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

Abstract

The purpose of this study was to examine the influence of Procurement Management Practices on Performance of state corporations in Nairobi City County, Kenya. The specific objectives were to assess the influence of Procurement Planning, Contract Management and Procurement Audit Practices on Performance at the State Corporations in Kenya. The independent variables of the study included; Procurement planning, Contract management and Procurement Audit practices while the dependent variable is Performance of state corporations in Nairobi City County, Kenya. The theories that guided the study included; Transaction Cost Economics, Principal Agent Theory and Institutional Theory. The study adopted Survey research design. According to the State Corporations Act cap 446, there are 247 state corporations in Kenya. The target population was 168 state corporations in Nairobi City County, Kenya from which a sample size of 119 was drawn from using the Yamane formula. Semi-structured questionnaires were used to collect primary data from the respondents. Quantitative data were analyzed using SPSS version 26, and 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. Based on the comprehensive regression analysis, the results definitively establish that systematic procurement audit practices (β = 1.147, p = 0.000) and robust contract management (β = 0.516, p= 0.000) are the paramount drivers of organizational performance, whereas procurement planning, despite its foundational role, demonstrates no statistically significant direct impact (β = 0.121, p = 0.346). A critical and counterintuitive finding is the significant negative moderating effect of Budget Allocation (β = -0.325, p = 0.003), which indicates that highly rigid budgetary controls can paradoxically weaken the positive relationship between other procurement functions and performance, likely by stifling operational flexibility. 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.