Document of the World Bank
LAGOS STATE PROCUREMENT ASSESSMENT REPORT
(LSPAR)
MAIN REPORT
November 20,2003
Nigeria Country Department
Africa Region
CONTENTS
Preface
Acronyms and Abbreviations
1.
2.
3.
4.
5.
iv
v
Introduction................................................................................................…1
Objectives of the LSPAR.................................................................................1
Relevant Country Information.........................................................................1
Bank Portfolio in Lagos State..........................................................................3
Main Findings and Recommendations......................................................…5
Pillar 1: Legal, Regulatory and Institutional Framework.................................5
A. Legal and Regulatory Framework...........................................……5
B. Institutional Framework.........................................................…….12
Recommendation for Institutional Reform of the Procurement
System... ……………………………………………………………...14
Pillar 2: Procurement Methods and Practices...................................................16
Standard Tender Documents.................................................................18
Registration and Prequalification of Firms...........................................20
Exclusion Lists (Debarment)............................................................…21
Contract Payment.................................................................................27
General Conclusions and Recommendations.......................................30
Conclusion.........................................................................................…30
Pillar 3: Procurement Proficiency............................................................……..31
Pillar 4: Independent Auditing and Recourse..........................................……..34
Pillar 5: Effective Anticorruption Measures...........................................…….36
Other Issues.....................................................................................................38
Performance of Bank-Financed Projects..........................................................38
Private Sector...................................................................................................40
General Risk Assessment...............................................................................42
Recommended Action Plan............................................................................44
Tables
1:
Lagos State: Portfolio Analysis as of February 28,2003........................……..4
2:
Procurement Thresholds.............................................................……………..19
3:
Local Government Authority Procurement Thresholds...........................……19
4:
Agreement Fee Percentages...........................................................…………..26
5:
Prior Review Thresholds and Procurement Methods.............................…….39
6:
Procurement Risk..............................................................................………..43
7A.
Recommended Action Plan: Five Pillars of Sound Procurement................…44
7B.
Recommended Action Plan: To Improve the Partnership of Public............…45
ii
PREFACE
1.
This report was prepared in March/April 2003, following field missions to Lagos
State in October 2002 and March 2003.
Government Participating Organizations
2.
The Government took the driver's seat of the LSPAR. The Government created
awareness of the LSPAR by issuing a letter by the Permanent Secretary, Lagos State
Ministry of Finance, on October 17, 2002. The letter, addressed to stakeholders,
announced the commencement of the LSPAR and sought the cooperation of everyone
involved. Subsequently, a Task Force (TF) was created. It comprised the Lagos State
Ministries of Finance, Works, Health, Local Government, and Chieftaincy Affairs,
Economic Planning and Budget, Education, Justice, Environment and Physical Planning,
Commerce and Industry, Office of the State Auditor and Accountant General, the State
Public Service Office, Lagos Water Corporation, and five selected Local Government
Councils (Lagos, Ikeja, Ikorodu, Epe, and Badagary).1 The Task Force was inaugurated
on November 13, 2002. It administered the questionnaires prior to the arrival of the
diagnostic mission.
3.
The World Bank team2 and the Consultants worked very closely with the Task
Force during the mission. The private sector and members of the civil society who could
not take part in the diagnostic mission will be invited to participate in the subsequent
work of the Task Force to validate the draft LSPAR and the Review Meeting.
Other Cosponsors/Contributors
4.
The Bank provided the technical support necessary for the LSPAR including the
hiring of foreign and local consultants to help prepare the report. Other donors such as
DFID participated in the review of the first draft report by Government TF and has
accepted to finance part of the stakeholders' workshop cost (with $15,000), while AFDB,
EU, and USAID have been approached to participate in the stakeholders' review meeting
of the draft LSPAR. Contributions from these donors will be solicited to enhance the
quality and help implement the LSPAR recommendations. A meeting of all interested
donors will be held to map out the donors' participation and contributions before
submission of the final LSPAR to the Government.
1
See Appendix IV (a) List of TF members.
Bayo Awosemusi (Team Leader), Mary Asanato, and Mbuba Mbungu (all AFTPC), and Nancy
Bikondo (OPCS). The team also drew on the experience of consultants: Lucie Poirier (Foreign Consultant);
and three Local Consultants: Sina Fagbenro (Legal), Dr. Jackson Olujide (Practices), and John Kalega
(Trade). The peer reviewers for quality assurance were Victoria Kwakwa (AFTP3), V.S Krishnakumar,
Rogati Kayani (AFTPC), Francoise C. Bentchikou (LEGPR), and Ladipo Adamolekun (AFTPS) .
2
iii
GOVERNMENT FISCAL YEAR: January 1-December 31
Currency Equivalents
Currency Unit = Nigeria Naira (NG)
US$1= N131 (July 14, 2003)
ACRONYMS AND ABBREVIATIONS
ADR
ACEN
ASCON
BOOT
CAP
CAS
CCI
CFAA
CFRN
CIPSM
CORBON
CPAR
CPPR
CQ
CV
DCA
DFID
DTB
ECL
EMCAP
EU
FBS
FCT
FGN
FM
Forex
FR
FRN
GDP
GNP
GO
HOS
ICB
ICPC
ICR
IMF
IPR
IPSM
JISU
LGC
LGTB
LMDC
LSHA
LSPAR
MOE
MOF
alternative dispute resolution
Association of Consulting Engineers of Nigeria
Administrative Staff College of Nigeria
Build Own Operate and Transport
Chapter (law)
country assistance strategy
Chamber of Commerce and Industries
Country Financial Accountability Assessment
Constitution of Federal Republic of Nigeria
Chartered Institute of Purchasing and Supply
Management
Council of Registered Builders of Nigeria
Country Procurement Assessment Report
Country Portfolio Performance Review
Consultant Qualification
Contract Valuation
Development Credit Agreement
Department for International Development (UK)
Departmental Tender Board
English Common Law
Economic Management Capacity Building Project
European Union
Fixed Budget Selection
Federal Capital Territory
Federal Government of Nigeria
Financial Memoranda
foreign exchange
Financial Regulations
Federal Republic of Nigeria
gross domestic product
gross national product
Governor's Office
Head of Services
International Competitive Bidding
Independent Corrupt Practices Commission
Implementation Completion Report
International Monetary Fund
Independent Procurement Review
Institute of Purchasing and Supply Management
Joint Interim Strategy Update
Local Government Council
Local Government Tender Board
Lagos Multidoor Court House
Lagos State House of Assembly
Lagos State Procurement Assessment Report
Ministry of Education
Ministry of Finance
iv
MOW
MTB
NCB
NCMG
NGO
OPS
PER
PIU
Plc.
PMO
PPA
PPC
PPRSC
PPU
PRS
PSP
PSM
PTB
QCBS
SEC
STB
TB
TF
UNCITRAL
USAID
WTO
Ministry of Works
Ministerial Tender Board
National Competitive Bidding
Nigeria Conflict Management Group
nongovernmental organization
Organised Private Sector
Public Expenditure Review
Project Implementation Unit
Public Liability Company
Project Monitoring Office
Public Procurement Agency
Public Procurement Commission
Public Procurement Reforms Steering Committee
Public Procurement Unit
Poverty Reduction Strategy
Privatization Support Project
public sector management
Parastatal Tender Board
Quality and Cost-Based Selection
State Executive Council
State Tender Board
tender board
Task Force
United Nations Commission for International Trade
Law
United States Agency for International
Development
World Trade Organization
Vice President:
Country Director:
Sector Director:
Sector Manager:
Task Team Leader:
Cellist E. Macao
Mark D. Tomlinson
John Rome
Bernard Abbeville
Bayo Awosemusi
v
LAGOS STATE PROCUREMENT ASSESSMENT REPORT
(LSPAR)
1.
INTRODUCTION
Objectives of the LSPAR
1.1
The objective of the Lagos State Procurement Assessment Report (LSPAR) is to establish
the need for, and guide the development of, an action plan to improve Lagos State's system for
procuring goods, works, and consultant services. Lagos State Government attaches high priority
to fighting corruption and improving governance. Hence, the State requested the Bank to conduct
a SPAR with the belief that reforming the public procurement systems in the State will reduce
corruption, enhance accountability, and improve value for public money spent.
1.2
The LSPAR is important for the following reasons. First, the LSPAR responds to the
request of Lagos State Government to the Bank to assist it hi reviewing the existing procurement
policies and practices in the State and to make recommendations for appropriate ways to make the
system more efficient and effective and enable it to meet minimum international standards.
Second, achieving economy and transparency and better governance of the public sector are key
pillars of the Joint Interim Strategy Update (JISU) for Nigeria (an interim strategy put in place
pending preparation of the Country Assistance Strategy, or CAS). Third, in the future, should the
Bank agree to moving toward adjustment lending to the Federal Government of Nigeria and State
Governments, this lending would require a comprehensive diagnostic review of the environment
of Lagos State's fiduciary accountability, which includes an assessment of its procurement
fiduciary management system. Fourth, the report will consolidate the Bank's efforts to assist the
State in the Public Expenditure Review (PER) report and the Lagos State Accountability
Assessment Report (LSFAAR), which are basic instruments, before an engagement to adjustment
lending can be considered. Finally, the LSPAR will provide a necessary input to the State
Governance Project under preparation.
Relevant Country Information
1.3
Nigeria is a Federal republic comprising 36 States and the Federal Capital Territory of
Abuja, and 774 Local Governments. It is the largest country in the West Africa Region, with a
population of approximately 125 million (48 percent of West Africa's population) and a GNP of
approximately US$38 billion (41 percent of West Africa's GDP). Nigeria has the potential to
become an economic giant in Africa by virtue of its size, human talent, rich resource endowment,
and economic capacity. Indeed, it could become the "locomotive" that pulls other economies in
West Africa forward. However, Nigeria's population is poor, and the poverty has worsened in the
past few years. Today's per capita income of approximately US$310 is well below the level at
Independence and the high of $780 achieved in the early 1980s. Today, over 60 percent
1
of the population falls below the poverty line of roughly $1 a day, compared to 46 percent in
1985. More than 60 percent of the population live in highly populated cities such as Lagos.
1.4
Among the sub-national governments, Lagos State is of special importance. It is one of
the world's megacities. With a population of approximately 12 million (10 percent of the country's
total population), the State equals the size of several African countries combined. Lagos is
Nigeria's center of commerce and industry and has the largest annual budget of all the States. It
also houses two major seaports and a busy international airport. Internally generated revenue
stood at approximately $174 million and $182 million in 1999 and 2000, respectively. Therefore,
improved transparency and good governance through the improvement of the public procurement
system is bound to have a great impact on budget expenditure: the LSPAR review reveals that, of
the State's 2000 and 2001 budgets, approximately only 58 percent and 67 percent, respectively,
passed through a procurement process.
1.5
Administratively, Lagos has 5 administrative divisions and 20 Local Government
Councils. The State has a vibrant political atmosphere and an active legal and judicial system. The
1999 Federal Constitution gave significant roles to subnational governments and required the
transfer of Federal resources to States and Local Governments. Until April 2002, Nigeria's
Constitution required a transfer of 44 percent of federation account resources (after deduction of
first charges) to States3 and Local Government Authorities (LGAs). Under the constitution,
Federal Government performs some functions classified under the exclusive legislative list while
the States are responsible for functions that are listed under the concurrent legislative list. The
functions of the Local Governments are Stated in the Fourth Schedule of the 1999 Constitution.
As noted in the JISU for Nigeria, the subnational governments' bigger role and significant share
of resources have not translated into an effective delivery capacity for critical services. It is also in
this regard that diagnosing the procurement systems of the States and Local Governments, and
putting in place the required reforms to achieve economy, efficiency, accountability, and
transparency become very important. Lagos State Government has indicated and demonstrated its
interest in reforming its procurement system.
1.6
The Federal Government of Nigeria (FGN) is implementing the procurement reforms
program based on the FY2000 CPAR to improve governance. By July 2001, FGN had
implemented the CPAR's short-term recommendations. Among other things, FGN streamlined the
ineffective inefficient, and proliferated tender boards. The procurement provisions in the
Financial Regulations were revised to accommodate internationally accepted procurement
standards. A multisectoral Procurement Reforms Steering Committee (PPRSC) was set up on
February 14, 2002, to oversee the implementation of the procurement reform. Pending the
establishment of a Public Procurement Commission (PPC), the PPRSC will serve as the
regulatory and oversight body on public sector procurement. The Federal Executive Council, the
highest ruling
3
A new revenue-sharing formula that would increase revenue given to States and Local
Governments to approximately 53.4% has been submitted for legislative approval.
2
body in Nigeria, has approved a draft procurement bill that was based on the United Nations
Commission for International Trade Law (UNCITRAL) model law and is in line with the 2000
CPAR recommendations. The National Assembly is expected to enact this bill soon. Through the
Economic Management and Capacity Building Project (EMCAP) facility, the Bank is assisting
FGN to address the inadequate procurement capacity in the public sector by providing
procurement training and technical assistance to government procurement officials.
1.7
Considering Nigeria's federated government, the reforms being implemented at the
Federal level will not be adopted automatically by the State and LGAs (both of which are big
spenders of public funds). This LSPAR draws lessons from the, CPAR and, therefore,
recommends close interface of the Lagos State's legal and regulatory procurement framework
with the reforms being put in place at the Federal level. Consistency in procurement fiduciary
management among Federal, State, and Local Governments is essential to avoid conflicting
procurement arrangements and confusion in contractual obligations.
1.8
The capacity of Local Government Councils (LGCs) to plan and implement procurement
is a key issue, as significant amounts of money all allocated to this tier of government. A
comprehensive review of the Local Government procurement system took place during the
LSPAR.
1.9
Lagos State Government recently carried out a Public Expenditure Review (PER) and is
reviewing the financial management (FM) system of the State through the LSFAA. It is envisaged
that FGN will put in place appropriate reforms in line with the recommendations of these
assessments.
Bank Portfolio in Lagos State
1.10
The Bank's JISU for Nigeria notes that Lagos "is essential to rejuvenate the Nigerian
private sector" and that the Bank Group intends to provide assistance to Lagos State in several
critical areas. It is noteworthy that a significant proportion (approximately 50 percent)
of Bank lending to Nigeria in FY03 is being onlent by the Federal Government to Lagos State. In
addition, $400 million of the Bank's IDA Credits planned for Lagos is at various stages of the
project cycle. Between 1986 and 2002, the Bank disbursed approximately $242.1 million IBRD
and $65.1 million IDA to Lagos State through Bank-financed projects. Current World Bank
lending to Lagos State is in the transport, health, education, and infrastructure sectors (table 1).
3
Table 1. Lagos State: Portfolio Analysis as of February 28,2003
Year
Project ID
Project Name
Financier Effective
Date
1986
P002088
IBRD
31-MAR-1986
1990
P002082
IBRD
02-APR-1990
CLOSED 173.2M -
173.2M
1993
P002175
Lagos Solid
Waste
Management
Lagos Water
Supply
Lagos Drainage
and Sanitation
Committed Amount
Principal Cancella Disbursed
US$
tions
USS
US$
CLOSED 72.0M 3.1M
68.9M
IDA
21-APR-1994
CLOSED 63.0M
63. 7M
P074963
Lagos Urban
Trans.
IDA
2002
P071494
IDA
2002
P070290
UBEII
(Multistates)
HSDPII
(Multistates)
Lagos Water
Restructuring
Project
Lagos Metro
Devt. Project
State Govt.
Project
IDA
308.2M 3.1M
Awaiting 100.0M
Effective
-ness
Awaiting .OM
Signing
Awaiting 1.5M
Effective
-ness
PIPE75.5M
LINE
305.8M
2002
2002
2003
2003
IDA
21-NOV 2002
IDA
Status
PIPELINE
PIPELINE
IDA
100.0M
282.0M
2002
2002
P070293
HIV/AIDs
Project
PSP-LSWC
IDA
ACTIVE 5.0m-
IDA
ACTIVE 11.19M
601.39M 3.1M
0
1.4M
307.2M
Source: Integrated Controller's System, Statement of Loans/Credit List Adapted from the
Summary Statement of Loans/Credits/Grants.
4
2.
MAIN FINDINGS AND RECOMMENDATIONS
2.1
Structure of a Sound Procurement System. As was done for the Nigeria CPAR, the
LSPAR measures public procurement against the five basic pillars of a well-functioning
procurement fiduciary management: (i) existence of a comprehensive and transparent legal,
regulatory, and institutional framework, guided by an independent procurement oversight body
for policy and quality control; (ii) use of modernized procurement procedures and bidding
documents, including transparent bid-evaluation and award procedures, and transparent contract
management; (iii) a proficient procurement staff who apply the regulations and procedures
efficiently and transparently; (iv) existence of an independent control system, with audit and
recourse mechanisms separate from the procurement implementation function and with effective
enforcement of sanctions; and (v) anticorruption measures incorporated in the procurement laws
and accompanied by the application of effective sanctions. The recommendations resulting from
the analysis of the LSPAR aim at improving the State's budget expenditure process and poverty
reduction.
Pillar 1: Legal, Regulatory, and Institutional Framework
A. Legal and Regulatory Framework
Findings
2.2
The Nigerian Legal System defines the predominant legal system applicable in Lagos
State.4 Sections 2(2) and 3(1) of the Constitution provide that Nigeria shall be a federation made
up of 36 States, of which Lagos is one (see Nigeria Constitution of 1999 In addition, boxes have
to be numbered). Section 7(1) also guarantees that there shall be the system of Local Government
within each State. Lagos has a three-tiered government structure of Federal, State and Local
Governments, each having various levels of autonomy as provided for hi the Constitution.
2.3
Section 4(2) of the Constitution provides that the National Assembly of the Federation
shall have the power to make laws for the peace, order, and good governance of the federation or
for any part thereof with respect to any matter included in the Exclusive Legislative List set out in
Part 1 of the Second Schedule to the Constitution. (see appendix III for the full Exclusive
Legislative List).
2.4
Under Section 4(3), Houses of Assembly of States are excluded from making laws in
respect of matters under the Exclusive Legislative List.
4
This legal system consists of Statutes of General Application (the most important of which is the
Constitution of the Federal Republic of Nigeria), the received English Common Law, and
Customary Law compatible with principles of good conscience, equity, and natural justice.
5
2.5
In addition to making laws in relation to the matters listed in the Exclusive Legislative
List, the National Assembly is empowered under Section 4(3)(a) of the Constitution to make laws
on matters contained in the Concurrent Legislative List, set out in the first column of Part n of the
Second Schedule of the Constitution. These matters include tax; public funds; and commercial,
industrial, and agricultural development, all of which bear directly on public expenditure and
therefore public procurement. (See appendix IV for the detailed extract from the Constitution and
the Concurrent List).
2.6
The Constitution, in Section 4(6), vests the legislative powers of the State in the House of
Assembly of the State. According to Section 4(7), the Houses of Assembly of the States shall have
the power to make laws for the peace, order, and good government of the State or any part thereof
with respect to any matter not excluded in the Exclusive Legislative List and any matter included
in the Concurrent Legislative List.
2.7
One of the matters on the Concurrent Legislative List is the allocation of public funds,
which has a direct bearing on public procurement. Since Houses of Assembly have power to make
laws on matters included in the Concurrent Legislative List and those that are not excluded from
the Exclusive Legislative List (public procurement is not excluded from the Exclusive Legislative
List), each House of Assembly has the power under the Constitution to make public procurement
laws for its State.
2.8
Local government functions are outlined under Section 7(5) of the Constitution as being
the provision and maintenance of primary, adult and vocational training, the development of
agriculture and natural resources other than the exploitation of minerals, the provision and
maintenance of health services, and such other functions as may be conferred on a Local
Government Council by the House of Assembly of the State. All of these functions require local
authorities to undertake sizeable procurement, which mandate requires procurement rules that are
clear, comprehensive, transparent, and enforceable. However, the LGA Council has no legislative
powers to enact procurement law. The Constitution in Section 7(5) vests the power to make laws
that relate to Local Government Authorities within each State to the House of Assembly of that
State. Therefore, it is the responsibility of Lagos State House of Assembly to enact procurement
laws and regulations for all the LGAs within Lagos State.
Analysis
2.9
As can be seen from the above, the Constitution confers on both the National Assembly
and the Houses of Assembly of States the power to make laws on the matters on the Concurrent
Legislative List. Where the National Assembly and the House of Assembly of a State legislate on
the same matter, Section 4(5) of the Constitution says that if there is inconsistency between the
law enacted by the National Assembly and the law enacted by the House of Assembly of a State,
the law made by the National Assembly shall prevail, and the other law shall to the extent of the
inconsistency be void.
2.10
The Lagos State Government and the Local Government Authorities within the State use
the public procurement rules shown below.
6
Lagos State Government
2.11
There is no separate body of laws regulating the public procurement system in Lagos
State. However, there are various provisions of the general laws of Lagos that address particular
aspects of procurement.
2.12
The Finance (Control and Management) Law, chapter 48 of revised Laws of Lagos 1994,
provides for the establishment of a State Finance Board, which has powers to issue financial
instructions. It is pursuant to this law and against the backdrop of a history of military unitary
government that the State has adopted the pre-existing Federal Financial Regulations of 1976
(FR). The FR are legally binding in Lagos State. Although there is nothing in the Constitution that
stops a State from enacting its own public procurement law, Lagos State has never tried to enact
its own public procurement law but instead has been relying on the 1976 FR of the Federal
Government5 and as amended from time to time by administrative circulars.
2.13
In the whole of the FR, only two chapters-19 and 40-deal directly with procurement.
Chapter 19 describes the manner in which Government contracts are to be made, and chapter 40
addresses the establishment and constitution of Tenders Boards; thresholds; procurement
methods; advertisement of tenders; submission, opening and consideration of tenders; and
contract award.
2.14
Public procurement in Lagos State Government is also regulated by administrative
circulars, which are issued from time to time, the latest of which is the STB Circular No. 1/2000
(Circular 2000). This was issued by the State Executive under the hand of the Secretary of the
State Government, and it amends the FR to the extent of the areas that it touches. In particular,
this circular sets new thresholds for Tenders Boards and provides for, among other things, the
composition of Tenders Boards, procurement methods, procedures for contract award, and
advertisement of bidding opportunities. Both the FR and Circular 2000 are applied
simultaneously in the State in that the provisions of the FR that have not been amended by
Circular 2000 still apply.
2.15
Regarding public procurement, the provisions of the FR and Circular 2000 are outdated
and incomprehensible. In particular, they allow Accounting Officers unfettered discretion in the
use of uncompetitive methods of procurement in the State. As a result, most of the procurement in
the public sector is carried out using uncompetitive methods.
2.16
In addition to the above, there is the Public Contracts (Levy on Consultants fees and
Contract Awards) Law chapter 158, which provides for the imposition of consultancy fees on
contracts awarded by Lagos State Government. The law sets out fee scales for consultants but
does not provide any guidelines as to how the Government can go about selecting a consultant.
The rationale for arriving at the fees scales is not explained in the law.
5
Due primarily to the long military, unitary government in the country and the fact that Lagos
was then the capital of Nigeria.
7
2.17
There is also the Public Contracts (Restriction of Awards) Law chapter 159, which
regulates and controls awards of contract by agencies of Government. This law does not
adequately or at all address the core issues in the procurement process.
2.18
The 2000 Country Procurement Assessment Report (CPAR) explains the need for a
Public Procurement Law at the Federal level, hi furtherance of this, such a bill is before the
National Assembly for deliberation. However, it is evident from the Constitution that legislation
concerning public procurement is not an exclusive Federal prerogative. States are not obliged to
adopt this Federal public procurement law, if ever and whenever it is passed. The reason is that
States also have the authority to make their own public procurement laws. In addition, the present
bill does not make provision for procurement by States or Local Government Authorities. There
is, therefore, a need for the enactment of public procurement laws by the State House of
Assembly for Lagos State that will be applicable to Local Government Authorities within the
State.
Local Government
2.19
Local Governments' procurement issues are regulated by the Financial
Memorandum (FM) issued by the Office of the Military Head of State (Presidency) in 1991.
However, the Nigerian Constitution says that the States shall allow the existence of the Local
Government system within them and make laws to this effect. Pursuant to that, the House of
Assembly in Lagos State enacted the Local Government (Administration) Law of 1999 to provide
for the establishment and administration of Local Government Authorities, hi addition, the State
has issued Guidelines on Administrative Procedures of the Local Government (Administrative
Guidelines), the most important of which, so far as procurement is concerned, are those issued in
1999 and a later set in 2001.
2.20
The Administrative Guidelines issued by the State Government contain substantial areas
that conflict with the Federal FM issued in 1991. For example, the FM in Section 17.11(c)
provides that it shall no longer be necessary to refer any contract, whatever the size, to any organ
or functionary of the State. However the Administrative Guidelines of 1999 State that, for
expenses exceeding Nl million ($7,600), such approvals should be sought from the Governor. The
former provision is a Federal instruction, while the latter is a State instruction. There is
controversy as to which one should supersede. The controversy between Federal and State as to
control of Local Government is part of what has led to the postponement of the Local
Government elections scheduled for May 2002. The provisions of the FM and the Administrative
Guidelines are outdated, contradictory, and not comprehensive.
Analyzing Public Procurement Legal Framework in Lagos State against the Basic Tenets of
a Good Public Procurement Legal Framework
2.21
A public procurement system can be said to be well functioning if it achieves the five
objectives of economy, efficiency, fairness in competition, transparency, and accountability. The
legal framework is a key tool by which to determine to what extent a particular system meets
these objectives.
8
2.22
A good public procurement legal framework is one that is clear, comprehensive,
transparent, and enforceable. Such a legal framework is characterized by the presence of
regulations that are easily identifiable, promote all the objectives stated above, and govern all
aspects of the procurement process.
2.23
In addition, a good public procurement legal framework should be self-policing by, for
example, providing for public bid opening, which is a requirement that allows the law to police
itself. The legal framework also should provide for the choice of procurement methods by order
of diminishing competitiveness, with open competitive bidding being the most preferred method
and the least competitive being the least preferred method.
2.24
At a minimum, the legal framework should provide for the following basic tenets of a
good public procurement legal framework: (i) wide advertisement of bidding opportunities; (ii)
maintenance of records related to the procurement process: (ii) open tendering with other methods
with clear conditions for their use; (iii) public bid opening; (iv) contract award on the basis of
predisclosed evaluation criteria; (v) contract award to the lowest evaluated bidder; (vi) publication
of contract award; and (vii) an effective complaints and administrative review mechanism.
2.25
An examination of the public procurement legal framework in Lagos State Government
(LSG) and Local Government Authorities (LGA) against these basic tenets of a good public
procurement legal framework has revealed the weaknesses shown below.
2.26
Absence of a Comprehensive Public Procurement Law. There is no public procurement
law in Lagos State. Public procurement is regulated by financial regulations and memoranda as
well as administrative guidelines and circulars. All of these are administrative documents, which
could be easily amended without taking into account the fundamental rights of suppliers,
contractors, and consultants.
2.27
The existing legal framework is outdated, contradictory, and incomprehensible. It does
not adequately provide for the rights of suppliers, contractors, or consultants in regard to
advertisement of bids, maintenance of records of the procurement process, public bid opening,
disclosure of all criteria for bid evaluation and contract award, publication of contract award, or
an effective complaints and administrative review mechanism.6
2.28
Due to the inadequacy of the legal framework, the public procurement process in Lagos
State is not efficient, transparent, nor economical. Procurement rules in the State are not easily
identifiable, because they are hidden hi financial regulations or guidelines, which are amended by
administrative circulars that can be issued by the Executive from
6
The weaknesses of the public procurement legal framework in Lagos State are evident when its provisions are
benchmarked against those of the Federal Public Procurement Draft Bill and the UNCITRAL Model Law on the
Procurement of Goods, Construction and Services (appendix VI).
9
time to time. For the legal framework to be identifiable and comprehensive, a new public
procurement law should be enacted in the State.
Recommendations:
(a)
All the existing regulations and guidelines on public procurement should be harmonized
and modernized through the enactment of a new public procurement law that provides for all the
basic tenets of a good public procurement legal framework.
(b)
The new law should be based on the United Nations Commission for International Trade
Law (UNCITRAL Model Law)7 on Procurement of Goods, Construction and Services, as is the
case for the new procurement law being prepared at the Federal level, and also be consistent with
the provisions of this Federal law.
(c)
The new law should contain separate provisions for the selection and hiring of
consultants and should cover concession contracts. It should be applicable to all entities that use
public funds, including the Governor's security funds.
(d)
The proposed law should also contain rules on the review of bids and a mechanism to
handle complaints from bidders and should develop rules on how potential issues, such as
conflicts of interest, would be resolved.
2.29
Procuring Entities Subject to Regulation. Purchases by the State Government and by
its agencies-including ministries, departments, and parastatals are subject to the provisions of the
FR and Circular 2000. However, expenditure under the Governor's Security Vote (public fund for
maintaining security in the State) is not covered by the FR or the circular. Issues of police and
military expenditure fall under the powers of the Federal Government and are therefore not the
concern of State Governments.
2.30
All Local Government Authorities including all their departments are subject to the
Financial Memorandum (FM) of 1991, Administrative Guidelines of 1999, as well as the
Administrative Guidelines of 2001, which only provide for new thresholds in Local Authorities.
2.31
Since public funds are to be spent in the public interest, the use of public funds by any
entity (public or private) should be the factor that determines the application of public
procurement rules.
7
Although there are some provisions in the UNCITAL Model Law that Government may wish to
amend (for details, see appendix V for the Bank's Legal Depart comments on UNCITAL).
10
Recommendation:
To ensure proper use of public funds in the procurement
State should apply to all entities that use public funds,
parastatals. State procurement rules also should apply to
when that fund is intended to purchase sensitive security
case, the security fund is at the Governor's discretion.
process, procurement rules in Lagos
such as all the State ministries and
the Governor's security fund, except
and military equipment. In the latter
2.32
Applicable Sectors. In the State Government ministries and parastatals, the FR and
Circular 2000 are used for the procurement of goods, works, services, and consultant services.
Unfortunately, there is no regulatory provision for differentiating between goods, works, and
services on one hand, and consultant services on the other. In January 2001, due to its decision to
involve consultants in its Private Sector Participation Road Development Program of the Ministry
of Works, Lagos State Government re-established the State Consultancy Board. The Board is the
apex body responsible for all consultancy matters within Lagos State Public Service and is,
among other functions, empowered to consider and recommend the use of consultant services
and the appointment of consultants for the execution of priority programs and projects of the State
Government. However, there are no guidelines on how the Board is to select consultants, hi
addition, attempts to retrieve minutes of meetings held by this Board proved abortive. There is no
evidence to show that this Board has actually engaged in any form of competitive selection of
consultants.
2.33
Although the State is involving the private sector in building some roads through
concession arrangements, no concession laws exist in the State. Furthermore, the State has not put
in place any guidelines to guide it on how to engage the private sector in concession contracts.
This situation also holds true for the Local Governments.
2.34
According to international standards, goods, works, services, and concession contracts all
are covered under a public procurement law that contains separate regulations for the selection
and hiring of consultants. In line with international standards, the legal framework in Lagos State
needs to cover all of the above procurement categories.
Recommendation:
The scope of future public procurement laws and regulations in Lagos state should include the
procurement of goods, works, services, and concession contracts, and should contain separate
regulations for the selection and hiring of consultants.
General Conclusions and Recommendations of the Legal
and Regulatory Framework
2.35
It is clear from the above that the existing legal framework in Lagos State cannot support
an efficient, transparent, and economical public procurement process and,
11
therefore, needs to be strengthened in all the critical areas. The
recommendations on how the existing legal framework can be strengthened:
following are
Recommendation:
All existing regulations and guidelines on public procurement need to be modernized and
harmonized through the enactment of a new public procurement law that provides for all the basic
tenets of a good public procurement legal framework. The new law should be based on the
UNCITRAL Model Law on Procurement of Goods, Construction and Services and reflect the
provisions of the Federal law being prepared oil the same basis.
B.
Institutional Framework
2.36
The organization of the public procurement system in the State of Lagos is decentralized
to the extent that each department, parastatals, and Local Government have their own tender
boards. However, the tender boards in Lagos State and the Local Councils are mere
recommending bodies, tender boards (TBs) have a limited mandate, with the power to decide
contract awards de facto resting with the Governor of the State in most cases. The TB position can
be undermined by an individual approval, which leads to the perception of a nontransparent
process, political interference, unfairness, noncompetitiveness, and corruption. This procedure
that Governor decides most contract awards, besides causing delay, makes the TB inefficient and
ineffective and can make procurement unnecessarily expensive. The TB organization, therefore, is
characterized by the lack of responsibility and capacity of the contracting authorities to manage
their own resources. There is no efficient institution that performs a monitoring or oversight
function for public procurement. There is also an imbalance between contracting parties-the State
and the private sector-as there is no complaint mechanism for aggrieved bidders. This Section
describes the various actors in the public procurement system in Lagos State.
Composition of Tender Boards
2.37
Section 4.1 of Circular 2000 deals extensively with the issue of tender boards
organization, including the tender procedures, composition, and regulations for the award of
contracts in Lagos State. The section stipulates that the relevant TB should be convened to open
and consider tenders as well as recommend the award to the appropriate authority. Effectively,
there are three levels of tender boards: State, ministerial, and parastatal.
2.38
Local Governments also have their TBs, but their large contracts are referred to the
central State Tender Board (STB). Similarly, parastatals have their own tender boards but refer
contracts over N5 million to the STB.
12
State Tender Board
2.39
The STB comprises seven members to be appointed by the Executive Council, four of
whom are permanent members; the Commissioner for Economic Planning and Budget, who acts
as Chairman, and the Commissioners for Works, for Finance, and for Justice, who are members.
The three other members are selected on rotational basis.
2.40
The Commissioners of the State TB, who are political appointees, are directly involved in
the award process. These same officials are responsible for the allocation of resources and are also
involved in the oversight of how these resources are spent. However, since budgetary resources
all are allocated to individual ministries, the responsibility to manage theses resources should be
left to the ministry concerned and the control mechanism given to nonpolitical appointees.
Once a law on public procurement has been enacted and regulations, manuals and standared
bidding documents issued, carrying out public procurement including contract award will clearely
be a profesionally administrative function the mechanics of which should be desengae from the
political appointee. This is an area where the the opinon of the Bank team differs from some of
the participant (mainly political appointees — Commisionners) at the stakeholders workshop ( see
Apendix.X). This group's view is that STB should be retained as curently consituted to ensure
transparency and accountability, even after reforming the procurement system.
Ministerial Tenders Board
2.41
The MTB is chaired by the Permanent Secretary of the procuring ministry (Chairman)
and composed of Permanent Secretary or Representative of the Ministries of Works, Finance,
Economic Planning and Budget, the Permanent Secretary of the procuring ministry/agency, a
Representative of the STB, the Director of Finance, and an Administration Secretary.
Parastatal Tender Board
2.42
Each State Parastatals has its own TB The PTB is chaired by the Chairman of Governing
Board. It is constituted by Division heads and representatives of the Ministries of Works, Finance,
and Economic Planning and Budget. A Secretary is provided by the agency.
2.43
Approval of tendering goes directly to the TBs of the parastatals and those that have
Governing Boards constituted for them. Tendering processing follows the same procedure as at
the MTB. Approval of recommendations for contract award from the PTB comes from the
Governor of the State. Parastatals play a significant role in public procurement in Lagos State
because of their number, size, and scope of operations.
13
State Consultancy Board
2.44
The State Consultancy Board (SCB) was reorganized by a circular dated February 25,
2003. The Board is made up of 9 members under the Chairmanship of the Commissioner for
Works and has these 3 functions:
•
•
•
Reviews appraisals on proposals relating to Consultant services
Negotiates with consultants in respect of submitted proposals for consultant
services
Recommends fees and other terms of engagement.
2.45
Agencies/ministries whose project execution demands the use of consultant services are
required to seek and obtain the approval of the Governor of Lagos State and thereafter to advise
the SCB for further processing of their request. It should be noted that there are no regulations
guiding the whole process of appointing consultants in Lagos State. A review of available
documentation did not show any value added to the Government resulting from the function of
the SCB.
Recommendation for Institutional Reform of the Procurement System
The proposed system has the advantage of respecting to a great extent the present structure while
(i) delegating greater responsibilities to ministries and agencies to award and manage contracts;
(ii) differentiating between those who carry out the procurement function and those who have
oversight responsibilities; (iii) strengthening controls both ex-ante and ex-post; (iv) improving the
bidder complaints review mechanism, and (vii) creating an autonomous procurement regulatory
body.
Recommendations:
(a)
Create a Regulatory Agency with an enhanced oversight responsibility. The
Agency shall report directly toffee Governor. This Agency shall have no involvement
in internal
operational procurement matters in procuring
entities.
The
additional responsibilities of the Agency shall .include quality control of public
procurement, public procurement policymaking . and coordination, uniform standardsetting for public procurement, and training procurement officers. It said also Mve the
responsibility for receiving and handling bidder complaints independently.
(b)
Decentralize the procurement function by (i) building procurement
management capacities at the level of the ministries/parastatals, (ii) increasing
thresholds of contracts subject to prior review by MTB and by SIB, 8 and (iii)
introducing post review for the other cases.
(c)
Strengthen the roles of Ministerial tender board (MTBs) parastatal tender
Boards (PTBs), and LGTBs; and attribute to them greater responsibilities to award and
manage contracts. The TBs should approve or disapprove the procuring entity's award
recommendations.
(d)
Require MTBs to control the procurement process upstream.
8
Pending the abolishment of the STB within two years of the reform program.
14
(e)
Strengthen and streamline the organization and functions of MTB and PTBs to
function more efficiently, independently, and professionally. They should have
approval authority, and thresholds should be increased to a more significant level
Members should be drawn based on professional experience in procurement, finance,
and legal matters
(f)
Gradually abolish the STB and merge its functions with those of the MTBs
after building adequate procurement capacity at the level of the procuring entities
(PPUs).
(g)
Pending its abolishment, change the composition of the STB. Its members
should be representatives of the Accounting Officers of the ministries (Permanent
Secretaries) and not be political officeholders.9 In addition, the functions of the State
Consultancy Board should be absorbed by the MTBs. Pending its abolition, the STB
should be given approval authority for all contracts that exceed the MTB's thresholds.
(h)
The MTBs should absorb the functions of the State Consultancy Board to
rationalize the number offender boards and to reduce the inefficiency and
ineffectiveness of the procurement process.
(i)
Establish a formal Public Procurement Unit (PPU) in each ministry staffed
with procurement professionals.10 The procurement function should be. rehabilitated
by the creation; of a procurement professional cadre in the Civil Service governed by
an accreditation program. The PBU shall be staffed with procurement professionals
who are given a the required support in terms of training, guidelines, legal framework,
and clear delegation of responsibility. Special technical specialists will be used when
necessary to development technical specifications. The PPU should be responsible for

General
coordination
within the ministry
the procurement
process,
including:

Organizing development of technical specifications

Preparing bid documents

Organizing advertisement

Issuing bid documents

Organizing communication with bidders

Organizing bid receipt and keeping bids until opening date

Participating in bid evaluation as determined by the IB

Preparing draft contracts

Submitting recommendations for award to the appropriate TB for approval

Arranging for contract signature

Managing procurement process during contract execution

Maintaining appropriate records for me whole procurement process.
(j)
Secure enforcement of procurement rules by ex-post contopi and regular audits. to
contract the private sector consultants to conduct independent audits and make appropriate
recommendations. The Auditor-General will make its report. (The
9
This will eliminate the perception of undue political interference, which is often regarded as a
source of corruption, delays, and inefficiency in the procurement process.
10 The PPU will be responsible for all procurement activities up to sending the recommendation
for contract award to the MTB or the STB. PPUs will implement the recommendation for contract
award rendered by the MTB or STB.
15
Regulatory Agency will have the responsibility to make appropriate recommendations at a policy
level).
(k)
Build the bidder complaints review mechanism on an existing initiative of the Judicial
system: the Multidoor Courthouse. This NGO was created as a fast-track solution to avoid the
very cumbersome present court system.11 By its status, it easily can include representatives of the
civil society and private sector, making it a tripartite appeal body. It is recommended to create a
division that would deal exclusively with complaints emanating from the private sector on
government contracts.
Pillar 2: Procurement Methods and Practices Findings
2.46
This Section describes the procurement procedures as provided in the Circular 2000 and
the FR at State level and in the FM at Local Government level. This Section also highlights how
these procedures are actually implemented in practice. One of the most salient points of the
analysis is the involvement of the Governor throughout the procurement cycle and the impact that
this has on efficiency, economy, and effectiveness of the public procurement system in the State
(see box below).
Governor's Approval Cycle
First request for Governor's approval:
Project execution is to be initiated by Ministries/Offices/Bureaus leading to presentation of
memorandum to the Governor of the State for approval to carry out the project, provided that the
total fund involved is above N100,000 (US$770). In practice, a formal request is issued by the
procuring agency to the Governor asking him to consider and give approval for (1) quotations
being received and for (2) the Ministerial Tender Board (MTB) to convene.
If selective tendering is to be adopted, the Chief Executive must approve the short-listed
contractors.
Second request for Governor's approval:
Approval of (1) the MIB's decision and (2) payment of the mobilization fee (advance payment).
From the file reviewed during the mission, the mobilization fee is in general up to 70 percent- but
it may vary from 20 percent to 70 percent-of the total
Approval of the Chief Executive of the State must be obtained for payment of awards made by the
MTB and STB, irrespective of me amounts.
Third request for Governor's approval:
Payment of the 30 percent balance.
Procurement Planning/Budgeting
2.47
The review focused on the efficiency of planning and budgeting and how it affects public
procurement performance. Planning and budgeting in the public sector of
11
The NGO will serve as the third layer of the State review mechanism.
16
Lagos State and those of local councils are seen as annual rituals in which projects to be executed
by government are identified and costed, and the resulting cost estimates provided for in the
budget. The process is characterized by unrealistic budgeting. There is no proper linkage between
planning and budgeting to ensure that project/procurement activities are properly conceived,
analyzed, planned, and implemented. The system is characterized by poor project funding,
irregular cash releases, and delays in project implementation, with the consequence of delivering
poor and costly service to the population.
2.48 Although Circular 2000 stipulates that, before seeking the approval of the Chief Executive
of the State to spend, Ministries/Offices/Bureaus shall ascertain from the Ministry of Economic
Planning and Budget (MEPB) that there is provision for adequate resources. In practice,
availability of funds is not verified before a contract is signed. Funds all are allocated case by case
at the time of paying the invoices according to cash provisions.
2.49
Moreover, interviews clearly brought out that the implementation of capital projects is
sometimes characterized by revisions, leading to changes in project scope and to significant
increases in project cost above what was anticipated at the time of planning and budgeting.
Circular 2000 merely states that no government agency shall entertain any price variation, except
if such variations arise as a result of government's fiscal measures or a change in the quantum of
work. Any variation in the original contract sum of less than 25 percent shall be approved by the
Chief Executive of the State (the Governor), while variations in excess of 25 percent must be
considered by the STB before being forwarded to the Chief Executive. This apparent lack of
proper guidance and the exercise of discretion by officials can lead to confusion and
indiscriminate requests for variation, thereby creating room for inappropriate practices.
Recommendations:
(a)
Make provision in the new procurement legislation for the preparation of realistic
procurement plans to determine fund requirement by various government agencies on a quarterly
basis in the fiscal year. This procurement plan should spell out the timing for different
procurement actions and hence the cash backing requirement at different stages.
(b)
Order contract variations only under very exceptional circumstances and after approval
obtained from me appropriate TB.
Procurement Methods
2.50
The existing legal framework provides little or no guidance on the selection of
procurement methods, and great unlimited discretion is given to procuring entities when
employing uncompetitive methods of procurement. FR specifically say in Section 1901, among
others, that a government official should not be seen to have the appearance of favoritism and is
obliged to consider all claims of all qualified firms wishing to work for the procuring agency. FR
thus indicate that competitive bidding ought to be the preferred method of public procurement in
the State. However, a proviso in FR Section 4001 says
17
that public tender is mandatory "unless otherwise ordered by the Commissioner for Finance." The
Circular 2000 further directs that "in cases where the subject of the tender would customarily be
competitive between some reputable and specialized firms or is dictated by economy/speed of
action,., .and where tendering would be a wasteful effort" selective tendering could be employed.
It further states that such speed/economy of action must be certified by the Chief Executive of the
State. "
2.51
In practice, procurement methods other than open competitive bidding represent the rule
rather than the exception. Three procurement methods are used by the Lagos State Government:
(i) local shopping or direct purchasing, (ii) selective tendering (most commonly used), whereby a
small number of contractors from the list of registered contractors are requested to submit
quotations, and (iii) open tendering, whereby advertisements are placed on notice boards and at
times in one national newspaper for all procurements above N5 million.
2.52
Due to poor procurement planning and under the guise of "emergency purchases,"
selective tendering-which should be restricted and contained within appropriate limits-is widely
used. Moreover, the bidders selection process used under that method is questionable, given the
ambiguity surrounding the registration process.
2.53
The FM provides that at the Local Government level all transactions over N10,000.00
(US$76) must go to open tender except when approval has been given otherwise. The FM further
provides for use of selective tendering without spelling out the conditions under which it should
apply. In practice, it seems that this provision is not strictly adhered to.
Recommendations:
(a)
All procuring entities that use public funds in Lagos State should be required to undertake
their procurement using open competitive bidding as the default method. Procurement methods
other than open compet&rve bidding must be restricted and contained within appropriate limits.
Clear, detailed, and unbiased criteria for the use of noncompetitive procurement methods should
be provided. Such criteria should: clearly set out the circumstances under which methods other
than open, competitive bidding can be used.
(b)
To achieve social and employment goals and a sustainable delivery of services in sectors
that are unattractive to larger companies, such as agricultural extension services and informal
education, consideration should be given to the introduction of a
Standard Tender Documents
2.54
Open, competitive bidding, whether at the international/national/local level, calls for the
use of standard procurement documents. Typically, different documents should be prepared for
goods/works/services. There is no regulation dealing with this issue hi Lagos State and/or its
Local Government Authorities. The review of various contract files confirmed the nonexistence of
standard bidding documents.
18
Recommendation:
Develop standard procurement documents for goods/works/services in accordance with national
and international acceptable standards.
Application of Thresholds
2.55
The Circular sets the latest thresholds applicable in Lagos State Government and
Parastatal Organizations (table 2).
Table 2.
Procurement Thresholds
Procuring Entity
Thresholds
Thresholds
(Naira)
($)
State Tenders Board
10 million and above
77,470 and above
Ministerial Tenders Board
100,000>5million
770 > 38,735
(recurrent expenditure)
10 million capital
77,000
expenditure)
Tenders Boards/Parastatals
Below 5 million
38,735
Accounting officers and Chief 50,000 > 100,000.
Between 385 and
Executive Officers of Parastatals
below 770
2.56
The current thresholds in Lagos State Government, Local Government Authorities, and
Parastatal Organizations are considered very low and have a direct impact on the level of
efficiency. While the FR prohibits contract splitting and the Circular is silent on this subject, it
was observed that, in some instances, contracts were split to avoid clearance by higher authorityan action that may lose the economy of scale. At present, there is a strong demand from users to
increase thresholds to improve the efficiency and effectiveness of the procurement process.
Moreover, there is no adjustment mechanism (inflation/price indexing) in the current legislation
to compensate for inflation. This situation undermines the authority, power, and potency of the
TBs.
2.57
Table 3 shows the thresholds in LGAs as set out in the Administrative Guidelines of
2001. The Governor's approval is required for expenses above N 500,000.
Table 3. Local Government Authority Procurement Thresholds
Procuring entity
Thresholds
Thresholds
(Naira)
($)
Caretaker Committee
< 1,000,000
7,633
Executive Secretary
< 50,000
381
Elected Council
1 million
7,633
12
It should be noted that, at the time of the mission, there were no elected officers at the Local
Government level. Their responsibilities have been taken over by appointed caretaker committees
with executive secretaries acting as chief executives.
19
Recommendations:
(a)
Thresholds should be raised significantly to benefit from economies of scale and improve
the efficiency and effectiveness of the public procurement process in Lagos State.
(b)
Due to their changing nature, thresholds should not be incorporated in substantive public
procurement law but be contained in regulations, which are easier to change.
Registration and Prequalification of Firms
2.58
The Circular 2000 requires all firms wishing to engage in government contracts to
register with the relevant Ministries/Offices/Bureaus and/or Parastatal Organizations.
2.59
In addition, local and foreign bidders in the engineering and construction industries need
to obtain prior registration and accreditation from the appropriate professional body (see appendix
VIII, Registration Process). These requirements limit access to bidding opportunities by
international firms since registrants/bidders are required to have tax clearance certificates issued
by the State.
2.60
In practice, nonregistration does not prevent a bidder from being evaluated. However, the
bidder must register immediately after winning the contract. The registration process is purely a
money-making exercise for procuring entities and does not serve the purpose of determining the
capacity of a supplier, contractor, or a consultant or increase the value of the bids. Therefore,
registration does not add value to the procurement process. Moreover, there is a lot of confusion
among contracting authorities as to whether registration with the State central Registration Board
in the Ministry of Works, which was mandatory under the Circular 1995, still applies.
2.61
Under the FM of the Local Government, there are no considerations for Prequalification,
but suppliers, contractors, and consultants are required to register with the Local Government
Authority with which they wish to do business.
Recommendations:
(a)
Government should continue the best practice of not using registration as a precondition
for tender, However, the registration process should be streamlined, well defined, less costly, and
more flexible. It should serve as an interactive tool to identify contractors/suppliers/consultants’
experience and capacity.
(b)
prequalification rules should be provided for in the future legislation.
20
Exclusion Lists (Debarment)
2.62
The regulations and circulars are silent on the use of blacklists. However, in practice,
government establishments take note of contractors who have bad records of performance. Local
Governments do the same.
Recommendation :
Establish a process to debar, either indefinitely or for a stated period of time, suppliers,
contractors, and consultants who are found to be involved in corruption or corrupt practices as
well as those who have bad records of performance. The debarment process should be detailed in
the procurement regulations.
Advertisement of Bidding Opportunities
2.63
Section 4005 of the FR requires that tender notices be advertised in the State official
Gazette and/or in a local newspaper irrespective of the monetary value of the envisioned
procurement contract. Section 8 of the Circular 2000, which amends the FR in this regard,
requires that invitation for tender of tenders valued below N5 million ($38,735) be published on
the bulletin boards of all Ministries/Offices/Bureaus and in at least one national /local newspaper.
The Circular fails to include the official State official Gazette as a medium for advertisement of
bidding opportunities.
2.64
In practice, the State official Gazette is not published regularly nor is it easily available in
the State. These limitations restrict the dissemination of information about existing bidding
opportunities in the State Government and undermine the transparency and competitiveness of
public procurement in the State as a whole. In addition, advertisement in newspaper is seldom
done. The high cost of advertisement in the national newspaper at Nl00,000 (approximately $760)
(full page) was raised as an obstacle to advertising.
2.65
With regard to the Local Government Authorities, the FM provides in Section 17.13 that
tender shall be invited by open advertisement in the form determined by the Council. There is no
requirement to advertise tendering opportunities in the Gazette or the local media. According to
the current practice, tenders are advertised on the notice boards of all Local Government offices.
Advertisement is therefore done at the discretion of the procuring entity.
21
Recommendation:
Advertisement of all competitive bidding opportunities in national newspapers, State website,
State journals/local media as well as on notice boards of procuring entities and/or the State
official Gazette, should be made mandatory.13
Predisclosure of Bid Evaluation Criteria
2.66
The FR does not require that procuring entities predisclose bid evaluation criteria, hi
addition, Circular 2000, Section 3.1, requires that preference be given to State agencies that
participate in a bid exercise, which is unfair to the other bidders. In practice, apart from
information in the advertised public tender notices, no information on award criteria is made
known to bidders, hi most cases, criteria not specified hi the advertisement (for example,
indigenous considerations as well as past working relations with the procuring entity) are taken
into account when determining the award of contract. As a result, fairness and transparency of the
public procurement process in the State has been greatly undermined. The same situation is true
for the Local Governments.
Recommendation:
For procurement to be fair and transparent, disclosure of all criteria for evaluation and contract
award should be made mandatory and, where applicable, quantified in monetary terms. The
criteria should be spelled out in the bidding or consultant proposal documents prior to issuance.
Public Bid Opening
2.67
Although the FR in Section 4012 provides that bid opening shall be done on the date and
the hour at which a particular tender closes, it does not require that bidders or their representatives
be present at the bid opening. Circular 2000 amends the above provision by stating that bid
opening shall be performed at the Tenders Board meeting. It states further that the closing date of
tenders shall be the day before a duly convened MTB or STB meeting, hi practice, there is no
public bid opening. Bids are usually opened in secret (at MTB meetings) 2-7 days after bid
submission has closed.
2.68
It is also not mandatory for a LGA to conduct public bid openings, hi practice, bids can
be opened several days after the closing date of bid submission.
13
To reduce the cost of publication, advertising in other venues, such as existing publications
produced by the Chamber of Commerce and Industries, should also be explored. The State
Gazette should be published regularly and widely distributed. To reduce the cost of advertising,
the space in local newspapers should be limited, but adequate visibility ensured.
22
Recommendation:
Procuring entities should be required to carry out public bid opening in the presence of bidders or
their representatives who choose to attend, at the time and date specified in the Invitation to Bid
or bid documents. Bids may be submitted by mail or by hand. Bid opening should be done
immediately after the closing time of bid submission. Opening procedures should be recorded in
minutes that have to be sent to all bidders shortly after bid opening date.
Bid Evaluation and Basis for Contract Award
2.69
Section 10.2 of Circular 2000 states that TBs should be free, when the need arises, to
appoint an ad-hoc technical subcommittee. The subcommittee should comprise experts from the
public service and, when necessary, receive technical advice from private consultants. The
subcommittee prepares and submits an appraisal report to the tender board that appoints it. There
is no provision in the FR or the Circular requiring that a contract be awarded to the lowest
evaluated responsive bidder. Instead, Section 17.15 of the FM requires local authorities to award
contracts to the lowest priced tender. However, basing contract award on the lowest price only is
risky because the lowest priced tender may not necessarily be competent or have correctly costed
its bid.
2.70
In practice, evaluation of bids consists of a simple combination of price and nonprice
factors including experience on the job; performance; competence; and ability to negotiate on a
variety of issues in the case of works, and price and quality in the case of consultant services. The
State Government usually has its price, which is used as a benchmark for negotiating the price of
any given contract. There are no specific regulations guiding the determination of profit. Thus,
bidders do not know the criterion used by a TB. Information from the State Ministry of Works
indicates that between 25 percent and 40 percent profit margin over the government price is
usually allowed, given the procurement entities' discretionary power. The implementing agency
then compares the price of each bid with the estimated government price and profit margin, and
on this basis determines whether a bid is low or high.
2.71
Although no provision is made for negotiation in the FR and Administrative Circulars, in
practice, negotiations of contractual conditions always take place. Issues negotiated include price,
time of contract completion, advance payment, and capacity of the suppliers. Negotiation is
conducted with more than one supplier, and it takes place before a recommendation for award is
made to the approving authority.
23
Recommendations:
(a)
Each Tenders Board should have a permanent Technical Evaluation Committee which,
depending on the nature of the tender, will have the power to call upon relevant experts to assist it
in the evaluation process.
(b)
Members of the TB, evaluation committees, and approval authorities should declare any
conflicts of interest and, if any, excuse themselves from bid evaluation and approval process.
(c)
Bid evaluation criteria should be clearly defined in the bidding documents. Evaluation
should be based purely on criteria defined in the bidding documents.
(d)
Profit margins and government reference price should no longer be allowed as an
evaluation criterion.
(e)
Negotiation of contracts, except in the case of direct contracting, should be discontinued
immediately.
(f)
Public enlightenment about discontinuation of the use of negotiation in open competitive
bidding should be pursed rigorously and immediately.
(g)
To ensure that procuring entities in the public sector in Lagos State obtain best value for
money, they should be required to award contracts to the lowest evaluated responsive bidder.
Conflict of Interest
2.72
Under Section 1 of the Code of Conduct for Public Officers, which is contained in Part 1
of the Fifth Schedule to the Federal Constitution, public officers are required not to put
themselves in a position that conflicts with their duties and responsibilities. However,
circumstances that may lead to a conflict of interest situation are not spelled out in the Code.
2.73
There are no provisions either in the State FR or the Circular requiring a member of a
tender board or a Tender Evaluation Committee to declare any conflict of interest in regard to any
tender that is to be deliberated upon. Due to the lack of the requirement to declare a conflict of
interest, decisions on tenders are sometimes made by people whose judgment is clouded by the
interest that they have in the tender before them, and this bias makes the procurement process
most unfair and uncompetitive. In Local Government Authorities, there are no such provisions
either (for example, in the Transitional Committee, which is composed of unelected officials and
is dealing with tenders in the absence of the Finance Committee of elected councilors).
24
2.74
The selection of consultants at the State Government or Local authorities do not prohibit
conflict of interest with prior or existing obligations to clients. When a consultant's interest
conflicts with that of the client, there is a tendency for the consultant to take care of his/her own
interest and to ignore the interest of the client. In such instances, the client ends up receiving
poor-quality service from the consultant.
Recommendation:
To maintain fairness and promote competition hi the public procurement process, declaration of
conflict of interest should be made mandatory, and any person with a conflict of interest in a
particular tender should be barred from participating in discussions or making a decision on that
tender. Consultants should be prohibited from carrying out any assignment that would be in
conflict with their prior or existing obligations to their client.
Contract Award Procedures
2.75
Contract award for competitive bidding is the sole responsibility of the State Executive
Council under the chairmanship of the Governor. The tender boards are mere recommending
bodies, and the procuring entity has no means to appeal the decision of the Governor. The
relevant tender board recommends to the procuring entity which tender must be awarded subject
to the approval of the Governor of the State. The requirement that the Chief Executive of the State
approve contract awards gives room for political interference in the procurement process.
Political interference often clouds the procurement process in unfairness as well as
noncompetitiveness, both of which can make procurement unnecessarily expensive.
2.76
At the Local Government Authority level, the FM in Section 17.11(c) provides that it
shall no longer be necessary to refer any contract, whatever the size, to any organ or functionary
of the State. However, the Administrative Guidelines for Local Governments issued by the
State Ministry of Local Government states that, for expenses exceeding Nlmillion, such approvals
should be sought from the Governor. The former provision is a Federal instruction while the latter
is a State instruction. There is controversy as to which should supersede.
2.77
Due to lack of a procurement professional cadre in the service, procurement capacity at
the ministries and parastatals is limited. Therefore, shifting the contract award responsibilities
from the Governor's office to the procuring entities will require capacity building to increase the
competencies at that level.14
1
There is no procurement capacity at the Governor's office.
25
Recommendations:
(a)
To achieve desired efficiency and effectiveness of the award process and overcome
potential political interference, TBs should not have to seek the Governor's Office approval before
making award recommendations to the procuring entities.15
(b)
A review mechanism to address the complaints of procuring entities on decisions
rendered by the Tenders Boards should form part of the functions of the PPRA.
(c)
The procurement function needs to be rehabilitated by the creation of a procurement
professional cadre in the Civil Service to serve as the PPU.
Contract Agreement Fee
2.78
As stated in Circular 2000, payment of an agreement fee-based on the contract value-is
required prior to a contract agreement signature. The payment rate is set by the Ministry of
Justice. The Circular also states that the rates can revised by the procuring entity without prior
notice. Table 4 shows how the various rates are applied:
Table 4. Agreement Fee Percentages
Value of contract
5m-20m
21m-50m
51m-100m
101m— above
Agreement fee (%)
0.25
0.50
0.75
1.00
Recommendation:
As this requirement of contract agreement fees can lead to serious abuses and impacts directly on
the overall contract cost» this requirement should be removed immediately.
Publication of Contract Award
2.79
Section 4018 of the FR provides that, after a contract has been entered into, the name of
the successful tenderer and the nature of services to be rendered will be published in the official
Gazette. The Circular is silent on this matter. In practice, as the official Gazette is not published
regularly and, when published, is not readily available, the public hardly can have information on
contract awards hi the State.
15
This will eliminate the perception of undue political interference that is often regarded as a
source of corruption, delays and inefficiency in the procurement process.
26
2.80
There is no obligation in the FM or the Administrative Guidelines requiring Local
Government Authorities to publish contract awards.
Recommendation:
To attain and maintain transparency in the public procurement process in Lagos State, publication
of contract award should be made mandatory on notice boards, State websites, or national or State
journals.
Contract Payment
2.81
In Lagos State, payment procedures are partly regulated by the FR. Advance payment
generally ranges between 30 percent to 70 percent, depending on the nature of the contract. In the
large majority of the contracts reviewed during the diagnostic mission, the advance payment was
70 percent. There have been cases of defaulting contractors after the payment of mobilization.
Despite the money paid for such contracts, the 1999 Audit Reports highlights widespread
contravention of financial instructions leading to unfulfilled contracts or partial performance of
contract awards.17 In addition, it has been difficult to recover the advance payment from
defaulting contractors because the guarantees used are insurance bonds and, in most cases, the
insurance company used is controlled by the Lagos State Government. The LSPAR team was
informed that, in cases in which private insurance companies have been used, it was possible for
the State Government to recover the advance payment by recourse to, or invocation of, the
advance payment bond.18 However, this remedy was reported to have been used only in isolated
cases.
2.82
Examination of records and further interaction and interviews with government officials
and contractors indicate that contractors who have completed their jobs experience delays in
payments because of the problem of "cash backing." There are no guidelines in the FR regarding
late payments, but Section 14.1 of Circular 2000 states that delayed payment shall be viewed with
all seriousness and should be prevented.19 Since there are no regulations providing remedies for
delayed payments, the team was informed that contractors add 30 percent to 40 percent to the bid
price as a "compensation" for delayed payment.
2.83
The consequence is that bid prices are higher than they would otherwise be. Tying up
large sums of money by the Government (with advance payment to contractors ranging between
30 percent to 70 percent of the contract price) for works and goods should be avoided. The
Government would save substantial interest payments if the amount used for these excessive
advance payments were kept in the bank. These savings could be channeled to more productive
uses.
16 Unnecessary
tie-up of public funds in the private sector.
Lagos State Government Public Expenditure Review 1996-2001. A Collaborative Study by the National Planning
Commission and the Lagos State Government. July 2002.
18 After a long time and enormous effort was put in by government.
19 There are no clear guidelines/process for dealing with such issues in the Circular.
17
27
Recommendations:
(a)
To avoid abuse, advance payments should not exceed 15 percent of the contract value.
(b)
To facilitate easy recovery of advance money paid in cases of nonperformance of
contracts, advance payment guarantees should be limited to bank guarantees issued by reputable
banks.
(c)
To build private sector confidence in public procurement, provision for interest payments
on delayed payment and liquidated damages to contractors should be introduced.
Contract Monitoring and Administration
2.84
Section 14.1 of Circular 2000 provides that tender boards must monitor contract
execution to ensure that there is no default by the contracting firm. Although the process and level
of sanction are not defined in the Circular, it states further that nonperformance with the agreed
schedule of work would also be viewed seriously and lead to sanctioning of the contractor as
appropriate. The FM of the Local Government has no provision for contract monitoring.
2.85
In practice, each agency has a project monitoring committee while the Ministry of
Economic Planning and Budget (MEPB) has a unit charged with the responsibility of monitoring
State-wide projects. However, most of these monitoring committees are not effective enough
because of inadequacies in staffing, equipment, motivation, and authority.
2.86
Project monitoring can be said to be undertaken on a regular basis for public sector
procurement (PSM) in Lagos State, as payment at each stage of the contract is contingent on the
issuance of a certificate of performance based on the report of this monitoring exercise.
28
Recommendations:
(a)
Develop a monitoring system that provide for adequate sanctions against both public
officers and contractors/suppliers. These sanctions must be well known to both contractors and
implementing agencies.
(b)
The existing project monitoring office should be strengthened by providing appropriate
staff, equipment, and motivation and by empowering the team with the required authority.
(c)
Develop immediately a handbook for monitoring goods/works/services. The handbook
should build on best practice and guide contract managers through the process in a systematic and
professional manner. The handbook must be designed to suit the existing organization to facilitate
easy application. It must deal with both financial and technical issues and must be linked to the
monitoring provisions mat will be provided in the new procurement law.
(d)
To enhance quality, use private consultants for monitoring/supervision of large technical
supplies and civil works.
Record keeping
2.87
An important ingredient of public procurement is good recordkeeping and management.
It is an important basis for ensuring transparency and accountability.
2.88
In Lagos State and the councils, recordkeeping is done manually, thereby making it
tedious to operate, difficult to store and retrieve, and easy to doctor. The quality of records varies
from one department/unit to the other. Generally, the staff handling filing activities are not
trained in information management and archiving activities. Furthermore, recordkeeping
facilities, such as cabinets and binders, are inadequate. These inadequacies explain why it is very
difficult to retrieve records and information on past activities. Colossal numbers of staff hours are
being wasted in the search for documents, which time could be used for more productive
purposes.
Recommendation
(a)
Restructure the current filing system to meet acceptable standards that will promote
efficiency, transparency, and accountability
(b)
Include record management as part of the basic procacement training system, in the State
and LGAs.
29
(c)
Create a procurement activity network between the proposed PPU and the Lagos State
Global Computerisation Program (GCP) (see IT Capability and E-Procurement below) to manage
the procurement information system. The State Government is making efforts through the GCP to
rectify the situation.
General Conclusions and Recommendations
Conclusion
2.89
In comparing the essential features of the different procurement systems, the review has
found that the State and Local Government FR and FM, respectively, are weak in very critical
areas. The State's rules are shallow and quite unenforceable in many regards. The scope of
discretion given to the Governor is quite high, while the governor has are no demands for
accountability. The Bank team recommended that the Governor should be more involved in
policy matters and less in implementation, so that the system can promote accountability.
Recommendations:
Short Term
The legal framework should include, the issuance of circulars that make the following mandatory:
(a)
Advertisement of all bidding opportunities in the Gazette, local dailies, State website, and
notice boards of procuring entities
(b)
Public bid opening
(c)
Publication of contract awards of above a certain threshold.
Medium Term
(d)
The Public Procurement Regulatory Agency recommended above should be charged with
the responsibility of issuing sound procurement policies and monitoring quality of
implementation by the implementing agencies.
(e)
The new public procurement law recommended above should include: procurement
methods and the criteria for their use, advertisement of bidding opportunities, disclosure of all
criteria for contract award, public Bid opening, publication of contract award of above a certain
threshold, audit and records management.
(f)
The legislations and regulations must also provide "for enforcing standard model bid
forms and publishing and widely disseminating a procurement procedures manual and bidders'
guide. The new law should contain separate regulations for se1ecting and hiring consultants.
30
Pillar 3: Procurement Proficiency
Findings
Procurement Function
2.90
Currently, the procurement function is not generally performed by professionally
qualified staff. Procurement officials previously rose to the level of Chief Supply. Assistants in the
Civil Service hierarchy. With the recent reforms in the service, they would appear to have been
relegated, as they are now regarded as General Duties Staff in the Administrative Department.
There is a tendency to believe that the procurement function can be performed by anybody;
consequently, the procurement function has been merged with administrative function. Thus,
procurement functions have been taken over and performed by Administrators, and opinions of
procurement specialists are usually not sought before award decisions are taken. The result is that
the few procurement specialists available in the system are not recognized and trained over the
years. There is an immediate need to raise the professional standing of procurement staff, their
skills, and their reward system to enhance the quality of procurement practice in the State and
make it more efficient and effective.
Training
2.91
Provision for training staff on grade levels GL01 to GL12 are usually included in
departmental/ministerial budgets, but funding is inadequate. Such training is carried out by the
Lagos State Public Service Staff Development Centre (PSSDC). Training for officers on grade
levels GL 13 and above is funded through a central training budget included in the budget for the
Ministry of Establishments. Senior officers sometimes attend custom designed courses run by
external consultants, public courses by the Administrative Staff College of Nigeria (AS CON), or
workshops/annual conferences mounted by PSSDC or other external bodies. The high cost of
training and capacity building, which the proposed reforms entail, should be weighed against the
benefits of enhanced capacity and reduction in corrupt practices.
31
Recommendation:
There is a fundamental need to develop professional standards for procurement staff and build
their capacity in the field of procurement management. These professional standards could be
achieved by putting in place a Certification system supported by a training program. The IPSM is
commended for providing the sort of procurement training that is desired, and the Government
needs to support the Institute as much as possible. To this effect, the Government needs to look
into IPSM's efforts to be legally established and recognized as a professional body. IPSM should
be encouraged to collaborate with existing local institutions in the State such as University of
Lagos, Lagos State University, Lagos State Polytechnic, and the Lagos State Staff Training and
Development Center. Such agencies should operate in a network to share experiences and
optimize the benefit of cooperation. The general, systematic, and continuous on-the-job training
for all civil servants should be considered alongside the specialized training of procurement
experts. Since decisions on procurement are made by multiple layers of administrative officers,
procurement training needs to be broadly conceived to benefit such officers as well.
IT Capability and E-Procurement
Findings
2.92
Presently, this is an ongoing installment and training exercise of Civil Service staff on
Oracle finance and nonfinance application. This initiative called the Lagos Global
Computerisation Center is geared to bring IT into the mainstream of governmental activities.
Areas expected to be covered include Human Resource/Payroll, Accounts Receivable (Revenue),
Accounts Payable, (Expenditure), cash management, General Ledger, public sector budgeting,
purchase, and fixed assets management.
2.93
So far the Lagos Center has trained 100 State Governments staff of different levels in
both Computer Science and Business Managements curses. The training for selected user staff
drawn from all ministries concentrates on finance and budgeting staff. There is a separate module
for procurement and training, which has just commenced with staff drawn from the Ministry of
Works and the Auditor-General's office. Plans are underway to create a procurement activity
network, which is to be housed in the Oracle center. The project manager, who is a noncivil
servant, was employed as consultant and reports to a director. This hiring arrangement has
enabled the system to work as it should. This initiative could set the ground for improving the
application of information technologies to the procurement process.
2.94
The level of basic infrastructure that is required to support E-Procurement is low and
inadequate. Electricity is not available in most parts of the State and, when available, it is erratic.
The level of literacy and technological advancement in the State is also poor. Hence, Eprocurement is not a good option for the State at this time.
32
Recommendations:
(a)
The Lagos Global Computerisation Center should liaise closely with the PUs and TBs to
develop appropriate electronic filling system for procurement.
(b)
E-Procurement is not recommended as an option for the State until there is significant
improvement in the level of infrastructure that will support such an initiative.
Public Sector Management Performance
Findings
2.95
Two fundamental aspects of public sector management have a direct negative impact on
the performance of public procurement. We have described earlier in the report how the weakness
of budgeting and financial management result in uncompetitive process and the high cost of
public procurement.
2.96
The public service reform is the other area of PSM that is needed to assure successful
procurement reform. While salaries and benefits of procurement specialists in the public sector
compare well with other professionals in the Civil Service, they are not adequate for basic living,
and they are much lower than the private sector by approximately 80 percent. The lack of
efficiency and low morale of staff are attributed mainly to low salary. Low salaries are believed to
be one of the main reasons for fraudulent activity and mismanagement of public funds. The
essential aspect of public service reform required in Nigeria (both at the Federal and State
Government levels) is rationalization to achieve a leaner, better paid work force, while at the
same time freeing up some of the resources that are at present expended on a bloated public sector
that consumes 70 percent to 80 percent of budgetary allocations as recurrent expenditure.
Recommendations:
(a)
The reform of the budget process should aim at (a) transparency so that the private sector
is informed of planned procurement; (b) finding of procurement prior to tendering process is
initiated, and (c) build in a balanced prior and post controls mechanism that puts in place the
adequate safeguards while not interfering with the efficiency of the procurement process.
(b)
A public sector reform is needed to restore an acceptable pay level €qr civil {Servants to
improve efficiency and reduce malpractice. Within me procurement function, a procurement
accreditation system based on specific training modules should be put in place and serve as a
criteria for promotion.
33
Pillar 4: Independent Auditing and Recourse
5.
A.
Audit
Auditor-General Office
Findings
2.97
In the past, preparation of the final accounts of government fiscal operations ware not
accorded much priority. The State' final accounts from 1996 to 1999 were not audited nor were
they available to the public at the time of preparing the PER report hi June 2001.20 However,
with the return of democracy, there is now a State Assembly charged with the responsibility of
approval of the State Budget prepared by the Executive. The Office of the Auditor-General is
once again being insulated from the political pressure by ensuring that it reports directly to the
State Assembly. The Audit arrears of the State' Financial Account from 1996-1999 and those of
2000—2001 have been carried out. However, the public has not had adequate access to these
reports that could be achieved through the sales of the reports of the Auditor-General to the
public.
2.98
In carrying out its mandate, the Auditor-General Office faces various constraints:
(a)
Unavailability of timely accounts of appropriation and financial statements for
audit
(b)
Relative lack of resources available to the Auditor-General
(c)
Ambivalent commitment to managerial accountability.
Recommendation:
(a)
The LSPAR supports the following recommendation .extracted from the PER: "The
public must be carried along through the sale of the reports of the Auditor-General to the public at
affordable prices to enhance widespread patronage and information about the government
programmes and activities."
(b)
The Auditor-General's Office should be strengthened and given appropriate means to hire
a private Technical Specialist to carry out a Value for Money Audit periodically.
20
Lagos State Government Public Expenditure Review 1996-2001, Appendix A. Observations on
the Auditor-General's Reports.
34
B.
Complaints and Administrative Review
Findings
2.99
There is no provision for administrative review of bidders' complaints at State and Local
Government levels. Bidders who want to complain are directed to address their complaints to the
procuring entity concerned. Many bidders shy away from complaining for fear of never being
awarded a government contract again. The reason is that award of government contracts is
perceived to be part of the sociopolitical reward system and the prerogative of those in power.
Most contractors would rather wait their turns to win rather than be seen as working against the
government by complaining the loss of contracts.
2.100 There is a need for the creation of a bidder complaints review mechanism whereby
bidders can be free to lodge their complaints without any fear of government reprisal. For
instance, the procuring entities should be the first layer of the review mechanism, followed by the
Public Procurement Regulatory Agency and the existing initiative of the Judiciary systemMultidoor Courthouse-which was found to be effective and efficient in dealing with issues that
would have taken years to resolve by a court of law.
2.101 The court process in Lagos State can be quite slow and expensive and, as a consequence,
bidders and other aggrieved people in the State find it difficult to lodge their complaints there. For
this reason, Lagos State Government has put in place some measures to reduce the difficulties
experienced by its citizenry. The Ministry of Justice (MOJ) under the Directorate of Citizen's
Rights has formed an alternative dispute resolution (ADR) center known as 'The Citizen's
Mediation Center." The Center provides a nonadversarial forum for mediation and settlement of a
wide range of disputes. In addition, MOJ and the Judiciary have set up an ADR facility known as
the "Lagos Multidoor Court House" (LMDC),21 which is a court-connected alternative dispute
resolution center. The creation of the LMDC is a result of the collaboration between the Ministry
of Justice, the Judiciary, and a nongovernmental organization (NGO) known as the Nigeria
Conflict Management Group (NCMG), which is based in Lagos and has done extensive work hi
arbitration.
2.102 "Multidoor" refers to the additional options that LMDC provided to supplement litigation.
Instead of using 1 door-litigation leading to the court house-the LMDC provides 3 additional
doors or options by which disputing parties can resolve their dispute: (i) early neutral evaluation
(whereby the strengths and weaknesses of a case are assessed and parties advised accordingly),
(ii) mediation, and (iii) arbitration. This system has been found to be working and with further
support may be useful to the public procurement review mechanism in the State.
21
The LMDC is a pilot project sponsored by the United States Embassy and NCMG.
35
2.103 In addition, the public in Lagos State has access to the Public Complaints Commission,
which entertains all types of complaints. In spite of the foregoing, there is a need for the creation
of a bidder complaints review mechanism whereby bidders can be free to lodge their complaints
without any fear of government reprisal.
Recommendation:
A complaints mechanism for aggrieved bidders should be established in Lagos State to address
the complaints of bidders. This mechanism should be reflected in the new procurement law and
be a function of the proposed Public Procurement Regulatory Agency. In establishing the
mechanism, the possibility of using existing alternative dispute resolution mechanisms already in
existence in the State should be explored. This can be achieved by LMDC's opening an "extra
door" through which bidders' complaints can be heard and resolved. Using an existing institution
for this purpose will, in the long run, be less time consuming and cheaper than establishing a
brand new institution. LMDC may require technical and other assistance for it to fully implement
a door for the review of bidder complaints.
Pillar 5: Effective Anticorruption Measures
Findings
2.104 There is no exclusive anticorruption legislation in Lagos State similar to the ICPC Act,
although the criminal provisions in the Criminal Code address some of these issues. However,
Section 98 of the Criminal Code prohibit official corruption and bribery. Section 209 of the
Federal Constitution requires that all persons in the public service of a State observe and conform
to the Code of Conduct for Public Officers, which is contained in the Fifth Schedule to the
Constitution.
2.105 A Code of Conduct Bureau is set up under the code. The bureau is charged with the
responsibility of investigating any misconduct arising out of the breach of any of the provisions of
the code. The Bureau is required in this regard to investigate, among others, cases of bribery or
corruption. These two acts are considered to be misconduct. However, this requirement has not
been effective because the mechanisms for investigating and evidencing such misconduct are
nonexistent. There is, therefore, a need for specific Code of Conduct for Procurement staff.
2.106 Recently, the Federal Government enacted the Corrupt Practices and Other Related
Offences Act of 2000. The act attempts to solve the problem of corruption by providing for an
Independent Corrupt Practice Commission to which citizens can report instances of corruption,
which the Commission can investigate. The Commission is yet to set up office in Lagos State.
36
Recommendations:
(a)
State.
The Lagos State Government should encourage the ICPC to set up an office in Lagos
(b)
Build a State-wide coalition to fight corruption, involving representatives of State
Government, Local Governments, private sector, NGOs, and civil society groups (including
media, churches, academia, and community groups) with a convener drawn from a leading
anticorruption NGO or civil society group.
37
3.
OTHER ISSUES
Performance of bank-Financed projects
Findings
3.1
The current active and planned portfolio in Nigeria comprises 15 projects with total
commitments of US$1,250 million, of which US$400 million is for Lagos State. The Nigeria
Country Portfolio Performance Review (CPPR), conducted in November 2002, notes that the
implementation of Bank-financed projects in Nigeria has been slow. The major reasons identified
also apply to projects in Lagos State: (i) lack of effective project implementation plans and
procurement plans at project inception leads to ad hoc decisions on contract packages, which
often result in contract splitting to avoid the regular review of procurement procedures; (ii) lack
of procurement capacity in the project implementation units results in continuous use of
procurement consultants throughout the project funding period, and there is frequent change of
trained and experienced procurement staff; (iii) lack of an adequate contract monitoring
mechanism causes project and payments delays, as well as unsatisfactory contractor performance,
and (iv) untimely release of counterpart funding causes project interruptions and costly delays.
3.2
The independent procurement review (IPR) of some projects in the country conducted in
1999 (including some components implemented by Lagos State Government, such as the
National Water Rehabilitation Project, which closed in 2000) also revealed the weak procurement
capacity. However, a Post Procurement Review conducted in February 2003 as part of the LSPAR
revealed change. For example, under the Privatization Support Project (PSP), there have been
considerable improvements since a similar review in March 2002 in the way that procurement
functions were carried out. The Bank Procurement Guidelines and Procedures were followed in
accordance with the provisions of the Development Credit Agreements (DCA). Recordkeeping
and retrieval mechanisms were found to be adequate. However, the 2003 review noted that,
compared to market prices, project cost estimates are very low. These low estimates cause
prolonged delays in concluding the procurement process to avoid underbidding and subsequent
cost increases from addenda by contractors. The low estimates could also be a deliberate way to
avoid the use of the ICB.
3.3
Review of Implementation Completion Reports (ICRs) of some closed projects in Lagos
did not reveal any major procurement deficiencies. The reason was that Project Implementation
Units that lacked procurement capacity engaged consultants. The review also noted that
consultants failed to build the needed procurement capacity in the PIUs throughout the project
financing period.
38
Recommendations:
(a)
Build Borrowers' procurement capacity before project effectiveness and on ; continuous
basis during project implementation. If external consultants are engaged, the; must be matched
with transfer of training counterparts to ensure transfer of skills and continuity. Training should be
included in the TOR and the technical assistance budget.
(b)
Efficient implementations of the project procurement capacity assessment action plans
should be enforced and monitored.
(c)
The contract management mechanism should be strengthened; contract splitting should be
avoided; and noncompliance should be monitored regularly and sanctioned.
Prior Review Thresholds for World-Bank-Financed Projects
Table 5. Prior Review Thresholds and Procurement Methods
Expenditure
Category
1. Works
Minor Works
Small Works
Major works
2.Goods
Procurement Method
3 Minim, Quotation
NCB
ICB
Shopping
NCB
ICB
3. Consultancy
Services
Firms
QCBS
CQ/QBS/LCS/FBS
Individuals
IQ
IQ
Firms/
Individuals
Single-Source
4. Training,
QBS/CQ/LCS/IQ
Workshops,
QBS/CQ/LCS/IQ
Study Tours
Contract Value Threshold
US$ Equivalent
Low
Medium
Risk
Risk
Contract Subject
to Prior Review
High
Risk
<50,000
<1 0,000,000
>10,000,000
<30,000
<1,000,000
>1,000,000
<50,000
<3,000,000
>3,000,000
<30,000
<400,000
>400,000
<50,000
<300,000
>300,000
<30,000
<250,000
>250,000
Ex-post
Ex-Post
All
Ex-post
Ex-Post
All
>750,000
<750,000
>200,000
<200,000
>350,000
<350,000
>100,000
<100,000
> 100,000
<1 00,000
>50,000
<50,000
All
Ex-Post
All
Ex-Post
All
>50,000
<50,000
All
>50,000
<50,000
All
>50,000
<50,000
All
All
Annual plans
Notes:
QCBS - Quality and Cost-Based Selection, CQ - Consultant Qualification; FBS - Fixed Budget
Selection;
LCS - Least-Cost Selection; IQ - Individual Qualification.
For consultant contracts estimated to cost US$150,000 or less, the shortlist of firms may consist
entirely of national consultants.
39
Private Sector
Performance on Public Procurement Contracts
The private sector in Nigeria is diverse, comprising both formal and informal enterprises engaged
in a wide array of activities throughout the country.22 Lagos State is the base of approximately 60
percent of the formal enterprises. Private sector participation in public procurement in Lagos is
characterized by restrictive registration requirements; lack of transparency in bid
solicitation/opening/evaluation; the absence of standard procedures for the selection of
consultants; delays in contract awards; and late payments to suppliers, contractors, and
consultants. Access to bank credit by contractors is restricted by a certain perception by financial
institutions that financing public contracts is risky given the poor payment record of Government
and annual interest rates as high as 25 percent to 35 percent. The evaluation of the commercial
risk in doing business with the State is considered high, and this belief results in high unit prices.
The SPAR team was informed that a possible savings of 45 percent could be achieved if the
private sector were to regain confidence in the procurement system.
3.4
The volume of private sector procurement hi Lagos State cannot be estimated on the basis
of the available data. The main importers of raw materials and finished products are multinational
companies in the upstream oil and gas sector, as well as in the manufacturing and service sectors,
all in the formal sector, while several indigenous enterprises in agriculture, mining, and smallscale manufacturing and services are in the informal sector, hi addition, since Lagos State
Government does not collect nor publish data on performance of the public procurement system,
a realistic estimate of the value of public procurement in the State is difficult to make. However,
Lagos State annual expenditures for year 2000 and 2001 were $180 million and $205 million,
respectively. Interviews and available records indicate that approximately 67 percent of the State
Government annual expenditures for these years passed through public procurement.
3.5
Performance on public contracts appears to be of lower quality when compared with
private sector-sponsored projects, as evidenced by the quality of some public housing estates.
Timeliness in public procurement is compromised by poor planning and late payment for
completed and approved stages, while cost effectiveness suffers from less than transparent
contract evaluation procedures, poor monitoring, delayed payments, and the need to pay
variations. Poor quality performance on public procurement contracts may be due to poor project
planning as it relates to the specification of deliverables, as well as poor monitoring and
supervision of public projects. A possible explanation for this pattern given by one private sector
operator is that professionals in the public service tend to have more administrative and less field
experience compared with project monitoring consultants in the private sector. Another possible
reason is that contractors believe they can get away with poorer performance on public projects
by being well connected or by bribing monitoring officials. This inadequacy, or loophole, can be
22
See appendix VIII for detailed diagnosis of the private sector practices in Lagos State and
possible ways of improving them.
40
overcome by the use of private monitoring consultants, especially on major work which the costs
of such consultants can be justified. In addition, the capacity of Project Monitoring Office (PMO)
should be strengthened to make its" operations efficient and effective. Contract documents in
Lagos State also tend to routinely specify the performance bond should be obtained from the
State-owned insurance comp LASACO. Not only is this requirement restrictive, but it can lead to
situations in w LASACO is being asked to cover cumulative risks beyond its carrying capacity.
Recommendations:
(a)
Put in place appropriate, effective, and efficient public procurement system Lagos State
as recommended above to bring about the required private sector confidence in public
procurement
(b)
Make the registration process a less costly, more flexible, and interactive tool will not be
used to disqualify suppliers/contractors/consultants both at the State and L levels, but as a tool to
identify their experience and capacity. In addition, provide rule; Prequalification in future
legislation.
(c)
Pay for work done promptly to facilitate access to bank credits by contractors ensure
timeliness in project execution
(d)
Make contract agreements requiring the provision of insurance bonds '. restrictive by
demanding that the insurance coverage be by "LASACO or other repute insurance company."
41
4.
GENERAL RISK ASSESSMENT
Findings
4.1
The analysis of the procurement system in Lagos State indicates that there are serious
weakness in the current procurement system including (i) lack of an appropriate legal framework
characterized by the use of outdated, contradictory, and incomprehensive financial regulations and
memoranda, as well as administrative guidelines and circulars. All of these are administrative
documents, which could be easily amended without taking into account the fundamental rights of
suppliers, contractors, and consultants. While the existing regulations are inadequate, there are, in
addition, the following obstacles to sound procurement: (i) a noticeable gap between these
regulations and actual practice, which adversely affects procurement performance even more; (ii)
inadequate organization and staff resources; (iii) lack of provision for an administrative review
mechanism of bidder complaints; (iv) nonexistence of enforcement of remedies; and (v) absence
of procurement audits or ex-post procurement review.
4.2
Measured against these weaknesses in the system, the environment for conducting
procurement in Lagos State is one of high risk. However, there is hope for improvement. Given
the political will shown for the LSPAR and the strong indication that the current state government
is ready for the new initiative, the Government appears determined to implement the
recommendations contained in this report and address the above weaknesses.
4.3
Table 5 summarizes the risks to be managed to have a sound, transparent and efficient
procurement system, which would increase the absorptive capacity of Lagos State and improve
service delivery to the population.
42
Table 6. Procurement Risk Mitigation
Risk to Be
Managed
Weak
absorptive
Capacity
What Can Happen
How It Can Happen
Excessive delay
for contract award
and contract
execution
• All steps of the procurement cycle
must be approved by Governor.
• Weak procurement planning
• Lack of well defined procedures
• Shortage of experienced or trained
staff
• Lack of standard documents and
manual
Unfair and
inequitable
treatment of
suppliers
and
contractors
Corruption
Responsible
parties have
double standards
in dealing with
suppliers and
contractors.
• High level of
Patronage
• Contracts are
awarded to
selected
suppliers at a
higher cost.
High cost
• Tenders are
not awarded
to lowest
responsive
bidder.
• Tenders
received/
awarded do
not represent
best value for
money.
• Preferential treatment beyond that
provided for in the law is practiced.
• Price matching is used to secure the
participation of enterprises targeted
in terms of a preferential procurement
policy.
• Lack of safeguards in the legislation • Introduce appropriate
• Lack of oversight mechanisms
safeguards in the
• Lack of recourse mechanism
legislation
• Lack of sanctions
• Provide oversight
• Political interference in contract
mechanism
award
• Establish recourse
mechanism
• Eliminate political
interference in
contract award
• Lack of competition
• Promote competition
• Weak procurement planning
• Reduce excessive
• Excessive advance payment and
advance payment.
excessive delay in paying the balance •Pay contract executed
promptly
43
-Risk Mitigation
Measures
• TBs responsible
for approving
procurement
process
• Adequate
procurement
planning
• Create
procurement
professional
cadre;
follow up with
adequate training
•Prepare standard
bidding document
and manuals
• Adhere to rules and
regulations
• Avoid use of
unregulated
preferences
5.
5.1
7A.
RECOMMENDED ACTION FLANS
Tables 7A and 7B detail the recommended Action Plans to improve procurement in Lagos
State:
Recommended Action Plan: Five Pillars of Sound Procurement
Legal, Regulatory, and
Institutional
Procedures and
Practices
Procurement
Proficiency
Independent Audits
and Recourse
Anticorruption
measures
Enact a new public
procurement law based
on the UNCITRAL
Model Law being
prepared at the Federal
level.1
Responsible: Governor
Timing: Next 12 mos.
Prepare, disseminate,
and ensure the use of
standard bidding and
contract documents,
and a procurement
manual based on the
new law. Responsible:
PPA
Timing: Within next
12-18 mos.
Develop and
implement a capacity
building plan
including:
• Do detailed
assessment of training
and material support
needs
• Develop procurement
curricula in IPSM for
training of PPU, MTB,
and staff of new
Oversight body
• Create certification
program for
procurement staff.
Responsible: State
MOE-PPA Timing:
Within next 24 mos.
Make Auditor-General
Office responsible for
carrying out ex-post
control of
procurement, with
appropriate resources
to hire experts for
independent audits.
Responsible: State
Ministry of Justice and
MOF Timing: Within
next 12 mos. and
ongoing
Encourage FGN to set
up offices of the
Independent Corrupt
Practice Commission
in Lagos State.
Responsible: Governor
and ICPC
Timing: within the
next 6 mos..
Create an independent
complaints mechanism
for bidders and
provide for complaints
mechanism in the new
procurement law.
Responsible: State
Ministry of Justice and
Governor Timing:
Next 6 to 12 mos.
Build a State-wide
coalition to fight
corruption, involving
representatives of State
government, Local
Governments, private
sector, NGOs, civil
society groups
(including media,
churches, academia
and community
groups) with a
convener drawn from a
leading anticorruption
NGO or civil society
group. Responsible:
Governor, MOJ and
NGOs.
Timing: Within the
next 12 mos. and on a
continuous basis.
Issue Circular to
improve procurement
process with
mandatory
requirements for
• Advertisement of
all competitive bidding
opportunities in the
State official Gazette,
local dailies, and
notice boards of
procuring entities
• Public bid opening
• Publication of
contract awards above
a certain threshold.
Responsible: State
MOF and HOS
44
7 A. Recommended Action Plan: Five Pillars of Sound Procurement
Legal, Regulatory, and
Institutional
Procedures and
Practices
Procurement
Proficiency
Independent Audits
and Recourse
Anticorruption
measures
Timing: Next 2 mos.
Create Independent
Oversight Body for
policymaking and
quality control.
Responsible:
Gov./SMOF Timing:
Next 6 mos. Establish
a Steering Committee
to initiate and
supervise intial
impementation of
reforms. Responsible:
Gov./SMOF Timing:
Immediate
Carry out extensive
awareness campaigns
aimed at sensitizing
the population on ways
to fight corruption.
Create PPUs within
the procuring entities.
Responsible:
MOE/HOS Timing:
Next 12 mos.
Reorganize the MTBs
and gradually abolish
the STB. Responsible:
State MOF Timing:
Within next 6 mos.
Table 7B. Recommended Action Plan: To Improve the Partnership Public and Private
Sector
Associate the private sector in the oversight through their participation in
the Regulatory body and the appeal mechanism
GO/MOF
6-12 Mos
Recorganize the bidders registration system to make it a more flexible
and less costly system and not restrictive to foreign bidders
MOF/MOW/PPA
Immediate
Improve payment. Advance payments should not exceed 15% and should
be limited only to bank guarantees issued by reputable bank. Introduce
provision for interest payment and liquidated damages to contractors.
MOF
12 mos
Remove the requirement of contract agreement fees.
MOJ/MOF
Immediate to 12
months
Disseminate information on budget and public expenditure
MOF/MOEFB
Immediate to 12
months
Notes:
1.
The implementation details, the need for technical" assistance, and the identification of
potential source of financing were discussed with the Government during the
stakeholders' workshop held in Lagos in March 2004.
46