Disposal of organizational assets is a critical function within procurement management, ensuring that obsolete, damaged, or surplus items are removed efficiently and transparently. Preparing an asset disposal plan is essential to align with organizational policies, legal frameworks, and financial prudence in Kenya’s public and private sectors. This chapter focuses on foundational concepts and procedural requirements that procurement professionals must master to plan asset disposal effectively, thereby safeguarding organizational value and accountability.

1.1 Definition of Terms

Asset disposal is the last stage of an asset's life cycle in an organisation, after planning, acquisition, use and maintenance. Assets that are no longer needed or useful take up space, cost money to store, insure and guard, and lose value the longer they are kept, so they must be removed in a planned, transparent and lawful way. In public entities in Kenya, disposal is governed by the Public Procurement and Asset Disposal Act, 2015 and its Regulations of 2020, while private organisations follow their own policies and board approvals. Example: a national polytechnic in Kitale that has replaced its old computer laboratory must follow the disposal procedure before the old machines can leave its store.

1.1.1 Disposal

Disposal is the process by which an organisation gets rid of assets, stores or equipment that are unserviceable, obsolete or surplus to its needs, by transferring, selling, trading in or destroying them, and removing them from its records. Disposal ends the organisation's ownership of the asset and its responsibility for it, and it must give the best value obtainable while protecting the environment and public interest.

Methods of disposal

• Transfer to another public entity: Moving the asset to another government office or institution that can still use it, with or without payment.
• Sale by public tender: Inviting sealed bids through an advertisement and selling to the highest responsive bidder.
• Sale by public auction: Selling to the highest bidder at an open auction run by a licensed auctioneer.
• Trade-in: Giving the old asset as part payment for a new one, such as an old vehicle in exchange for a discount on a new vehicle.
• Waste disposal management: Destroying, dumping or recycling items with no value or that are hazardous, in line with environmental laws.
• Donation: Giving items to schools, charities or communities where the organisation's policy and the law allow.

1.1.2 Disposal plan

A disposal plan is a document prepared by the procurement function that lists the assets an organisation intends to dispose of within a period, usually a financial year, with their description, condition, estimated value, proposed method of disposal and timeline. It is prepared alongside the annual procurement plan and approved by the accounting officer, so that disposal is planned rather than done in a hurry or in secret. It is covered in detail under 1.4.

Features of a disposal plan

• Time-bound: It covers a defined period and gives target dates.
• Based on verified need: Items are listed only after inspection by a disposal or inspection committee.
• Approved: It carries the approval of the accounting officer or management.
• Linked to budgets: It shows expected income from sales and the costs of disposal.
• Public in the public sector: It supports transparency and is open to audit.

1.1.3 Condition for disposal

An asset may be disposed of only when there is a valid reason and the right authority has approved it. The conditions protect organisations from losing useful assets and from disposals that benefit insiders.

Conditions that make an asset due for disposal

• Unserviceable: The asset is damaged, worn out or broken and cannot be economically repaired.
• Obsolete: The asset still works but is out of date, unsupported or no longer suitable because technology or operations have changed.
• Surplus: The organisation has more of the item than it needs now or in the foreseeable future.
• Expired: Items such as medicines, chemicals and food have passed their expiry dates.
• Uneconomic to keep: Repair, storage or running costs are higher than the value of the asset's service.
• Hazardous: The item has become a risk to health, safety or the environment.

Requirements before disposal

• Inspection and verification: A committee confirms the condition and quantity of the items.
• Valuation: A reserve price is set, by a qualified valuer where necessary.
• Recommendation: The disposal committee recommends the method of disposal.
• Approval: The accounting officer or board approves the disposal in writing.
• Records: The asset register and stores records are updated after disposal.
• No conflict of interest: Employees and committee members involved in the disposal may not buy the assets.

Chapter Summary

This chapter provided a comprehensive exploration of preparing an asset disposal plan, beginning with clear definitions of key terms such as disposal, disposal plan, and conditions that warrant disposal. It then examined the notification process for asset disposal, outlining its meaning, purpose, essential components, and procedural steps. The chapter further discussed how to identify and classify assets eligible for disposal, distinguishing between unserviceable and obsolete items. Attention was given to the structure and content of a disposal plan, emphasizing its purpose in guiding the disposal process effectively. Various types of disposal plans were introduced, highlighting different approaches depending on organizational needs. Finally, the chapter detailed the systematic process involved in developing a disposal plan, ensuring that asset disposal is conducted in a transparent, efficient, and accountable manner.