Why public procurement law should be revised – DG Budget Office

Photo Credit: Nigerian Newspaper

The public procurement law in its current design can hinder economic growth and kill local businesses if its provisions are not urgently revised and amended, the Director-General of the Budget Office of the Federation, Ben Akabueze, has said.

According to Mr Akabueze, although the intention of the World Bank and other development partners with the law was positive, its provisions were not well-conceived to promote the country’s development interests.

“If relied upon the way it was designed, the law is capable of killing growth in the local economy,” he said.

“I subscribe to the view that the public procurement law needs to be revised if we are going to make progress. Both government officials and National Assembly members have agreed something is wrong. Yet, nobody is doing anything about amending it,” Mr Akabueze said.

The DG was speaking as a special guest at a policy advocacy roundtable on “Budget Cycle, Budget System and Public Expectation” organized by the Abuja Chamber of Commerce and Industry (ACCI) in Abuja.

The Public Procurement Act 2007 designed primarily after the United Nations Commission on International Trade Law (UNCITRAL) was to ensure transparency, competitiveness, value for money and professionalism in the public sector procurement system.

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But, Mr Akabueze criticized the provision of the law that allows a maximum of 15 per cent of the total contract sum as mobilisation fees to contractors.

He said the provision was hardly sufficient to either mobilise the contractor and his equipment to a construction site nor finance a satisfactory job delivery.

“How can we have a public procurement law that approves a maximum of 15 per cent mobilisation fees to contractors? In most parts of the world, with a government contract, you can walk into a bank for a loan and the only thing the bank will check will be the capacity to deliver.

“The question about whether the government will pay is taken for granted. That is not the case here, where doing government contracts has killed many businesses. If you collect money from the bank, you are not sure when the National Assembly will approve the budget.

“Banks are not even in a hurry to finance government contracts. So, if you give somebody a contract and allow him 15 percent advance payment, he will spend the next six months going from one bank to another to get finance for the contract.

“After six months, the cost will escalate. That means from Day 1, the contract has failed. Some people will even prefer to make away with the 15 percent advance payment and abandon the contract. If we do not do something (revise the law), the problem will continue,” he said.

2018 BUDGET PERFORMANCE

On the performance of the 2018 Budget, the DG said although it was normal practice globally to aim for 100 per cent implementation when drawing up a budget, governments at all levels has never achieved the target.

He said Nigerians often misconstrue budget implementation for capital expenditure and ignoring similar components in statutory transfers to agencies like the Independent National Electoral Commission, Niger Delta Development Commission, and Universal Basic Education.

“So, when the percentage of what has been implemented in the capital and statutory transfers, which were fully disbursed, is fully aggregated, you will come to about 75 percent implementation level for the year,” he said.

However, the DG expressed regrets that in reality, it was the capital component of the budget, which he described as the most important, that always suffers the most in the implementation.

BLAME NATIONAL ASSEMBLY

Mr Akabueze, however, blamed the National Assembly for poor budget implementation.

“Once a new year begins, regardless of what the National Assembly does, in terms of approving the budget, does not stop the recurrent component of the budget from running.

“You cannot stop paying the interest on your loan or stop paying workers’ salaries in January, because the National Assembly has not approved the budget.

“The only aspect that cannot run until the National Assembly passes the budget is the capital component, which happens to be the most important, from a developmental point of view because this is where the roads, electricity, housing, railways, airways are covered,” he said.

WHY NATIONAL ASSEMBLY DELAY BUDGETS

A former director, Bureau of Public Procurement, Joe Abah, who was also a special guest at the event, identified a number of reasons why the National Assembly always delays the passage of the federal budget.

According to Mr Abah, these include corruption, opaque procurement rules, and regulations, lack of standard pricing template involving about 22,000 budget items.

Under the 2016 budget, he said, those standard prices template was not updated for more than three years. He attributed it to the failure of the BPP procurement process.

Within those three years, he said, the value of the Naira crashed and affected the prices of items quoted by ministries, departments, and agencies.

Recently, the Border Communities Development Agency was enmeshed in a massive procurement fraud involving the abuse of the process to select contractors for the award of almost 1,000 self-enrichment contracts by members of the National Assembly.

The agency’s procurement officials disregarded key criteria it had set for selection of prospective contractors by shortlisting bidders that had neither tax nor pension clearance certificates as requirements for the award of contracts.

The exclusive report by PREMIUM TIMES showed the growing abuse of the procurement law by government agencies in Nigeria.

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