Annex 1b

REPUBLIC OF KENYA

MINISTRY OF INDUSTRY, TRADE AND COOPERATIVES

STATE DEPARTMENT FOR INDUSTRIALIZATION

REQUEST FOR EXPRESSIONS OF INTEREST

(CONSULTING SERVICES – FIRM SELECTION)

Project Name: Kenya Industry and Entrepreneurship Project (KIEP)

Project ID: P161317 (Credit No.: IDA 6260-KE)

Assignment Title: MANAGEMENT OF SUPPORT TO SMEs THROUGH

CAPACITY ASSESSMENT AND PERFORMANCE BASED

FUNDING

Reference No.: KE-SDII-61548-CS-QBS

TERMS OF REFERENCE FOR THE CONSULTANT

Terms of Reference: SME Linkages and Upgrading

Programme

1. BACKGROUND

The Government of Kenya (GoK) will be implementing the Kenya Industry and

Entrepreneurship Project (KIEP), designed with the assistance of the World Bank Group.

The Project Development Objective is to increase innovation and productivity in select

private sector firms, in line with Kenya’s Vision 2030 and its Second and Third Medium

Term Plan 2010-2017 (MTP2 and MPT3) that have set ambitious growth targets in private

sector employment generation and productivity.

The Project’s direct beneficiaries are primarily formal private sector firms in Kenya, but

also include incubators and accelerators, technology bootcamp providers, small and

medium-sized enterprises (SMEs), and corporates, as well as select tertiary education and

technology bootcamp students. It consists of three components: (i) Strengthening the

innovation and entrepreneurship ecosystem; (ii) SME Linkages and Upgrading; and

(iii) Project implementation support and M&E.

The SME Linkages and Upgrading component of KIEP (Component 2) aims to increase

productivity and innovation within established Kenyan SMEs by supporting select firms to

improve their managerial and technical skills and their access to and use of technology so

that they can link to and become suppliers to large firms in Kenya. This component will

work both with individual SMEs across various manufacturing and trade-exposed service

sectors, and with SMEs who already (or wish to) supply large firms in Kenya. Eligible

SMEs accepted into the program will receive an integrated package of diagnostic and

advisory services, and financial support for the implementation of changes necessary to

their innovation, increased productivity and competitiveness. This component will be

delivered as an integrated package by a consultant selected by the GoK through this

procurement process.

For the implementation of this component, the GoK is seeking to competitively select and

procure a Consultancy that will be responsible for all aspects of component delivery and

administration including: (i) outreach and engagement of target beneficiaries and key

stakeholders (bringing both SMEs and lead firms into the program); (ii) sourcing and

managing of Business Advisors used in the initiative; (iii) providing the initial diagnostic

service to SMEs; (iv) providing coaching to assist selected SMEs with implementing the

recommendations of the diagnostic; (v) reviewing deliverables and achievement of

performance contract targets, and conducting due diligence of beneficiary SMEs; (vi)

disbursing funding to beneficiaries via performance contracts; and (vii) establishing a

database of SME advisory firms.

Glossary

Consultant Entity that will administer the SME Linkages and Upgrading

Program, to be selected by the GoK through an open tender and

competitive process

Business Advisor Individuals working for the Consultant who will provide the

Business Diagnostic service and Implementation Support

Business Diagnostic

service

Initial diagnostic assessment of SMEs done by the Business

Advisors, results in a performance Plan

Implementation

Support

Post-Business Diagnostic Service coaching and support to client

SMEs provided by Business Advisors

Performance Plan Mutually agreed plan for SME to pursue upgrading, with

prioritized actions, milestones and performance targets

Financial

Disbursements

Financial support provided by program as part of Implementation

Support

2. STATEMENT OF OBJECTIVES

The overarching objective of KIEP is to increase innovation and productivity in select

private sector firms in Kenya.

The objective of the SME Linkages and Upgrading component is to help strengthen the

productivity and internal capabilities for innovation of select SMEs, by improving their

managerial and technical skills and their use and access to technology, in order to

significantly increase their competitiveness. It is also to strengthen local supply chains and

sales by Kenyan SMEs to large companies.

3. AN OUTLINE OF THE TASKS TO BE CARRIED OUT (SCOPE OF THE

SERVICES)

The intervention will consist of three phases of tasks over 4-5 years, and to end no later

than December 31st, 2024:

Phase I: Participation of lead firms, investment funds, business/industry

associations and other stakeholders for sourcing of SME beneficiaries

● The selected consultant will identify lead firms, investment funds, business/industry

associations and other stakeholders to become strategic partners and participate in the

program.

● The Project will utilize lead firms as one of the ways to identify SME beneficiaries.

The aim will be to identify and select lead firms with existing or potential local supply

needs based on industry reviews, International Financial Corporation’s (IFC)

references, and other project experience. Lead firms will be asked to identify SMEs in

their supply chain (or with interest in becoming part of their supply chain) that can

potentially benefit from the program.

● Business/industry associations, investment funds and other stakeholders will also be

used to identify high-potential SMEs who may not be part of supply chains but who

may benefit from the initiative, and a portion of each cohort may be made up of such

firms. The Consultant can also propose other ways to identify high potential SMEs

during the life of the program for the consideration of the Project implementation Unit.

● In order to raise awareness about the program, a series of outreach events will be

organized through lead firms and business associations. High-potential SMEs would

then be invited to participate in the upgrading support scheme, they may also be sourced

from investor and bank referrals if the initial threshold number of firms for each cohort

is not met.

● Business development for later cohorts should draw on early exemplary clients of the

initiative in marketing and outreach.

● Specific target for the participation of women-led or women-owned SMEs is at a

minimum of 10% of the total beneficiaries in the program. Women-owned or women-

lead enterprises are defined as firms with a) 51% or more ownership/stake by a

woman/women; or b) greater than or equal to 20% owned by a woman/women and 1

or more woman/women as CEO/COO (President/Vice President) as well as 30% or

more of the board of directors being women if a board exists. The consultant should

gather key lessons on outreach and retention of women-owned SMEs during the first

round of applications and propose modifications on the program design to the Project

Implementation Unit as needed, to increase the number of participating women-led or

women-owned SMEs.

Phase II: Diagnostics and action plan preparation

● A Business Diagnostic service will be provided to beneficiary SMEs to identify

managerial, technical, production, and supply chain relationship gaps and

opportunities. The service will also utilize benchmarking to enable SMEs to compare

themselves and their performance empirically against Kenyan and international peers.

● The consultant will be provided with an outline of the features and preferred outcomes

of the diagnostic service and diagnostic tool and the consultant will then develop the

business diagnostic service (including the selection of a benchmarking tool).

● A cohort of experienced Business Advisors will be selected and provided by the

consultant to serve as the interface between the program and SMEs and engaged by the

program. They will administer the Business Diagnostic service, whose output will be

an Implementation Plan that identifies key constraints and opportunities and prioritizes

implementation actions to address them. The Advisors will tailor the Business

Diagnostic service when lead firms are involved to include specific elements of specific

relevance to those lead firms as well as to any available information on export

opportunities for Kenyan SMEs.

● When lead firms are involved, the program will be demand-driven, involving lead firms

(potential customers) throughout the process to ensure that SMEs secure additional

business at the end of the diagnostics and upgrading process. Potential role of lead

firms, including large corporations, will involve: sharing purchasing needs and

requirements, nominating SMEs to participate in the program, providing feedback on

diagnostics service exercise, contributing to training or acting as a mentor, participating

in the program management in an advisory capacity, and committing to increasing local

supply if requirements are met (in a written memorandum of understanding). The team

of Business Advisors will strategically analyze and target market opportunities

presented by lead firms to drive the program.

● When investment funds, business and industry associations are involved, the program

will try and involve these parties in an advisory or mentorship capacity where required.

Phase III: Performance contract and implementation

● Upon the delivery of the Implementation Plan, if the participant SME wishes to utilize

the financial subsidy, a performance contract will be incorporated into the

Implementation Plan. This will be drafted, mutually agreed and signed, under which

Financial Disbursement to participant SMEs will be tied.

● Beneficiary SMEs will be eligible for Financial Disbursements of up to US$150,000 if

they meet their agreed implementation targets. These project funds will partially cover

the cost incurred in achieving the target, and the beneficiary SME will be expected to

also monetarily contribute in achieving the target. The consultant will verify that the

targets are met, and manage these disbursements. Disbursements will only be done

upon target completion. The funds for Disbursements are additional and separate from

the funds available for this consultancy.

● A Business Advisor will coach each SME throughout the improvement process to

ensure implementation progress, alongside lead firms, investment funds and

business/industry associations that will also be encouraged to provide general coaching

and mentorship to SMEs. Business Advisors will also provide support to SMEs

regarding the purchase and use of BDS and technology by providing tips on how to

scope projects, assessing providers, and providing simple templated contracts. They

will also collect performance information and provide referrals to other potential

sources of help.

● Participating SMEs will be asked to provide feedback on BDS providers, and the

consultant will develop and maintain a database of BDS providers in order to assist

other SMEs with choosing BDS providers.

● The improvement efforts by individual SMEs will be made public on a dedicated

program website and social media account including the BDS used for additional

transparency and awareness building. Selected participant SMEs and their

improvement story will be used to showcase the program to prospective clients, and

demonstrate best practice.

Based on the above scope of work, indicative tasks and activities that are to be delivered

are listed below. Prospective consultants are expected to apply their experience and

perspectives and provide their views on the detail of design and delivery arrangements for

all components, how (and why) they will deliver these components, overall management

and program coordination, the potential design and implementation risks, and how they

will address these risks. Further, once operating, the consultant is expected to be proactive

in identifying areas of potential project design and delivery improvement and

communicating these to the Government.

The consultant will be responsible for the following:

● Recruiting and involving the lead firms, investment funds, business/industry

associations throughout the life of the program;

● Gathering information on the supply chain needs of lead firms;

● Developing a database of eligible SMEs based on the recommendations of lead firms,

investment funds, business and industry associations and banks;

● Recruiting SMEs into the program, including through outreach events and workshops;

● Recruiting, training and managing at least ten Business Advisors to deliver the Business

Diagnostic Service, and the Implementation Support coaching;

● Conducting the Business Diagnostic Service, including the assessment of the

productivity and growth potential of each participating SME, as well as generating a

Performance Plan for each SME with agreed upon milestones;

● Assisting beneficiary SMEs to access BDS and equipment providers in order to

implement their upgrading plans;

● Collecting firm-level productivity improvement data every six months for SMEs still

in the program, SMEs who dropped out, and for graduates of the program for up to 2

years after engagement;

● Managing the Financial Disbursements to SMEs;

● Creating and managing a database of BDS providers and periodically conducting

customer satisfaction surveys with SMEs on these providers;

● Repeating and rolling out the program to new cohorts of potential SMEs; the timeline

for each cohort will be flexible based on the performance contracts drawn for

participating SMEs

● Periodically revisiting proposed financial disbursement and upgrading arrangements

after gaining some operational experiences

● Compiling information and images/videos on participating firms, their action plans,

and implementation progress for dissemination on a project website and publishing it

externally, i.e., through SME Linkages and Upgrading website, Facebook page, or

database. Coordinate with the overall communications firm for the project.

● Collecting baseline performance data on participating SMEs as part of the Business

Diagnostic Service, and tracking changes by Business Advisors over the life of the

engagement to measure progress or changes against the baseline, as well as conducting

surveys after the end of the engagement. Coordinate with the overall M&E firm for the

project.

4. SCHEDULE FOR COMPLETION OF TASKS

● The consultant shall provide quarterly update reports to the PIU summarizing

project activities progress and next steps.

● In addition, at various stages for each implementation cycle, the consultant shall

provide short concise reports in an agreed upon format to the Ministry as follows:

○ Diagnostic Stage reporting

○ Selection Stage reporting

○ Negotiation and Verification documents specification

○ Funds disbursement and performance report

○ Lessons learnt and program replication report

Component 2: Level of reporting basis schedule for completion of tasks

5. DATA, SERVICES AND FACILITIES TO BE PROVIDED BY THE CLIENT

Specific services to be made available to the consultant by the Ministry are as follows:

● Provide recommendations on sectors to target and SMEs, lead firms, investment

firms, business/industry associations to engage;

● Provide documentation from any prior piloting and database of lead firms, SMEs

and other relevant organizations engaged through project preparation;

● Provide basic selection criteria of program participants;

● Provide no objection to the SMEs, lead firms, investment firms, business and

industry associations engaged;

● Review and provide no objection to the final disbursement conditions and

performance contract milestones with selected SMEs;

● Review and provide no objection on the individual disbursements to SMEs and

following disbursements based on evidence provided by the consultant on

milestones met and disbursements maid;

● Support reporting & monitoring and evaluation; oversee impact evaluation as

appropriate;

● Review reports and data provided by the Consultant.

Selection criteria for program participants

The selection of beneficiary SMEs as well as lead firms, investment funds,

business/industry associations and BDS providers will be based on objective criteria as

described below (to be fine-tuned and adjusted during the life of the project as needed by

the consultant in coordination with the Project team):

SMEs:

● Who have been nominated by lead firms or third parties such as business or industry

associations, banks, and/or investment firms;

● Whose annual turnover fall between KSH 50m-1b (US$0.5 m and US$10 m). This

turnover may be from the previous fiscal year, or an average turnover from the previous

three years;

● Priority will be given to SMEs in the manufacturing and trade-exposed service sectors

among others;

● Whose management is committed to participating in the program (with a written

commitment to the program by senior management/owners);

● Who have been incorporated and in existence for at least two years, and are not

insolvent;

● Specific criteria should be put in place to ensure a higher participation rate for women-

owned or women-led SMEs. The consultant will work closely with the Project

Implementation Unit in iterating the program design in such a way that allows for a

growing number of women-owned or women-led SMEs to participate.

Lead firms:

● Who belong to sectors with potential for local supplies and exports (participating lead

firms will need to provide information on what they buy from suppliers locally and

internationally, and define their purchasing requirements, standards and specifications,

as well as nominate existing and potential SMEs or suppliers that fit the program’s

selection criteria);

● Those with strategic alignment to areas of government priorities;

● Those that are domiciled in Kenya, growing, or having the potential to grow, exporting

or having the potential to export, and willing to commit to the program;

● Those that have part of their supply chain in Kenya and ideally beyond Nairobi, have

suppliers that are SMEs that add value in Kenya, and have a significant supply chain

(i.e. the lead firms have at least 10 SME suppliers in their supply chain), or want to

build their local supply chain.

Investment funds, business and industry associations:

● Those that are domiciled in Kenya, and have investments or members within Kenya;

● Those that are willing to commit to the program, and nominate existing and potential

SMEs that fit the program’s selection criteria;

● Those with investments or members with strategic alignment to areas of government

priorities.

Business Advisors:

The Business Advisors will have a key role in the initiative, undertaking diagnostics,

providing help with the performance plan implementation and being involved in business

development. In order to ensure Business Advisors understand their product offering and

are providing a high-quality service, the consultant will be expected to provide training

both at the start of the initiative, and professional development and coaching through the

life of the initiative. A broad outline of their expected skill set is below:

● Who have a Business or related degree or experience;

● Who possess at least 5 years’ experience in relevant business roles, preferably in Kenya

or similar countries;

● Who have an understanding of, and ability to effectively communicate with SMEs in

Kenya, including the provision of diagnostic services (use of diagnostic and

benchmarking tools) and coaching;

● Who have the ability to work effectively with large (lead) firms and undertake effective

business development.

Potential consultants are expected to propose their preferred employment/ engagement

structure for the Business Advisors, as there are various potential options. Three of these

options are listed below:

▪ Option 1: Employ full time Business Advisors on salary, with Key Performance

Indicators (KPIs) that include business development as well as providing

diagnostic services and follow-on coaching.

▪ Option 2: Employ a few business development consultants who would engage

individual SMEs, and also seek to identify groups, lead firms, supply chains to

work with. Under this model, Business Advisors provide the diagnostic work

part-time for the program.

▪ Option 3: The implementing consultant meets the KPIs and states in their

proposal how they will meet this requirement.

Financial Disbursements

● Each SME will be eligible for up to US$150,000 in support of their Performance

Plan. The SMEs can directly purchase the specialized consulting and training

services from local and international BDS providers, and also purchase any relevant

equipment.

● Disbursement will be based on the achievement of milestones, and is envisaged to

work as follows:

o An initial disbursement of up to US$5,000 following the award of the

Performance Plan to stimulate implementation with no expectation of an in-

cash or in-kind contribution by the SME (i.e. to 250 SMEs over the life of

the component);

o A second disbursement will be made upon the achievement of the first

milestone set out in the Performance Plan. The participating SMEs that have

shown willingness and capacity to improve and that have met the milestones

specified in their implementation plan would be entitled to a grant not

exceeding US$40,000. It is estimated that 60 percent of the SMEs reach this

stage (i.e. 150 SMEs over the life of the project).

o SMEs that have met more advanced milestones, and that have shown above

average performance in improving productivity, would be entitled to

additional grants (not exceeding US$50,000 additional). With this funding,

SMEs could potentially finance more complex upgrading projects and the

sophisticated technical assistance needed to reach the next milestone in their

performance contract. It is estimated that 30 percent of participating SMEs

reach this stage of implementing improvements (i.e. 75 SMEs over the life

of the project). SMEs would receive a grant of up to 65% of the total cost

they had incurred in achieving the milestone.

o In the end of participation in the Project, the SMEs will be eligible for a

final disbursement of up to US$55,000 for the most complex projects. It is

estimated that 10 percent of participating SMEs reach this stage (i.e. 25

SMEs over the life of the project). SMEs would receive a grant of up to 65%

of the total cost they had incurred in achieving the milestone

.

● These proposed disbursement arrangements are not final, and can be revisited during

the life of the project, both with the winning consultant and potentially after operational

experience, to accommodate lessons learned and maximize impact. For instance, there

may be cases where clients wish to embark on major upgrades relatively early in the

improvement process, in these cases staggering payments may not be the most sensible

approach.

Component 2: Illustration of the disbursement schedule each year*

*The disbursement schedule will differ for each SMEs based on individual performance contract.

This timeline is meant to be an illustrative sample

Monitoring & Evaluation

● Baseline performance data on participating SMEs will be collected as part of the

diagnostic service, and changes will be tracked by Business Advisors over the life

of the engagement to measure progress or changes against the baseline. After the

end of the engagement, data will be collected through surveys for another 2 years,

also through the Business Advisors. The set of required information to be collected

for the project will be provided to the consultant.

6. FINAL OUTPUTS (i.e., REPORTS, DRAWINGS, etc.) THAT WILL BE

REQUIRED OF THE CONSULTANCY

The consultant shall provide a completion report at the end of the consultancy. This will

include handover manuals and materials to manage the project, as well as analysis based

on the rich data set from the diagnostics, performance plans and the performance contract

reports and recommendations on how to best support the ecosystem moving forward.

7. PROCEDURE FOR REVIEW OF PROGRESS REPORTS, INCEPTION, STATUS,

FINAL DRAFT AND FINAL REPORTS

All reports should be submitted to the PIU at the Ministry of Industry, Trade and

Cooperatives within an agreed timeframe.

8. LIST OF KEY PROFESSIONAL POSITIONS WHOSE CV AND EXPERIENCE

WOULD BE EVALUATED.

S.

No.

Key Position Area of Specific Expertise required Minimum

Qualification and

Professional

Experience

Required

Likely

Staff

inputs

required

in person

months

1. Team Leader

(1)

● Minimum 5 years of

experience in overall project

execution and management

● Experience in working with

governments in three or

more similar projects in the

last five years

● Experience working with

SMEs in Kenya, preferably

in evaluating business plans

and developing

performance improvement

plans

● Experience in leading a

team and providing

quarterly update reports

summarizing project

activities progress, next

steps as well as the project

completion report in

previous assignments over

the last five years

MBA or similar

degree; At least 7

years or similar

project management

experience

Average

12

months a

year

● Experience in project

leadership, with a focus on

strategy

● Proven expertise in

partnerships with lead firms,

business associations,

investment funds,

partnerships with technical

assistance providers, as well

as working with SMEs on

performance improvement

Strategic

Business

Analysts (At

Least 2)

● Experts with understanding

of the shortcomings and

opportunities within the

operating and business

environment of the

entrepreneurship ecosystem

in Kenya in assignments

undertaken in the last five

years

● Expertise in gathering

strategic data and

undertaking business

analysis for organizational

development including

strategic business analysis

frameworks and elaboration

of strategic performance

plans in previous

assignments

● Experience in working with

diagnostic tools to

administer the diagnostic

exercise and evaluate

performance plan proposals

in at least three similar

projects in the last five years

● Experience in working

across the lifecycle of a

BA or equivalent

degree; At least 5

years experience

working on the SME

ecosystem in Kenya.

Average

12

months

per year

project of similar nature -

i.e. conducting the initial

diagnostic, creating a

performance improvement

plan, administering the

disbursements and setting,

individual disbursement

milestones throughout the

contract length

● Experience in verifying

milestone achievement

through evidence collection

in previous similar

assignments

Legal expert on

contract

framing and

negotiation (At

Least 1)

● Legal experience in drawing

official performance based

contracts and managing

performance-based funding

in addition to the

aforementioned; if not,

experience managing

performance-based funding,

experience managing

complex contract

negotiation processes

through at least 2 prior

assignments

● Experience managing

qualitative results-based

contracts/P4R programs.

● Experience in the capacity

of providing legal expertise

where required and

negotiating and framing

performance contracts

Law degree; At least

5 years experience

working with

corporates in

emerging markets;

Experience working

with SMEs

Average 6

months

per year

Knowledge

Management

Specialist (At

Least 1)

● Experience in consolidating

and managing M&E data,

verifying participant data,

analyzing the data and

BA degree or

equivalent; At least 5

years’ experience in

finance and

Average

of 6

months

per year

preparing lessons learned

reports, and course correct

recommendations for

program design in previous

assignments over the last

five years

● Experience in analyzing rich

data sets from the

diagnostics, performance

plans, and the performance

contract reports o coordinate

activities in previous

assignments over the last

five years

consulting,

preferably with prior

experience in M&E

Funds

Disbursement

and

Monitoring

Specialist (At

Least 1)

● Experience in managing

fund disbursements to

intermediaries in multiple

assignments over the last 5

years

● Experience in monitoring of

performance contracts and

program overall in the last

five years

● Academic background in

business or finance would

be preferred

BA degree or

equivalent; At least 5

years’ experience in

finance and admin.

Average

of 12

months

per year

9. PAYMENT SCHEDULE

Inception report 10% of Total Contract

Service level agreement 10% of Total Contract

Annual lump sum 20% of Total Contract

Annex 1B1: Expression of Interest Response to Criteria Form

Consultants expressing interest in managing the implementation of performance-based

funding must fill the form below:

# Required Information Response

a Does your organization have a

proven track record of at least three

projects of similar nature (i.e.

organizational capacity assessment,

SME strategy, performance-based

contracting, or grant management for

SMEs) during the last five years?

YES / NO ______________

Please elaborate on your response in the space

below.

b Does your organization have

experience working with SMEs in an

advisory capacity over the last five

years?

YES / NO ______________

Please elaborate on your response in the space

below.

c Does your organization have a strong

understanding of the shortcomings

and opportunities within the

operating and business environment

of the SME ecosystem in Kenya and

in the region?

YES / NO ______________

Please elaborate on your response in the space

below

c Does your organization have 10

years of experience undertaking

consulting engagements focused on

organizational capacity development

and formulating performance plans

focused on business operations,

ideally with SMEs?

YES / NO ______________

Please elaborate on your response in the space

below

d Does your organization have

experience managing long term (2

year or more) projects including

disbursement of funds?

YES / NO ______________

Please elaborate on your response in the space

below

e

Have you worked with government

counterparts in the past five years?

YES / NO ______________

Please elaborate on your response in the space

below

I certify that the information provided in the responses above is true and accurate. I

understand that withholding of information or giving false information will result in

immediate disqualification.

___________________________________________

Authorised Representative of Interested Consultant