SPECIAL REPORT: How NPA officials by-passed procurement laws to corner N717 billion contracts

Nigerian Ports Authority, Roro Port

Officials at the Nigerian Ports Authority (NPA) are brazenly and fraudulently bypassing Nigeria’s public procurement law to award multi-billion naira contracts to handpicked contractors, a month-long investigation by PREMIUM TIMES has shown.

At least N717 billion in juicy contracts have so far been illegally awarded to one contractor alone. Under Nigerian Public Procurement Law (PPA), contracts of such magnitude should go through open competitive bidding.

The PPA Act, enacted in 2007, prescribes principles by which public procurement entities within the various Federal Government Ministries, Departments and Agencies should conduct their affairs.

The principles, which include honesty, integrity, transparency, accountability, fair competition, economy and efficiency and value for money, apply to all transactions, large or small, and describe the behaviour expected of every public officer in the conduct of public procurement.

The spirit of the Act is to offer all interested contractors, suppliers and consultants a level-playing field on which to compete and thereby, directly expand the purchaser’s options and opportunities.

It is also to serve as a key deterrent to collusion and corruption, submission of inflated or deflated tenders, followed by delayed or defective performance.

The law also frowns at procurement officials betraying and abusing public trust for personal gain.

To avoid these pitfalls, the Procurement Act stipulates that bids shall be invited only from qualified/approved contractors/suppliers competent to do the work or provide the services to the nominated standards.

It also says that contracts shall be awarded to the lowest evaluated responsive bidder, and shall meet all technical requirements and standards on the basis of competitive tendering unless overriding technical grounds exist to justify any other course of action.

Impunity unparalleled

NPA officials have however ingeniously found a way of circumventing Nigeria’s procurement regulations, carefully engineering what appears a fraudulent process of disguising contracts as Joint Venture projects between the authority and companies of their choosing.

The processes of choosing the joint venture partners are never thrown open, and so also are the procedures for awarding contracts to them.

One company that featured prominently in the so-called joint venture arrangement is Bonny Channel Company Limited.

In its own official document, Bonny Channel Company Limited (BCC) describes itself as a Public Private Partnership (PPP) arrangement between the NPA and The Channel Management Company, through a joint venture agreement signed on June 23, 2014.

The Channel Management Company, TCMC, is itself described as a technical consortium made of Dredging International, Vinci and IPEM. The share structure arrangement gives 60 per cent to NPA and 40 per cent to TCMC.

BCC says it “creates and maintain a safe navigational passage for all marine users to and in the eastern ports of Bonny Island, Onne, Okrika and Port Harcourt”.

For 10 years, beginning from 2006, BCC carried out two major contracts a year; one in Rivers Port and the other in Onne Port. In 2006, the contract sum awarded without passing through the standard procurement process was 127 million dollars.

Total contract figure was 163.2 million dollars in 2007; 195.4 million dollars in 2008; 143.4 million dollars in 2009 and 192.1 million dollars in 2010.

In 2011 the sum of contracts awarded to BCC for projects in Rivers and Onne ports respectively was 327 million dollars. Total contract sum was 300.2 million dollars in 2012; 296.3 million in 2013; 328.6 million dollars in 2014 and 286.2 million in 2015.

Curiously, the same contract of “Capital and Maintenance Dredging” is awarded to the BCC Joint Venture year after year. The company was awarded a total of $2.4 billion (or N717.3 billion) contracts in 10 years, in disregard for the nation’s procurement law.

The Procurement Process

There are nine essentials steps in public procurement in Nigeria. They include (1) efficient procurement plan driven by needs assessment; (2) adequate appropriation; (3) advertisement: (4) transparent prequalification /tender; (5) bid submission /opening; (6) bid evaluation – technical and financial; (7) tender board /FEC approval; (8) contract award /execution; (9) project implementation.

The fine details of this process are captured in sections 17 and 24 of the Public Procurement Act. The transparency steps for procuring goods, works and services must begin with the public posting of procurement notices and solicitations on a Notice Board located in a public area.

The Requests for Proposals (RFPs) must also be advertised in at least two national newspapers of general circulation – and the Federal Tender’s Journal. The same announcement must be made in the government official gazette and by placement on the procuring entities’ website.

The name of the procuring entity must be stated; also the name or nature of the contract; items to be procured; contact information for obtaining tendering documents; cost of the tendering documents; place and deadline for tender submission; Required Bid security amount and format; the place, date and time of tender opening; and the minimum qualifications bidders must meet.

Others are transparent pre-qualification of bidders; submission/receipt of tenders; evaluation of tenders; comparison of tenders; recommendation of the winning bid to Tenders Board /FEC; issuance of Certification of ‘No Objection’ to Contract Award by the Bureau of Public Procurement (BPP); debrief the bid losers on request; resolve complaints and disputes, if any; obtain and confirm the validity of any performance guarantee; announce and publicize contract awards; and execute all contract agreements.

To forestall cases of sweetheart deals and protect the integrity of the process, formulators of the Procurement Act found it pertinent to include a provision forbidding communication with bidders. It says: “At no stage shall the composition, names or any other details of any of the above committee members (the Technical and Financial Evaluation sub-committees) be divulged to the bidders. Other than when direct negotiations are required with the bidders, members of the above named committees shall not communicate directly with the bidders. All such communications shall be done through the procuring entity.

NPA has ‘superior’ ideas to the Procurement Law

The Procurement Act may have spelt out statutory procurement guidelines for all Federal Ministries, Departments and Agencies, but the NPA does not appear to think much of the law. If anything, the parastatal sees it as a clog in the wheel to be avoided as much as possible.

Justifying the joint venture, six reasons are given by BCC (that is NPA top managers and TCMC Consortium), one of which is “the need for an uninterrupted project (that may arise) from frequent bidding and due processes which are common in one-off government contracts”.

The agency gave a second reason for the joint venture saying it “provides the additional technical capacity, mainly with regards to capital and maintenance dredging, bathymetric survey, buoys maintenance and surveillance, continuous monitoring of the access channel, wreck removal, training, planning and management”.

These are supposed to be the statutory duties of the NPA but they are routinely contracted out under a joint venture.

“Given that maritime is the second largest revenue earner for the nation after oil, all NPA contracts should pass through the eye of the needle under the Procurement Act,” an NPA insider said.

“That the NPA has cleverly resisted by resorting to what is called restricted tendering method or in some cases single bid method, none of which subjects the procurement process to any form of competition. The only competition that exists is among the different companies or consortium begging to give an arm just to be NPA’s joint venture partner.”

Although the Procurement Act makes provision for direct contracting, it expects that that would only apply only in exceptional cases. For example when the contractor is needed for early delivery of essential goods in emergency operations. Or when an equipment required is proprietary and there is only one source and no alternative equipment or products with equivalent performance characteristics are available.

Direct contracting is also recommended when there are only a few known suppliers or exceptional reasons such as emergency actions related to a major natural disaster which may justify the waiving of advertising of competitive bids.

Other joint venture partners

PREMIUM TIMES gathered that BCC is not the only joint venture partner the NPA uses in circumventing the nation’s procurement laws.

Investigations by this newspaper showed that the agency arbitrarily awards N750million worth of contracts annually to SeaView Properties Ltd, another so-called joint venture, to provide various categories of environmental services.

The company in turn awards these contracts in batches of N2million to sub-contractors. The contract award by the sub-contractor is done through an internal advert process that is not subjected to the public procurement law.

“The threshold is maintained at N2million to retain the award threshold to domicile with the MD of the company and below what is required for public tender,” a top official of the authority told PREMIUM TIMES.

“The small lots of N2million are inefficient and cumbersome, the scope does not seek to maximize value for money but just to ensure that the contract award is not subjected to public tender.”

The parastatal also set up joint venture structures that gave birth to such companies as Lagos Channel Management (LCM) and Calabar Channel Management Limited (CCM).

PREMIUM TIMES found that the same CCM has a working relationship with another company called Nigeria West Minister Dredging Marine Limited. It is these handpicked companies, some of them amorphous, that NPA parades to give a semblance of compliance with the Procurement Act under its restrictive tendering. Other times it is just single bid process involving only one company.

The Lagos Channel Management Company manages the Lagos Pilotage District. It was incorporated in August, 2005 by NPA with an equity shareholding of 60 per cent and 40 per cent equity to the Joint Venture partner, Depasa Marine International.

Another NPA’s joint venture is called Continental Shipyard Limited. This is described by NPA as a joint venture partnership between the Nigerian Ports Authority and Dockyard Engineering Service Limited of Geneva Switzerland.

“The primary purpose for the establishment of the Joint Ventures is to turn around the Dockyard as a lucrative commercial enterprise through operating, up-grading and modernizing the facility to provide essential support for construction, repair manufacturing and maintenance of vessels, crafts, rigs etc.”, the NPA stated on its website.

The Calabar Channel Management Company Limited is stated as a newly established Joint Venture arrangement between Niger Global Engineering and Technical Company Limited with the Nigerian Ports Authority for what is described as Management Contract on Dredging of Calabar Channel. The NPA holds 60 percent equity while the consortium led by Messrs Global Engineering and Technical Company Limited has 40 per cent shareholdings.

Yet another of NPA’s joint venture, although incongruous with the organization’s core competence, is Agura Hotels Limited in Abuja which is listed as the agency’s joint venture in the hospitality industry.

There are no available information on how much contracts the NPA has so far awarded to the Calabar Channel Management Company Limited under the joint venture arrangement. None too for Continental Shipyard Limited and the Lagos Channel Management Company.

The N717 billion naira is the value of contracts awarded to just one joint venture partner, Bonny Channel Company (BCC) over ten years.

Explaining its joint venture arrangement with the NPA, BCC (NPA and TCMC) says the works it undertook were “carried out at a cost effective way based on the fact that competitive rates charged to NPA are more or less within the same range with that for third-party jobs carried out by BCC …”

Industry watchers queries NPA’s claim to competitive rates saying it is the statutory duty of the Bureau of Public Procurement (BPP), not that of NPA or BCC to determine what is a good price for a contract.

In fact the BPP itself, alarmed by the manipulations and total lack of transparency at NPA has stepped forward to say that the NPA joint venture agreements “contained terms that were skewed and disadvantageous to the financial interest of the Nigerian Ports Authority”.

NPA Reacts

Hadiza bala UsmanIn August 2016, the new Managing Director of NPA, Hadiza Bala Usman, was quoted by the News Agency of Nigeria (NAN) as saying there was need to look at some of the funds expended on capital and maintenance dredging.

She said the funds used for such dredging projects in the past “should not be that high’’.

“It’s good time for us to compare capital dredging and maintenance dredging,’’ NAN quoted the managing director as saying.

When contacted Tuesday, Ms. Bala Usman said she had been taking stock of affairs at the NPA since she assumed duties in July, and that one of the areas her team was scrutinising was the procurement system in the agency.

“We will surely overhaul the procurement system here to ensure it complies with the PPA and Bureau of Public Procurement’s regulations,” she said.

“For instance, at the second board meeting of Seaview Properties last week, I directed that henceforth contracts will be classified into lots that are efficient and the authority will advertise them in line with BPP and if the subsidiary or joint venture wants to bid, they can, alongside other companies.

“We will commence the process of the new lot sizes and scope. Then we will have a public tender process of awarding the contracts. We believe by 1st quarter 2017 the process will be complete and new contractors that have gone through a public tender process will emerge and take over.

“We are hoping to do that with other joint ventures and subsidiaries going forward.”


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