THE CHALLENGES OF PUBLIC PROCUREMENT IN NIGERIA (A CASE STUDY OF IMO STATE)

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THE CHALLENGES OF PUBLIC PROCUREMENT IN NIGERIA (A CASE STUDY OF IMO STATE)

ABSTRACT:

The study attempted to assess the implementation of the public procurement Act of Imo State Government.  The Act was put in place because of the weakness in the general procurement system of Nigeria and be sure that, Due Process is followed in the award of contract (Public Procurement).  The study tried to find out how implementation of Due Process Act affected public procurement towards transparency and accountability in Imo State.  Data for the study were obtained with the aid of self-designed (Secondary), questionnaires and interview.  Data for this study were analysed using both descriptive and inferential statistical tools. The study revealed that, due process in procurement act is only finding among others, aimed at ensuring transparency in contract awards yet the level of public advertisement in bidding is low.  The study recommended that, effort should be intensified in ensuring that all contracts to be awarded are advertised with the details of the criteria and requirement for the bidding.  Therefore, the use of media like television, radio, newspapers etc. should be intensified for openness and transparency to transpire.

              

 

CHAPTER ONE

INTRODUCTION

1.1       Background to the study:

Public procurement is the process by which governments buy inputs for vital public-sector investments. Those investments, both in physical infrastructure and in strengthened institutional and human capacities lay foundations for national development. In procurement terms, those inputs are generally grouped into three categories.  The first category is under civil works, for example, bridges and buildings, highways and  basic physical infrastructure.  The second category falls under goods, typically equipment, material and supplies, commodities,  textbooks, medicalsupplies; and final category falls under services, that areexpert advice and training, as well as such things as building maintenance, computer programming, etc.

 

The quality, timeliness, suitability and affordability of those procured inputs can largely determine whether the public investments will succeed or fail. So the beneficial impact and contribution of the input, particularly in the case of technical assistance services, can exceed their direct costs. Yet, procurement costs can be substantial, consuming scarce resources of tightly constrained government budgets. Often the required funding must be borrowed. Moreover, the process also consumes scarce skilled public-sector human resources. It takes time, not merely for procurement planning and contracting but also for contract supervision and execution. And much of this process is highly visible, as well as controversial; exposing public sector executives and civil servants to scrutiny and second-guessing for procurement choices they made deferred or discarded.There are five basic concerns that govern procurement policies.  These are: Firstly, to ensure that goods and services needed are procured with due attention to economy and efficiency.  Secondly, to ensure that public fund is used to buy only those goods and services needed for national development.  Thirdly, to give all qualified bidders an equal opportunity to compete for contracts. Fourthly, to encourage development of local contractors and manufacturers; and finally, to ensure that the procurement process is transparent.

Government does most of economic activities by providing most of the services we earlier mentioned.  The government discharges these responsibilities of contracts award under normal circumstances.  However, the award of contracts is supposed to follow Due process to ensure viable and cogent service delivery to the public.  The essence of due process is to ensure efficiency, accountability integrity and transparency in government activities (Ekpokhio 2003).

Moreover, competitive tendering (bidding) is a widely used procurement method within government agencies and private sector organisations. The idea behind competitive tendering is that it forces suppliers to compete and (so the theory goes) consequently the purchaser and taxpayer will gain better “value for money”.Murray (2013)

Competitive tendering is often considered to promote competition, provide transparency and give all suppliers the opportunity to win business. It may be that price tags are driven down, but the question is, “At what cost?” People and companies will meet the lower price requirement, but if they are not using the Deming System for managing to do so,i.e“Financial people like to have several vendors pit against each other to drive down price. This practice, Deming (2010) says, with no regard to quality and service, can actually drive good vendors and good service out of business.”,they will have to cut corners. Cutting corners eventually results in more losses.

If the leading supplier or suppliers do not tender, the purchaser can only consider bids from suppliers who do tender. If leading suppliers are not considered, the purchaser may end up buying inferior product or service. An example is reported in this news link in which a key, potential supplier decided not to tender a bid because of the costs and the terms/conditions for the contract were onerous.When making significant purchases, frank and open communication between potential supplier and customer is crucial. Competitive tendering is not conducive to open communication; in fact, it often discourages deep dialogue because in many cases all discussions between a bidder and the purchaser must be made available to all other bidders. Hence, Bidder A may avoid asking certain questions because the questions or answers may help other bidders by revealing Bidder A‟s approaches, features, and the like.

However, the level of abandoned projects in Nigeria is scary and it impinges on the national economy in disastrous ways. Many factors contribute to the hydra- headed problem called abandoned projects. First, most of the time projects are initiated without evaluating the business needs that the project will fulfil. In the end there will be no commitment to realize the projects because there are no business needs for them.

Many projects are started without project planning, which involves project design. A project design specification provides explicit information about the requirements for the project and how the project is to be put together. A design specification includes all necessary drawings, dimensions, environmental factors, ergonomic factors, aesthetic factors, costs, maintenance that will be needed, quality, safety, documentation and descriptions.

Third, most of the projects executed in Nigeria were done outside the project management skills and techniques. What this means is that skilled project management personnel are rarely involved in project supervision.  Engineers and architects are very good in design, but they still need to be skilled in project management to deliver quality projects.

Abandoned projects including Building, Civil Engineering and heavy engineering development project like: houses, churches, schools, roads, bridges, dams, tunnels, airport, sea port etc. litter the whole Nigeria. Osemenan (1987) reported that Nigeria has become the „‟world‟s Junk-yard of abandoned projects worth billions of naira and it is greatly unthinkable that Nigeria blessed with so great potential in the construction industry can experience such magnitude of project abandonment. According to another report by Kontagora (1993) there are about 4000uncompleted or abandoned project belonging to the Federal Government of Nigeria with an estimated cost of N300 billion which will take 30 years to complete all at the present execution capacity of government.  Also in Imo State, as case for analysis, there isabandoned Ikara Food Processing Company Limited, Imo, which makes tomato paste among other products.  The company, which was established about 33 years ago in Ikara, Ikara Local Government Area, has a capacity to process 16,950 tons of tomato, 5,760 tons of mangos, 5,120 tons of Oranges and 780 tons of Pineapple annually (Daily Trust June, 2014), it gathered that the company which also has 700 hectares of land for tomato farming was abandoned due to poor funding and mismanagement.

Above processes were laid down to ensure that government activities and procurements are carried out openly, economically and transparently without favouritism and corruptible tendencies (Ezekwesili 2004).  The rules and procedures of procurement are made in a very simple and direct manner so it will be implementable and enforceable by every government and contractors.

However, public procurement Act of Imo StateLaw No.5 of 25th May, 2007: A law to establish the Bureau of Budget Implementation, Monitoring and Price Intelligence (Ref. Imo State of Nigeria Gazette No.14, Vol.41, 21st June 2007) like that of other states of the federation laid down certain process as which must be followed in the award of contracts within the state.  These processes include Advertisement which shall follow government standard format, pre-qualification Requirement, Invitation to Tender/Bid, Opening of Tender/Bid, and Evaluation of Tender by Tender Evaluation Committee.

1.2       Statement of the problem

It has been a decade of public procurement reform in Nigeria from 2001 – 2011 aimed at enhancing government services delivery. Stakeholders at both national and international level have come together to ensure vibrant and effective public procurement process which was further anchored by the effort of Bureau of Public Procurement all in an attempt to ensure efficient public procurement exercise in Nigeria.

Ideally, due process is supposed to be the guiding principle in the award of contract in Imo State which will in turn ensure that right channel is followed in public procurement.  The channel or process starts from Advertisement of the said work to be done, pre-qualification notice of applicants, Invitation to tender which has to do with technical and financial bid process, tender opening is assumed to be the next stage, evaluation of bid process and finally determination of winning bid.

The above mentioned process is supposed to always be supported by sincerity of purpose, accountability and transparency in public procurement.  If all the procedures are adhered to, viable, vibrant and efficient services delivery would be attained.  In spite of the above mentioned laid down principle and procedures, the governments at all levels tried to ensure or device means and measures through which the illegal and improper factors undermining procurement process are done away with, but all efforts to avert them proved abortive.  These abnormalities are stillhampering public procurement which in turn affects services offered by the government.  This research work will focus on the assessment of implementation public procurement act and the related issues between the application of due process, transparency, accountability, competitive bidding, value for money, efficiency and abandoned projects in the public sector.  How does due process affect public procurement in the pursuit of regulating and minimizing the irregularities in government?

Thus despite the national and international stakeholders‟ efforts, with an emphasis on the need to follow the laid down principles in the Act to ensure viable and efficient contracts execution and implementation within Imo State,  for example in an efforts to improve the motor-ability of roads in Imo State and to improve on the needed access to densely populated communities in Imo, the state Government, on the 28th September, 2012, awarded contract for the immediate construction of 31 roads all across the 23 local Governments of the state at a total cost of 28 billion with various completion dates. Already the state government has made preparation for 25% advance payment to each contractor upon the contractor submitting a bank bond (advance payment guarantee)researches have shown that the level of accountability and transparency in the procurement process is still low, hence, desired to be improved, particularly in the aspect of tendering and bidding.  Another issue of concern is on the area of Tender Evaluation Committee (TEC) to objectively assess the winning bid for efficiency and effectiveness in service delivery in the state.  Therefore, it is pertinent to ask the following research questions which seek answers by the research work.  These are:

  1. What has been made towards public procurement efficiency in Imo State?
  2. To what extenthas the competitive bidding ensured obtaining goods and services at the  lowest prices by stimulating competition, and by preventing favouritism in Imo State?
  • To what extent do accountability and transparency affect the outcome of public procurement in the state?
  1. What are the benefits of public procurement towards value for money in Imo State?
  2. What are the factors responsible for the high level of abandoned projects in Imo State?

1.3       Objectives of the Study

The main objective of this research work is to assess the implementation of the public procurement Act of Imo State.  Other specific objectives are:

  1. To find out what progress has been made towards public procurement efficiency in Imo State.
  2. To examine the extent in which the competitive bidding at obtaining goods and services stimulate competition and by prevent favouritism in Imo State.
  • To determine the extent to which accountability and transparency affect the outcome of public procurement in Imo State.
  1. To find out the benefits of public procurement towards value for money in Imo State.
  2. To identify the factors responsible for the high rate of abandoned projects in Imo

State.

1.4       Statement of Hypotheses

The following hypotheses are made to ensure they establish a relationship between the variable in this research work:

  1. Ho – There is no significant relationship between Efficiency and Value for money in award of contract in Imo State.
  2. Ho –  There is no significant relationship between the competitive bidding and the viability of contracts executed in the State.
  3. Ho –  There is no significant relationship between Accountability and Transparency and the implementation of Public Procurement Act in Imo State.
  • Significance of the study

The significance of this study cannot be overemphasized in this covering knowledge gap. Thai (2012) developed a model depicting the scope of public procurement that consists of five elements; Policy making and Management; authorization and appropriations; Procurement regulations‟ Procurement function in operation.  Ahmed (2011) viewed procurement in his research topic titled “Public Procurement System and e-Government Implementation”, he stated that since the adoption of privatization as an economic policy reform in 1986, public procurement by contractual means in Nigeria has increasing day by day.  His objectives of his study discussed the e-Government Procurement Implementation and he recommends measures to be adopted.  He viewed that the world Banks Evaluation, concluded that the implementation of procurement process is far from satisfactory.  Implementation of e-Government procurement, according to him, e-Government will supplement the present government vision for building a Digital Nigeria by 2021.  The idea of a virtual bidding process according to him could save more than 15% of the government‟s procurement cost.

Therefore, the researcher furtherassessed the implementation of the public procurement act in Imo State to figure out the impact of accountability, transparency, value for money and because there is an apparent gap in knowledge in this area, and it is relatively new and has not been written on, as an area of research.    This by extension is relevant to policy makers, implementers, general public and the society at large.  The studyalso implored the reason why projects are abandoned in public procurement act Imo State, and further viewed how competitive bidding will reduce the level of high price in procurement cost.

Finally, the study will add to the frontiers of knowledge as a reference for further study.

  • Scope and the Limitation

The study which limited itself to assessing the implementation of public procurement act has concentrated on the period between 2007 and 2012because that is when the Act was enacted,also because it will have been appropriate to assess this implementation.The Imo State Act was enacted on 25th May, 2007, the law to establish the Bureau of Budget Implementation, Monitoring and Price Intelligence.

The study further focused on the monitoring, competitive bidding, value for money, transparency, accountability and regulatory activities on government‟s projects, to view how it will help and move Imo State to a level where government procurement is carried out with integrity, transparency, competency and competitiveness.

The study is also limited by the following factors; insufficient information, time constraint and financial insufficiency.  However, efforts were successfully made to reduce the negative impacts of these limitations, by sourcing the basic datai.e primary and secondary, and utilizing same for a successful completion of the study.

It would be expedient to provide a sufficient operational definition of some key terms used in the hypotheses and study as a whole.  The terms used in this research are therefore defined as follows:

Abandoned Project:Abandonment of project in this study implies that most of the time projects are initiated without evaluating the business needs that the project will fulfil. In the end there will be no commitment to realize the projects because there are no business needs for them.

Accountability and Ethical Standards:Ethical standard and accountability in this study refers to a good procurement process, holds its practitioners responsible for enforcing and obeying the rules. Also view in this study is being responsible by the stakeholders, including donors, sponsors, programme beneficiaries, staff, states and the public.

Contract Award:Contract awarding is the method used during a procurement in order to evaluate the proposals (tender offers) taking part and award the relevant contract.

Corruption:  Corruption in this study is the contamination or adulteration of product, which militatethe bastardization language and violation of norms value or laws, and godfatherism in government otherwiseknown as political corruption, which is misuse of power for private gains.

Competitive Bidding:A competitive bid is mostly used in the procurement of goods and services to entail submitting a sealed envelope detailing the price and terms of an offer. The recipient of the offer then selects the competitive bidder that has delivered the lowest price or best terms

Due Process:This is a mechanism for ensuring strict compliance with the openness, competition and cost accuracy rules and procedures that should guide contract award within the federal and state government.

Economy:This is a purchasing activity whose purpose is to give the purchaser best value for money. For complex purchases, value may imply more than just price, for example, since quality issues also need to be addressed. Moreover, lowest initial price may not equate to lowest cost over the operating life of the item procured. But the basic point is the same: the ultimate purpose of sound procurement is to obtain maximum value for money.

Efficiency:The best public procurement is supposed to be simple and swift, producing positive results without protracted delays.Efficiency in this study implies practicality, especially in terms of compatibility with the administrative resources and professional capabilities of the purchasing entity and its procurement personnel.

Fairness:Good procurement is impartial, consistent, and therefore reliable. Operationally in this study fairness is to offer all interested contractors, suppliers and consultants to a level playing field on which to compete and thereby, directly expands the purchaser‟s options and

opportunities.

Transparency:In this study, transparency is the establishment and maintenance of rules and procedures that are accessible and unambiguous. It is not only fair, but it is seen to be fair in the procurement process.

Value for Money:This implies the utility derived from every purchase or every sum of money spent. Value for money is based not only on the minimum purchase price (economy) but also on the maximum efficiency and effectiveness of the purchase.

THE CHALLENGES OF PUBLIC PROCUREMENT IN NIGERIA (A CASE STUDY OF IMO STATE)

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