Assessment of the Impact of Public Procurement Act 2007 on Construction Procurement in Nigeria.

Olufemi Adedamola Oyedele, ND Building Technology, BSc. Estate Management, MSc. Housing, MSc. International Project Management, MPhil. Construction Management, ANIVS, RSV.

Abstract

The Public Procurement Act 2007 was established in Nigeria as a global best practice to sanitise public procurement process in Nigeria. The Act stipulates that all public procurement in Nigeria, as from the date of its promulgation, must follow due process, that is, must be certified okay by public procurement office established specifically to analyse public procurement and issue a certificate of ‘NO OBJECTION’. This is because procurement is a major cost centre of any nation and is important in infrastructure provision. It is an area where corruption is mostly practiced and any nation that is able to get her procurement process right will surely get her infrastructure provision right. The bane of economic development in Nigeria is lack of infrastructure. Nigeria was 122nd in the Global Infrastructure Table in 2014. The World Bank in 2012 reported that Nigeria required 17 million housing units to bridge its deficit and a sum of N59.5 trillion with a conservative unit rate of 3 bedroom bungalow put at N3.5 million per unit. This paper explored the case study approach to evaluate the performance of the Public Procurement Act 2007 in Nigeria. The paper found out that the PPA 2007 did not perform to expectation because of high level of corruption in the country, poor justice administration, politics mixed with procurement, indiscriminate choice of procurement system and poor monitoring and evaluation of projects. The paper recommended the use of “Prudent Contractor Scheme’, fixation of ranges of profit for different projects and treating of construction contractors as a ‘specification product’ and not as a ‘composite product’.

Key words: Build, Operate and Transfer (BOT), Corruption in Construction, Monitoring and Evaluation, Public Procurement, Public Procurement Act 2007.

Introduction

Despite the importance of construction industry in national development (Hillebrandt, 2000; Myers, 2010; Oyedele, 2015), the industry in Nigeria has been criticized for its high costs, inefficiency, ineffectiveness and adversarial nature, especially in terms of the procurement methods being adopted (Wahab, 1986; Mohsini & Botros, 1990; Adesanya, 1992; Babalola & Aladegbaiye, 2006; Ojo, 2009; Ogunsanmi, 2013; Adesanya, 2014). This adversarial nature of the construction industry is partly due to human nature (Benneth & Jayes, 1995), numerous inputs and partly due to the high level of uncertainty in the business environment of construction industry (Oyedele, 2016).

1

Procurement budget of any nation is so high that it cannot be done shabbily, especially construction procurement, because of its vital role in infrastructure provision. The successful procurement of construction projects is hindered by several factors, such as ineffective communication among construction parties, wrong choice of procurement methods, unethical practices of construction parties, skills inadequacy, bad bidding process, lack of cooperation between the procuring entity (client or project owner) and the contractor (Latham, 1994; Reading Report, 1995; Egan, 1998; Oyedele, 2016), and corruption (Obanikoro, 2013; Mbamalu & Iyatse, 2013; Transparency International, 2012).

Lack of accountability in public procurement was so rampant in Nigeria before the advent of Budget Monitoring and Price Intelligence (BMPI) Unit under the Presidency and was affecting the Nigerian budget. This was due to financial indiscipline and lack of diligence in procurement. Transparency International (TI) (2012) stated that the construction industry is highly susceptible to corruption. Bribery and corruption may occur anywhere in the world; however, the risk is higher in certain jurisdictions. For example, North Korea and Somalia are recognized as particularly high risk counties, whilst Denmark and Finland are acknowledge as very low risk (Transparency International, 2012).

This assertion and the practice of inflating prices of construction projects procurement to exhaust existing budget and justify increment in the future budget request by Ministries, Departments and Agencies (MDAs) seriously affect the Nigerian economy, causing inflation and impropriety. Budget Monitoring and Price Intelligence (BMPI) office was thus, established with Dr. (Mrs) Oby Ezekwesih; as the head of the unit in 2001. BMPI metamorphosed into Bureau of Public Procurement (BPP) in 2007 after the bill establishing it was passed by the National Assembly as Public Procurement Act No 14, 2007.

Federal procurement in the United States of America (USA) is governed primarily by Titles 10 and 41 of the United States Code. The Federal Property and Administrative Services Act of 1949 (“FPASA”) and the Armed Services Procurement Act of 1949 (“ASPA”) are the foundation for modern federal procurement, but Congress has enacted several significant changes to the basic regime over the years, including:

the Truth in Negotiations Act of 1962 (TINA), which established rules requiring tenderers to disclose certain cost information during the bidding process and imposed penalties for failure to disclose accurate cost data;

the Competition in Contracting Act of 1984 (CICA), which enhanced competition in federal procurement and established a variety of acquisition procedures, including competitive negotiation;

the Federal Acquisition Streamlining Act of 1994 (FASA) and the Federal Acquisition Reform Act of 1995 (FARA), which simplified the federal procurement process; and

the Weapon Systems Acquisition Reform Act of 2009 (WSARA), which made important changes to the process by which the Department of Defense procures major weapons systems (Frank, 2016).

2

Kenya enshrined Procurement rules in her constitution in 2010 as Article 227 and South Africa has Section 217 of her 1993 constitution dealing with procurement.

Since the establishment of BMPI, and later BPP, there have been some controls in the procurement practices of MDAs in Nigeria. Though the construction industry is still performing below capacity and expectation, the bureau and the Act have tried to sanitize the construction industry in Nigeria. It stipulates that contractors must be paid their money as at when due and that contracts should not be awarded without available fund for their execution in the coffers of the client (procuring entity) amongst other stipulations. The PPA 2007 also stated that retention fees should not be held by procuring entities for more than sixty (60) days after handing over of job by the contractors.

It is the effectiveness of the Nigerian Public Procurement Act 2007 that this paper aimed to evaluate.

Literature Review on Public Procurement

Construction projects are very complex and require numerous tasks involving huge sum of money and many inputs. The procurement of construction goods and services must therefore, be done correctly (Oyedele, 2015). Love, Skitmore and Earl (1988) explored the impact of choice of procurement methods on project performance and concluded that different categories of construction will do well with different procurement routes.

Though the World Bank Guidelines on Procurement of Goods and Services (2011) emphasized the invitation of as many bidders as are qualified, Love, Skitmore and Earl (1988) and Kadefors, Bjorlingson and Karlsson (2007) stated that limited bid invitation and careful partners’ selection facilitate the development of cooperative relationship between clients and contractors. Ojo (2009) stated that different construction projects categories by contract sum require different procurement methods. In this world of globalism and dynamism where invention and innovation rules the world, a new inventor or innovator who has sole manufacturing right on his or her product cannot bid with another supplier. All procurements of goods and services cannot therefore, be done through competitive bidding.

Leonard and Moshini (1998) defined procurement as a “strategy to satisfy the client’s development and/or operational needs with respect to the provision of constructed facilities or a discreet life cycle”. According to Palaneeswan, Kumaraswamy and Ng (2003), “procurement refers to the process of acquiring or obtaining material, property or services, and begins with the determination of a need for a property or service and ends with the completion and close-out of a contract. Ogunsanmi (2013) stated that “there are various factors affecting projects performance emanating from procurement selection criteria, tending methods and variation order factors”.

3

In all construction projects procurement, the clients and contractors have differing interests (Prasad, 1997; Winch, 1998; Chapman & Ward, 2011). The client’s concerns focus on time, cost and quality (or project performance) in relation to both the design and construction of the building (PMI, 2007), whereas, the contractor’s concern centres on profit-making (financial performance (Ross and Williams, 2013). The end-users are more interested in the functions of the project (technical performance) (Post, 2000; Emmitt & Gorse (2005). Daniel (2006) believed that the emphasis of procurement method is on optimizing all parameters involved in project delivery, namely; time, cost and quality.

Leading institutions both in United Kingdom and other oversea countries have seen confined cost and quality benefits, of up to 20% over time through detailed re-engineering of their procurement activities. A clear strategy is needed to do this, with strong support from the very top to provide the impetus that market competition would otherwise not provide. The strategy needs to recognize the charges in the way government spends its resources and the increased complexity of procurement activity (Ministerial Cabinet Committee on Public Expenditure, 1998).

According to Aregbesola (2016), “Procurement is one way government interfaces with the people and enlivens its domestic economy”. It is important that the resources of government are managed judiciously and procurement process seen to be transparent and equitable. Governments, as stewards of public funds, must be accountable and be seen to have got the best deal in procurement for the people with public funds.

Nigerian procurement environment (climate and culture) is characterized by different procurement methods. It is all different methods for different public and private clients in their choice of procurement methods. One important issue amongst clients - both private and public - in their choice of procurement route is that there are no defined rules in the procurement method being used for construction and what method being used for different types or sizes of projects (NEDO, 1982; Ojo, 1999; Nwosu, 2007; Ojo, 2009; Babatunde, Opawale & Akinniku, 2012). This is despite the assertion by many researchers that construction success depends largely on procurement methods (Ojo, 2009; Osipova & Eriksson, 2011; Kashiwagi, Kashiwagi, Smithwick, Kashiwagi & Kashiwgi, 2012; Wells, 2014). Cui and Chen (2014) opined that “an appropriate project delivery system (PDS) is critical to the success of construction project.”

Onuba (2016) stated that the Bureau of Public Procurement (BPP) had saved Nigeria a total of N658.88bn (about $1.833bn) from inflated contracts submitted by contractors of the Ministries, Departments and Agencies (MDAs) of the Federal Government. The Bureau of Public Procurement was created in 2007 through public procurement Act No 14 2007 to supervise public procurement practices and recommend the best public procurement methods for different goods and services procured by the governments’ MDAs (policy formulation, monitoring and evaluation).

4

The bureau also acts as arbiter for procurement disagreements between public clients and contractors. It sanitizes procurement in Nigeria and gives directions on public procurement. It had successfully resolved 365 out of 557 complaints it received from contractors between 2009 and 2014 (Onuba, 2016). Most of the disagreements between clients and contractors aroused because of wrong choice of procurement methods and corruption. Ojo (1999) observed that in the Nigerian construction industry; the client and consultants do not have a specific procedure in choosing their procurement method to implement their projects but base it on familiarity with a particular method.

Traditional methods, especially, Design-Bid and Build (DBB), is popular while modern methods like Public-Private Partnership (PPP), Concession, Build Operate and Transfer (BOT), Build, Own, Operate and Transfer (BOOT), Turnkey Projects and Partnering are just being introduced into the market. Procurement and supply chain management functions are now well recognized as having value-adding potentials for corporate competitiveness and corporate performance. This is a far cry from past years when the sourcing of construction inputs was more often than not thought of as an administrative task unconnected to strategizing for success.

Clients and contractors do not cooperate; contractors and consultants lack harmony and trust; and contractors and sub-contractors, site workers work in “master-servant” relationship. There is disintegration across all lines in Nigerian procurement system. There is disintegration of construction teams vertically, diagonally and laterally. Clients and contractors/sub-contractors do not trust each other (vertical disintegration). Contractors and consultants, and contractors and sub-contractors do not work in harmony (horizontal disintegration). Contractors’ workers and sub-contractors’ workers do not trust their employers to be fair to them (vertical disintegration) and sub-contractors’ workers will not take instruction from contractors or consultants (diagonal disintegration). Nigerians also lack confidence in the public-client and the contractors to deal with each other without perpetrating fraud.

Public procurement is the process whereby public sector organizations acquire goods, service and works from third parties. It includes much that supports the work of government and ranges from routine items (e.g. stationery, temporary office staff, furniture or printed forms), to complex spend areas (e.g. construction, Private Finance Initiative (PFI) projects, aircraft carriers or support to major charge initiatives) (OGC, 2013). The value of public procurement in the UK stands at approximately £125 billion each year (Unite, 2007). “Today more than ever, the government must ensure that it spends money wisely and eliminates waste and abuse tax payer’s dollars. With more than one out of every six dollars of Federal Government spending going to contractors, it is imperative that contract actions result in the best value for the taxpayers” (OFPP, 2013). Procurement of goods and services is seen, worldwide, as significant ‘cost centre’ and must be prudently and pragmatically managed.

Nwachukwu (2016) stated that to demonstrate its resolve to cut down industry costs in Nigeria’s oil and gas operations, the Federal Government has directed all operating companies in the

5

country to prune down costs, even if it means a total redesign and conceptualization of projects. Nigeria is reputed to experience the highest industry costs among oil producing countries and construction sectors. In her oil production, joint venture cost are as high as $27/barrel, a development that made governments to direct companies to cut down costs by at least 30 percent. Construction rate of ready mixed concrete in Nigeria is as high as N1300/cm3 as against N500/cm3 in a country like Ghana.

Government procurement services is a part of the Crown Commercial Service in the UK stated that “our role is to provide procurement savings for Government and the UK public sector, including Health, Local Government, Devolved Administration, Education and Not-for-profit organizations” (GPS, 2013). Procurement is now being given serious attention it requires because of its crucial role in infrastructure provision, security provision, transportation, health and education, employment generation, fiscal policy implementation and practical role especially on the fight against climate change and corruption. According to Jones (2001), “an Australian parliamentary report referred to the search for excellence in contract management as arguably one of the most pressing challenges facing the Australian public services”. It is the same story worldwide, especially in the developing nations. Construction procurement indiscipline has been the bane of Nigeria development for a long time.

“Construction procurement in particular, has been defined by the Counseil International Batiment (CIB, 1998) working commission (W92) “as the framework within which construction is brought about, acquired or obtained”. It is the process of acquisition of physical infrastructures in the built environment. “Procurement is a term which describes the activities undertaken by a client or employer who is seeking to bring about the construction or refurbishment of a building. It is a mechanism which provides a solution to the question: “how do I get my project built?” On most projects, clients (usually through their advisers or in-house team), will start the procurement process by devising a project strategy.

The strategy entails weighing up the benefits, risks, and budgets constraints of a project to determine what the most appropriate procurement method is, and what contractual arrangement will be required” (JCT, 2013). The scandalous way of public procurement in Nigeria has led to the suggestion of a Project Implementation and Continuity Act (PICA). The PICA bill seeks to combat the bane of abandoned projects in Nigeria. Government is supposed to be a continuum, but no state government in Nigeria has continued the projects of its predecessor. The only exceptions are federal projects in the continuation of Gwarimpa Estate by President Olusegun Obasanjo started by late General Sanni Abacha and the completion of rail project between Kubwa in FCT to Kaduna, started by former president Goodluck E. Jonathan and completed by President Muhammad Buhari.

6

Monitoring and Evaluation

Monitoring and Evaluation of projects: Monitoring and Evaluation (M&E) is about performance management. M&E during projects ensure quality execution of projects and help predict success, while anticipating problems and finding solutions s needed. At the end of a project, a post-project evaluation provides an objective view of its appropriateness, effectiveness and impact, and serves to inform future guidelines.

Procurement performance evaluation system rests on six principles:

Systemisation: All operations must be evaluated one to three months after completion; Decentralisation: Evaluations are steered at the local level and fed back to local stakeholders; Outsourcing: Outside consultants perform procurement performance evaluations, to ensure

independence and fair judgement; Localisation: Assessors are local experts from the project environment, though they may

observe ‘glocal’ practice in their evaluation, that is bring global best practice to local understanding.

Robustness and credibility: Assessments conform to international norms and standards; Partnership: Every evaluation is shared with the procurement project shareholders.

Public Procurement Act 2007 (Act No 14, 2007)

Public Procurement Act 2007 (PPA 2007) was enacted by the administration of Late President Umar Musa Yar’adua to instill discipline in the public procurement practice in Nigeria.

The core values of PPA (2007) are:

Competition Transparency Efficiency and Value for money.

Public procurement Act 2007 is an Act that establishes the National Council on Public Procurement (NCPP) and the Bureau of Public Procurement (BPP or the Bureau) as the regulatory authorities responsible for the monitoring and oversight functions of public procurement, harmonizing the existing government policies and practices by regulating, setting standards and developing legal framework and professional capacity for public procurement in Nigeria, and for related matters.

The objectives of the Bureau are:

(a) The harmonization of existing government policies and practices on public procurement and ensuring probity, accountability and transparency in the procurement process;

(b) The establishment of pricing standards and benchmarks;

7

(c) Ensuring the application of fair, competitive, transparent, value for money, standards and practices for the procurement and disposal of public assets and services; and

(d) The attainment of transparency, competitiveness, cost effectiveness and professionalism in the public sector procurement system.

Part IV of the PPA (2007) treats fundamental principles for procurements.

Subject to regulations as may from time to time be made by the Bureau, under the direction of the Council, a procuring entity (Ministry, Department and Agencies) shall plan its procurement:

(a) Preparing the needs assessment and evaluation;(b) Identifying the goods, works or services required;(c) Carrying appropriate market and statistical surveys and on that basis, prepare analysis of

the cost implications of the proposed procurement;(d) Aggregating its requirements whenever possible, both within the procurement entity and

between procuring entities, to obtain economy of scale and reduced procurement cost;(e) Integrating its procurement expenditure into its yearly budget;(f) Prescribing any method for effecting the procurement subject to the necessary approval

under this act; and(g) Ensuring that the procurement entity functions stipulated in this section shall be carried

out by the procurement planning committee (PPC).

Subject to regulation as may from time to time be made by the Bureau, under the direction of council, a procuring entity shall, in implementing its procurement plans:

(a) Advertise and solicit for bids in adherence to this Act and guidelines as may from time to time;

(b) To invite two credible persons as observers in every procurement process, one person each representing recognized;(i) Private sector professional organization whose expertise is relevant to the particular goods or services being procured, and(ii) Non-governmental organization working in transparency, accountability and anti-corruption areas, and observers shall not intervene in the procurement process but shall have right to submit their observation report to any relevant agency or body including their own organizations or association;

(c) Receive, evaluate and make a selection of the bids received in adherence to this Act and guidelines as may be issued by the Bureau from time to time;

(d) Obtain approval of the approving authority before making an award;(e) Debrief the bid losers on request;(f) Resolve complaints and disputes if any ;(g) Obtain and confirm the validity of any performance guarantee; and

8

(h) Obtain a “certificate of “No objection to Contract Award” from the Bureau with the prior review threshold as stipulated in section 3 (A) of the act.

Impacts of Public Procurement Act 2007 on Construction Procurement in Nigeria.

Objective(c) of the Public Procurement Act 2007 is to ensure the application of fair, competitive, transparent, value for money, standards and practices for the procurement and disposal of public assets and services. Procurement costs of goods and services in Nigeria are still one of the highest in the world. Objective (b) of the Act stipulates that the Bureau of Public Procurement (BPP) will establish pricing standards and benchmarks. Ministries, departments and agencies (MDAs) of the federal and state governments still use different pricing standard. For example, “In Nigeria, a kilometer of road costs ₦1bn against World Bank’s N238m bench mark (African Roads Evolution, 2016).

Objective (d) is on attainment of transparency, competitiveness, cost effectiveness and professionalism in the public sector procurement system. The $2.9 arms procurement is a case study on violation of this objective. The contracts which were said to be for the purchase of four Alpha Jets, 12 helicopters bomb and ammunition were not executed and the equipment were never supplied to the Nigeria Air Force, neither are they in its inventory (Nwabughiogu, 2015).

Part IV of the PPA (2007), that is, the Fundamental Principles for Procurement, in its section (a) stated that procuring entity shall prepare the needs assessment and evaluation before procuring. Most goods and services procured by federal government, states and local governments and their MDAs are political and do not follow the rule of needs assessment. Examples are the Primary Health Care Centre’s which have been completed but were not put into use in more than fifty locations across Nigeria. Most of the constituency projects of the National Assembly members are not functioning and are unnecessary.

Section (e) of the Principles for procurement stated that procuring entity must integrate its procurement expenditure into its yearly budget. Most states and local governments still procure goods and services without having provision for money to pay. Federation of Construction Industries (FOCI) stated that federal governments, state governments and others are owing contractors over N600 billion. The PPA (2007) stated that retention fee shall be paid to contractors within sixty (60) days after the work has been delivered. Most contractors are owed retention fees, two (2) years after completion and delivery of works. The Public Procurement Act (PPA) 2007 stipulates that all states, local governments, ministries, departments and agencies must follow due process in its public procurement. Ministries, departments and agencies (MDAs) delay contractors’ payments more than the stipulated 60 days by the Procurement Act (Ezeh, 2011).

The PPA (2007) stipulates that procurement plans shall be implemented by inviting two (2) credible persons as observers in every procurement process, one person representing private sector professional body whose expertise is relevant to the particular goods and services being

9

procured, and the other person representing non-governmental organization working in transparency, accountability and anti-corruption. Federal MDAs and states do not invite these persons when opening bids. In fact, the Cotonou Treaty on Procurement stated that one of the observers must not only be an observer, but a scoring member of the bid selection committee.

The incessant abandoned projects despite coordination by procurement despite coordination by Procurement Planning Committee (PPC) is a testimony to the ineffectiveness of the Public Procurement Act 2007.

Challenges of Implementation of PPA 2007

As at 6th August, 2009, when the 18th meeting of the National Council on Works, Housing and Urban Development was held at Lafia Investment Conference Hotel, Lafia, Nasarawa State, twenty (20) Memorandum of Understanding (MOU) and Development Lease Agreement (DLA) have been signed with Real Estate Developers/Investors in nine (9) cities of the federation to construct 3,150 housing units under Public-Private Partnership (PPP). None was executed. The Federal Ministry of Housing and Urban Development also entered into partnership with Real Estate Developers Association of Nigeria (REDAN) to develop 400,000 units of house nationwide. None was developed. The PPA 2007 has not made the expected impact in the Nigeria construction industry because of the following:

1. Poor Justice System: Though the PPA 2007 stipulates punishment for the breach of its sections, poor justice system in Nigeria has ensured that no government official is punished for breaching the procurement act. High corruption level in the judiciary means that court case can be frustrated by the highest bidder.

2. Corruption: There is high level of corruption in Nigeria and this has seriously affected the performance of the PPA 2007.

3. Politics: The way politics is being played in Nigeria is a bane to the performance of PPA 2007.

4. Indiscriminate use of bidding system for all procurement jobs: Procurement projects are wrongly matched with procurement routes in Nigeria. While some projects will benefit from the traditional procurement method, other will benefit from Design and Build or Turnkey projects, Public-Private Partnership (PPP) or Concession while others will be best procured through Partnering.

5. Poor Monitoring and Evaluation of projects: Monitoring and Evaluation (M&E) of procurement is very poor in Nigeria.

Methodology of Research

Case study methodology was used for this research. Four cases of construction procurement process were study to evaluate the performance of Public Procurement Act 2007 in Nigeria. The four cases studied are: The Amphitheatre Project at Osun State College of Education, Ila (OSSCEILA); Second Runway of the Nnamdi Azikiwe International Airport, Abuja; Lagos-

10

Ibadan Expressway Concession to Messrs Bi-Courtney Limited and Ministry of Defense Procurement.

(1) Amphitheatre Project at Osun State College of Education Ila, Osun State

The contract followed the provisions of contractors’ selection as stipulated by PPA Act 2007.

(a) Total Contract Sum: N228,288,302.00

(ii) About 50% of the total contract sum was released by Tertiary Education Trust Fund (TETFUND) to Osun State College of Education, Ila (OSSCEILA) as the first tranche.

(iii) Total Amount paid by OSSEILA to the contractor, DIGITPRO = N107,734,235.90. The Bursar, Mr. Akingbade Latilo, in his capacity as the Secretary to the Procurement Committee of council, issued the letter of award. In the letter, he clearly indicated that an advance payment/mobilization fee of fifteen per cent (15%) would be made and that the payment would be covered by an appropriate performance bond by the contractor. However, it was discovered much later by Council that the same Bursar, Mr. Akingbade Olatilo, paid out forty-five per cent (45%) to the Contractor as mobilization fee while he received from the Contractor a performance bond for only 15%.

The Council reported the matter to the Osun State government appropriately. DIGITPRO, the Contractor, unfortunately, failed to execute the project prudently. All efforts by the Council to make the Contractor perform to the amount collected failed. Osun State Ministry of Works professionals were called to do interim valuation. It was found out that DIGITPRO works on site was less than 23% of contract sum, an amount less than what DIGITPRO collected as mobilization. The contract was terminated by the Council of the school and the Amphitheatre was constructed through direct labour by the College Management (College News, 2016). Up till today, the Contractor has not been able to return the amount not spent on site.

(2) Second Runway at Nnamdi Azikiwe International Airport, Abuja.

(i) Total Contract Sum = N64 billion

(ii) Actual Contract Sum by PW Nigeria Limited, the contractors that won the bid was N32 billion.

(iii) The Presidency, under former President Goodluck Ebele Jonathan reviewed the contractor sum to N45 billion. By the time the Certificate of No Objection was issued by Bureau of Public Procurement (BPP), the contract sum had become N64 billion. The masses kicked against the abnormal variance of the cost and the House Committee on Aviation invited the Contractors for a meeting. The Presidency hurriedly and preemptively reviewed the contract sum to N48 billion and when the House Committee kicked against the action of the Presidency, President Goodluck Ebele Jonathan terminated the contract. The masses

11

bases for kicking against the outrageous pricing of the Second runway at Nnamdi Azikiwe International Airport was that similar 2.0 kilometre runway in South Africa cost N18 billion. The whole of Yobe Airport with 3 kilometre runway was built with N18 billion. It is surprising that the Ministry of Aviation resubmitted the sum of N64 billion for the cost of the runway in February 2016.

(3) Lagos-Ibadan Expressway Concession

(i) Total Contract Sum = N89 billion for 25 years lease in 2009.

(ii) The road will be redesigned and redeveloped in five (5) lanes on each side by consortium of developers led by Messrs Bi-Courtney Limited. These developers will include construction companies and finance institution.

(iii) Three years after Messrs Bi-Courtney was in possession of the Lease Agreement and, of course, the site, nothing happened on the road. Standard Bank of South Africa which Messrs Bi-Courtney claimed would provide the finance renege or decline and the terms of lease could not be carried out. The Federal Government therefore, terminated the contract in 2012.

(4) Defense Procurement of Ammunition

(i) The $2 billion arms deal is an arms procurement deal in Nigeria that resulted in the embezzlement of $2 billion through the office of the National Security Adviser to President Goodluck Ebele Jonathan under the leadership of Retired Colonel Sambo Dasuki, the former National Security Adviser. The illegal deal was revealed following an interim report of the presidential investigations committee on arms procurement under the Goodluck Jonathan administration. The committee report showed an extra-budgetary spending to the tune of N643.8 billion and an additional spending of about $2.2 billion in the foreign currency component under the Goodluck Jonathan administration.

Preliminary inquiry suggested that about $2 billion may have been disbursed for the procurement of arms to fight against Islamic insurgency (Boko Haram) in Nigeria. The investigative report indicated that a total sum of $2.2 billion was bizarrely disbursed into the office of the National Security Adviser in procurement of arms to fight against insurgency, but was not spent for that purpose. Many reports suggested that part of the disbursed fund was diverted for the sponsoring of the re-election of Goodluck Jonathan, the former President of Nigeria. The preliminary study prompted the establishment of committee to look into the matter.

The arms procurement investigative committee was inaugurated on 31 August 2015 by President Muhammadu Buhari to investigate the procurement of ammunition to fight against insurgency. The interim report of the committee revealed several illicit and fraudulent financial transactions. The report revealed an extra-budgetary spending to the tune of N643.8 billion and inexplicable spending of about $2.2 billion in the foreign currency component

12

under the Goodluck Jonathan administration. This amount excluded grants received by the state governments and funds received by the Directorate of State Services and the Nigerian Police Force.

The committee analyzed how funds were transferred to the office of the National Security Adviser and the Nigerian Armed Forces in local and foreign currencies. The committee observed that about $2.2 billion was disbursed for the procurement of ammunition to tackle insurgency but regretted that despite these enormous financial transactions, little or nothing was spent for the procurement of the arms for which the fund was disbursed. The committee discovered that out of the 513 contracts awarded at $8,356,525,184.32, ₦2,189,265,724,404.55 and £54,000.00, about 53 were failed contracts amounting to about $2,378,939,066.27 and ₦13,729,342,329.87 respectively.

The committee also noted that the amount of foreign currencies spent on failed contracts was more than twice the $1 billion loan approved by the National Assembly for borrowing from the World Bank to fight insurgency. The investigative committee also discovered a total transfer of ₦3.850 billion to a single company by Colonel Dansuki, the former National Security Adviser. These transactions were made with neither agreements nor fulfilment of tax obligations to the Federal Government of Nigeria.

Further investigation by the committee provided evidence that phantom and fictitious contracts to the tune of ₦2,219,188,609.50, $1,671,742,613.58 and £9,905,477.00 was awarded between March 2012 and March 2015 by Colonel Dasuki. In addition, the funds disbursed for the purchase of 12 helicopters, 4 Alpha Jets, bombs and other ammunition were not utilized for those purposes. The committee also noted that Dansuki directed the Central Bank of Nigeria (CBN) to transfer a total sum of $132,050,486.97 dollars and £9,905,473.5 to the accounts of the Societe D'equipmente Internationaux in West Africa, the UK, and the US with no documentation.

While receiving the report of the Presidential Project Assessment Committee (PPAC), President Goodluck Jonathan yesterday expressed concern at the large number of on-going federal projects all over the country. The president spoke after the Presidential Projects Assessment Committee (PPAC) led by Ibrahim Bunu, chairman of the committee, presented its report at the State House. PPAC disclosed that the Federal Government is currently executing 11,886 projects at the cost of N7.78 trillion, out of which N2.696 trillion had been paid to contractors.

The figures represent the total responses received from the ministries, departments and agencies, some of whom for reasons best known to them, failed to respond to the committee's request for data on ongoing projects. The report also stated that, "reckoned in today's prices and allowing for unreported ongoing projects, the total cost needed to complete all projects may well be as high as N8 trillion". As part of its findings, the committee said corruption in the handling of projects by many self-seeking officers and contractors had led to the massive inflation of costs and undermined the legitimacy of their monitoring and supervision responsibilities.

The committee's in depth assessment of many of the projects revealed that there is indeed evidence of large scale, widespread institutional mediocrity, deficiency of vision and a lack of

13

direction in project management, which results in poor conceptualisation, poor design and faulty execution. This has resulted in avoidable losses of billions of naira to the Federal Government. As a matter of routine, contracts are awarded without securing the required funds in the annual budget to ensure their timely execution.[i] Now, with eight trillion naira commitment, and on the basis of the prevailing allocation of about one trillion naira for capital projects annually, it will take the next eight years or so for the Federal Government to complete existing ongoing projects, provided there will be no inflation within the period.

According to PPAC, factors responsible for the high cost in project financing include "consistent delays in payment to contractors, leading to massive claims for overhead costs, interests and additional costs; poor co-ordination between government officials in the planning and execution of projects; poor planning and conceptualisation of projects, resulting in costly variations and inefficiency in the implementation and management of projects and lack of adequate and efficient municipal services, such as the provision of electricity, transport, security and water supply, all of which contractors have to arrange privately".

Undercutting by agenciesThe report also said the project cycle was subverted, as most of the ongoing projects had not been subjected to the normal cycle of conceptualisation, planning, the undertaking of full economic, social and environmental impact analyses, design and procurement, contract execution and maintenance. It also said the Bureau for Public Procurement Act was undermined and subverted at the MDAs. The report further disclosed that on occasion, ‘No Objection Certificates' issued by the Bureau of Public Procurement (BPP) were revoked without any justification, as well as cases of disqualification of duly pre-qualified contractors in questionable circumstances. The committee pointed out that there are many uncompleted projects where trillions of Naira has already been spent, including the Ajaokuta Steel Company project, on which $4.5 billion had been spent. The report recommended "the need to streamline and downsize the ongoing projects to a manageable proportion through a well thought out realisation process."

Conclusion and Recommendations

The Public Procurement Act 2007 is not performing to expectation because of impunity and high level of corruption in our judiciary. Most states in Nigeria do not have Bureau of Public Procurement and have not domesticated the PPA 2007. Ministries, Departments and Agencies (MDAs) still award contracts without fund to execute them (extra-budgetary spending). The high corruption level in Nigeria is seriously affecting public procurement of goods and services. Over six years after its establishment, no client or contractor has been prosecuted for procurement indiscipline or violation of procurement act.

Clients’ representatives in public procurement are the owners of construction companies that they usually award contracts to. In some cases, when consultants do call the numbers on the letterheads of companies bidding for jobs, the phones will belong to the procurement officers that suppose to regulate procurement process and ensure that there is transparency in the whole process.

14

There is no stakeholders’ involvement in conceptualization, award and execution of public projects. Monitoring and evaluation (M&E) is poor and most projects are failure because they are not value for money. In most cases, needs assessment is not carried out before projects are embarked upon and projects are abandoned because government in Nigeria is not a continuum.

Government must reform the judicial system and improve its integrity before there can be sanity in the procurement process in Nigeria. There should be regular training on procurement among the public servants and collaboration between the private and public procurers. Partnering is a popular method of procurement that will ensure that merits is adopted in awarding contracts. Public entities (MDAs) of federal, state and local governments must list all projects embarked in a year including the description of the work, the size and the amount in national dailies and all contractors must swear to an oath under “PRUDENT CONTRACTOR SCHEME” sating that they have been truthful in their quoted price and that they will be responsible for any misrepresentation during or after the contract execution. The government should be able to fix reasonable profit for all categories of contractors and must ensure that neither party is shortchanged in public contract delivery.

15

References

Adesanya, D. A. (2014). Recipe for Affordable Housing in Nigeria: Through the Eye of a Building Service Expert. Inaugural Lecture Series 263, Obafemi Awolowo University, Ile-Ife. Ile-Ife: OAU Press, p. 128.

Adesanya, O. M. (1992). Management Contracting Concepts and Nigeria’s Construction Industry. A Paper Presented at the Joint seminar on Management Contracting, Organised by the Nigeria Institute of Quantity Surveyors and Quantity Surveyors Registration Board of Nigeria, September 1992, p. 4.

African Roads Evolution (2016). What to expect in 2016. Available at www. roadsevolution .com/10-slider/6-what-to-expect-in- 2016 . Accessed on October 17, 2016.

Aregbesola, R. (2016). Public Procurement Law Now Operational in Osun. Being text of paper delivered by the Governor on the signing into law of Public Procurement Law.

Babalola, O. & Aladegbaiye, O. (2006). Determination of Appropriate Contingency Sum for Building Projects. Conference of the Royal Institution of Chartered Surveyors, University College London, COBRA, May, 2006, p. 8.

Babatunde, S, O., Opawole, A. & Akiniku, E. O. (2012). Critical Success Factors in Public-Private Partnership (PPP) on Infrastructure Delivery in Nigeria. Journal of Management, 10 (3), pp. 212 – 225.

EmmitT, S & Gorse, C. A. (2005). Barry’s Introduction to Construction of Building. Oxford: Blackwell Publishing Ltd.

Bennett, J. & Jayes, S. (1995). Trusting the Team: The Best Practice Guide to Partnering in Construction. Reading: Centre for Strategic Studies in Construction, pp. 22 - 27.

Chapman, C. & Ward, S. (2011). How to Manage Project Opportunity and Risks: Why Uncertainty Management Can Be A Much Better Approach Than Risk Management, 3 rd

Edition. London: Wiley & Son.

CIB (1998). Partnering in the Team, A Report by the Construction Industry Board Working Group 12. London: Thomas Telford Publishing.

College News (2016). Amphitheatre: A troubled project. College News Bulleting, 2(5), May 31st, 2016.

Cui, Y. & Chen, Y. Q. (2014). A Relational Case-Based Reasoning Framework for Project Delivery System Selection. International Journal of Civil, Architectural, Structural and Construction Engineering, 8 (9), p. 11.

16

Daniel, W.H. (2006). Construction Management. New Jersey, USA, John Wiley & Sons Inc.

Egan, J. (1998). Rethinking Construction. Report of the Task Force on Construction in the UK led by Sir S. John Egan. London: Department of the Environment, Transport and the Region.

Ezeh, E. (2011). Review of specific procurement issues and challenges confronting MDAs. Being Text of Paper Delivered at one-day stakeholders’ workshop for Ministries, Departments and Agencies (MDAs). January, 2011.

Frank, F. (2011). The International Comparative Legal Guide toPublic Procurement 2011: A practical cross-border insight into public procurement. London: Global Legal Group.

GPS (2013). Government Procurement Service: Our Roles. Available at https://www.gov.uk/government/organisations/government-procurement-service. Accessed on June 12, 2013.

Hillebrandt, P. M. (2000). Economic Theory and the Construction Industry, Third Edition. Basingstoke, UK: MacMillan Press Limited.

JCT (2013). Joint Contract Tribunal. Available at www.jctltd.co.uk. Accessed on November 13, 2014.

Jones, R. (2002). Partnerships in Action: Strategies for Managing the Development of Voluntary Community Groups in Urban Parks. Journal of Managing Leisure, 7 (1), pp. 3 - 5.

Kadefors, A., Björlingson, E. & Karlsson, A. (2007). Procuring service innovations: Contractor selection for partnering projects. International Journal of Project Management, 25 (4), p. 325.

Kashiwagi, D., Kashiwagi, J., Smithwick, J., Kashiwagi, I. & Kashiwagi, A. (2012). The Source of Degradation of the Construction Industry. Journal for the Advancement of Performance Information and Value, 4 (2), p. 2.

Latham, M. (1994). Constructing the Team. Report of the Task Force on Construction in the UK led by Sir Michael Latham. London: Department of the Environment, pp. 14-85.

Leonard, D. & Moshini, R. (1998). Recommendations from the Organizational Workshop’, CIB- W-92 – Procurement – The way forward, in C. H. Davidson (ed) p.79.

Love, P. E. D., Skitmore, M. & Earl, G. (1998). Selecting a Suitable Procurement Method for a Building Project. Construction Management and Economics, 16, pp. 221- 233.

Mbamalu, M. & Iyatse, G. (2013). Concession: A sell-out to Cronies? The Guardian, Saturday, July 20, 2013, p. 13.

17

Ministerial Cabinet Committee on Public Expenditure (1998). Efficiency in Civil Government Procurement. London: HM Treasury Cabinet Office, July 1998.

Mohsini, R. A & Botros, A. (1990): Pascon: An Expert System to Evaluate Alternative Project Procurement Process. Proceedings of International Council for Building Research Studies and Documentation on Building Economics and Construction. CIB, Sydney, 2, pp. 525-537.

Myers, D. (2013). Construction Economics: A New Approach, 3rd Edition. London: Routledge, 2013.

Nnabugwu, F. (2015). FG, states, others owe construction firms N600bn — FOCI. Vanguard, June 24, 2015.Nugwax, M. (2011). Nigeria Needs N8tn To Complete Ongoing Federal Projects. Available at http://www.nairaland.com/683615/nigeria-needs-n8tn-complete-ongoing. Accessed on October 8, 2016.

Nwachukwu, C. (2016). Govt enforces review of projects costs: slashes Bonga deepwater’s by 50%. The Guardian, Tuesday, August 16, 2016, p. 20.

Nwosu, K. E. (2007). Utilization of Construction Management: A Procurement Method in Nigerian Construction Industry. A PGD thesis submitted to the Department of Building and Quantity Surveying (Construction Management option), Nnamdi Azikiwe University, Awka, Anambra State.

Obanikoro, M. (2013). Lekki-Epe Expressway Concession Buy Back, a Badly Put Together Cover-up. Available at www.theeagleonline.com.ng/lekki-epe-expressway-concession-right-buy-back... Accessed on May 18, 2014.

OFPP (2013). Simplifying Government Acquisitions: A Conversation with Anne Rung. Available at www.businessofgovernment.org/blog/business-government/simplifying-federal-acquisition-conversation-anne-rung-administrator-office. Accessed on October 16, 2016.

OGC (2013). Introduction to Public Procurement. Available at www.internationaltenders.eu/en/choose.../introduction_to_ public _ procurement .htm . Accessed on Octiober 3, 2016.

Ogunsanmi, O. E. (2013). Effects of Procurement Related Factors on Construction Project Performance in Nigeria. Ethiopian Journal of Environmental Studies and Management, 6 (2), pp. 215 – 222.

Ojo S. O. (1999). An Evaluation of Procurement Methods in Building Projects in South Western Nigeria. Unpublished M.Sc. (Construction Management) Thesis, Obafemi Awolowo University, Ile-Ife, July.

18

Ojo, S. O. (2009). Development of Framework for the Selection of Appropriate Procurement Methods for Building Projects. Unpublished PhD. (Construction Management) Thesis, Obafemi Awolowo University ,Ile-Ife, September.

Onuba, I. (2016). Slow Procurement Process Delays N770 bn Capital Utilisation Release. The Punch, October 2, 2016.

Osipova, E. & Eriksson, P. E. (2011). How Procurement Options Influence Risk Management in Construction Projects. Construction Management and Economics, 29 (11), pp. 1149 - 1158.

Oyedele, O. A. (2015). An Evaluation of Construction Cost Estimation Methods in Nigeria. A Paper Presented at the FIG Working Week, Sofia, Bulgaria.

Oyedele, 2016). A study of partnering as a construction procurement method in Abuja, Nigeria. Unpublished MPhil. (Construction Management) Thesis, Obafemi Awolowo University, Ile-Ife, March.

Palaneeswaran, E., Kumaraswamy, M. & Ng, T. (2003). Targeting Optimum Value in Public Sector projects through best value‘ – focused contractor selection. Engineering, Construction and Architectural Management, 10 (6), pp. 418-431.

PMI (2007). The Objectives of Projects. A Guide to the Project Management Body of Knowledge (PMBOK Guide), Third Edition. Newtown Square, PA: Project Management Institute (PMI).

Post, N. M. (2000). No stamp of approval on building plans: Contractors sound of over difficulties with bid documents. Engineering News Record, 224, pp. 34 – 46.

Prasad, B. (1997). Seven Enabling Principles of Concurrency and Simultaneity in Concurrent Engineering in Construction, In: Proceedings of 1st International Conference organized by the Institution of Structural Engineers Informal Study Group on Computing in Structural Engineering, 3 and 4 July 1997, London, pp. 1 – 12.

PPA (2007). Public Procurement Act 2007. Available at www.bpp.org.ng. Accessed on October 13, 2014.

Reading Report (1995). Trusting the Team, The Best Practice Guide to Partnering in Construction. Centre for Strategic Studies in Construction, University of Reading, UK.

Ross, A. & Williams, P. (2013). Financial Management in Construction Contracting. Oxford: Wiley.

Transparency International (2012). Corruption Perception Index, December 5, 2012.

19

Unite (2007). Introduction to Public Procurement. Available at http://www.internationaltenders.eu/en/choose_country/united_kingdom/introduction_to_public_procurement.htm. Accessed on October 3, 2016.

Wahab, K. A. (1986). Coping With Inflation in The Construction Industry through a Rationalization of Building Process, Journal of the Federation of Building and Civil Engineering Contractors in Nigeria, 3 (1), pp. 13-19.

Wells, T. (2014). Construction Management Fundamentals. Available at http://d2wjnr0ochjyn5.cloudfront.net/booklist/construction-management-fundamentals-hardcover-_1fhus.pdf. Accessed on October 23, 2016.

Winch, G. (1998). The Growth of Self Employment in British Construction. Construction Management and Economics, 16, pp. 531 – 542.

World Bank Guidelines (2011). Guidelines on Procurement of Goods, Works and Services under IBRD Loans. Available at worldbank.org/.../Procurement_GLs_English_Final_Jan2012. Accessed on November 4, 2014.

20