Procurement Act: Why Civil Society Groups Are Against 50% Mobilisation Fees

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The amendment of the Public Procurement Act 2007 has generated interests among key stakeholders in the country. AGBO-PAUL AUGUSTINE reports on why civil society groups are against the 50 per cent mobilisation fees and the removal of the Minister of Finance as chairman of the National Council for Public Procurement.

The Public Procurement Act (PPA, 2007) is, arguably, Nigeria’s sunshine law against corruption in the public service. Experts in the sector have often postulated that over 60 per cent of all the corruption cases reported in the public sector stem from processes involving procurement.
The PPA came into being as an anti-corruption instrument, during the time of former President Olusegun Obasanjo in 2007, as a response to the 2010 World Bank Country Procurement Assessment Report (CPAR), among others.
Since the establishment of the Act 10 years ago, the law has been observed in disobedience without complying with the provision of Part 1, Section 1 and Section 2 of the Act which is the inauguration of the National Council For Public Procurement (NCPP), as the policy-making organ of the body and the appointment of a director-general in accordance with the law.
Attempts have been made in the past to tinker with the PPA, the latest being the one by the House of Representatives in a Bill to amend relevant sections of the Act. Key among the amendment were the increase of contracts’ mobilisation fees from 15 to 50 per cent; removal of the Minister of Finance as chair of the Public Procurement Council (PPC); and includes National Defence and Security Agencies in procurement processes.
While the inclusion of the defence and security agencies in the procurement processes is generally believed will increase the level of transparency in the management of Defence and Security spending with hitherto had remained elusive, the increase from 15 to 50 percent contract mobilisation fees in the proposed Bill is viewed as tantamount to given more room for corruption.
However, the removal of the Minister of Finance as the chairman of the NCPP in the proposed amendment has remained a sore point for some of the civil society groups.
Reacting to the development, Procurement and Observation and Advocacy Initiative (POAI), a civil society group and a member of trained non-state actors under the 2010 Federal Government of Nigeria/World Bank-assisted Economic Reforms and Governance Project kicked against the proposal by the lawmakers.
Stating its position in a letter to the chairman, House of Representatives Committee on Public Procurement, the group insisted that the move by the lawmakers was not in the right direction.
The letter, jointly signed by the national coordinator of the POAI, Mohammed Attah and national secretary, Ayo Adebusoye, expressed fears that the new amendment would further worsen the situation in the country, as enforcing a law that a contractor must be mobilized with 50 per cent of the contract fees before the execution of the project would be a clear way of encouraging corruption.
The letter read in part: “It is a requirement in Section 16(6) (a) (ii) under Fundamental Principles for Procurement which provides that any contractor bidding for contract under the extant law must have the financial capability.
“This is further stressed with the condition that a contractor is required to provide performance guarantee (Bond) as security before the award of the contract. A non-compliance with this requirement implies that contract cannot be awarded in the first instance,” the letter stated.
The statement said: “This cannot, in our view, stop or reduce instances of project abandonment. It is on record that part of the major reasons why projects are being abandoned in Nigeria is as a result of delayed payment by government, owing to non-availability of funds to meet up her contractual obligations.
“As contained in the extant law, a mobilisation of 15 per cent fees to the contractor is to enable the contractor move their equipment to site, while another 30 per cent fees is payable after an inception report, otherwise, referred to as ‘Interim Performance Certificate’ is submitted.
“This is followed by another 50 per cent payment when half of the work is done and a balance of 5 per cent payable after completion of the work. This is the standard worldwide and [any] contractor that fails to meet up with the above is deemed to have committed an offence and punishable under Section 38.
“From the above, it is very clear that payments to contractors are in sequence to guide against abandoning the work and not drag government into unnecessary controversies.”
The CSOs’ worries about the proposed amendment of the laws is that giving up to 50 per cent mobilisation fees will not only further encourage corruption, the 15 per cent, as contained in the law (Section 35 of the PPA), is purely a mobilisation fees which implies assisting or mobilising the contractor to site and not ‘advance payment’.
It further argued that a 50 per cent increment to contractors would not be in the best interest of Nigeria. Instead of jacking up mobilisation fees for public contracts, government would endeavour to pay contractors as soon as they achieve their milestones.
“It is on record that part of the major reasons why projects are abandoned in Nigeria and at the federal level is as a result of delayed payment by government, owing to non-availability of funds to meet up her contractual obligations.
“Rather than increase mobilisation fees, government should endeavour to pay contractors as soon as they achieve their milestones. Not even Section 37 of the PPA 2007 has been able to deter government from owing contractors; rather, government officials allow these interests to accumulate, leading to price fluctuations or increment in contract prices and increasing the cost of government projects,” it argued.
Arguing further, the civil society group said that it believed that Nigeria’s economy would not only suffer under the proposal, it would weaken “our efforts to reduce financial flows.”
If 400 out of the existing ministries, department and agencies (MDAs) of government award contracts to the tune of N500m each and if the contractors are mobilised with 50 per cent of the total amount, government would be paying in advance an equivalent of N250m each. When it is multiplied by 400, the result, about N100bn, would be removed from the treasury in one fell swoop. The magnitude of the amount has sparked fears that the proposed increment may actually do more harm to the nation’s economy than good, as being advanced by the sponsors of the Bill.
Furthermore, the recommendation in the Bill that mobilised contractors risk two years in jail or an option of fine over abandoned projects would be a ridicule and inconsistent with the extant law. The civil society group believes that, to reduce corruption in contract awards and execution, the crafter of the law had carefully made all offences criminal in nature with no option of fine and not less than four years in jail.
“Therefore, the Bill by the House seeking to jail offenders for two years, with an option of fine, is a clear case of providing soft landing for offenders and this can only increase corruption,” it further stated.
On the removal of the Minister of Finance as chairman of the NCPP and replacing her with the president of the Federal Republic of Nigeria, the group argued that it would be irrational and result to an “open abuse of the exalted office of the Executive President and an attempt to ridicule the fight against corruption.”
The argument by the House of Representatives that the Minister of Finance is a head of a ministry covered under the Act for procurement functions and, therefore, cannot sit as chairman to superintend over procurement issues of the country is a far cry from reality, the body argued.
“The Council (NCPP) – and by extension, the members – as contained in Section 1 of the Act, is not contract-awarding or approving authority but a body charged with the policy direction of the procurement process. It is important to state categorically here that it is only the Bureau of Public Procurement (BPP) that has the statutory responsibility of reviewing contracts and not the council.”
Stating further that the removal of the Minister of Finance as chairman of the council is a clear violation of the Finance (Control and Management) Act of 1958, the group insisted that the minister remained the gate-keeper of the economy and protector of the treasury; thus, making her fit to occupy the office.
The group posited that over 70 per cent of total corruption in the public sector could be linked to procurement matters and all efforts must be devoted to addressing the cankerworm.
While it is against the proposed amendment, it suggest that the president be encouraged and advised to constitute and inaugurate the National Council for Public Procurement (NCPP) as the most effective tool in fighting corruption in the public sector, to cur corruption in the public sector and instill sanity in the way contracts are awarded, executed and maintained.

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