The Unseen Cost of Cost-Cutting: How Tender Price Slashing Hurts Those at the Bottom

The Unseen Cost of Cost-Cutting: How Tender Price Slashing Hurts Those at the Bottom

Just recently, our team received a polite yet disheartening message from an NGO in Kenya:

"After careful evaluation and consideration, we regret to inform you that we have chosen not to proceed with your proposal at this time. While your proposal is compelling, it doesn't align with our current budget constraints."

This response, while professional, hints at a larger problem lurking beneath the surface—the race to the bottom in tender pricing. And although we take the Kenyan case as an example, the problem is broader. With our presences in 46 countries on the African continent, there is clearly a trend.

We recognize that the aid and development sector is often under pressure to maximize the funds allocated directly to its beneficiaries rather than spending on studies or evaluations. The pursuit of "best value for money" is commendable and essential in ensuring that resources reach those in need. However, in the quest to minimize expenses, there can be an oversight of what is actually obtained per dollar spent. Opting for the lowest bid may lead to compromised quality, ethical concerns, and unintended support of exploitative practices in the labor market.

The Irony of It All: A Case in Point

Ironically, this message came from an NGO that had recently announced its search for a consultant to conduct a salary and benefits benchmarking exercise. The aim? To align their remuneration structures with current market standards and ensure that their salary levels are competitive for local professionals. The consultancy's purpose was to make sure their organization remains a fair and attractive employer within Kenya's job market, with a special focus on aligning pay structures to local benchmarks.

However, the disconnect between stated intentions and the reality of tendering raises questions. In an environment where many firms are forced to underbid to secure contracts, one has to wonder whether these salary benchmarking exercises truly reflect the reality of employment conditions or if they serve as mere formalities to justify reduced costs for organizations.

The True Impact of Price Slashing in Tenders

In highly competitive environments like Kenya, the tendency to slash prices and cut staffing costs to untenable levels is becoming alarmingly common. Data collectors and national experts—the backbone of any research or development project—are often the first to bear the brunt. Given the current job market and the scarcity of opportunities, many professionals feel compelled to accept low-paying offers, even if these are barely sustainable.

According to the Labour Market Profile: Kenya 2024 by the Danish Trade Union Development Agency:

"Approximately 83% of employment is in the informal economy, where workers face insecure employment, low income, and lack of social protection."

Labour Market Profile: Kenya 2024

This oversupply of labor makes it easier for organizations to justify offering lower wages, knowing that there will always be someone desperate enough to accept.

Low Pay, High Expectations: The Exploitation Narrative in Kenya’s Job Market

Recent reports highlight the growing discontent among Kenyan professionals regarding exploitative salary offers. An article by Odrimedia titled "Kenyans on X Speaks Out: Shocking Salary Offers Reveal Employer Exploitation in the Job Market" captures this sentiment vividly. One social media user lamented:

"I was offered a job paying Ksh 10,000 ($70) per month, yet they expected me to work 10 hours a day, including weekends. It’s exploitation, plain and simple."

Such experiences are not isolated incidents but reflect a broader trend where professionals are forced into accepting unsustainable pay due to economic pressures and an oversupplied job market.

The Business Daily Africa article, "Nexus Between Kenya's Job Challenges and Exploitation", further emphasizes this issue:

"Employers are capitalizing on the high unemployment rate to offer low wages and poor working conditions, knowing that job seekers have limited options."

The Business Daily Africa article highlights the exploitation of young professionals in Kenya due to limited job opportunities. With formal job creation struggling to meet the demands of a growing workforce, many are forced into low-paying roles or unpaid work labeled as "self-employment."

Employers often exploit this labor market condition by offering inadequate compensation under the guise of "exposure." This dynamic leads to a devaluation of skills, perpetuating a cycle of low-quality job creation and entrenched exploitation .

The Plight of Educated Youth

The challenge is particularly acute among educated young professionals. Despite attaining higher education qualifications, many young Kenyans struggle to secure meaningful employment. The Nyamboyo Technical Training Institute discusses this in their article "Why Educated Youth Struggle to Find Work":

"A mismatch between the skills acquired in education and those demanded by the job market, along with an oversupply of graduates in certain fields, has led to a situation where even educated youth are unemployed or underemployed."

This surplus of qualified workers creates an environment ripe for exploitation. Employers in white-collar industries are increasingly offering low wages and precarious employment conditions, exploiting the desperation of job seekers.

The Kenya Labour Market Profile 2024/25 by the Danish Trade Union Development Agency highlights ongoing challenges in the Kenyan labor market, including a decline in real wages, an 81% share of informal employment, and widespread labor rights violations. Despite positive strides, the profile underscores weak enforcement of labor regulations and the persistence of precarious job conditions, especially in informal sectors. The report notes that minimum wage increases have not kept pace with rising costs, leading to worker vulnerability.

Universities and the Skills Gap

The problem is compounded by the role of educational institutions. As highlighted in The Conversation article, "Young Kenyans Are Not Finding Work: How Universities Can Do a Better Job of Training Entrepreneurs", universities are producing graduates who are ill-prepared for the realities of the job market:

"Kenya's universities need to focus on equipping students with practical skills and an entrepreneurial mindset to navigate the challenging job market."

Without adequate preparation, graduates find themselves competing for a limited number of positions, often accepting any terms offered.  

Nevertheless, placing the blame solely on universities for not bridging the gap between studies and the labor market would be an oversimplification. Many graduates have made significant investments in their education and careers, and are understandably hesitant to accept just any job, especially when it doesn't align with their qualifications or aspirations. Often, with the support of their families, they avoid poorly compensated roles. Others turn to alternative or informal jobs to sustain themselves, highlighting a mismatch not in skills, but in the opportunities available to them.

Aries Consult Ltd staff frequently review CVs of candidates who have graduated from reputable universities, only to find that several years later, many still have little more than a series of short-term internships listed.

This troubling trend reflects the limited opportunities for stable, long-term employment in Kenya, where entry-level professionals are often trapped in cycles of low-paying, temporary roles or unpaid internships. This situation not only stunts career growth but also indicates the deeper issue of underemployment and exploitation within the job market.

That said, we have observed that the issue of professionals struggling with limited, short-term internships is not isolated to Kenya. This pattern is evident across other countries where we work and recruit, pointing to a widespread problem within the job markets. While this specific tender experience in Kenya serves as an example, it underscores a broader issue of underemployment and exploitation that affects professionals in various regions, highlighting the need for fair and sustainable employment practices globally.

Youth Voices on Exploitation

Organizations like the Organization of African Youth Kenya have been vocal about the challenges facing young people in the workforce. In their summary report "Youth Unemployment in Kenya", they note:

"Young people are disproportionately affected by unemployment and underemployment, leading to increased vulnerability and exploitation in the labor market."

This exploitation manifests in the form of low wages, lack of job security, and poor working conditions, even in sectors that traditionally offer better prospects.

Gendered Exploitation in the Job Market

The issue of exploitation is even more pronounced for women in Kenya's job market. Women often face additional barriers, including gender discrimination, sexual harassment, and expectations of inappropriate favors in exchange for employment opportunities. Predominantly male employers sometimes exploit their positions of power, making the job market particularly hostile for women.

A report by the Federation of Women Lawyers (FIDA) in Kenya highlights:

"Women are frequently subjected to sexual harassment and are often pressured into providing sexual favors to secure or maintain employment."

FIDA Kenya Report on Gender-Based Violence at the Workplace

This exploitation not only violates women's rights but also perpetuates a cycle of inequality and discrimination in the workplace.

The Labour Market Profile: Kenya 2024 also notes:

"Gender disparities persist in employment, with women often concentrated in low-paying and insecure jobs. They are more likely to experience workplace harassment and have fewer opportunities for advancement."

Such conditions make it even more challenging for women to assert themselves in negotiations over pay and working conditions, leaving them vulnerable to further exploitation.

The Double Burden on Women

Women in the workforce often carry a double burden of professional and domestic responsibilities. This reality is exploited by employers who assume women are less likely to demand higher wages or better conditions due to societal pressures and familial obligations.

An article from The Conversation titled "Women’s Work in Kenya is Crucial for the Economy, But They’re Not Getting the Support They Need" explains:

"Despite their significant contributions, women receive less pay and fewer benefits, and they are more likely to be employed in vulnerable conditions without social protection."

This systemic exploitation undermines not only individual women but also the broader economic potential of the country.

When Underbidding Undermines Both Quality and Dignity

Low pay and high expectations lead to diminishing morale and a decline in project quality. Data collectors and national experts face challenges in sustaining themselves on meager wages, often juggling multiple jobs to make ends meet. This not only affects their well-being but also compromises the integrity of the projects they're engaged in.

A Reddit thread titled "Exploiting Young Professionals" provides firsthand accounts of such exploitation. One user shared:

"Companies are bidding low on projects and then expect us to work for peanuts to make up for their low margins. It's demoralizing and unsustainable."

Poor remuneration practices contribute to high turnover rates and decreased professional commitment, directly impacting the reliability of project outcomes.

Many users shared their experiences of being offered minimal or no salaries under the promise of “gaining experience.” This trend not only devalues professional skills but also takes advantage of young professionals’ desperation to secure employment. Commenters expressed frustration with employers leveraging the competitive job market to justify poor compensation.

The Disconnect Between Benchmarks and Reality

The irony in this situation is stark. An NGO commissioning a salary benchmarking study should focus not only on aligning pay structures but also on recognizing the broader implications of underbidding practices. As long as price slashing remains prevalent, benchmarks risk becoming symbolic gestures disconnected from the lived realities of those affected.

Moreover, as the Labour Market Profile: Kenya 2024 points out:

"Despite efforts to improve labor standards, enforcement remains weak, and many workers continue to suffer from low wages and poor working conditions."

This suggests that without a genuine commitment to fair compensation, benchmarking exercises may fail to bring about meaningful change.

At Aries Consult Ltd, or its subsidiary in Kenya, we refuse to lower what we consider fair fees for data collectors or national experts. Instead, we would rather reduce our profit margins or, if necessary, adjust the fees for international experts to ensure that those in the field are compensated fairly. This approach prioritizes the welfare and dignity of our local staff over short-term financial gains.

Conclusion: A Call for Change in Tendering Practices

It's time to acknowledge the reality of price slashing in tenders and its impact on those who earn the least yet contribute the most. Employers—including those in white-collar industries—must align their actions with their stated goals of fair and competitive pay, ensuring that tendering practices do not inadvertently exploit the very professionals they rely on for success.

As noted in Business Daily Africa:

"Sustainable growth cannot be achieved on the back of exploited labor. Fair wages and decent working conditions are not just ethical imperatives but also essential for economic development."

Similarly, the Organization of African Youth Kenya emphasizes:

"Empowering young people through fair employment practices is crucial for the nation's socio-economic development."

As long as price slashing remains an accepted practice, the ripple effect will continue to erode the foundations of quality, equity, and professional integrity. By rethinking our approach to tendering and prioritizing fair compensation, we can ensure a better, more sustainable future for everyone involved.

When it comes to gendered exploitation, the stakes are even higher. Addressing the specific challenges faced by women in the workforce is essential for achieving true equality and harnessing the full potential of the labor market.

Final Thoughts

As long as price slashing remains an accepted practice, the ripple effect will continue to erode the foundations of quality, equity, and professional integrity. By rethinking our approach to tendering and prioritizing fair compensation—while actively combating gender-based exploitation—we can ensure a better, more sustainable future for everyone involved.

Empowering all professionals, especially women who face additional hurdles, is not just a moral imperative but a strategic necessity for any organization committed to long-term success and social impact.