The Role of Law in Combating Public Procurement Corruption in Nigeria

THE ROLE OF LAW IN COMBATING PUBLIC PROCUREMENT CORRUPTION IN NIGERIA

BY

PROFESSOR MUHAMMED TAWFIQ LADAN (Ph.D)

DEPARTMENT OF PUBLIC LAW,

FACULTY OF LAW, A.B.U., ZARIA, NIGERIA

BEING A PRESENTATION MADE AT

THE SECOND PHASE OF NATIONAL SENSITIZATION AND ENLIGHTENMENT PROGRAMME ON THE PUBLIC PROCUREMENT ACT 2007 FOR NORTH-WEST ZONE OF NIGERIA

ORGANIZED BY

THE BUREAU OF PUBLIC PROCUREMENT, THE PRESIDENCY, DUE PROCESS OFFICE, ABUJA IN COLLABORATION WITH CISLAC, ABUJA

DATE: - 10TH SEPTEMBER, 2009

VENUE: - COMMAND GUEST HOUSE, KADUNA

THE ROLE OF LAW IN COMBATING PUBLIC PROCUREMENT CORRUPTION IN NIGERIA

BY

PROFESSOR M. T. LADAN (Ph.D)

1. INTRODUCTION

It is a paradox that Nigeria is a rich country inhabited by the poor. Her poverty profile in statiscal figures according to a recent study indicates that Nigeria is poverty endemic. Poverty incidence increased between 1980 and 1985 and between 1992 and 1996. The trend also shows that there has been appreciable decrease in poverty rates between 1985 and 1992 and 1996 and 2004. In 2004, growth in population almost equals growth in poverty since 1980.

Poverty has predominated in the rural area than in the urban area by 63.3% and 43.2% respectively. The trends in poverty levels by zones show that in the northern part of the country, the North-East zone has a higher incidence of poverty followed by North-West and North-Central.

Out of over 140 million population at 3.2% population growth rate, 5.3% unemployment rate, real GDP growth rate of 5.7%, oil sector growth rate of 4.31%, non-oil sector growth rate of 8.93%, inflation rate of 8.50%, about half of the total population (68.7million) live below poverty line.

Corruption in the management of public finance is a veritable area for corrupt practices. Every state must at various times procure goods and services. This calls for request for contract practices, is that public officials disclose to those with interest in the bid, the position of things, this unfairness leads to a situation in which honest bidders are outmaneuvered by smart alecs. The bidding process favours those who lest disposed to perform and the end-product suffers from mediocre handling. Very often, the favoured bidders later ask for contract price adjustment upwards. The eventual consequence is that the buildings cost more and are often poorly executed. Transparency and objective criteria should guide government procurements, contract awards and other financial management of public finance.

All information about a tender or contract must be widely disseminate for all those who have an interest to prepare their tenders, consults with their tenders, consults with their financiers, architects, structural engineers and other consultants in order to enable them make informed bids. Time, being of essence, must be adequate. Many prospective bidders have been cut by shortage of the time allowed for preparations and have been stampeded into hasty evaluations leading to their inability to perform the contracts or evaluations leading to their inability to perform the contracts or poor performance or even abandonment of work on site. This is very common in developing states. The terrain is littered with uncompleted projects resulting from the initial rush to bid. This is full disclosure of all material facts in order to facilitate the contracts award process, which would eliminate insider informants, insider trading and other malignant practices.

It is against this background that this paper seeks to achieve the following objectives: -

a)To provide conceptual clarification of key terms;

b)To justify the central argument of this paper;

c)To highlight the clear objective and benefits of the Public Sector Procurement Reform and the challenge of fighting corruption, promoting transparency and accountability in governance;

d)To conclude with recommendations.

1. CONCEPTUAL CLARIFICATION OF KEY TERMS: -

“Due Process, Public Procurement, Certificate of No Objection, Contractor or Supplier, Open Competitive Bidding and Procuring Entity”.

1. Due Process and Public Procurement

Due Process implies that governmental activities and businesses can be carried out openly, economically and transparently without favouritism and corruptible tendencies. The essence of this is to ensure that rules and procedures for procurement are made in such a way as to be implementable and enforceable. It is hoped that this Due Process should put an end to “the Business as Usual Syndrome” in Nigeria. Due Process is a mechanism that certifies for public funding only those projects that have passed the test of proper implementation packaging and that adhere stringently to the international competitive bid approach in the award process.

There is no gain saying the fact that improved Public Procurement systems would have a beneficial effect on economic condition of the nation. Wittig (1999) views Public Procurement as a business process within a given political system, with distinct consideration of integrity, accountability, national interest and effectiveness. These business operations of government, as controlled by public procurement, usually affect many different elements of society. The procuring entities for instance have needs for material support like roads, hospitals, etc, to help in fulfilling their designated national mission. The business communities of actual or potential suppliers on the other hand need to satisfy government procurement requirement. There are also other interested parties like professional bodies, various agencies, interested public, etc who are all affected or influenced in one way or the other by public procurement.

1. Certificate of No Objection, Contractor or Supplier, Open Competitive Bidding, and Procuring entity

"Certificate of No Objection" means the document evidencing and authenticating that due process and .the letters of this Act have been followed in the conduct of a procurement proceeding and allowing for the procuring entity to enter into contract or effect payments to contractors or suppliers from the treasury;

"Contractor or supplier" means any potential party to a procurement contract with the procuring entity and includes any corporation, partnership, individual, sole proprietor, joint stock company, joint venture or any other legal entity through which business is conducted;

“Open Competitive Bidding” means the offer of prices by individuals or firms competing for a contract, privilege or right to supply specified goods, works, construction or services;

“Procuring entity” means any public body engaged in procurement and includes a Ministry, Extra-Ministerial office, government agency, parastatal and corporation; "Public Procurement" means the acquisition by any means of goods, works or services bythe government;

1. MAIN ARGUMENT OF THE PAPER

The central argument of this paper is that law is the bedrock of good governance and democratic consolidation for six (6) basic reasons: -

1. Law defines the primary purpose of government, the nature and scope of the functions and powers of all the arms and levels of government in Nigeria.(See for example the combined effect of sections 13-14 and 16 of chapter two of the 1999 Nigerian Constitution).

(13) It shall be the duty and responsibility of all organs of government, and of all authoritiesand persons, exercising legislative, executive or judicial powers, to conform to, observe and apply the provisions of this Chapter of this Constitution.

(14)(2) It is hereby, accordingly, declared that:

(b) the security and welfare of the people shall be the primary purpose of government:

(16) -(1) The State shall, within the context of the ideals and objectives for which provisions are madein this Constitution.

1. harness the resources of the nation and promote national prosperity and an efficient, adynamic and self-reliant economy;
2. control the national economy in such manner as to secure the maximum welfare, freedom andhappiness of every citizen on the basis of social justice and equality of status and opportunity;
3. without prejudice to its right to operate or participate in areas of the economy, other thanthe major sectors of the economy, manage and operate the major sectors of the economy;
4. without prejudice to the right of any person to participate in areas of the economy within themajor sector of the economy, protect the right of every citizen to engage in anyeconomic activities outside the major sectors of the economy.

(2) The State shall direct its policy towards ensuring:

a)the promotion of a planned and balanced economic development;

b)that the material resources of the nation are harnessed and distributed as best as possible toserve the common good;

c)that the economic system is not operated in such a manner as to permit the concentration ofwealth or the means of production and exchange in the hands of few individuals or ofa group; and

d)that suitable and adequate shelter, suitable and adequate food, reasonable national minimumliving wage, old age care and pensions, and unemployment, sick benefits and welfare of the disabled are provided for all citizens.

II.Law sets out the mechanism for combating corruption in public procurement including the legal rules and regulations as well as the guiding principles of the why, who, when, what and how of public procurement of goods, works and services, disposal of public property and management of public funds.

(see e.g., sections 4-6, 15-16 of PPA Act 2007)

4. 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;

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.

5. The Bureau shall:

a)formulate the general policies and guidelines relating to public sector procurement for the approval of the Council;

b)publicize and explain the provisions of this Act;

c)subject to thresholds as may be set by the Council, certify Federal procurement prior to the award of contract;

d)supervise the implementation of established procurement policies;

e)monitor the prices of tendered items and keep a national database of standard prices;

f)publish the details of major contracts in the procurement journal;

g)publish paper and electronic editions of the procurement journal and maintain an archival system for the procurement journal;

h)maintain a national database of the particulars and classification and categorization of federal contractors and service providers;

i)collate and maintain in an archival system, all federal procurement plans and information;

j)undertake procurement research and surveys :

k)organize training and development programmes for procurement professionals;

l)periodically review the socio-economic effect of the policies on procurementand advise the Council accordingly;

m)prepare and update standard bidding and contract documents;

n)prevent fraudulent and unfair procurement and where necessary applyadministrative sanctions;

o)review the procurement and award of contract procedures of every entity towhich thisAct applies;

p)perform procurement audits and submit such report to the National Assemblybi-annually;

q)introduce, develop, update and maintain related database and technology;

r)establish a single internet portal that shall, subject to Section 16 (21) to this Actserve as a primary and definitive source of all information on governmentprocurement containing and displaying all public sector procurement information atall times; and

s) co-ordinate relevant training programs to build institutional capacity.

6.-(1)The Bureau shall have the power to:

a)enforce the monetary and prior review thresholds set by the Council for theapplication of the provisions of thisAct by the procuring entities;

b)subject to the paragraph (a) of this subsection, issue certificate of "NoObjection" for ContractAward" within the prior review threshold for all procurementswithin the purviewof thisAct:

c)from time to time stipulate to all procuring entities the procedures anddocumentation pre- requisite for the issuance of Certificate of 'No Objection' underthis Act;

d)where a reason exist:

(i)cause to be inspected or reviewed any procurement transaction to ensure compliance with the provisions of this Act,

(ii)review and determine whether any procuring entity has violated any provision of this Act;

e)debar any supplier, contractor or service provider that contravenes any provision of this Act and regulations made pursuant to this Act;

f)maintain a national database of federal contractors and service providers and to the exclusion of all procuring entities prescribe classifications and categorizations for the companies on the register;

g)maintain a list of firms and persons that have been debarred from participating in public procurement activity and publish them in the procurement journal;

h)call for such information, documents, records and reports in respect of any aspect of any procurement proceeding where a breach, wrongdoing, default, mismanagement and or collusion has been alleged, reported or proved against a procuring entity or service provider;

i)recommend to the Council, where there are persistent or serious breaches of this Act or regulations or guidelines made under this Act for .

i)the suspension of officers concerned with the procurement or disposal proceeding in issue ;

ii)the replacement of the head or any of the members of the procuring or disposal unit of any entity or the Chairperson of the Tenders Board as the case may be;

iii)the discipline of the Accounting Officer of any procuring entity;

iv)the temporary transfer of the procuring and disposal function of a procuring and disposing entity to a third party procurement agency or consultant; or

v)any other sanction that the Bureau may consider of appropriate ;

j)call for the production of books of accounts, plans, documents, and examinepersons or parties in connection with any procurement proceeding ;

k)act upon complaints in accordance with the procedures set out in thisAct ;

l)nullify the whole or any part of any procurement proceeding or award which is incontravention of thisAct ;

m)do such other things as are necessary for the efficient performance of its functionsunder thisAct

(2) The Bureau shall serve as the Secretariat for the Council.

(3) The Bureau shall, subject to the approval of the Council, have power to:

a)enter into contract or partnership with any company, firm or person which in itsopinion will facilitate the discharge of its functions;

b)request for and obtain from any procurement entity information including reports, memoranda and audited accounts, and other information relevant to its functions under this Act; and

c)liaise with relevant bodies or institutions national and international for effective performance of its functions under this Act.

15.(1) The provisions of this Act shall apply to all procurement of goods, works, and services carried out by:

a)the Federal Government of Nigeria and all procurement entities;

b) all entities outside the foregoing description which derive at least35% of the funds appropriated or proposed to be appropriated for any type of procurement described in this Act from the Federation share of Consolidated Revenue Fund.

(2) The provisions of this Act shall not apply to the procurement of special goods; works and services involving national defense or national security unless the President's express approval has been first sought and obtained.

16.-(I)Subject to any exemption allowed by this Act, all publicprocurement shall be conducted: -

a)subject to the prior review thresholds as may from time to time be set by theBureau pursuant to Section 7(1) (a)-(b);

b)based only on procurement plans supported by prior budgetaryappropriations and no procurement proceedings shall be formalized until theprocuring entity has ensured that funds are available to meet the obligations andsubject to the threshold in the regulations made by the Bureau, has obtaineda"Certificate of ' NoObjection' to ContractAward" from the Bureau;

c)by open competitive bidding ;

d) in a manner which is transparent, timely, equitable for ensuringaccountability and conformity with thisAct and regulations deriving therefrom ;

e)with the aim of achieving value for money and fitness for purpose;

f) in a manner which promotes competition, economy and efficiency; and

g) in accordancewith the procedures and time-line laid down in thisAct and asmay be specified by the Bureau from time to time.

(2) Where the Bureau has set prior review thresholds in the procurementregulations, no funds shall be disbursed from the Treasury or FederationAccount or any bank account of any procuring entity for any procurementfalling above the set thresholds unless the cheque, payments or other form ofrequest for payments is accompanied by a certificate of "No Objection" to anaward of contract duly issued by the Bureau.

(3) For all cases where the Bureau shall set a prior review threshold. TheBureau shall prescribe by regulation, guidelines and the conditions precedentto the award of Certificate of "No Objection" under this Act.

(4) Subject to the prior review thresholds as may be set by the Bureau,any procurement purported to be awarded without a "Certificate of ‘NoObjection' to Contract Award" duly issued by the Bureau shall be null and void.

(5) Asupplier, contractor or service provider may be a natural person, alegal person or a combination of the two. Suppliers, contractors or serviceproviders acting jointly are jointly and severally liable for all obligations and orresponsibility arising from this Act and the non-performance or improperperformance of any contract awarded pursuant to this Act.

(6)All bidders in addition to requirements contained in any solicitation documents shall:

a)possess the necessary;

i)professional and technical qualifications to carry out particular procurements ;

ii)financial capability ;

iii)equipment and other relevant infrastructure ;

iv)shall have adequate personnel to perform the obligations of the procurement contracts.

b)possess the legal capacity to enter into the procurement contract;

c)not be in receivership, the subject of any form of insolvency or bankruptcy proceedings or the subject of any form of winding up petition or proceedings;

d)have fulfilled all its obligations to pay taxes, pensions and social securitycontributions

e)not have any director who has been convicted in any country for any criminaloffence relating to fraud or financial impropriety or criminal misrepresentation orfalsification off acts relating to any matter;

f) accompany every bid with an affidavit disclosing whether or not any officer of therelevant committees of the procurement entity or Bureau is a former or present director,shareholder or has any pecuniary interest in the bidder and confirm that all informationpresented in its bid are true and correct in all particulars.