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How to mitigate fraud and corruption in Nigerias Public Procurement Process

Published by The Nation on Sun, 23 Jun 2019


This article begins with a grim outlook: In corruption prone environments, such as Nigeria and other African countries, when a new law, which is designed to promote efficiency and transparency, is passed, its implementation is hampered by powerful bad actors-institutions and individuals-who see the new law as a serious threat to their arbitrary and corrupt ways of doing things; hence, they slow-walk the implementation of certain provisions in the law.Furthermore, on paper, the law satisfies the minimum requirements under the global best practices but, because of certain factors, including the above-stated encumbrance and a pervasive culture of bribery/kickbacks, the practical implementation of certain provisions of the law collide with a grim reality-of a tripartite system (legislative, executive, and judiciary), historically entrenched in corruption, fighting back.While this article focuses mainly on mitigating the risks of frauds, bribery and corruption in the Nigerian public procurement process, it also critiques certain loopholes in the Public Procurement Act 2007 (hereinafterthe Public Procurement Act), the enabling statute that created the Bureau of Public Procurement (hereinafterthe Bureau), a federal parastatal tasked with providing legal and institutional framework and professional capacity for public procurement in Nigeria, recommending practical solutions on how to bring the process into compliance with the global best practices.This article embraces this grim outlook, not as an indictment of this administration, or any officials for that matter, but to further remind reform-minded government officials, stakeholders, and policymakers that much work needed to be done in this particular area of governance.Furthermore, since fighting corruption is a central theme of the Buhari administration, I hope that my common-sense recommendations will be given a serious consideration.Without further ado, my summarized recommendations are as follows:To spur a significant growth in our communities, the Bureau should award a percentage of its annual contracts to small businesses.The creation of an independent tribunal (in this case, a court of first instance) to adjudicate contractual disputes amongst parties (the Bureau and aggrieved contractors).Create a robust information sharing and access agreement between the Bureau and the Economic and Financial Crimes Commission (hereinafterthe Commission).The creation of a special office within the Bureau to perform due diligence investigations on certain contractors.Throughout this article, I will duel more on each recommendation, providing a fillip of supporting argument for each recommendation.Read Also:Fighting corruption in Nigeria non-negotiable, says BuhariBeginning with the first recommendation, and in order to spur a significant growth in our communities, the Bureau must award a percentage of its annual contracts to small businesses; additionally, it should hold seminars that sensitize and enlighten the general public on how small businesses can participate/benefit from government contracts, without jeopardizing efficiencies and its overall goals.If the Public Procurement Act doesnt grant the Bureau the power to award a percentage of its contracts to small businesses, then the National Assembly will have to grant it such power, but I reasonably believe that the Bureau can administratively resolve that (by so doing, the Board will be reasonably acting within the scope of its enabling statute).In the United States of America, for instance, we have a small business set-aside clause, which statutorily requires a contracting official to include small businesses in its list of prospective contractors. Of course, this wont be a guessing game, for it requires drafting officers to standardize necessary procedures.For that reason, our standardization system must mirror the global best practicesthe North American Industry Classification System (NAICS) is the gold standard in this area. Under the NAICS codes, for instance, every federal solicitation is assigned an NAICS code, ensuring the government-wide goal for participation of small businesses is established annually at the statutory levels.This government-wide goal is consistent with what the drafters envisaged when they drafted the Small Business Act (15 U.S.C. 631 et seq.) and the Small Business Investment Act of 1958 (15 U.S.C. 661), which created the U.S. Small Business Administration.In the United States, when designated federal agencies are awarding contracts, they must comply with the overall objectives of the Small Business Administration: The Small Business Administration aids, counsels, assists, and protects the interests of small business; ensures that small business concerns receive a fair portion of Government purchases, contracts, and subcontracts, as well as of the sales of Government property; makes loans to small business concerns.And to ensure that those designated federal agencies comply with the aforementioned statutes, their own enabling statutes, say, the Chief Financial Officers (CFO) Act, are in sync with the government-wide goal. It means that chief financial officers at those federal agencies must submit annual reports on how their agencies are complying with relevant applicable statutes.In Nigeria, I reasonably believe that big businesses always bully small businesses, so the system cannot correct itself, which is why we need to codify an amendment to the Public Procurement Act that will grant more sweeping powers to the Bureau, helping it to better aid, counsel, assist, and protect the interests of small business; and to ensure that small business concerns receive a fair portion of government purchases, contracts, and subcontracts, as well as of the sales of government property.Already, under the Public Procurement Act, there is a zonal arrangement guideline, which accounts for our unique geography and diversity, but we can also create other exceptions, too, which will allow us to include historically marginalized groups (companies led by young people/women) in the mix. It is not a crazy idea, for we do something similar in the United States, ensuring that our economic prosperity is widely shared by all.Right now, some Nigerian entrepreneurs, who have technical capabilities that can be beneficial to the government, strongly believe that, if they dont know top politicians/officials, they can never win a government contract-sentiments that should have been completely cured with the enactment of the Public Procurement Act. Their concerns are legitimate. I strongly believe that the government can do better, if these recommendations are incorporated into its existing legal and regulatory framework.Now, I switch gears to the next recommendation: The creation of an independent tribunal (in this case, a court of first instance) to adjudicate contractual disputes amongst parties (the Bureau and aggrieved contractors).Right now, the Bureau is self-policing itself, and contractors, particularly those who have grievances against the Bureau, are at the mercy of the same awarding agency.Historically speaking, the same arbitrary process was in place before the introduction of the Public Procurement Act, and this type of arbitrariness does not alleviate contractors worries that the cards are stacked against them. This is a serious compliance issue that the Buhari administration/Bureau can swiftly address in order to bring transparency and due process into the procurement process.Because it is a given that contractual disputes will always arise between parties, it is important that we have a separate, independent tribunal to objectively review these contractual disputes amongst parties.My experience in the United States is quite different from what is being practiced in Nigeria, for there is a separate tribunal that reviews rejected bids and other disputes arising from government contracts, including in the United States military, which I experienced firsthand when I clerked for the General Counsel of the Michigan National Guard.Furthermore, we should continue to bring our laws and regulations in sync with the global best practices, and that will go a long way in cementing the rule of law in Nigeria, assuring our global partners that we are following the core principles of the public procurement, which are as follows: The principle of efficiency of funds spending; the principle of equality and nondiscrimination; the principle of free and fair competition; the principle of proportionality; and the principle of publicity and transparency.If I may duel more on the fifth principle, I strongly believe that the Bureau must create a standalone tribunal, which will be inferior to a conventional court, to first hear cases arising from contractual and bidding disputes, bringing before a neutral panel all the parties involved, including contracting officers and prospective/current contractors who have grievances against the Bureau.My recommendation is consistent with the due process rationale behind the creation of the Public Procurement Act (let us not forget that, prior to the enactment of the Public Procurement Act, arbitrariness characterized our procurement process), so we should be strengthening the law, not weakening it.As I wrote in a different piece, we must continue to strengthen our institutions, and that can be done by embracing transparency and accountability, ensuring that no institution should be given carte blanche to violate our due process and equal protection rights under the Constitution of the Federal Republic of Nigeria.Additionally, because taxpayers fund the activities of the Bureau, they expect their activities to be conducted in compliance with the global best practices.In the United States, for example, if a contracting agency rejects a prospective contractors bid, and s/he believes that the agency erroneously reached that conclusion, s/he can appeal to the Civilian Board of Contract Appeals (hereinafterthe Board), an independent tribunal that was established under the Contract Disputes Act of 1978, and this independent body can adjudicate any disputes between both parties. Obviously, the Board adjudicates contract-related disputes amongst parties, too, making it the court of first instance.As required by the due process clause, of course, cases decided by the Board can be appealed to an Article I court (in Nigeria, a corresponding Article I court will be the Federal High Court, the final arbiter under step 9 of the 9-step complaint procedure issued by the Bureau).When I cross-referenced the current complaint procedure in place-the 9-step complaint procedure under the Public Procurement Act, Part IX, section 54-with the global best practices, I reached this conclusion: The current system under the above-cited provision, which does not include an independent review board, is fatally flawed.This recommendation cures those unacceptable deficiencies contained in the 9-step complaint procedure, administratively separating agents (accounting officers) of the Bureau from reviewing complaints against the Bureau-a procedure that, on its face, prejudices the complainant.I reasonably opine that a reviewing tribunal, which mirrors the Board can be created, and its decisions will also be appealable to the Federal High Court.To reiterate, I am calling for a new framework that replaces steps 1- 8, but still retains step 9, as highlighted above.Now, I switch gears to the next recommendation: Creation of a robust information sharing and access agreement between the Bureau and the Commission.Because the Bureau deals with thousands of contractors vying for billions of naira in government contracts, I reasonably believe that some bad actors are likely to abuse the system, increasing the likelihood of frauds and corruption within the Bureau and its third-party contractors.To mitigate against this known risk, officials at the Bureau must take proactive steps, ensuring that bad actors are quickly weeded out of the system. In addition to the Bureaus own internal procedures, I am recommending a more robust interagency agreement between the Bureau and the Commission.This type of arrangement will serve as a strong deterrence to bad actors. The Bureau, through its initial due diligence findings (more on that later), can refer contractors, who present false documents in their bids or/and commit inchoate crimes, to the Commission for further investigations and prosecution.As a preemptive measure, and while further investigations are being conducted, such questionable contractors should be placed on an administrative suspension. The Bureau will have to work collaboratively with the Commission to draft an easily implementable memorandum of understanding between the Bureau and the Commission.Because financial crimes are best tackled before they materialize, the memorandum of understanding must create an alert system that flags inchoate crimes-attempts, conspiracy, and solicitation-as worthy of further investigations.While some contractors will ignore these provisions, law enforcement officers will be harmed with sufficient tools to go after them (already, under section 58 of the Public Procurement Act, any false declaration and submission could lead to prosecution, debarment and disqualification for 10 years from public procurement), but bad actors will always test the limits of the system.
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