidentiality is a very sensitive matter at the work place. However, the researcher
assured the respondents that none of the information is going to be used for any other
purpose other than that which was intended for that is for academics only.
1.8 Scope of the Study
The study focused on factors affecting contract negotiation in the public sector with
specific reference to Rural Electrification Authority Offices along Mombasa Road
Nairobi. The study targeted 118 employees and a sample of 59 respondents was
drawn from the three levels of management representing 50% of the target population.
The study took a period of 6 months from January to June 2022.
7

CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter analyses literature related to contract negotiation in the Public Sector and
globally. It involves identification, location, analyses and evaluation of relevant
materials related to contract negotiation activities in the public sector. The chapter
will analyze past studies, have a critical analysis of the literature review and indicate
the gaps that the researcher will identify.
2.2 Review of Theoretical Literature
2.2.1 Quality
Quality is defined in numerous ways by different quality experts. Quality can be both
reviewed from both consumers and producers’ perspective, consumer perspective is
concerned. With the level of satisfaction the consumer receives from a product. The
producer perspective is concern with conformity to specification and level of errors
(David, 1994).
David (1994) defines quality as the efficient production of goods and services that
meet customer specifications. Deming argued that higher quality leads to higher
productivity which in turn leads to long term competitive strength. The theory is that
improvement in quality lead to lower cost and higher productivity because they result
in less rework, few mistakes, few delays and better use of time. With better quality
and lower prices, a firm can achieve.
Jones (1995) asserts that quality is the fitness for use and freedom from defects.
Among others things Juran’s philosophy include the quality triology and quality
planning road map. The quality trilogy emphasizes the roles of quality planning,
quality control and quality improvement. Quality planning’s purpose is to provide
operators with ability to produce goods and services that meet customer needs. In
quality planning stage an organization must determine who the customers are and
what they need, develop the product or service features that meet customer needs,
develop processes which are able to deliver those products and services and transfer
the plans to operating forces. Quality control is used to present things from getting
worse. Quality control is the inspection part of quality trilogy where operators
compare actual performance with plans and resolve the differences. Quality
8

improvement encompasses improvement for fitness for use and error reduction, it
seeks a new level of performance that is superior to any previous level and is attained
by applying breakthrough thinking.
Wisner et al (2005) noted that quality is seen as a combination of the following
aspects: conformance to specification, feature of excellence, fitness for purpose or
fitness for use and conformance to customer requirements. He explained quality was
the outcome of an all-encompassing philosophy geared toward personal and
organizational growth. He argued that growth occurs through top management vision.
Support and value placed on all employees and suppliers. This needs commitment to
quality improvement by top management, development of a prevention system,
employee education, training and continuous assessment focusing on quality, control
and improvement. He found in his dealings with companies that most gave priority to
quality control but paid little attention to quality planning and improvement. He also
emphasized on the need for continuous improvement efforts, training and the use of
statistical methods for control purposes Crosby (2001). Quality is conformance to the
requirements. In his book quality is free Crosby makes the point that it cost money to
achieve quality but it costs more money if quality is not achieved.
According to Clifford (2008), organizations practicing Total Quality Management
Principle create a customer focused management system and company culture that
seeks to meet their customers’ needs the first time and every time. Effective
organization analyses their customers’ needs, wants and expectations, translate them
into technical specific and organize their key business operations accordingly. This
organization ensure that their leadership creates and implements strategic plans that
focuses on what is important to their customers and market hence effective
management.
An effective organization needs an accurate understanding of what their customers
expect. If they are going to properly target improvement activities, they also need to
identify the gap between their current performance and customer requirements. This
will make them identify the importance of studying customer voices, perceptions and
satisfaction. Customer perceived value, the outcome of comparing purchasing
alternatives, looks towards future and is proactive. Knowledge of customer perceived
value allows an organization to change future products or services offering to better
9

suit its customer. Customer satisfaction compares past experiences or expectations to
the realities experienced. An organization can use information about perceived value
and customer satisfaction to help improve their existing process leading to
improvement of quality of the product or services (Cheng, 2003).
According to Clifford (2008), there are methods of discovering customer. Using the
product or services to acquire a firsthand experience as a customer, organizations
must close the gap of service and customer expectations to create a desiring
opportunity for companies to do better than their competitors and gain market share.
Organizations can only close the gap by understanding customers’ needs. An
organization should seek to understand every customer interaction with the company.
Effective organizations understands that this process begin when the customer first
contacts the company and continues until the services has completed.
Organizations realize what business they are really in because they ask questions from
the point of view of the customer. Effective organizations pay attention to the part of
Feigenbaum’s definition that says that quality is a moving target that is it can be
subjective or technically operational, stated or unstated, conscience or merely sensed.
Cheng (2003) quoted that “We are based by powers that keep coming over the
horizon and are over changing directions: New technology, market competition and
international conflicts. These changing forces create new customers’ needs or change
the priority given to existing ones.”
Deming in his text said that it is important to measure customers’ expectations though
customer research by which company is able re-design its product or services to make
it better as measured by quality and its uniformity that are best suited to the user of
the product or services and the price that the customer can pay. Quality Foundation
Development (QDF) is a technique that seeks to bring the value of customer into
process designing or developing a product or services (Cheng, 2003). Quality is of
high importance since it ensures that the buyers and suppliers get what they want. One
of the major potential benefits of this relationship is simply high quality goods, the
reduction of time and costs for processing the thousands of individual acquisition and
purchase orders that flow through the typical company’s system. Time could be saved
by developing and executing source strategies, building strategic supplier relationship,
continued improvement programs and other high value activities. The major sources
10

of value in buyer supplier relationship are; the ability to stimulate completion and the
ability to drive better prices and quality and bring them to a bottom line.
The overall usefulness of efficiency oriented relationship solutions depend largely on
how efficient the current purchasing process is, how good the existing supply
contracts are and how much added value is available by redeploying staff who are
working primarily on transaction processing and related administrative tasks (Cheng,
2003). One percent improvement on the quality on overall cost of purchased materials
can increase a company’s bottom line by 10% to 20% more, a dramatic impact on the
profitability and shareholder value. A wide variety of buyer supplier relationship
solutions have developed to help improve a company’s access, a broader range of
suppliers and achieved price and quality improvements. A good relationship creates a
market base which provides valuable methods of increasing access to new potential
supply source.
Suppliers also benefit from joining the buyer’s electronic procurement network. Since
the amount and nature of information shared between buyers and suppliers will
greatly affect the value that suppliers can extract from the relationships, we identify
two different components of supplier benefits; comparative efficiency and
competitive advantage. Comparative efficiency comes from lower costs in producing
quality goods or services than competitors through sharing ordering and invoicing
information electronically with buyers (Deming, 1993). By receiving order
information that is directly entered by buyers, suppliers can reduce the costs of order
entry and at the same time capture data more quickly. The response time for feedback
on product availability and price will also be reduced. Another benefit is that
suppliers was able to provide goods of high standards since buyers can shop and track
orders electronically by self-service.
In addition to comparative efficiency, buyers and suppliers can both obtain
competitive advantage by joining e-procurement networks. Besides the ordering and
invoicing information, buyers may also share inventory and sales data with suppliers.
Such information will enable suppliers to have more timely and accurate data for
demand forecasting, promotion scheduling and production planning. With the aid of
electronic communication, complex and detailed product design information can also
be transferred between buyers and suppliers, enabling joint product design and
11

development. By doing so, suppliers participating in extranets was able to accumulate
expertise about market demand and product features, which usually lead to product
innovation and market expansion. This is a zero sum situation among competing
suppliers, although it makes participants in extranets better off. Access to the buyers’
business information, including inventory management data, product design and sales
data, has the potential to increase the suppliers’ bargaining power in buyer-supplier
relationships (Lysons, 2006).
Once suppliers have such information, buyers will find it difficult to control the use
of these resources and inevitably become more vulnerable to supplier opportunism
(Wilson, 2010). As a result, suppliers will gain bargaining advantage relative to their
buyers for pricing and more beneficial contract terms. From the viewpoint of buyers,
this is a cost due to sharing business information with the suppliers. With the
deployment of electronic procurement systems and information sharing, buyers and
suppliers expect to enter into agreements to sustain the buyer-supplier linkage.
These agreements often ask for reduced replenishment lead time or a vendor-
managed-inventory program. Reducing replenishment lead time reduces buyers’
inventory holding costs while increasing the supplier’s logistic costs due to more
frequent delivery in smaller quantity. The program allow buyers to transfer costs of
monitoring, holding and replenishing inventory to suppliers, as a result, suppliers tend
to end up bearing that costs that buyers used to bear. Such costs are contractual
payments (Richard, 1994).
Quality is the degree to which inherent characteristics of products meet requirements
(ISO 9000:2005). Quality standards communicate information about the attributes of
a product. the attribute can be classified on the access of JIT should be understood in
relation to changing features of consumption is increasing characterized by the rate
in which materials are being used as been increased important for issues of quality
that may be seen as a question of competition and corporation. Quality entails
standards, labels, certification and procedures. Suppliers are typically selected based
on the buyers ‘perception of the suppliers’ ability to meet quality, quantity, delivery,
price needs of the firm. To date much of the emphasis in buyer supplier relationship
has been on cost reduction but performance in real world supply chain has multiple
12

attributes where performance is measured in terms of reliability, responsiveness,
flexibility and cost (Lysons, 2006).
The way in which dominant firms in the manufacturing sectors complete is changing
with increased emphasis on product quality attributes as a means to product
differentiation. Indeed it is argued that the ways in which manufacturing markets are
both structured and operated are defined by such quality based. Competition, and the
same time the associated institutional arrangements are crucial to the legitimacy of the
quality attributes embedded in manufactured products. Quality attributes encompasses
the manner in which products are produced and substances present in the products
that are perceived to be unsafe and or unhealthy including contamination (for example
residues), as well as the environment , worker welfare .quality being a customer
service encompasses at least four kinds testing activities which are quality applying
standards and measures services quality (Cheng, 2003).
Taguchi (2000) describes quality as an award with several meanings for example, it
can mean excellent which is quality of an extent to which a product or service
achievers customers satisfaction. Quality is whatever the customer says it is the
quality has been extremely influential and is relatively related to strategic advantages.
Quality is often used to satisfy excellence of a product or service. If we define quality
in a way that is useful in its management then we recognize the need to include in
assessment of quality the requirements of the customer. Quality has to be managed
and it must involve everyone in the organization. Many people in the support function
of the industry handle or produce things like purchase orders or invoices if every
fourth invoices carries at least one error, will bring failure in one part of the system
and these creates elsewhere. The price of quality is the continued examination of the
requirements in terms of availability, reliability, maintainability and cost effectiveness
then this has a wide implication.
The concept of quality cost can be used to initiate quality improvement initiatives. In
many companies a considerable number of man hour spent on the inspection of
incoming goods and on solving acute quality problems. The costs involved are often
invisible and many companies have absolute no idea what the lack of quality is
costing them. Making these costs of preventing errors; assessments cost- the costs
13

relate to the timely recognition of errors and correction, cost that result from
rectifying mistakes (Clifford, 2003).
2.2.2 Product Specification
Baily et al (1995) noted that specification for an item is a statement of the attributes of
a product or service. It is basically a description of that item, its dimensions,
performance or other relevant characteristics in sufficient detail to ensure that it was
suitable in all aspects for which it is intended.
Baily et al (1995), the procurement function has a part in working towards the
optimum specification. This implies not only an attractive product for marketing to
sell or for production to manufacture, but one which includes services, materials or
components which are economic to purchase, this in turn presupposes that they are
attractive for the supplier to produce or provide. All this necessitates some degree of
compromise between the parties involved. A weak procurement function, which
simply purchases what, for example, production ask for is missing the opportunity of
contributing in this way clearly, it is not for procurement to ensure the design function
or any other , but it should inform the various parties of the constraints and
opportunities relating to specifications and to delivery reliability. It is frequently the
case that when services are being acquired or purchased it is not possible to prescribe
a conformance specification due to the fact that service provider alone knows how to
do the work required and we are able only to convey the intended outcomes (David,
1994).
Conformance specification is a slogan encountered in the purchasing function of the
British Airways states: ‘‘specification restricts innovation’’. This is of course,
particularly true of conformance specifications. Specifications where the buying
organization must lay down clear and ambiguous requirements that must be met, the
specification is of the product not the application. This type of specification is
necessary where, for example, items for incorporation is an assembly is to be bought,
or where a certain chemical product is to be acquired for a production process.
Nevertheless, the production of effective conformance specifications is rather difficult
to achieve on occasion. Even in situations where the greatest care has been taken, it is
sometimes the case that supplies will deliver material that meets the specification as
they understand it, while the customer complains that the specification means
14

something different and seek to reject the supplies. Conformance specifications take a
variety of forms and can be drawn up by various departments (Procter, 2003).
Crosby (2001) stipulates that in manufacturing, design or engineering department
usually has the specification for a product design, which includes the specification of
parts and materials. In service industries, user departments often prepare
specifications. In distributive industries, which sell the merchandise they buy rather
than products they have manufacture, the section of supplier, specified goods and the
development of specifications for purchasers specified good is of central importance
both in buying and marketing and reflects the organization’s policy on merchandising.
In buying supplier-specified goods, retailers pick a brand or a make or buy by sample,
but in specifications which usually very detailed and thorough.
Preparing specification is essentially a technical rather than a commercial activity.
However, commercial staffs have an important support role for their technical
colleagues, in providing information about relative price trends and availability,
keeping in touch with new development arranging contracts with essential suppliers
and obtaining supplier help in formulating specifications. Formal detailed
specifications are drawn up for the majority of relatively unimportant purchases.
Farmer et al (1995), an important stage of specification is to review alternative ways
of satisfying a given need. Commercial as well as technical consideration affects the
choice. For instance, copper is used more widely than silver for technical conductivity
but is more expensive. Aluminum has a lower conductivity than copper but is lighter,
so that for overhead power cables where weight is important it can be better than
copper depending on the relative prices of the two materials.
James (2001), Specification usually states a tolerance, the permissible variation in
important characteristics such as size and weight. Close tolerance simply assembly
and promote interchangeability, but increase the costs of production and inspection
and thus of purchase. Specification takes a variety of forms a pipe of drawings inches
thick to a brand name. every purchase order, larger or small critical or not, must
communicate the requirements to the supplier, but expense of preparing a detailed
specification is justified only when the requirement is critical or unusual or volume is
great and cost high. One of the simplest forms of description is a brand name. If there
is only one brand which meets requirements, this is the obvious way to specify.
15

2.2.3 Government Policy
A policy is a typically described as a principle or rule to guide decisions and achieve
rational outcomes. The term is not normally used to denote what is actually done and
this is normally referred to as either procedure or protocol. Whereas a policy will
contain the ‘what’ and the ‘why’ procedures or protocols contain the ‘what’ the
‘how’, the’ where’ and the ‘when’ .Policies are generally adopted by the board of or
senior governance body within an organization where procedures or protocols would
be developed and adopted by senior executive officers when a particular government
is involved in persistent devaluations there may be loss of confidence in its currency.
The government may influence the demand of given commodity through legislation,
for example, making it mandatory to open bars at 5:00 Pm and close at .This will lead
to the growth of economy. An expectation of increased taxation of foreigners’
income or confiscation of foreign assets by a particular government may also lead to
disinvestment with a consequent depreciation of currency (Murlis, 2004).
Micro economic theory is the branch of economics that studies the behavior of
individuals’ decision making unit such as consumers, a free market economy. The
aim of microeconomics is to explain determination of the prices and quantities of
individual goods and services. Microeconomics also considers individual markets for
example microeconomics analyzes television sets sold. It can also be considered as
the ultimate cellular structure for economics. The government can also stabilize
income by operating a stabilization fund from which it would make payments to
growers when income falls below normal. This would normally operate through a
marketing board controlling the industry with monopoly power to fix prices to
producers. The marketing board will usually guarantee a minimum price for the
commodity and make an initial payment to the grower followed by an additional
payment if sales by the board subsequently realizes a price in excess of the minimum
(Saleemi, 2006).
The government may gain stability of prices and income by operation of buffer stocks
where by governments buy up part of the supply when output is excessive, store
surplus and resell it to consumers in times of shortage and reduced supply. If output
fluctuates on either side of normal or planned level the amount that the government
buys up and sells out should roughly cancel each other over time. Government
intervention in providing merit goods entails the fact that the government needs to
16

intervene to provide essential goods and services ,demonstrate that the complete
reliance on consumer preference especially in a market oriented economy would lead
to the under provision of certain essential goods and services. Economic survey
(2010KNBS).The government in 2009/10 adopted an expansionary fiscal policy in an
effect to overcome the major policy challenges of accelerated economic growth to
sustain higher level, create economic opportunities, improves food security and
reduce poverty line with the first medium term plan of vision 2013 (Oluoch, 2004).
The intervention will also seek to counter the after stocks of the post-election violence
(PEV) experienced in 2008.Implementation of this measure will in this form of an
economic stimulus package that entails to a great extent, in public spending through
development of key infrastructure facilities and public work among other initiatives.
Financing shortfalls that are likely to arise from the increased spending was offset by
increased domestic spending combined with savings derived from expenditure
rationalization measures perused during period under review. Fiscal policy in the
review period was premised on the need to strike a balance between supporting the
anticipated growth and maintaining medium to long term debt sustainability through
prudent lending (Mullins, 1999).
According to Ross (2001), government recognizes the misallocation of resources
brought about by organization especially NGOs. On grounds of equity most
governments feel obliged to have policy to limit monopoly profits. Basic policies of
the government include the prohibition the formation of monopoly and run it in the
public interest and reorganization. The government can allow monopoly to continue
but pass legislation to make sure that it does not act against the public interest.
Kibera and Rue (1998), states that the government policies that encourage the
development of small and medium sized enterprises are important to any development
strategy. Also policies that protect the domestics market for local firms can be useful
at the early stages of development.
According to McCarthy (1994), public saving is linked to the government’s decisions
about spending and taxing. Government finances the bulk of the spending taxing the
NGO sector and private companies. The government may spend less than it collects in
taxes. The government should cut taxes or rise spending called expansionary fiscal
17

policies to get the economy out of slump. Conversely he holds that the government
should raise taxes or cut spending policies to bring the economy out of inflation.
According to Samuelsson (2003), over the last 35years, organizations have taken
numerous steps were legal landmarks such as the civil right. Act of 1964 that out laws
destruction hiring and employment and the equal pay. Act of 1963 that requires the
employers to pay men and women equally for the same work. Such will help
dismantle the most blatant discriminatory practices but more subtle barriers remain.
Keller (2003) defines political environment as laws, government agencies and
pressure groups that influences and limit various organizations and individuals of a
given society from conducting certain activities. Berkawitzz states that “Regulation
consists of restriction state and federal laws placed on business with regard to the
conduct of its activities.” Regulation exists to protect companies as well as the
consumer. Much of the regulation from the federal and state levels has been passed to
ensure competition and fair business practices. For consumers the focus of regulation
is to protect them from unfair trade practices by companies and ensure their safety.
According to McCarthy (1994), changes in political environment often leads to
changes in the legal environment too, and in the way existing laws are enforced laws.
The government has put rule that every company must fulfill, some of the rules or
laws are not imposed by the government but its subordinates. Businesses and business
managers are subject to both criminal and civil laws if they fail to abide by the law.
Penalties for breaking civil law are limited to forcing actions along with fines.
Government rules and regulations forces harsh economic disincentives on public
products and service consumption through high forces, court fines and jail fines and
this could force a sizeable portion of the population to trade down from legitimate
products to cheaper alternatives through smuggling and other firms of tax evasion.
The legislation by the government to protect both consumer and companies has three
main purposes: protect companies from unfair competition, protect consumers from
unfair business practices and protect the interests of society from inconclusive
business environment and unbridled business behavior hence it is important for
managers at any level of responsibility to be aware of the legal framework that applies
to work place. This information can be accessed from specific guides to legislation
which are published from time to time by appropriate government departments or
18

statutory bodies (Murlis, 2004). The Kenyan government has different roles in the
policy of business. The government issues licenses as a means of screening potential
entrepreneurs in an effort to certain their credibility and abilities. It is also used to
control exports and imports trade, the government is also concerned with the health
and safety conditions provided at places of work, works have to be protected
adequately to maintain and improve their productivity. The government in Kenya also
regulates the wages payable to workers. Minimum wage laws are in force and
business firms have to follow the guidelines stipulated by these laws. The government
is in the prevalence of good industrial relations in the business sector. It has set up
industrial court to arbitrate whenever industrial disputes occur.
Mullins (2004) describes policy as a deliberate plan action to guide decisions and
achieve national targeted outcome. The term may apply to government private sector
organizations, groups and individuals. Good examples of policies include; presidential
executive orders, corporate privacy policies and parliamentary rules of order. Policy
or policy study may also refer to the process of making important organization
decisions including the identification of different alternatives such as programs or
spending priorities and cohousing among them on the basis of the impact they will
have. Policies can be understood as political, management financial and
administrative mechanism arranged to reach explicit goals. Definition of policy and
research done into the area of policy are frequently performed from the perspective of
policies created by national government, or public policy. According to Sople (2001),
there is lack of consensus on the definition of policy. Sople et al, the term public
policy always refers to the actions of government and the intention that those actions
processes vary significantly from the stringent to the very informal large corporations
and government entities are most likely to have stringent and formal processes.
2.2.4 Lead Time
This is the duration of time taken between ordering and delivering of products
ordered. Basically ordering locally avails the goods faster compared to overseas
sourcing. Companies that can react promptly and accurately to the needs of their
customers are obviously more likely to attract orders than those who cannot. Thus it
can be seen that ideas such as responsiveness, time compression and market rightly
earn their place in developing management philosophies in logistics. Recognition of
time as a key variable and the need to minimize as wastage in supply chain has led to
19

increased degree of concern with time and responsiveness in recent years (Jessop,
2008).
Dobbler (1996) states that in the past it was often the case that prices were paramount
as an influence on purchase decision. He went on to suggest that while prices are still
important, a major determinant of choice of suppliers or brand is the cost of time. The
cost of time is supply additional cost that customer must beer while waiting for
delivering or seeking out alternatives. If a company is seeking competitive advantage
by becoming better to respond to customer needs as they are, that it follows that the
company will require greater degree of responsiveness from its own suppliers. The
achievement on time delivery is a standard purchasing objective. If goods and
materials arrive late or work is not completed at the right time, sales may be lost,
production hacked and damages incurred.
According to James (2001), lead time is the amount of time between recognition that
an order need to be placed and its arrival in the store ready for use. If it took two
months to a shipment of stationeries, the possibility of running out of stock is greater
than if lead were only two weeks because stationary stores would have to forecast a
long period. The shorter the lead time inherent in a quick response inventory system
using EDI result in a lower level of back-up store required to maintain the same level
of productivity, fluctuations in lead time also affect the amount of back-up stock.
According to Dobbler (1996) just in time (JIT) environment short lead times are a
major source of competitive advantage. Equally important however is the reliability of
consistency of that lead time. It can actually be argued that reliability of delivery is
more important than the length of the order cycle. Each of these steps in the chain will
consume time. Because of bottlenecks, insufficient processes and fluctuations in the
volume orders handled there will often be considerable variation in the time taken for
substantial reduction in the reliability of delivery and this greatly affect logistic
processes. If stationery stores knows that lead time for stationery is always two
weeks, plus or minus one day, it can be more accurately to plan its inventory level.
But if lead time is plus or minus five days on the next shipment the stationary stores
must carry additional back-up to cover uncertainty in lead time. Furthermore when
lead times are longer, retailers must retain or maintain large inventories to ensure that
merchandise is available when customers place a need.
20

For many plants, set up run time constitute 10-20% of total time. The rest of stock that
can be substantially cut because of inherent errors in forecast that rely on this can run
into a variety of problems i.e. wrong materials may be bought and perhaps processed
into “wrong goods”. Production lead time is the stacked lead time for purchasing of
raw materials, arriving, manufacturing and delivery and sometimes design of the
product. This also has impacts on demand lead time, the time from when a customer
places a need/order until goods are delivered. Organizations regard cash as
commitment once an order has been place, failure to obtain supply on time may slow
down cash to cash cycle, thus reducing the organization’s efficiency or profitability.
Purchasers are blamed sometimes rightly by user department colleagues if suppliers
fail to deliver on time. To obtain on time delivery however it is vital to ensure that
user department knows what lead time apply and other necessary information.
Purchasers has practical role in supply market convincing suppliers that they must
deliver as and when agreed (Jessop, 2008).
Lead time is another phase of procurement logistical procedures in which government
and industry differ. Here the government for the reason other than business has added
additional cost to its purchasing operations. It should be understood clearly that
without restraints, government procurement officials could purchase hand tools just as
quickly and economically as industrial firms and just with a “few pieces of paper.”
Government supply managers are fully knowledgeable concerning the hand tool
industry and low cost producers in industry yet are mindful that they steward public
trust (Barly, 1995). Most buyer and buying organization throughout industry and
commerce are happy with delivery times for most of their purchases, and regard late
delivery as an exceptional event which might require crisis action. Sometimes
suppliers quote delivery dates which they cannot meet. This may be unscrupulous
device to get the order or quote may actually be given in good faith but circumstances
change and delivery dates are rescheduled. The level of competency in firms to
efficiently deliver is widely portrayed by the ability to deliver the goods on time
hence meeting the production planning and control schedules. Frequently buying
organizations are themselves the source of delivery problem through issuing
constricted timelines for delivery.
21

Having ensured that requirement dates notified to the procurement department are
achievable, procurement can properly be expected to go out and fulfill them. A vital
step in achieving on-time delivery is to ensure that suppliers know and are fully aware
that on-time delivery is an important element in logistics (Barly, 2008). Lead time is
critical in supply chain management. However it is usually viewed incrementally and
sub-optimally. Just in time cash and cash is important to business also important flow
of goods and information that have generated the cash flow in the first place. The cash
to cash cycle time is of the time from buying to receipt of payment for sales is
therefore critical (David, 2008).
2.2.5 Ethical Issues
According to Armstrong (2000), value for money is the core principle in public
procurement, incorporating ethical behaviors and ethical use of resources. The
application of the highest ethical standard will help ensure that the best achievable
procurement outcome. He continues to say that the ethical behavior and good
practices enhance the procuring entities reputation in the market places. This increases
business confidence in procurement processes and is likely to maximize the number
of suitable responses for future tenders. Equally important ethical behavior on the part
of the contractor or consultant increases their chances of completing the assignment
successfully and therefore the possibility of wining more tenders in the future.
Cole (2004) stipulates that there are some emerging issues that have been noted about
the new procurement laws. Although they may not be directly connected to the main
areas of the research problem, they touch the center of the procurement policies that
the government has formulated and are now in the implementation stage. For many
decades, the public has lost billions of shillings due to bad procurement practices,
with the greedy suppliers inflating prices of goods and services to enrich themselves.
According to Jones (1995), airtight regulation to save public resources are laudable,
there are grey arrears in the Act. Buried in the new statute are provisions which if
implemented, will make the practice of architecture, quantity surveying and
engineering impossible. Under the new law, that is no is longer the case. The Act
introduces a middleman in the name of procuring agent. The Act provides for
tendering of professional services, therefore placing the exporters in the same
22

category with unregulated profession and service providers, including stationary
suppliers.
Oloo (2002) says the new regulation, stipulate the setting up of the work testing and
acceptance committees, whose responsibilities is to measure, approve and satisfy
payment of work done. In the past this has been the work of architects, engineering
and quality surveyors as provided in the Act of parliament. Question was raised
regarding the new committees. The Act does not define the qualification of the
members.
The Act also outlaws variations. In any contract, there is a provision for
contingencies, price fluctuations and modification, among others. It would be
completely unwise to ban variation on contract involving large amount of money
because such project take months and even years to implement. Such issues will
continue to arise. They are healthy because they help to shape the new laws further.
Public Procurement and Regulation (2006) says that, one thing that need to be clear is
that procurement is a system which has the element of procedures standard
documents, regulation, institutions and appropriate legal framework. The procurement
system needs to have a solid foundation and the natured in order to be able to grow.
What need to have to be done to sustain the procurement system in Kenya is to
develop the human resource capabilities, which will make the procurement functions
to sustain itself for long. Officials involved in procurement must not make improper
use of their position. Officials may have access to very confidential or market
sensitive information. It is unethical to use inside information provided in the procure
ring entity as part of the tender process, either for the material benefit of the officials
or for another person (Procter, 2003).
Public procurement procedures often are complex. Transparency of the processes is
limited, and manipulation is hard to detect. Corruption in procurement affects the
efficiency of the public spending; create waste and affects the quality of service and
opportunities they present to improve quality. It also increases operation cost and
reduces competitiveness (Procter, 2003).
23

In Kenya, the use of sectors, ministries of finance circulars was so frequent that they
overshadowed the prepared supply guidelines. The main problem with the use of the
circulars was that corrupt civil servants easily manipulated the process. Dobler and
Bart (1996) talked of policies affecting external relationship and image of the
organization, supply source policies and policies on pricing and ethical practices. But
they are also specific on the policy manual saying that, if policies have to function
effectively, they must b e in written form. It is important that the message reaches
those who are to receive it as clearly and accurately as possible.
According to Newman (2002), purchasing functions supports the firm’s competitive
strategy by adopting purchasing techniques and products which strengthens the firm’s
competitive position. Rock says that, the public procurement is different from private
procurement, because in public procurement the economic results must be measured
against more complex and long-term criteria. Furthermore, public procurement must
be transacted with other considerations in mind, besides the economy. These
considerations include accountability, non-discrimination among potential suppliers
and respect for international obligation. For this reasons, public procurement is
subjected in all countries to enacted regulations, in order to protect the public
interest. It is worth noting that unlike private procurement, public procurement is a
business within a political system and has therefore significant consideration of
integrity, accountability, national interest and effectiveness.
2.3 Review of Critical Literature
Moses (2000) indicated that quality is the collection of features and characteristics of
a product that contribute to its ability to meet given requirement. He continues to say
that there are three views for describing the overall quality of a product. First is the
view of manufacture who is primarily concerned with design, engineering and
manufacturing process involved in fabricating the product. Quality is measured by the
degree of conformance to pre-determined specification and standards and deviations
from these standards can lead to poor quality and low reliability. Efforts for quality
improvements are aimed at eliminating defects (components and subsystems that are
out of conformance) it need for scrap and rework and hence overall reductions in
production cost. Second is the view of consumer or the user. To consumer a high
quality product is the one that satisfies their preferences and expectations. This
24

consideration can include a number of characteristics some of which contribute to a
little or nothing too functionally of the product but are significant in providing
customer satisfaction. A third view relating to qualities is to consider the product
itself as a system and to incorporate those characteristics that pertain directly to the
operation and functionally of the product. This approach should include overlap of the
manufacture and customer views. While this is true the Research Data failed to show
how price quality would influence contract negotiation in the Public Sector and hence
the need to address the gaps
Baily et al (1995) argued that product specification for an item is a statement of the
attributes of a product or service. It is basically a description of that item, its
dimensions, performance or other relevant characteristics in sufficient detail to ensure
that it was suitable in all aspects for which it is intended. The procurement function
has a part in working towards the optimum specification. This implies not only an
attractive product for marketing to sell or for production to manufacture, but one
which includes services, materials or components which are economic to purchase,
this in turn presupposes that they are attractive for the supplier to produce or provide.
All this necessitates some degree of compromise between the parties involved. A
weak procurement function, which simply purchases what, for example, production
ask for is missing the opportunity of contributing in this way clearly, it is not for
procurement to ensure the design function or any other , but it should inform the
various parties of the constraints and opportunities relating to specifications and to
delivery reliability. There are basically two approaches to specification i.e.
performance and conformance specification. Performance specification- the idea of
performance specification is that a clear indication of the purpose function,
application and performance expected of the supplied material or services is
communicated, and the supplies is allowed or encouraged to provide an appropriate
product. The detailed specification is in the hands of the supplier. Where applicable,
performance specification is to be preferred in that they allow a wider competition
and enable suppliers to suggest new or improved ways of meeting the requirement. It
is frequently the case that when services are being acquired or purchased it is not
possible to prescribe a conformance specification due to the fact that service provider
alone knows how to do the work required and we are able only to convey the intended
outcomes. While this is true the Research Data failed to show how specification
25

would influence contract negotiation specifically to public sector and hence the need
to address the gaps.
There are a number of other government policies as well as administrative practices
which must be observed in relation to the contracting policy requirements. Many of
these administrative requirements follow from the applicability of other laws, policies,
conventions and procedures which are of them outside of the policy on contracting for
goods, services and construction. This article provides an overview of these other
policies; the guidelines and appendices contain additional information. Contracting
Research Dataities cannot assume or acquire the powers or Authority of any
department, branch or agency in Kenyan Government to which they provide services
such that they acquire greater powers and Authority than those conferred by their own
legislation or other applicable statutes or regulations. Departments must ensure that
adequate management controls are in place to protect the integrity of the bidding
process. It is recognized that the bidding process may employ either traditional hard
copy documents or electronic bid documents. Departments must have the ability to
demonstrate that all bid materials are received on time and in the manner prescribed in
the tender/solicitation documents. In the case of electronic bids, Departments must
also ensure that the documents are not altered, forged, changed or corrupted either
intentionally or by error. While this is true the Research Data failed to show how
government policy would influence contract negotiation with special reference to
Public sector and hence the need to address the gaps.
According to Christopher (2005), the concept of lead time from the customer’s
viewpoint having only one lead time being available: That is the elapsed time from
order to delivery. Clearly this is a crucial competitive variable as more and more
markets become increasingly time competitive. Nevertheless it represents only a
partial view of lead time. Just as important from the suppliers’ perspective, in the time
it takes to convert an order into cash and, indeed, the total time that working capital is
committed from when materials are first procured through to when the customer’s
payment is received. He further illuminates that lead time from a marketing point of
view is the time taken from receipt of customers’ order through to delivery
(sometimes referred to as order cycle time) OCT. While this is true the Research Data
failed to show how time elapsed before reaching a consensus during negotiation
26

would influence contract negotiation in the Public Sector and hence the need to
address the gaps.
When creating a contract, a negotiator is not only doing so to reach an agreement
between two or more parties, but to create an agreement that is durable; whereby
parties of the contract are legally bound and committed to its promises (Wade and
Honeyman 2005, 7). A legally binding contract is defined as an exchange of promises
or an agreement between parties that the law will enforce, and there is an underlying
presumption for commercial agreements that parties intend to be legally bound.
Following are reasons for breaches in contracts and the way in which these ethical
considerations may impact upon them. In most of these situations, the law may not
agree with moral or cultural relativism and award in favour of what people generally
view as being ‘right’ or ‘wrong’. It is therefore imperative that contracts are created to
be as durable as possible so parties are unable to find legal ‘loopholes’ and use their
power, wealth, ignorance or cultural differences in setting contracts aside. While this
is true the Research Data failed to show how ethical issues would influence contract
negotiation in the Public Sector and hence the need to address the gaps.
2.4 Summary
The literature review was restricted to five independent variables and their
relationship to the dependent one. They are quality, product specifications,
government policy, lead time and ethical issues. The various Research Datas have
emphasized on the need for effectiveness of conversion of inputs to desired outputs.
Using the results of technology a company gains high productivity while the company
enjoys the low supervision from better training and development employed. Service
delayed is a key measure to competitiveness of an organization. It is measure of the
effectiveness of conversion of inputs to desired output. The organization that manages
to achieve a consistently high service delivery was able to offer the most competitive
price for the same service and so beat competition.
This study investigated the influence of relationship quality on negotiation of
contracts. It is summarized that when an organization designs and builds an item right
the time (or provides a service without errors), quality is free. It does not cost
anything above what you have already spent. When organization has to rework or
27

scrap an item because of poor quality it costs more. Crosby discloses of quality and
cost of non-quality. The intention is spend more money on preventing defects and loss
on inspection and rework. Crosby espoused his basis theories about quality in four
absolutes of quality management as follows. Quality means conformance to customer
requirements, not goodness. The cost of causing quality is prevention, not appraisal,
the performance of standard must be zero defects not that are close enough. The
measurement of quality is the price of non-conformance, not indexes.
There are basically two approaches to specification i.e. performance and conformance
specification. Performance specification- the idea of performance specification is that
a clear indication of the purpose function, application and performance expected of
the supplied material or services is communicated, and the supplies is allowed or
encouraged to provide an appropriate product. The detailed specification is in the
hands of the supplier. Where applicable, performance specification is to be preferred
in that they allow a wider competition and enable suppliers to suggest new or
improved ways of meeting the requirement.
Policies are mandatory and must be adhered to by all individuals and corporate in
their activities throughout the organization. At corporate and operational level,
policies have the following advantages; they generate Authority based on principles
for a given course action, they provide guidelines when formulating functional and
operational strategies to allow coordination across organizational units and reduce
time managers spend in making decisions. Kenyan government also regulates
advertising, before an advertisement can be put on mass media they have to conform
to the requirements laid down by government through legislation.
Lead time is not value to be measured but a parameter to be managed in negotiation,
the longer the lead time is perceived between order launching date and due date,
consequently leading to longer time and more order in the shops reflects longer time
in the queue and work in progress. Some work in progress is needed at work centers
where high utilization is important. However, a basic principle of control system is
substitute information for inventory. The firm does not need to have job physically in
front of machines, orders can be held in a computer and converted into physical units
only as needed.
28

2.5 Conceptual Framework
Figure 2.1 Conceptual Framework
Independent Variables Dependent Variable
Source: Researcher (2022)
2.5.1 Quality
The achievement of delivery on time is a standard purchasing objectives. If goods and
material arrive late or work is not completed at the right time, sales may be lost,
production halted and damages clauses may be invoked by dissatisfied customers. In
addition, most organization regard cash as committed once an orders has been placed,
failure to achieve supply in time may slow down the cash to cash cycle, thus reducing
the organizations efficiency or profitability.
2.5.2 Product Specification
Specification for an item is a statement of the attributes of a product or service. It is
basically a description of that item, its dimensions, performance or other relevant
characteristics in sufficient detail to ensure that it was suitable in all aspects for which
it is intended.
2.5.3 Government Policy
The study defines it as a broad network of ideas and values within which decisions are
taken and action or government or managers in a government or organization in relation
to the problem at hand pursue inaction.
2.5.4 Lead Time
The first step to obtaining delivery on time is to decide firmly and precisely what is
required when it is required through effective negotiation. Normally it is a material
29
Quality
Product Specification
Government Policy
Lead Time
Contract Negotiation in
Public sector
Ethical Issues

related department such as stock control or planning and control which work out
without regard to suppliers’ lead time and market realities, since this is likely to delay
procurement process. To avoid late delivery, procurement should work on the
problem of getting shorter lead time by contracting reliable suppliers and should
ensure that mutual understanding of the expression lead time is achieved.
2.5.5 Ethical Issues
Contract negotiation procedures often are complex. Transparency of the processes is
limited and manipulation is hard to detect, corruption in awarding contracts affects the
efficiency of public spending, creates waste and affects the quality of services and the
opportunities they present to improve quality. It also increases operation costs and
reduces contract negotiation processes.
30

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
This chapter presents the methodology, which was used to carry out the study. It
describes the type and source of data, the target population and sampling methods and
the techniques that was used to select the sample size. It also describes how data was
collected and analysed by the researcher.
3.2 Study Design
The study design is the outline, plan or scheme that was used to generate answers to
the research problem. It is basically the plan and structure of investigation. The
researcher will use descriptive research design to collect data from respondents.
Descriptive research design was used to establish factors associated with certain
occurrences, outcomes, conditions or types of behavior. Descriptive research is a
scientific method of investigation in which data was collected and analyzed in order
to describe the current conditions, terms or relationships concerning a problem
(Kothari, 2005). The design was preferred by the researcher because it provided an in-
depth analysis of the study phenomenon in its nature of occurrence.
3.3 Target Population
Target population as defined by Kothari (2005) is a universal set of the study of all
members of real or hypothetical set of people, events or objects to which an
investigator wishes to generalize the result. The target population was 118 employees.
The population was divided into three groups with distinct sections of top
management, middle management and support staff. The total target population for
the study was as follows:
Table 3.1 Target Population
Category Target Population Percentage (%)
Top Management 4 3
Middle Management 22 19
Support Staff 92 78
Total 118 100
Source: REA (2022)
31

3.4 Sampling Design
Sampling is the process by which a relatively small number of individual, object or
event was selected and analyzed in order to find out something about the entire
population from which was selected (Mugenda & Mugenda, 2003). A sample is a
small proportion of target population which was selected using in a systematic form.
The researcher used stratified random sampling because it enabled generalization of a
larger population with a margin of error that is statistically determinable. The sample
size was 50% of the target population. The sample size was as follows:
Table 3.2 Sample Size
Category Target Population Sample Size Percentage
Top Management 4 2 4
Middle Management 22 11 19
Support Staff 92 46 77
Total 118 59 100
Source: REA (2022)
3.5 Data Collection Methods
3.5.1 Primary Data
Mugenda (2003) describes primary data as firsthand information collected, compiled
and published for some purpose. This data was collected from the respondents by the
researcher in form of questionnaires that they was required to fill. Since it was
collected from original sources for specified purposes, it involved collection of data
by the researcher from own observations and experiences.
3.5.3 Validity and Reliability of Research Instruments
The researcher obtained Authority from relevant departmental sections of the
organization to circulate questionnaires. To ensure reliability and validity of
questionnaires, a pre-test was done on three respondents. The pre-tested
questionnaires were not be included in the final research study. The questionnaires
was corrected before the final circulation to ensure that they are able to elicit the kind
of information needed. It made it possible for a similar study to be reciprocated with
consistent outcomes.
32

3.5.4 Administration of Questionnaires
Questionnaires used in the study was hand delivered and collected after a period of
two months. The types of questions included both open and closed ended. Closed
ended questions was used to ensure that the given answers are relevant. The
researcher phrased the questions clearly in order to make clear dimensions along
which respondents was analyzed. In open-ended questions, space was provided for
relevant explanation by the respondents, thus giving them freedom to express their
views. This method was considered effective because it enhanced confidentiality of
the respondents. The presence of the researcher was not required as the questionnaires
was self-administered.
3.6 Data Analysis Methods
According to Orodho and Kombo (2003), data analysis procedure includes the process
of packaging the collected information putting it in order and structuring its main
components in a way that the findings can be easily and effectively communicated.
After the fieldwork, before analysis, all questionnaires was adequately checked for
reliability and verification. Editing, coding and tabulation was carried out.
Quantitative analysis was used to analyze closed ended questions and qualitative
analysis was used to analyze open-ended questions.
3.7 Research Ethics
The respondents was given the assurance that their responses was treated in strict
confidentiality and that they should be fair and honest. To protect the confidentiality, the
respondents was expected to indicate their names on the questionnaire. The researches
was courteous while engaging the respondents and avoid embarrassing them. This will
create a conducive environment for collecting the required data. The researcher also
guaranteed the respondents that the study was conducted for academic purposes only.
33

CHAPTER FOUR
DATA ANALYSIS, PRESENTATION AND INTERPRETETION OF THE
FINDINGS
4.1 Introduction
This chapter outlines the analysis of the data collected in the study. The data is then
presented in form of tables and figures. An interpretation of the data is done in order
to draw generalizations.
4.2 Presentation of Findings
4.2.1 Response Rate
The researcher sought to establish the response rate from 59 questionnaires
administered to the target sample and the number of questionnaires that were
completed fully and returned to the researcher was 50. This translated to 85%
response rate.
Table 4.1 Response Rate
Category Frequency Percentage
Respondents 50 85
Non- respondents 9 15
Total 59 100
Source: Research Data (2022)
Figure 4.1 Response Rate
Source: Research Data (2022)
Table 4.1 and figure 4.1 above show the response rate. Out of the 59 questionnaires
administered to respondents, 50 of them which comprised of 85% were completely
filled and returned to the researcher for analysis while 9 questionnaires comprising of
34

15% were not completely filled and were not returned to the researcher for final
analysis. From the analysis, it can be concluded that the response rate was high.
4.2.2 Gender Analysis
Table 4.2 Gender Representation
Category Frequency Percentage
Male 32 64
Female 18 36
Total 50 100
Source: Research Data (2022)
Figure 4.2 Gender Representation
Source: Research Data (2022)
Table 4.2 and figure 4.2 indicate the gender analysis of the respondents. From the
analysis 64% of the respondents were male while 36% were female. Based on the
analysis, it is interpreted that majority of the respondents were male.
35

4.2.3 Age Representation
Table 4.3 Ages of Respondents
Category Frequency Percentage
18 – 24 years 6 12
25 – 30 years 14 28
31 – 40 years 20 40
41 years and above 10 20
Total 50 100
Source: Research Data (2022)
Figure 4.3 Age of Respondents
Source: Research Data (2022)
Table 4.3 and figure 4.3 shows age analysis of the respondents where 12% of the
respondents were aged between 18 and 24 years, 28% were aged between 25 – 30
years, 40% were aged between 31 - 40 years and 20% were aged 41 years and above.
This reveals that the organization comprises of a middle aged workforce as the
majority.
36

4.2.4 Highest Level of Education
Table 4.4 Highest Level of Education of Respondents
Category Frequency Percentage
Primary 5 10
Secondary 10 20
College 20 40
University 15 30
Total 50 100
Source: Research Data (2022)
Figure 4.4 Highest Level of Education of Respondents
Source: Research Data (2022)
Table 4.4 and figure 4.4 shows the highest level of education the respondents where
10% had primary level of education, 20% had attained secondary level, 40% had
college level and 30% had attained university level of education. It can be concluded
that majority of the respondents had attained college level of education.
37

4.2.5 Working Experience
Table 4.5 Working Experience of the Respondents
Category Frequency Percentage
Below 10 years 16 32
11 – 15 years 20 40
16 – 20 years 10 20
Above 20 years 4 8
Total 50 100
Source: Research Data (2022)
Figure 4.5 Working Experience of the Respondents
Source: Research Data (2022)
Table 4.5 and figure 4.5 indicate the working experience of the respondents. Based on
the analysis, 32% of the respondents have been in employment between 5 – 10 years,
40% 11 – 15 years, 20% 16 –20 years and 8% 20 years and above. From this analysis
the researcher concluded that majority of the respondents have been in employment
between 11 – 15 years.
38

4.2.6 Quality
Table 4.6 Whether Quality affects Contract Negotiation
Category Frequency Percentage
Yes 33 66
No 17 34
Total 50 100
Source: Research Data (2022)
Figure 4.6 Whether Quality affects Contract Negotiation
Source: Research Data (2022)
Table 4.6 and figure 4.6 indicate whether quality has effect on the contract negotiation
in the public sector. Based on the analysis, 66% of the respondents against 34% were
of the opinion that indeed quality affects contract negotiation. From the study findings
it can be concluded that when negotiating for a contract, quality should not be
overlooked.
39

4.2.7 Quality
Table 4.7 Rating of Quality on Contract Negotiation
Category Frequency Percentage
Very high 26 52
High 18 36
Moderate 6 12
Low 0 0
Total 50 100
Source: Research Data (2022)
Figure 4.7 Rating of Quality on Contract Negotiation
Source: Research Data (2022)
Table 4.7 and figure 4.7 shows the extent to which quality affect contract negotiation
in the public sector. From the analysis 52% of the respondents indicated it affects to a
very high extent, 36% said it does affect to high extent 12% said it affects to a
moderate extent while response on low extent was none.
40

4.2.8 Product Specification
Table 4.8 Whether Product Specification affects Contract Negotiation
Category Frequency Percentage
Yes 36 72
No 14 28
Total 50 100
Source: Research Data (2022)
Figure 4.8 Whether Product Specification affects Contract Negotiation
Source: Research Data (2022)
Table 4.8 and figure 4.8 indicate whether product specification affect contract
negotiation in the public sector. From the analysis majority of the respondents at 72%
indicated that it affects against 28% who said that it does not affect. Based on the
results it can be concluded it is essential when negotiating for contract to specify
which product is required for certain task or job to be completed or fulfilled.
41

4.2.9 Product Specification
Table 4.9 Rating of Product Specification on Contract Negotiation
Category Frequency Percentage
Very high 25 50
High 18 36
Moderate 7 16
Low 0 0
Total 50 100
Source: Research Data (2022)
Figure 4.9 Rating of Product Specification on Contract Negotiation
Source: Research Data (2022)
Table 4.9 and figure 4.9 indicate the extent to which product specification affects
contract negotiation in the public sector. From the analysis, 50% of the respondents
felt that it affected to a very high extent, 36% of the respondents felt it affects at high
extent, 14% indicated low moderate extent while none of the respondents was of the
opinion that it product specification affect contract negotiation in low extent..
42

4.2.10 Government Policy
Table 4.10 Whether Government Policy Affects Contract Negotiation
Category Frequency Percentage
Yes 28 56
No 22 44
Total 50 100
Source: Research Data (2022)
Figure 4.10 Whether Government Policy Affects Contract Negotiation
Source: Research Data (2022)
Table 4.10 and figure 4.10 shows whether government policy affects contract
negotiation in the public sector. From the analysis 56% of the respondents indicated
that it affects while 44% felt it does not affect. Based on the findings it can be
concluded that government policy provide rules and regulations or rather laws which
directly or indirectly does affect contract negotiation.
43

4.2.11 Government Policy
Table 4.11 Rating of Government Policy on Contract Negotiation
Category Frequency Percentage
Very high 18 36
High 15 30
Moderate 9 18
Low 8 16
Total 50 100
Source: Research Data (2022)
Figure 4.11 Rating of Government Policy on Contract Negotiation
Source: Research Data (2022)
Table 4.11 and figure 4.11 shows the rating of government policy on contract
negotiation in the public sector. From the analysis majority of the respondents at 36%
indicated that government policy affects contract negotiation in the public sector at a
very high extent, 30% felt it affected to high extent, 18% to a moderate extent and
16% to a low extent.
44

4.2.12 Lead Time
Table 4.12 Whether Lead Time Affects Contract Negotiation
Category Frequency Percentage
Yes 36 72
No 14 28
Total 50 100
Source: Research Data (2022)
Figure 4.12 Whether Lead Time Affects Contract Negotiation
Source: Research Data (2022)
Table 4.12 and figure 4.12 shows the effect of lead time on contract negotiation in the
public sector. From the analysis 72% of the respondents indicated that lead time
affects contract negotiation while 28% felt it did not. Based on the findings it can be
concluded that the time that elapses from ordering and actual delivery of product or
service should be known.
45

4.2.13 Lead Time
Table 4.13 Rating of Lead Time on Contract Negotiation
Category Frequency Percentage
Very high 18 36
High 15 30
Moderate 9 18
Low 8 16
Total 50 100
Source: Research Data (2022)
Figure 4.13 Rating of Lead Time on Contract Negotiation
Source: Research Data (2022)
Table 4.13 and figure 4.13 indicate the rating of lead time on contract negotiation in
the public sector. From the analysis 36% of the total respondents felt it affects to a
very high extent, 30% of the respondents felt it affects to a high extent, 18% to a
moderate extent and 16% at low extent. Based on the analysis, it is evident that lead
time contributes towards contract negotiations in most organizations.
46

4.2.14 Ethical Issues
Table 4.14 Whether Ethical Issues Affects Contract Negotiation
Category Frequency Percentage
Yes 39 78
No 11 22
Total 50 100
Source: Research Data (2022)
Figure 4.14 Whether Ethical Issues Affects Contract Negotiation
Source: Research Data (2022)
Table 4.14 and figure 4.14 shows the effect of ethical issues on contract negotiation in
the public sector. From the analysis 78% of the respondents indicated that ethical
issues affects contract negotiation while 22% felt it did not. Based on the findings it
can be concluded that the professionalism and demonstration of good code of conduct
should be given a priority when negotiating for contracts.
47

4.2.15 Ethical Issues
Table 4.15 Rating of Ethical Issues on Contract Negotiation
Category Frequency Percentage
Very high 20 40
High 13 26
Moderate 11 22
Low 6 12
Total 50 100
Source: Research Data (2022)
Figure 4.15 Rating of Ethical Issues on Contract Negotiation
Source: Research Data (2022)
Table 4.15 and figure 4.15 shows the rating of ethical issues on contract negotiation in
the public sector. From the analysis 40% of the total respondents felt it affects to a
very high extent, 26% of the respondents felt it affects to a high extent, 22% to a
moderate extent and 12% at low extent. Based on the analysis, it is evident that ethical
issues do jeopardize contract negation process in most organizations.
48

4.3 Summary of Data Analysis
4.3.1 General Information
Out of the 59 questionnaires which were administered to respondents, 50 of them
which comprised of 85% were completely filled and returned to the researcher for
analysis while 9 questionnaires comprising of 15% were not completely filled and
were not returned to the researcher for final analysis. On gender analysis of the
respondents, 64% of the respondents were male while 36% were female. With respect
to age analysis, 12% were aged between 18 and 24 years, 28% were aged between 25
– 30 years, 40% were aged between 31 - 40 years and 20% were aged 41 years and
above. Based on the findings, 10% had primary level of education, 20% had attained
secondary level, 40% had college level and 30% had attained university level of
education being their highest level of education that respondents had attained. On the
side of tenure, 32% stated that they have been in employment from 0 – 10 years, 40%
were 11 – 15 years, 20% were 16 –20 years and 8% were 20 years and above.
4.3.2 Quality
From the analysis, majority of the respondents believed that quality affects the
contract negotiation in the public sector. Based on the analysis, 66% of the total
respondents against 34% were of the opinion that indeed quality affects contract
negotiation. From the study findings it can be concluded that when negotiating for a
contract, quality should not be overlooked hence quality should be the first
consideration than any other aspect.
4.3.3 Product Specification
As to whether product specification affect contract negotiation majority of the
respondents at 72% indicated that it affects against 28% who said that it does not
affect. Based on the results it can be concluded that it is essential when negotiating for
contract to specify which product is required for certain task or job to be completed or
fulfilled. The respondents indicated that specifications are among the major
considerations in the procurement of products and they felt that the organization
should put clear standards and set specifications so as to avoid any inconveniences
that can arise due to lack of clear specifications.
49

4.3.4 Government Policy
From the analysis 56% of the respondents indicated that government policy affects
contract negotiation while 44% felt it does not affect. Based on the findings it can be
concluded that government policy provide rules and regulations or rather laws which
directly or indirectly does affect contract negotiation. In this regard the respondents
reiterated policies should be formulated in a way that it gains maximum flexibility to
allow effective negotiation of contracts.
4.3.5 Lead Time
Based on the study findings respondents asserted that lead time was a factor to be
considered during contract negotiation, in connection to this 72% of the respondents
being the majority indicated that lead time affects contract negotiation while 28% felt
it did not. Based on the findings it can be concluded that the time that elapses from
ordering and actual delivery of product or service should be known, before reaching
an agreement upon negotiation of contract.
4.3.6 Ethical Issues
According to the study findings majority of the respondents at 78% indicated that
ethical issues affects contract negotiation while 22% felt it did not. Based on the
findings it can be concluded that the professionalism and demonstration of good code
of conduct should be is a priority when negotiating for contracts.
50

CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter summarizes the findings of the study. It focuses on the answers to the
research questions derived from the study. It also draws conclusions by providing the
major factors raised by the respondents. Recommendations for further studies have
been made in order to address other factors that affect contracting negotiation in the
public sector in Kenya.
5.2 Summary of Findings
5.2.1 How does quality affect contract negotiation in the public sector?
It was found that quality affect contract negotiation in the public sector, 52% of the
total respondents indicated it affects at a very high extent, 36% said it does affect at
high extent 12% said it affects at a moderate extent while response on low extent was
none.
5.2.2 What is the effect of product specification on contract negotiation in the
public sector?
On the rating of product specification towards contract negotiation in the public sector
majority of the respondents at 50% felt that it affected at a very high extent, 36% of
the respondents felt it affects at high extent, 14% indicated low moderate extent while
none of the respondents was of the opinion that it product specification affect contract
negotiation in low extent.
5.3.3 How does government policy affect contract negotiation in the public
sector?
According to the study findings majority of the respondents indicated that government
policy affects contract negotiation. From the analysis majority of the respondents at
36% indicated that government policy affects contract negotiation in the public sector
at a very high extent, 30% felt it affected to high extent, 18% to a moderate extent and
16% to a low extent.
5.2.4 What is the effect of lead time on contract negotiation in the public sector?
Research findings indicated that lead time affects contract negotiation in the public
sector. From the analysis 36% of the total respondents felt that lead time affects
contract negotiation at a very high extent, 30% of the respondents felt it affects to a
high extent, 18% to a moderate extent and 16% at low extent.
51

5.2.5 How do ethical issues affect contract negotiation in the public sector?
It was found out that ethical issues does affect contract negotiation, as to what extent,
majority of the respondents at 40% indicated that ethical issues affects at a very high
extent, 26% of the respondents felt it affects to a high extent, 22% to a moderate
extent and 12% at low extent.
5.3 Conclusions
Quality plays a vital role in the contract negotiation. Effective negotiation of contracts
leads to improvement in quality and also results to lower costs of because there is less
re-work, few mistakes, few delays and proper utilization of time. Most respondents
indicated that quality should be the first consideration than any other aspect.
Product specifications are considered in contract negotiation is vital. The buying
organization should lay down clear requirements that must be met. Specifications
usually state a tolerance, the permissible variation in important characteristics such as
size and weight. There are two approaches to specifications; these are performance
specification and conformance specification. Performance specification is to be
preferred in that they allow a wider competition and enable suppliers to suggest new
improved ways of meeting the requirement.
Government policies have effects on contract negotiation and the overall procurement
as a result what is to be purchased or supplied in the public sector has to be
determined by the polices prescribed by the government. Hence government policy
should be revised to put proper measures in place to avoid contradictions in
government policy to enhance effectiveness and efficiency in the procurement
systems such as contracting.
The achievement of delivery on time is a standard purchasing objective with calls for
shorter lead time. To obtain on time delivery, it is vital to ensure the user departments
know what lead time apply and any other necessary information. The first step to
obtaining delivery on time is to firmly and precisely indicate what is required and
when it is required. The supplier should be fully aware that on time delivery is an
important element.
Procurement ethics should be properly followed to avoid any contradictions with the
other organizations, suppliers, buyers. If ethics are highly adhered to there would not
be problems when it comes to the negotiation of contracts as a procurement function.
52

5.4 Recommendations
5.4.1 Quality
Improvement in quality lead to lower cost and higher productivity because they result
in less re-work, few mistakes, few delays and better use of time. The researcher
recommends that the organization put major emphasis on the aspect of quality during
negotiation of contracts in procurement. It is recommended that the organization
follows the three steps to quality which are; leadership, modern quality technology
and organizational commitment.
5.4.2 Product Specification
Having established that product specification has an impact in contract negotiation in
procurement, the researcher recommends that the organization should basically
describe items, their dimensions, performance or any other relevant characteristics in
sufficient detail to ensure it would be suitable in all aspects for which it is intended to
fulfill.
5.4.3 Government Policy
There is also need to have effective government policy of all services in procurement
which would be followed to avoid ineffective procurement procedures being
experience by the public sector.
5.4.4 Delivery
It is very essential for the user department to have an idea about on time delivery and
any other necessary information that may apply to delivery. The researcher
recommends that the organization should encourage other departments to get more
information that is needed that pertains to lead time so as to avoid unnecessary delays.
It is further recommended that the organization should have good relationships with
their supplier and do supplier appraisal continuously to ensure efficient services this
will ensure effective contract negotiation.
5.4.5 Ethical Issues
Business ethics should highly be maintained to uphold the integrity of conducting
business and professional values. Management should formulate polices of auditing
procurement proceedings to avoid fraudulent dealings that may damage the reputation
of the entire organization.
53

5.5 Suggestion for Further Study
Based on the research findings, the study suggests that a further study should done on
the same topic using other variables such as company policy, availability of finance,
communication and any other factor that befits the study. Additionally, incorporation
of a different case study would elaborate the research outcome from a different
perspective.
54

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Newman, Cullen and Thill J.V. (2002), Business Communication Today, 3rd Edition,
McGraw Hill Publishers, New York
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Nairobi
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Publications, Makuyu
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Printers, Tokyo Japan
56

APPENDICES
Appendix I: Letter of Introduction
Rose Mwikali Kimeu
MoiUniversity
P.O. Box 63056 - 00200
Nairobi, Kenya
Dear Respondent,
REF: REQUEST FOR PARTICIPATION IN A RESEARCH STUDY
I am a student at Moi University-Nairobi Satellite Campus, pursuing a Bachelor’s Degree in
Business Management. I have chosen your organization as my proffered area of study basing
on the topic entitled “Factors Affecting Contract Negotiation Strategies in the Public
Sector in Kenya (A Case Study of Rural Electrification Authority-Nairobi)”. The
information to be provided was used for academic purpose only. Also the information
provided was treated with utmost confidentiality. There is no need to indicate your name on
the questionnaire.
Thank you in advance as I look forward to your cooperation in this study.
Yours faithfully,
Rose Mwikali Kimeu
57

APPENDIX II: QUESTIONNAIRE
SECTION A: GENERAL INFORMATION
Please tick where applicable. This information was treated with total confidentiality and not
part of it was reproduced to be used against any respondent.
1. Gender
Male [ ]
Female [ ]
2. Age of Respondents
18-24 years [ ]
25-30 years [ ]
31-40 years [ ]
40 years and above [ ]
3. Highest Education Level Attained
Primary [ ]
Secondary [ ]
College [ ]
University [ ]
4. For how long have you worked for this organization?
Below 10 years [ ]
11 – 15 years [ ]
16 – 20 years [ ]
Above 20 years [ ]
SECTION B: QUALITY
5. Does quality affect the contract negotiation in the public sector?
Yes [ ]
No [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
6. How does quality affect contract negotiation in the Public Sector?
58

Very High [ ]
High [ ]
Moderate [ ]
Low [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
7. State and explain how your organization makes sure quality mechanisms are put in
place to facilitate contract negotiation.
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
………………
SECTION C: PRODUCT SPECIFICATION
8. Does product specification affect contract negotiation in the Public Sector?
Yes [ ]
No [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
9. What is the effect of product specification on contract negotiation in the Public
Sector?
Very High [ ]
High [ ]
Moderate [ ]
Low [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
SECTION D: GOVERNMENT POLICY
59

10. Does government policy affect contract negotiation in the Public Sector?
Yes [ ]
No [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
11. How does government policy affect contract negotiation in the Public Sector?
Very High [ ]
High [ ]
Moderate [ ]
Low [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
SECTION E: LEAD TIME
12. Does lead time affect contract negotiation in the Public Sector?
Yes [ ]
No [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
13. What is the effect of lead time on contract negotiation in the Public Sector?
Very high [ ]
High [ ]
Moderate [ ]
Low [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
60

SECTION F: ETHICAL ISSUES
14. Do ethical issues affect contract negotiation in the Public Sector?
Yes [ ]
No [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
15. How do ethical issues affect contract negotiation in the Public Sector?
Very High [ ]
High [ ]
Moderate [ ]
Low [ ]
Explain…………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
Thank you for your awesome cooperation
61

APPENDIX 2 - WORKING PLAN
Table 6: Work Plan
Activity JAN – March
(2022)
May
(2022)
June
(2022)
July
(2022)
Proposal Writing X
Data Collection X
Data Analysis X
Report Writing X
Presentation of
findings
X
62

APPENDIX 3: BUDGET
ITEM UNITS COST/UNIT AMOUNT (Ksh)
Printing 64 10 640
Travelling 6 600 3600
Miscellaneous 20 300 6000
Total 10,240
63