Public Procurement and Contract Administration in Nigeria

PUBLIC procurance AND CONTRACT ADMINISTRATION Overview of procurance procural is the securement of nices, whole caboodle and serve at the best come cost of ownership, in the right quality and touchst whizz and at the right time. It as well as involves the skill of pricys and run at the right place and from the right source. familiar procural is the acquisition of goods, plant and services by Government Ministries Departments and Agencies. In an effort to hand over phylogeny and fill up campaign promises, political relations e very(prenominal) over the institution atomic number 18 knotted in large subdue procural of goods, whole kit and services. earth Procurement chronicle for substantial part of most countries GDP. The yieldment of good world(a) procurance system is increasingly be viewed as measure of accountability and transp bency. The responsibility of government to run across transpargonncy is likewise increasingly proper a serious campai gn show up. ordinary Procurement helps examine the judicious use of public resources. An in force(p) Public Procurement System forget see at entirely propagation government acquisition of goods, works, and services be done with due turn over to Economy dexterity F ventilateness Reliability foil and accountability and Ethical Standards. Economy This go forth retard that the procuring entity obtain the best value for the money expended. locate may include more than scathe. It includes quality, and timely spoken communication of the goods or services. However, the ultimate aim of a strong procural is to obtain the maximum value for money. Efficiency A good procural moldiness be seen to be positive. It should be devoid of bottlenecks and an different(prenominal) forms of inefficiencies. A good procurance system is devoid of protract delays. It mustiness be simple and swift. FairnessA good system will ensure virtue to entirely temptders and will be impar tial, consistent, and reliable. It will ensure level playing field to all bowdleriseors, suppliers and consultants. enhancer Good procurance system establishes and maintains rules and procedures that are ready to hand(predicate) and unambiguous. It is not only fair, but it is seen to be fair. Accountability and Ethical Standards A system must ensure its practitioners obey the rules. It enforces the rules by dint of a crop of pass those who neglect, disobey or bend the rules to gain real advantages.The rules and procedures must be clear and unambiguous The help of establishing formal public procural system in Nigeria started with the election of Obasanjo in 1999. It started with the establishment of Due answer self-confidence downstairs the Presidency. The Due carry out office was headed then by Mrs. Oby Ekwesili, the current Vice professorship of creative activity aver in charge of Afri give the gate Region. The Due process Office succeeded in conservation billions of Naira according to the press release by the Agency. Public Procurement bill was passed by the some(prenominal) houses of the theme Assembly and sign-language(a) into law by the prexy in 2007.The phone number proffer for the establishment of Public Procurement Council and means for Public Procurement to beheaded by a Director prevalent. Nigeria public procurement Act was enacted in 2007. Overview of squash Administration adjure Administration on the opposite hand involves all those activities which are performed with aim of promoting the unagitated murder of lose weights. involve Administration starts from the time a go is write to the time a subscribe is closed. There are divers(a) forms in which a press show up can closesA subdue can close when an working(a) certification has been renderd and the affirmer collects the final retribution at a lower place the deoxidise. A contract can close if it is over(p) and what is due to the all of the caller ( client or contractor) has been paying. A contract could be terminated due non doing by the contractors, due to failure of the client to fulfil obligations under the contract or due to events or happening beyond the control of the parties to the contract (force majeure). A contract can be discharged when there is a dispute.This can happen each amicably or through mediation through arbitration and adjudication or through the court. The court is normally the ratiocination resort in this kind of settlement. Most new(a) contracts proscribe mediation implement. condense closure should be seen as part of the procurement process that assures that the employer gets what it paid for and contractor, payment for goods or services delivered. The Role of canon in Public Procurement A good regulatory framework is pre-requisite for an efficient Public procurement system.The role of insurance form _or_ system of government formulation should be relegate from indemnity capital punishme nt and a mechanism for discourse protests must be realised. Any agency involved in any form of execution of public procurement should not be involved in regulating procurement. The Nigeria Public Procurement Act is however, somehow deficient in the area of separation of policy formulation, execution and regulation and protest intervention mechanism. The Bureau is involve in giving no objection for contracts yet is involve enforcing compliance with the victual of the Act. This vested the ability of execution and regulation in the Bureau.The Bureau also through the council (where the DG is the secretary) is involved in policy formulation and handling of protest. A good display case of separation of regulation, execution and protest handling mechanism is the Kenyan public procurement system. It incorporated the compulsionful separation of execution, policy formulation and protest handling mechanism. However, this has not prevented politicians in Kenya from abusing the procurem ent system. In 2004 all the procurement officials in the mixed MDA in Kenya were suspend to allow politicians recover the money they spent in election campaign.The various agencies under the Kenyan Act are Public Procurement inadvertence way The functions of the Kenyan Public Procurement Oversight strength are To ensure that the procurement procedures found under the Act are complied with To reminder the public procurement system and report on the overall operation to the Minister and also do the quest functions fend for the training and professional development of persons involved in procurement Issue written postulateions to ublic entities with respect to procurement including the conduct of procurement proceedings and the dissemination of selective information on procurements and ensure that procuring entities engage procurement professionals in their procurement units. To initiate public procurement policy and propose amendments to the Act. To perform such(prenominal) former(a) functions and duties as provided for under the Act Public Procurement Oversight Advisory Board CompositionThe Public Procurement Oversight Advisory Board shall consist of nine-spot members appointed by the Minister approved by Parliament from persons nominated by the prescribed organizations and the Director-General. Functions To send away the Authority generally on exercise of its powers and the surgical process of its functions To approve the estimates of the revenue and expenditures of the Authority To recommend the troth and termination of the Director-General of the Authority Perform such early(a) functions and duties as provided for under the Act.Public Procurement administrative Review Board The Public Procurement administrative Review Board, review complaints and make appropriate testimony to the government. The Public Procurement Oversight Authority shall provide administrative services to the Review Board. Procuring Entities (MDA) It is the responsibility o f Procuring Entities to honor with provisions of the Act.Specifically the Kenyan Act provides What is be procured must be within the approved cipher of the procuring entity and included an annual procurement plan Procurement under bindn by a procuring entity must be as per threshold matrix as set forbidden in the regulations There is adequate segregation of duties in respect of procurement initiation, processing and receipt of goods, works and services. A public entity shall establish a testy committee, procurement unit and such other bodies as ingestd under the regulations for the purpose of do such ecisions on behalf of the public entity as condition in the Act . Procurement Planning The first occasion to do in procurement is, planning the process. It involves definition of the project circumstance and expected completion time. Specifically, the procuring entities need to identify the required works, goods or services to be procured. The procuring entities also need to d etermine the various procurement sequences. The procuring entity will select equipment packages and choose the method of procurement to use depending on the scope and complexity of the assignment.The following methods are usually used in procurement of goods, works and services (non-intellectual services) multinational belligerent statement (ICB) Limited international bid National competitive bidding Shopping Procurement Plan should adjourn consultancy services, works, goods and bring out and installation of plants and equipments. Procurement plan should yell the following How the procurement process should be handled (ICB,NCB, Others, Co-financing) jell the timing of each step in the procurement process (Each step, Each Package).It should also identify the procurement & implementation team The plan should also make full in account the approvals process and delays that may occur. It should fool away into account all technical, staffing, legal and training and so ontera P rocurement Steps There should be character of needs. The list of goods, equipment, materials plants etc. Types of Works (Large, Small, Very Small) and aassociated Services. The procuring entity should also indentify the means of transportation, distribution and training.The plan should also take into account after sales service and stock-purchase warrant period. The steps include the advertisement of tenders. The cosmea situate require advert in G. D. Market and united Nation Business on-line. National competitive bidding requires advert in at least two nationally read newspapers. The process includes yield of bid Documents cutter or Quotations Submission & Opening Bid or Quotation valuation tighten and acquire Order Award. This will be preceded by contract notification, signature and effectiveness. Pre-contract MeetingOfficials of the procuring entity involve in the procurement process should meet in order to reckon their responsibilities and restrictions under the con tract The role of the project bus should also be defined The various tests and other forms of quality control should be defined. Specific deliverables and peculiar(a) contract provisions should be explained. Monitoring and mental process measurement should be understood and invoicing and payment procedures should be explained. Pre- contract clashing/discussion mingled with the employer and the contractors are usually organised.At such meeting, the objective of the contract and its requirements are clearly defined. The contract effectiveness conditions are explained. Others issues to be discussed are The project manager (from the employer) and contractors exemplar Organization and structures of the contractors implementation team. carrying into action schedule and Reporting method come along meetings, works certification and invoicing After the pre-contract discussion all hoary areas are ironed out, the contract is signed by contractors incorporateative with the power of a ttorney and the authorised voice of the contractor. Contract EffectivenessThis will take place after the contract has been signed and following conditions defy been fulfilled Contractor provide performance guaranty and advance payment guaranty (if required) If the contract requires payment of advance payment, it has been paid If garner of Credit is required it must be established The Letter of Credit must be confirm (if funded by Nigeria government) or do operative through issuance of special load if reality chamfer financed contract or letter of guaranty if AfDB financed contract The employer must write a letter impartation the effectiveness to the contractor Letter of Credit letter of Credit are guided by universal custom practice established by world-wide put up of commerce and Industry based in Paris, France. It provides condition to enable parties to contract of sale vivification in different countries to make and receive payment for goods supplied.It start with a cashbox in the buyers area (opening bank) opening direct communication with another bank in the seller clownish (advising bank), through a correspondence bank (usually the negotiating bank). The opening bank will open either an irrevocable Letter of quotation or a revocable letter of credit depending on the circumstance of the transaction. It is irrevocable because once established neither of the companionship can cancel it unilaterally before the expiration of the cogency. Letter of Credit is say to be confirmed if in addition to the validation of the opening bank, another bank (say the negotiating bank also add its confirmation). Under LC for contracts financed by World Bank, LCs are irrevocable but are unconfirmed. They are made operational when a special commitment is issued on it by World Bank. Inco impairment 2000Incoterms means transnational Commercial Terms published by external bedchambers of Commerce (ICC), Headquarter in Paris. Incoterms was created in 1936 by ICC to facilitate international trade by providing furnish interpretation of trade terms. Incoterms are regularly updated to go along pace with developments in international trade. The latest is incoterms 2000. The scope of incoterms is limited to rights & obligations of parties to contract of sales as it relates to voice communication of tangible goods. For example under the C terms, the seller fulfils his obligation upon the shipment of goods. Once the good are shipped by the seller, under the C terms the buyer is obliged to receive the goods.The following are the various incoterms pigeonholing E Departure school schoolbookbook edition editionlist-item Group E Main heading unpaid schoolbooklist-item textlist-item Group C Main Carriage Paid textlist-item textlist-item textlist-item textlist-item Group D Arrival textlist-item textlist-item textlist-item textlist-item textlist-item Terms of defrayal There are terms of payment for various contracts. Terms of payment are usual ly specified in the bidding document or beseech for proposal (RFP). Under a project financed by credit from the World Bank, the following terms shall implement as follows Schedule 1-Plant & Equipment from Abroad textlist-item textlist-item textlist-item Schedule 2-Plant & Equipment from Employers Country textlist-item textlist-item textlist-item Schedule 3-Local Transportation textlist-item textlist-item Schedule 4-Installation Service textlist-item textlist-item textlist-item All payment must be made 45 years from submission of poster and invoice not paid more than 60 days will attract interest. Role of retch motorcoach and Contractors Representative Project Manager The contractor must be notified of the Project Manager in pen. The Project Manager shall act and represent the employer at times during the validity of the contract. He shall give all instructions, notices, orders, certificates etc. He shall give approval and receives notices, instructions, information on behalf of the employer. Contractors Representative The employer must be notified in writing with his CV attached.Contractor representative must be approved by employer. The contractors representative act and represent the contractor at all time during the validity of the contract, He received all instructions, notices, orders, certificates, approvals and communications. The contractor representative issues all notices, instructions, information and other communications on behalf of the contractor Monitoring and Evaluation Monitoring and Evaluation is an essentially part of contract memorial tablet. It is usually performed by project manager. Project Manager approves all designs and drawings for bring out & installations contract etc. The project manager inspects & issue acceptance certificate before shipment.Proper observe ensures potential disputes are averted Invoicing and Payments Contractors and employers are partners. The contractors cook goods/services or works required by the em ployer plot of run aground the contractor want money from the employer. Contract won under international competitive bidding process give world-wide, most competitive price to the employer. Issuance of invoices and demand for payment is an obligation of the contractor fleck the employer has responsibility to pay for goods delivered and or services and works performed by the contractor. The format of invoicing and works certification should be worked out early to avoid employment of penalty clause. Progress MeetingsProgress meeting is necessary locution of large and complex contracts which takes longer time to complete. Progress meetings are held at regular intervals. It is usually held to monitor the progress of the contract implementation. At such meeting contract implementation progress are discussed and compared with the contract implementation schedule. Implementation hassles are also discussed with a view of solving them. The objective is to ensure that the contract will be completed with requisite quality, on time and within budget. Some identified Contract Administration Problems in Nigeria Institutional problems like contracts enforcement and draw out court procedures are serious impediment to smooth contract politics.Other gross contract administration problems are Contracts entered into with parties having little understanding of the contract terms. Ccontracts seen as ways of dispensing favours. Therefore, little attention is paid to qualification. Contractors in some cases do not employ fitting personnel to manage and execute contracts. It usually takes unnecessarily long time to issue sufficient Bonds and Insurances for the execution of contracts, due to stringent conditions. Inadequate monitoring by employers also affects smooth contract implementation. A common contract administration problem that has become very visible especially in Nigeria Power orbit is losing out other partners in JV or Consortium treaty Delay in making payment t o the contractors due to inadequate budgetary provisions Employment of unqualified or incompetent sub-contractors Delays in opening LCs and extension of LCs & stratum M. Misapplication of proceeds of advance payment by contractors Dispute in the interpretation of contract terms Delay in issuing Duties and vat exemptions certificate conveyance Difficulties in clearing goods in the ports and the shortsighted state of the nation infrastructure Inconsistency in government policies and degeneracy of government officials Avoiding Dispute in contract implementation The best dispute gag law method is not to generate disputed at all. However, if there is a dispute direct negotiations between the parties at an early stage could be helpful.If no solution is found through direct negotiation, establish in a letter the facts of which constitute the break of contract to focus the problem on the issue under dispute In United farming an alternative dispute resolution technique called partner ing technique is being employed. Partnering starts with a workshop usually during the cunt off meeting where expectations of parties (contractor and employer) are discussed and harmonised. A partnering agreement or charter is signed by the parties. Employer and contractor are expected to encourage their staff to achieve the charter. In some cases the employer and the contractor share offices in the spirit of the partnering. Dispute Resolution AdjudicationOnce a dispute cannot be resolved mutually between the parties, it can be referred to adjudicator by either party in writing with a copy to the other party. The adjudicator shall give his decision in writing to both parties. The decision of the adjudicator is not final. The name of the adjudicator and his CV is usually included in the bidding document. If a bidder has problem with a suggested adjudicator, he must indicate so in writing and suggest another adjudicator which must be accepted by the employer. Arbitration If either of the party is dissatisfied with the decision of the adjudicator, the dissatisfied party can write to the arbitrator. Either party may give the other notice to commence arbitration. The ddecision of arbitration are final and binding on all parties Arbitration accostsThe Court of Arbitration of International Chamber of Commerce (Paris) is the most popular arbitration comprise in the World. Other are London Court of Arbitration and Allied Professional Society The American Arbitration Association in United pronounce of American Arbitration Institute of Stockholm Chamber of Commerce based in Sweden. United Nations relegating on International Trade Law (UNCITRAL) UN International Centre for Settlement of Investment Dispute (ICSID)- WB Change Orders and Price Adjustments Contracts are base on plans, designs, specification and quantities which are best estimates. Field conditions, revisions to victor plan could cause the scope of the contract to modification.Revisions caused by change s in expectation and technology may require change order. A change order is bay for a change in the scope of a contract. It may be requested by either party to a contract. A change order signed by all the parties have the aforesaid(prenominal) authority as the original contract. For contracts financed by World Bank, change order is applied to changes in contract that is more than 5% of the contract sum. Under the World Bank procurement system, contract which exceed 18 months period should have provision for price adjustment. Contract Close Out Contract close out begins when the contract has been physically complete, i. e. all services have been performed and products delivered.Close out is completed when all administrative actions have been completed, all disputes settled, and final payment have been made. Materials and equipment to be handed over properly receipted. Contract close out is as important as contract mete out and contract monitoring. A chair list of all services, pr oducts, etc. to be delivered in the contract should be kept in the contract file. organisation Fraud, Corruption & contest of Interest Conflict of interest refers to a situation in which procurement official evaluate tenders involving companies in which they have direct or indirect interest. Fraud on the other hand includes misrepresentation or omission of facts to crook a procurement process or the execution of contract.It also includes collusion among bidders. corruption include offering, giving, receiving or soliciting directly or indirectly of anything of value to find the action of a public official in the procurement process or contract execution. Governance Identification of Corruption Some red flags in procurement process that indicate possibility of corruption include the following Poor record keeping Deviations from procedures without written justification Poorly defined roles/responsibilities absence of good internal control system rubicund flags can be exhibited b y individuals involve in procurement and contract administration as follows dissolute lifestyleExcessive interaction with supplier(s) and contractors Too oftentimes secrecy Reluctance to delegate duties Keeping linkup with certain suppliers exclusively Some red flags in a particular procuring entity are Always the equivalent suppliers competing & wining Reluctance of established supplier and contractors to bid for contracts in an entity Some red flags in contract administration Excessive cost overruns Excessive numbers of change orders (increasing cost) Payment of frivolous claims Governance Corruption alter Factors& cognise Signals neediness of competitive environment privation of trained & competent procurement staff widespread lack of trust & job security bailable environment (no sanctions after established cases of fraud and corruption) Lack of good mechanism for handling protest & delays Known signals textlist-item textlist-item textlist-item textlist-item compositors case Study Case 1 An employer invited bid for the supply of one X-ray machine for the main infirmary for delivery one month ex-stock within 2 months of Letter of Credit. In the bidding document, bidders were asked to quote price on CIP capital city by air in US dollars. Bidders were provided 60 days to lay out bids. Six bids were open(a) publicly. All except one bidder quoted the price as solicited. One bidder quoted the price in French Francs.In its paygrade the employer rejected the bid as it did not comply with the currency provision. The employer proposed to award the contract to the lowest bidder as all the other bid are responsive. The contract will be financed under a credit from World Bank and the rejected bidder protested to the World Bank on the ground that World Bank permitted bids from any member country and currency and his bid was in fact the lowest. What should the World Bank do and Why? Case 2 In an agricultural project, an employer presented papers relating to an advance procurement of two bulldozers for World Bank financing retroactively. The employer/borrower claimed to have followed the World Bank ICB procedures.On review, it was noted that the General Procurement abide by (GPN) and Specific Procurement Notice (SPN) were issued, adequate time provided for the bidding, there was good chemical reaction and award had been made to the lowest bidder. The only short-coming was the bids were opened by a government committee without inviting the bidder representative. Is the process valid under this circumstance? Case 3 You are the chairman of public procurement administrative review commission. A project includes the procurement of 10 tracks Dozers and excavators to be procured under a single package. The specifications say the tracks should be powered by an engine with a minimum of 175 horsepower (SAE) at a rated RPM. Firm A offered its dozers with a 165HP. In the evaluation the committee consider the deviation as humble and awarded the co ntract to Firm A. Firm B