Procurement Management Practices and Performance of State Corporations in Nairobi City County

Abstract

Public procurement in Kenya, which accounts for approximately 13-15% of the GDP, continues to be plagued by systemic inefficiencies and governance challenges that severely undermine its operational performance. This study aimed to examine the factors influencing performance of State Corporations in Nairobi City County, focusing on Planning, Contract Management and Procurement Audit Practices. The study adopted a Correlational survey research design targeting the Procurement managers and officers from the state corporations in Nairobi City County. Theories that guided the study included the, Transaction Cost Economics, Principal Agent Theory and Institutional Theory. The target population was 168 state corporations in Nairobi City County from which a sample size of 119 was drawn from. Data was gathered through a structured questionnaire administered online and analyzed using the SPSS version 26, for both descriptive and inferential statistics. The regression model yielded an R2 of 0.927, indicating that the combined independent and moderating variables explain 92.7 percent of the variation in the performance of service state corporations in Kenya. The analysis of the key coefficients, however, corrects the initial interpretation: Procurement Audit Practices (β = 1.147, p = 0.000) had the strongest significant influence, meaning a one-unit increase in audit practices leads to a 1.147-unit increase in performance, establishing it as the primary driver. This was followed by Contract Management Practices (β = 0.516, p = 0.000), indicating a substantial but secondary positive impact on performance. Conversely, Procurement Planning (β = 0.121, p = 0.346) was found to have a positive but statistically non-significant effect. Crucially, the moderating variable, Budget Allocation (β = -0.325, p = 0.003), demonstrated a significant negative moderating effect; this means that the relationship between the independent procurement variables and performance weakens as budgetary discipline increases, suggesting that the strict, institutionalized budget controls may inadvertently stifle operational flexibility and hinder the performance outcomes expected from good procurement practices. Therefore, the study concludes that the pathway to enhancing value for money, mitigating risk, and ensuring timely service delivery lies not merely in strengthening individual procurement functions in isolation, but in strategically integrating powerful audit and contract management mechanisms with a more adaptive and performance- oriented budgeting system. Consequently, it is recommended that state corporations and policymakers, such as the Public Procurement Regulatory Authority, prioritize investments in audit capacity and contract management expertise while reforming budgetary protocols to shift from a rigid, input-focused model to a flexible, output-based framework that empowers rather than constrains procurement efficiency and overall organizational performance