Slow uptake of e-GP a concern, PBO report states

The slow uptake and uncertainties in implementing electronic Government Procurement (e-GP) have slowed down procurement cycles for key programmes, the Parliamentary Budget Office (PBO) has warned.

According to the second edition of Devolution Budget Watch 2025 published by the PBO, full transition to the e-GP platform has encountered implementation challenges, including system downtime, limited user capacity and protracted approval workflows.

“These constraints have slowed procurement cycles for key programmes, potentially delaying the initiation and completion of critical public investment projects and weakening the overall fiscal multiplier,” the report states.

In the current financial year 2025/26, all government procurement processes, including those of county governments, are required to be conducted exclusively through the e-GP system.

The e-GP system is an end-to-end digital platform for government procurement of goods, works and services, in line with the Public Procurement and Asset Disposal Act, 2015. Its rollout is expected to enhance transparency in procurement processes, reduce opportunities for corruption and mis-procurement, and standardise procurement across counties and national government entities.

The system was piloted in three counties—Makueni, Busia and Elgeyo-Marakwet—and encountered several challenges, including unreliable system functionality, difficulties experienced by counties in uploading budgets and procurement plans, inadequate consultation by the National Treasury with county governments, and the need for enhanced user training, among others.

“These uncertainties could potentially result in delays in procurement processes, thereby affecting the timely acquisition of essential goods and services at the county level, including critical items such as medical supplies,” the report states.

To address the challenges, the PBO called for consideration of a phased implementation of the e-GP system to ensure that service delivery is not halted by technical challenges that may be experienced on the platform.

It also urged county budgeting and procurement plans to align with adjusted timelines to allow full system submission and approvals, so that delayed procurement does not stall service delivery. In addition, it called for enhanced consultation between counties and the National Treasury to facilitate quick resolution of technical bottlenecks faced by counties in using the system.

This comes against the backdrop of counties also being urged to audit assets and liabilities and fast-track verification of historical pending bills, which as of June 30, 2025 stood at Sh176.9 billion, to establish accurate opening balances.

At the same time, the report indicates that delayed exchequer releases stemming from tight cash flow conditions could slow budget execution, contributing to the accumulation of pending bills and undermining the efficiency of government operations.

The budget watch report notes that counties rely heavily on predictable transfers from the national government to fund their expenditure.

To this end, interruptions in cash flow force counties to defer payments, scale back development activities and delay procurement processes, compounding absorption challenges already caused by the e-GP rollout.

“The resulting implementation lags pose a risk to essential devolved functions and may weaken local economic activity, particularly in regions where county spending constitutes a major source of liquidity. Efficient county budget execution and timely exchequer releases are critical to sustaining the national GDP growth trajectory. Local economic bottlenecks or delays in capital spending can quickly aggregate into macroeconomic headwinds at the national level,” the report shows.

Meanwhile, the report states that successful budget implementation at the county level will depend on timely cash disbursement.

The National Treasury, in consultation with the Intergovernmental Budget and Economic Council (IBEC), is required to prepare and adhere to a cash disbursement schedule indicating the monthly payments of the equitable share to be made to counties, in line with Section 17(6) and (7) of the Public Finance Management Act (Cap. 412A).

For FY 2025/26, the county governments’ cash disbursement schedule for the Sh415 billion County Equitable Share was approved by the Senate on October 7, 2025, with the disbursement spread across 12 months of the financial year, from July 15, 2025 to June 15, 2026.

According to the report, the amount to be transferred to each county government per month averages 8.4 percent of the total allocation, with overall monthly remittances to all counties amounting to Sh34.58 billion.

Under the schedule, the highest disbursement of Sh37.35 billion—approximately 9 percent of the total equitable share—will be undertaken in April 2026.

The report states that in previous years, national revenue underperformance during the financial year has led to delayed disbursement and, at times, budget carryover of the equitable share. This has constrained county operations and hampered budget implementation, leading to stalled projects, accumulation of pending bills, delayed salaries and interrupted service delivery in critical areas such as healthcare.

“Such an outcome will limit a county’s economic performance and its contribution to national GDP growth. In turn, lower GDP growth constrains revenue performance, and policymakers should therefore monitor revenue performance and its implications on the timely disbursement of the counties’ equitable share,” the report states.

While the disbursement schedule provides for predictable revenues expected to be received by counties each month, actual monthly disbursements have often fallen short of the target.

For instance, in FY 2024/25, the schedule was not adhered to, leading to approximately 42 percent of the total Sh387.425 billion equitable share being disbursed in the fourth quarter. Policymakers have been urged to watch out for this back-loading of cash disbursements to the fourth quarter, as it risks slowing down county budget implementation and, consequently, GDP growth.

“Given the uncertainty in monthly revenue performance across different revenue streams, it is critical to consider the preparation of a cash disbursement schedule every quarter. This calls for amendments to Section 17(6) of the Public Finance Management Act (Cap. 412A),” the budget watch report states.

At the same time, the report shows that the equitable share allocation for FY 2025/26 is based on the fourth basis/formula of revenue sharing, which is divided into three main components relating to revenue allocation to counties.

In the first part of the formula, Sh387.425 billion is shared through a baseline allocation, which retains allocations to counties as received in FY 2024/25.

The second part of the formula sets aside an Affirmative Action Allocation of Sh4.46 billion, shared equally among 12 counties based on historically low expenditure on development. The allocation is meant to incentivise these counties to undertake meaningful development projects.

The 12 counties are Elgeyo-Marakwet, Embu, Isiolo, Kirinyaga, Laikipia, Lamu, Nyamira, Nyandarua, Samburu, Taita/Taveta, Tharaka-Nithi and Vihiga.

According to the report, the final part of the formula involves sharing the remaining equitable share after netting off the baseline allocation of Sh387.425 billion and the affirmative allocation of Sh4.46 billion.

“The average revenue growth rate in the counties’ equitable share from FY 2024/25 to FY 2025/26 is 7.12 percent, representing an increase of Sh27.6 billion. However, the growth is shared differently among counties, with the identified 12 counties showing the highest improvement from their previous allocation in FY 2024/25,” the report explains.