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APPLICATION OF DUE PROCESS IN EXISTING PROCUREMENT METHODS IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The construction industry activities include procurement of goods and services as well as the execution of a variety of physical structures and infrastructure (Ayangade, Wahab and Alake 2009), using different procurement methods. The activities of construction industry has helped in contributing to Gross Domestic Product (GDP), Gross fixed capital formation and creation of high level of employment to the changing professionals (Wahab, 2005). In industrialized countries, the building industry is responsible for up to 22.00% of the GDP and employs up to 12.00% of the total labour force, but in Nigeria, it is responsible for 16.00% of the GDP and employs up to 20.00% of the labour force (Akindoyeni, 2004). The construction industry has many features which set it apart from other process industries and which accentuate the need for professional engagement. Various methods have been used for procuring building and other infrastructural facilities in the country. One of the changes and new trends, which now influence the procurement system in the country, is the increasing fragmentation of the stages involved in construction process (Bamisile, 2004). Until 1999, Nigeriahad practically institutionalized corruption as the foundation of governance.
Hence institutions of society easily decayed to unprecedented proportions as opportunities were privatized by the powerful. This process was accompanied, as to be expected, by the intimidation of the judiciary, the subversion of due process, the manipulation of existing laws and regulations, the suffocation of civil society, and the containment of democratic values and institutions. Power became nothing but a means of accumulation and subversion as productive initiatives were abandoned for purely administrative and transactional activities. The legitimacy and stability of the state became compromised as citizens began to devise extra-legal and informal ways of survival. All this made room for corruption. (BPP website). There was therefore an urgent call for Procurement Reforms and enthronement of Due Process in the Nigerian public Sector. It is as a result of this, that due process was established in 2001.
Nigeria nation has lost several trillions of Naira on poorly executed contracts, bad workmanship, collapsed structures, delayed and abandoned projects, and the multiplier economic and social benefits derived from such projects are unachievable (Ajator, 2004). The problems of capital development program from the era of military dictatorship were characterized by full paid ghost projects, poorly executed or even abandoned projects. Over the years in Nigeria, the public procurement system has been described to be characterized by non-compliance with the principles of tendering process in the selection of contractors that have the financial, technical and managerial know-how to execute projects to time, cost and quality ends. The increasing reports on the abuse of public procurement system in the three tiers of government in Nigeria have led to huge losses of resources in various public projects [BMPIU, 2005]. Oboirien, 2005 showed that the country might have lost billions of money over the years as a result of abuse of procedures, inflation of contract costs, lack of transparency, competence based competition and merit as the fundamental criteria for the award of public contracts. There was also the problem of influence peddling, sycophancy, and use of primordial considerations. These abuses led to abandonment of government projects, non- value for public treasury, high cost of procurement and others.
Obasanjo (2004) rightly observed that Nigeria had practically institutionalized corruption as the foundation of governance. Hence, institutions in the society easily decayed to unprecedented proportion as opportunities were privatized by the powerful. Power became nothing but a means of accumulation and subversion as productive initiatives were abandoned for purely administrative and transactional activities. The legitimacy and stability of the state became compromised as citizens began to devise extra-legal and informal ways of survival. All this made room for corruption. There was therefore an urgent call for Procurement Reforms and enthronement of Due Process in the Nigerian public Sector. In 2001, the Federal Government issued New Policy Guidelines for procurement and award of contracts in Government Ministries/Parastatals (Circular F. 15775 of 27th June, 2001).
In the President Obasanjo political dispensation, the Budget Monitoring and Price Intelligence Unit (BMPIU), also known as Due Process was inbuilt into the capital budgetary system, so as to ensure that projects started are completed within stated criteria. Due process implies that governmental activities and business can be carried out openly, economically and with transparency without favouritism and corruptible tendencies (Ezekwesili 2004). 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 Adesugba (2004) opined that in order to provide additional boost to government anti-corruption policy, an office of the BMPIU, otherwise known as Due Process (D.P) was established in June 2003. To realize the objective for which it was set up, BMPIU was headed by a financial specialist, Mrs. Obiageli Ezekwesili and staffed with experts in financial regulations, project management and corruption prevention.
The seemingly professional failure of Nigerian project planners, designers and administrators to give value to capital projects has cast doubt on the credibility and relevance of construction professionals and contractors. Nigerian government since 2002 fiscal year has reservation on the import of consultancy fee scale in capital project delivery (Awosemusi 2002) and has instituted the Due Process Compliance (DPC) exercise in the planning and implementation of capital budget /projects (Ezekwesil 2002). The goal of BMPIU is to ensure full compliance with laid down guideline and procedures for the procurement of capital and minor capital project as well as associated goods and services for all Government contracts.
The objectives of BMPIU according to Ezekwesili (2003) are as follow:
1. To introduce more honesty, accountability and transparency into the procurement process.
2. To determine whether or not Due Process has been observed in the procurement of services and contracts.
3. To establish and update pricing standards and benchmarks for all suppliers to Government
4. To ensure that only projects which have been budgeted for are admitted for execution.
5. To harmonize existing government policies / practices and update same on public procurement
6. To monitor the implementation of projects during execution with a view to providing information of performance output and compliance with specifications and targets.
Lock (1989) opined that the objectives of contract / project performance or management can be condensed under three headings. A successful project is one which has been finished on time, within its cost budget and to a technical or performance standard which satisfies the end user. The Due Process Certificate ensures that the stated criteria are met by who will be the contractor to execute any project and the originating government Ministry and Public institutions. For any project to actually get Due Process Certificate readiness to implement, Kharbanda and Stallworthy (1989) stated some criteria for choosing the contractor to include:
i. Cost incentive and liability arrangement proposed
ii. Local currency content of the project cost and the total investment required for the project
iii. Appreciation and knowledge of local conditions at the job site.
iv. Quality of personnel nominated to carry out the project, with special emphasis on the project manager
v. Long terms meant for the project
vi. Project organization and relationship with local subcontractors
vii. Quality and contents of the technical proposal
viii. Contractor’s recent experience in the design and construction of similar projects
ix. Ability to provide the owner with technical support services
x. Schedule for project completion
The above criteria which are not exhaustive are similar to that used by the Due Process Unit (DPU) in contract procurement, regulation, certification, monitoring, implementation, evaluation, training and advisory. It is worthwhile to inquire whether this DPC has impacted positively or not on the performance of public executed projects since its inception. The introduction of Public Procurement Reforms in Nigeria followed a World Bank Country Procurement Assessment survey conducted in 1999 which established the link between poor/weak public procurement procedures and corruption as well as its far reaching negative \consequences on national development especially in the area of infrastructural development in Nigeria. The Assessment Report revealed that 60k was being lost to underhand practices out of every N1.00 spent by Government and that an average of ten Billion US Dollars ($10b) was being lost annually due to fraudulent practices in the award and execution of public contracts through inflation of contract cost, lack of procurement plans, poor project prioritization, poor budgeting processes, lack of competition and value for money and other kinds of manipulations of the procurement and contract award processes.
In order to address the above shortcomings, the Federal Government initiated the Public Procurement Reform as part of its Economic Reform agenda designed to restore due process in the award and execution of federal government contracts. This led to the setting up of the Budget Monitoring and Price Intelligent Unit (BMPIU known as Due Process) in 2001 to implement the Federal Government's Public Procurement Reform Policy aimed at minimizing open abuses to known rules, processes and standards in the award and execution of public sector contracts in Nigeria.
Following the growing Public demand that the reforms are sustained and institutionalized with legal backing, a Public Procurement Bill was articulated in 2003/2004 by the Leadership of BMPIU and presented to the National Assembly. The Public Procurement Bill was thereafter passed by the National Assembly on the 30th of May, 2007 and subsequently signed into Law by President Yar Adua on the 4th of June, 2007. (BPP website) Today the duties carried out by the bureau of public procurement (BPP) is popularly referred to as Due Process. Hence the topic application of due process existing procurement methods in Nigeria.
1.2 STATEMENT OF THE PROBLEM
There are various procurement methods used in carrying out different project in the construction industry, of which due process is applied. Analysis have shown that most contracts awarded by the government or its officials are awarded through corrupt means. Some of these contracts are awarded to contractors who have agreed to give the procurement official a certain percentage of the original contract amount. This encourages contractors to use substandard goods, render poor services or sometimes project abandonment (Ayodele, Charles, Akinusi& Marion 2010). Over the period, Nigeria as a nation has lost several trillions of Naira on poorly executed contracts, bad workmanship, collapsed structures, delayed and abandoned projects, and the multiplier economic and social benefits derived from such projects are unquantifiable. It has not been easy for the nation to realize the full economic objectives. The root of all these problems is corruption ( Ejiofor 2009).
In recent years, many people are wary of doing business in Nigeria because; the cost of doing business here is predictably higher than elsewhere. There seems to be more need, now than ever, to ensure that, rules and procedure put in place for any form of procurement show adequate clarity of purpose to make them implementable and enforceable (Nwaogwugwu 2005). There are due process criteria set for any public project to be undertaken at different government levels. Irrespective of this, there are still several abandoned public projects due to selfish reasons. It is therefore worthwhile to investigate the level and extent of the use of due process for project procurement in Nigeria.
1.3 AIM AND OBJECTIVES OF THE STUDY
The aim of this study is to assess the application of due process in existing procurement methods in Nigeria. The following are the study objectives.
(1) To examine the level of understanding/awareness of Due Process in the procurement of construction projects by projects participants
(2) To assess the effectiveness of due process in public project execution in Nigeria
(3) To determine challenges or barriers of due process application in project procurement process in Nigeria.
1.4 RESEARCH QUESTIONS
Based on the research objectives, the following research questions have been proposed.
(1) What is the level of awareness/understanding of Due Process in the procurement of construction project by project participants in Nigeria?
(2) How effective is due process application in public project execution in Nigeria?
(3) What are the challenges/barriers towards effective due process application in public procurement as it relates to the construction industry?
1.5 RESEARCH HYPOTHESES
The following null hypotheses are hereby formulated:
Hypothesis 1
H0: There is no awareness of the application Due Process in the procurement of construction project by project participants in Nigeria
H1: There is an awareness of the application Due Process in the procurement of construction project by project participants in Nigeria
Hypothesis 2
H0: Application of due process procedure has no significant impact on project delivery in Nigeria
H1: Application of due process procedure has a significant impact on project delivery in Nigeria.
Hypothesis 3
H0: There are no significant challenges and barriers to the implementation of due process in project procurement
H1: There are significant challenges and barriers to the implementation of due process in project procurement.
1.6 SIGNIFICANCE OF THE STUDY
This study is to assist the policy makers and other stakeholders on the effects of the Due Process procedure in the delivery of public projects in Nigeria. The assessment of the Due Process application will help to ascertain the gains of its use from when it was introduced in 2001 to 2013 in contract award, performance and implementation using Due Process certifications. Finally, this will throw more light on the importance of due process procedure as a prerequisite for project procurement used for public project delivery.
1.7 SCOPE AND LIMITATION OF THE STUDY
As it is more directly related to construction procurement, construction contract, project delivery, monitoring, implementation and evaluation. Sampling of the professionals was limited to Architects, Quantity Surveyors, Civil/Structural Engineers, Builders and Services Engineers along with the construction firms that have handled public project contract. This study focus on the project carried out within five years in which due process procedure was applied.
1.8 DEFINITION OF 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 Government of Nigeria.
Due Process Unit
The Unit under the Presidency charged with budget monitoring and price intelligence. It ensures that project procurements are implemented in accordance with laid down criteria.
Due Process Methodology
The application of basic tools and criteria in project management, assessment, monitoring and evaluation of government projects to ensure transparency, integrity, competence, competitiveness and create value for money in the planning and execution of capital program by the Due Process.
Procurement
This is the process that creates, manages and fulfills contracts. It is an integral part of construction projects and it covers the overall pattern of decision made by the client in executing project
Due Process Compliance
The exercise and assurance that these basic tools and criteria in the planning and implementation of capital budget / projects are adhered to by all the parties involved in project execution.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The construction industry activities include procurement of goods and services as well as the execution of a variety of physical structures and infrastructure (Ayangade, Wahab and Alake 2009), using different procurement methods. The activities of construction industry has helped in contributing to Gross Domestic Product (GDP), Gross fixed capital formation and creation of high level of employment to the changing professionals (Wahab, 2005). In industrialized countries, the building industry is responsible for up to 22.00% of the GDP and employs up to 12.00% of the total labour force, but in Nigeria, it is responsible for 16.00% of the GDP and employs up to 20.00% of the labour force (Akindoyeni, 2004). The construction industry has many features which set it apart from other process industries and which accentuate the need for professional engagement. Various methods have been used for procuring building and other infrastructural facilities in the country. One of the changes and new trends, which now influence the procurement system in the country, is the increasing fragmentation of the stages involved in construction process (Bamisile, 2004). Until 1999, Nigeriahad practically institutionalized corruption as the foundation of governance.
Hence institutions of society easily decayed to unprecedented proportions as opportunities were privatized by the powerful. This process was accompanied, as to be expected, by the intimidation of the judiciary, the subversion of due process, the manipulation of existing laws and regulations, the suffocation of civil society, and the containment of democratic values and institutions. Power became nothing but a means of accumulation and subversion as productive initiatives were abandoned for purely administrative and transactional activities. The legitimacy and stability of the state became compromised as citizens began to devise extra-legal and informal ways of survival. All this made room for corruption. (BPP website). There was therefore an urgent call for Procurement Reforms and enthronement of Due Process in the Nigerian public Sector. It is as a result of this, that due process was established in 2001.
Nigeria nation has lost several trillions of Naira on poorly executed contracts, bad workmanship, collapsed structures, delayed and abandoned projects, and the multiplier economic and social benefits derived from such projects are unachievable (Ajator, 2004). The problems of capital development program from the era of military dictatorship were characterized by full paid ghost projects, poorly executed or even abandoned projects. Over the years in Nigeria, the public procurement system has been described to be characterized by non-compliance with the principles of tendering process in the selection of contractors that have the financial, technical and managerial know-how to execute projects to time, cost and quality ends. The increasing reports on the abuse of public procurement system in the three tiers of government in Nigeria have led to huge losses of resources in various public projects [BMPIU, 2005]. Oboirien, 2005 showed that the country might have lost billions of money over the years as a result of abuse of procedures, inflation of contract costs, lack of transparency, competence based competition and merit as the fundamental criteria for the award of public contracts. There was also the problem of influence peddling, sycophancy, and use of primordial considerations. These abuses led to abandonment of government projects, non- value for public treasury, high cost of procurement and others.
Obasanjo (2004) rightly observed that Nigeria had practically institutionalized corruption as the foundation of governance. Hence, institutions in the society easily decayed to unprecedented proportion as opportunities were privatized by the powerful. Power became nothing but a means of accumulation and subversion as productive initiatives were abandoned for purely administrative and transactional activities. The legitimacy and stability of the state became compromised as citizens began to devise extra-legal and informal ways of survival. All this made room for corruption. There was therefore an urgent call for Procurement Reforms and enthronement of Due Process in the Nigerian public Sector. In 2001, the Federal Government issued New Policy Guidelines for procurement and award of contracts in Government Ministries/Parastatals (Circular F. 15775 of 27th June, 2001).
In the President Obasanjo political dispensation, the Budget Monitoring and Price Intelligence Unit (BMPIU), also known as Due Process was inbuilt into the capital budgetary system, so as to ensure that projects started are completed within stated criteria. Due process implies that governmental activities and business can be carried out openly, economically and with transparency without favouritism and corruptible tendencies (Ezekwesili 2004). 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 Adesugba (2004) opined that in order to provide additional boost to government anti-corruption policy, an office of the BMPIU, otherwise known as Due Process (D.P) was established in June 2003. To realize the objective for which it was set up, BMPIU was headed by a financial specialist, Mrs. Obiageli Ezekwesili and staffed with experts in financial regulations, project management and corruption prevention.
The seemingly professional failure of Nigerian project planners, designers and administrators to give value to capital projects has cast doubt on the credibility and relevance of construction professionals and contractors. Nigerian government since 2002 fiscal year has reservation on the import of consultancy fee scale in capital project delivery (Awosemusi 2002) and has instituted the Due Process Compliance (DPC) exercise in the planning and implementation of capital budget /projects (Ezekwesil 2002). The goal of BMPIU is to ensure full compliance with laid down guideline and procedures for the procurement of capital and minor capital project as well as associated goods and services for all Government contracts.
The objectives of BMPIU according to Ezekwesili (2003) are as follow:
1. To introduce more honesty, accountability and transparency into the procurement process.
2. To determine whether or not Due Process has been observed in the procurement of services and contracts.
3. To establish and update pricing standards and benchmarks for all suppliers to Government
4. To ensure that only projects which have been budgeted for are admitted for execution.
5. To harmonize existing government policies / practices and update same on public procurement
6. To monitor the implementation of projects during execution with a view to providing information of performance output and compliance with specifications and targets.
Lock (1989) opined that the objectives of contract / project performance or management can be condensed under three headings. A successful project is one which has been finished on time, within its cost budget and to a technical or performance standard which satisfies the end user. The Due Process Certificate ensures that the stated criteria are met by who will be the contractor to execute any project and the originating government Ministry and Public institutions. For any project to actually get Due Process Certificate readiness to implement, Kharbanda and Stallworthy (1989) stated some criteria for choosing the contractor to include:
i. Cost incentive and liability arrangement proposed
ii. Local currency content of the project cost and the total investment required for the project
iii. Appreciation and knowledge of local conditions at the job site.
iv. Quality of personnel nominated to carry out the project, with special emphasis on the project manager
v. Long terms meant for the project
vi. Project organization and relationship with local subcontractors
vii. Quality and contents of the technical proposal
viii. Contractor’s recent experience in the design and construction of similar projects
ix. Ability to provide the owner with technical support services
x. Schedule for project completion
The above criteria which are not exhaustive are similar to that used by the Due Process Unit (DPU) in contract procurement, regulation, certification, monitoring, implementation, evaluation, training and advisory. It is worthwhile to inquire whether this DPC has impacted positively or not on the performance of public executed projects since its inception. The introduction of Public Procurement Reforms in Nigeria followed a World Bank Country Procurement Assessment survey conducted in 1999 which established the link between poor/weak public procurement procedures and corruption as well as its far reaching negative \consequences on national development especially in the area of infrastructural development in Nigeria. The Assessment Report revealed that 60k was being lost to underhand practices out of every N1.00 spent by Government and that an average of ten Billion US Dollars ($10b) was being lost annually due to fraudulent practices in the award and execution of public contracts through inflation of contract cost, lack of procurement plans, poor project prioritization, poor budgeting processes, lack of competition and value for money and other kinds of manipulations of the procurement and contract award processes.
In order to address the above shortcomings, the Federal Government initiated the Public Procurement Reform as part of its Economic Reform agenda designed to restore due process in the award and execution of federal government contracts. This led to the setting up of the Budget Monitoring and Price Intelligent Unit (BMPIU known as Due Process) in 2001 to implement the Federal Government's Public Procurement Reform Policy aimed at minimizing open abuses to known rules, processes and standards in the award and execution of public sector contracts in Nigeria.
Following the growing Public demand that the reforms are sustained and institutionalized with legal backing, a Public Procurement Bill was articulated in 2003/2004 by the Leadership of BMPIU and presented to the National Assembly. The Public Procurement Bill was thereafter passed by the National Assembly on the 30th of May, 2007 and subsequently signed into Law by President Yar Adua on the 4th of June, 2007. (BPP website) Today the duties carried out by the bureau of public procurement (BPP) is popularly referred to as Due Process. Hence the topic application of due process existing procurement methods in Nigeria.
1.2 STATEMENT OF THE PROBLEM
There are various procurement methods used in carrying out different project in the construction industry, of which due process is applied. Analysis have shown that most contracts awarded by the government or its officials are awarded through corrupt means. Some of these contracts are awarded to contractors who have agreed to give the procurement official a certain percentage of the original contract amount. This encourages contractors to use substandard goods, render poor services or sometimes project abandonment (Ayodele, Charles, Akinusi& Marion 2010). Over the period, Nigeria as a nation has lost several trillions of Naira on poorly executed contracts, bad workmanship, collapsed structures, delayed and abandoned projects, and the multiplier economic and social benefits derived from such projects are unquantifiable. It has not been easy for the nation to realize the full economic objectives. The root of all these problems is corruption ( Ejiofor 2009).
In recent years, many people are wary of doing business in Nigeria because; the cost of doing business here is predictably higher than elsewhere. There seems to be more need, now than ever, to ensure that, rules and procedure put in place for any form of procurement show adequate clarity of purpose to make them implementable and enforceable (Nwaogwugwu 2005). There are due process criteria set for any public project to be undertaken at different government levels. Irrespective of this, there are still several abandoned public projects due to selfish reasons. It is therefore worthwhile to investigate the level and extent of the use of due process for project procurement in Nigeria.
1.3 AIM AND OBJECTIVES OF THE STUDY
The aim of this study is to assess the application of due process in existing procurement methods in Nigeria. The following are the study objectives.
(1) To examine the level of understanding/awareness of Due Process in the procurement of construction projects by projects participants
(2) To assess the effectiveness of due process in public project execution in Nigeria
(3) To determine challenges or barriers of due process application in project procurement process in Nigeria.
1.4 RESEARCH QUESTIONS
Based on the research objectives, the following research questions have been proposed.
(1) What is the level of awareness/understanding of Due Process in the procurement of construction project by project participants in Nigeria?
(2) How effective is due process application in public project execution in Nigeria?
(3) What are the challenges/barriers towards effective due process application in public procurement as it relates to the construction industry?
1.5 RESEARCH HYPOTHESES
The following null hypotheses are hereby formulated:
Hypothesis 1
H0: There is no awareness of the application Due Process in the procurement of construction project by project participants in Nigeria
H1: There is an awareness of the application Due Process in the procurement of construction project by project participants in Nigeria
Hypothesis 2
H0: Application of due process procedure has no significant impact on project delivery in Nigeria
H1: Application of due process procedure has a significant impact on project delivery in Nigeria.
Hypothesis 3
H0: There are no significant challenges and barriers to the implementation of due process in project procurement
H1: There are significant challenges and barriers to the implementation of due process in project procurement.
1.6 SIGNIFICANCE OF THE STUDY
This study is to assist the policy makers and other stakeholders on the effects of the Due Process procedure in the delivery of public projects in Nigeria. The assessment of the Due Process application will help to ascertain the gains of its use from when it was introduced in 2001 to 2013 in contract award, performance and implementation using Due Process certifications. Finally, this will throw more light on the importance of due process procedure as a prerequisite for project procurement used for public project delivery.
1.7 SCOPE AND LIMITATION OF THE STUDY
As it is more directly related to construction procurement, construction contract, project delivery, monitoring, implementation and evaluation. Sampling of the professionals was limited to Architects, Quantity Surveyors, Civil/Structural Engineers, Builders and Services Engineers along with the construction firms that have handled public project contract. This study focus on the project carried out within five years in which due process procedure was applied.
1.8 DEFINITION OF 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 Government of Nigeria.
Due Process Unit
The Unit under the Presidency charged with budget monitoring and price intelligence. It ensures that project procurements are implemented in accordance with laid down criteria.
Due Process Methodology
The application of basic tools and criteria in project management, assessment, monitoring and evaluation of government projects to ensure transparency, integrity, competence, competitiveness and create value for money in the planning and execution of capital program by the Due Process.
Procurement
This is the process that creates, manages and fulfills contracts. It is an integral part of construction projects and it covers the overall pattern of decision made by the client in executing project
Due Process Compliance
The exercise and assurance that these basic tools and criteria in the planning and implementation of capital budget / projects are adhered to by all the parties involved in project execution.
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