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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The Public Procurement Act, 2007 is a comprehensive legislation designed to eliminate the
shortcomings and organizational weaknesses which were inherent in public procurement in
Nigeria. The government of Nigeria, in consultation with its development partners had identified
the public procurement system as an area that required urgent attention in view of the widespread
perception of corrupt practices and inefficiencies, and to build trust in the procurement system. A
study by the World Bank (2003) reported that about 50-70% of the national budget (after
personal emoluments) is procurement related. Therefore an efficient public procurement system
could ensure value for money in government expenditure, which is essential to a country facing
enormous developmental challenges. The Nigerian public procurement system is still in its
relative infancy, given that the legislation regulating government contracts is still less than ten
years old. However, in spite of the passage of the Public Procurement Act and the establishment
of a procurement cadre in government ministries, departments and agencies, the procurement
system is not functioning as it ought to and compliance to public procurement in Nigeria is still
riddled with corruption, fraud, lack of transparency and other forms of irregularities (Sope,
2011). The efforts to comply with provisions of the Procurement Act, 2007 have been increasing
since its passage though as of today, the greatest challenge for the enforcement of procurement
law in Nigeria is the lack of compliance to the regulations of the Act as well as the involvement
of government functionaries in the procurement process which is possible as a result of lack of
fully implemented provisions of the Act by its government (Jacob, 2010). Wahab (2008)
observed that millions of dollars gets wasted due to inefficient and ineffective procurement
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structures, policies and procedures as well as failure to impose sanctions for non-compliance
with the procurement rules thus resulting in poor service delivery. Nonetheless Wahab (2008)
further asserts that challenges in public procurement goes beyond the non-compliance to
procurement regulations but to include procurement process, methods, organizational structure
and work force. This assertion is supported by the Country Procurement Assessment Report
(CPAR) commissioned by the Obasanjo Administration on Nigeria in 1999, which asserts that
non compliance to provisions of the Act is so high in Nigeria. To ensure sanity and value for
money in the public procurement landscape, the government of Nigeria in 1999 launched the
Public Financial Management Reform Programme (PUFMARP). The purpose of the programme
was to improve financial management in Nigeria. PUFMARP identified weaknesses in the
procurement system. Some of these weaknesses included: lack of comprehensive public
procurement policy, lack of central body with technical expertise, absence of clearly defined
roles and responsibilities for procurement entities, absence of comprehensive legal regime to
safeguard public procurement, lack of rules and regulations to guide, direct, train and monitor
public procurement. The programme also identified that there was no independent appeals
process to address complaints from tenderers. These findings led to the establishment of the
Public Procurement Oversight Group in 1999. The aim of this group was to steer the design of a
comprehensive public procurement reform programme which led to the drafting of a public
procurement bill early 2007 that was passed into law in later 2007.
Public procurement is the acquisition of goods, services and works by a procuring entity using
public funds (World Bank, 1995). Obiegbu (2005) defined procurement as the process that
creates, manages and fulfils contracts. It forms an integral part of construction projects and
occurs at any point in a project cycle. Clients often engage suitable procurement strategies for
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achieving project objectives in terms of time, cost and quality as cited by Chua (1999). The
clients main expectations are on project time delivery, completion within budget, satisfying of
the clients needs and within the required quality of work. Currently, together with its manual,
the public procurement act 2007 is the major document providing guidelines and procedures for
public projects (Wahab, 2008). Wahab (2008) reports that prior to the enactment of the
procurement act of 2007 in Nigeria, public procurement has been characterized with
irregularities like corruption and mismanagement based on world banks assessment, hence,
recommendation by the World Bank to the Nigerian government lead to the enacted of the Public
Procurement Act (PPA) in 2007 which aims towards been the guide to public procurement by
federal agencies. The level of compliance to procurement regulations can therefore determine
whether a government meets its goals and objectives or not as well as affect many internal and
external stakeholders. The enactment of PPA is a great opportunity for Nigeria to develop as a
nation because national resources will be allocated on just and transparent manner to satisfy the
needs of the people and the move towards government accountability will be guaranteed as the
people have a role to monitor the use of their resources. However the greatest challenge to the
Act is the reluctance on the path of the government to embrace in totality the full implementation
of the Act; for instance, public contract is seen as a tool to reward political loyalists and to amass
wealth (William, 2011).
Compliance according to Wahab (2008) is expressed as a stipulated number of provisions which
must be complied with to avoid the wrought of the laws. Non compliance with the provisions of
the Public Procurement Act 2007 will constitute offence and or vitiate the procurement as well as
the procurement process. For instance, the involvement of politicians in the procurement process
has become a serious problem, which needs to be given urgent attention to prevent forestalling
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the growth of Nigerias nascent procurement system (PEMFAR, 2007). At present, high-ranking
politicians are able to influence the outcome of the procurement process by putting undue
pressure on civil servants who feel unable to refuse to bend to this pressure. This means that in
practice, the procurement process is manipulated at the instance of the interested politician and
contracts awarded to the person or firm in which the politician has an interest leading to issues
on the part of compliance hence, a number of uncompleted high profile projects, in which
contractors were paid up-front and absconded with federal funds or which were completed at
prices high in excess of the original contract price.
The Public Procurement Act 2007 was enacted in order to harmonize the processes of
procurement in the public entities to secure a judicious, economic and efficient use of state
resources in public procurement. However over the years, since its enactment, several non-
compliance allegations in procurement processes were leveled against Public Entities and other
stakeholders involved directly or indirectly in procurement activities in the country. These non-
compliance allegations has resulted into inefficiency, delay in procurement due to long
procurement processes, high cost of projects, lack of fairness, transparency, and non-
discrimination in the selection and award of government contracts, as well as inflating contract
figures. Public Entities are also confronted with procurement issues such as professionalism,
limited career development opportunities for procurement staff in the public service, and weak
contract management (Elegbe, 2011). The Nigerian government as well as the construction
industry has witnessed lots of irregularities relating to the level of compliance of stakeholders to
issues relating to public procurement. This irregularities includes fiscal irresponsibility,
corruption, absence of centralized control, paucity, and non-use of qualified personnel, all
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leading to delays, overruns (cost, time) low quality, and general dissatisfaction and astronomical
cost to the economy (William, 2008).
The issue of procurement compliance is an area in which little research has been out carried in
recent times. This is appalling, because public procurement is part of the basic parameters for the
growth of a countrys economy. Several researchers have carried out various works on public
procurement in Nigeria, but majority of them have not been able to carry out studies on the level
of compliance with the Procurement Act of 2007. Elegbe (2011), compared the Public
Procurement Act of 2007 with the International procurement practices, Shwarka and Anigbogu
(2012), worked on the impact of the Public Procurement Act of 2007 on public projects delivery
in Nigeria, but none of these researchers have been able to carry out studies on the level of
compliance with PPA 2007. This has left a very wide knowledge gap which the study intends to
fill; therefore a thorough evaluation of the level of compliance with procurement act of 2007 is
highly required.
This study outlines the events leading to the public procurement reforms in Nigeria and discusses
challenges that confront the smooth compliance to the law. Some pragmatic ways, which if
adopted, could improve the effectiveness of the law and reduce the operational challenges will be
suggested. Substantial evidence in literature suggests that procurement problems relating to
Nigeria are similar to the situations in many African and some Asian countries (Ngowi, 2008).
The challenges observed and the remedial steps suggested are therefore of wider importance to
many developing economies.
A number of authors have investigated the factors that militate against compliance to
procurement around the globe (Thai, 2004; Wittig & Jeng, 2004; NPPA Annual Report, 2005).
However, these previous studies have not reported on obstacles to the compliance of
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procurement entities in Nigeria. There is therefore the need to undertake a rigorous analysis of
factors that have prevented the law in Nigeria from achieving the purpose for which it was
enacted.
The object of this study is to identify the specific challenges, in the case of Nigeria, that militate
against the smooth compliance of the Public Procurement Law and to proffer some solutions to
address the issues that confront the successful compliance of these law. Further this study aims at
promoting discussion and reflection on steps needed to promote procurement.
1.2 RESEARCH PROBLEM
A careful analysis of Nigerias corruption indices clearly indicates that one of the primary
sources of corruption in the country resulting in massive looting of the public treasury is through
fraudulent practices and leakages in the public procurement system (Wahab, 2008). These
diffractions found expressions in fraudulent and discretionary practices such as wanton disregard
for rules and procedures, abuse and short-circuiting of the contracting system, favoritism,
nepotism, price inflation, over-invoicing, disregard for standards, specifications, competence,
experience, quality and qualifications.
The utility of any procurement method is measured in terms of time/speed, cost, quality and
other variables such as certainty, flexibility of the method to accommodate unforeseen but
important design changes without a problem, ability to deal with complex projects, the level of
risk associated and how risk is shared and finally the avoidance of disputes (Osei Tutu, 1999).
Public Institution and Government Agencies in Nigeria are regulated in their procurement, since
2007, by the norms of economic transaction established by the state. The 663
rd
Act of the Federal
Republic of Nigeria entitled The Public Procurement Act, 2007 was enacted to provide the
legal framework for the procurement of public works following from past administration within
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the Nigerian economy, a general feeling that Public Procurement Act 1999 lacked the required
level of competition and transparency in the utilization of public funds. For instance, at the pre-
qualification stage, most agencies/ministries do not clearly state the requirements i.e. responsive
requirements like Certificate of Incorporation, Tax Clearance Certificates and Registration with
appropriate Ministries are not so indicated. According to Elegbe (2011), most developing
countries depend majorly on the World Bank as its catalyst for initiating a public procurement
reform. In 1999, World Bank conducted what is known as a Country Procurement Assessment
Report (CPAR) of the Nigerian public procurement system and found a number of deficiencies
with the system. It was found that Nigeria did not possess a public procurement law and there
was no institution with the responsibility for issuing policy direction on public procurement as
well as no defined standards for conducting procurement. Little wonder then that public
procurement was characterized by irregularities, fraud, corruption and mismanagement, so in
order to address the loopholes in public procurement in Nigeria, the Public Procurement Act of
2007 was enacted.
The study sets to assess the extent of compliance with the provisions of the Federal Public
Procurement Act, enacted in 2007 with a plight to ascertaining its effect on the Nigerian
economy and the entire procurement process.
1.3 RESEARCH QUESTIONS
Is the government complying wholly to the establishment of structures for
implementation of the Act?
Are there factor that could hinder the effective implementation of the Act?
What is the significant compliance indicator set out by the Public Procurement Act?
Is the entire process effective?
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1.4 AIM & OBJECTIVES OF THE STUDY
1.4.1 AIM
The aim of this research study is to assess the extent of compliance with the provisions of the
Federal Public Procurement Act, enacted in 2007 with a plight to ascertaining its effect on the
Nigerian economy and the entire procurement process.
1.4.2 OBJECTIVES
The objectives of this study are:
1. To determine the level of awareness of stakeholders about the Public procurement Act
2007 in the Nigerian Economy.
2. To identify significant factors hindering the effective implementation of the Public
Procurement Act 2007
3. To assess the efficiency and effectiveness in the entire process during the adoption of the
Public Procurement Act 2007
4. To investigate the level of government compliance in establishing structures for
implementation of the Act
1.5 HYPOTHESES OF THE STUDY
HYPOTHESIS ONE:
H
0
: There is no significant relationship in the level of compliance with the procurement act
between government establishments and private organisations
HYPOTHESIS TWO:
H
0
: There is no difference in the perception of respondents on factors hindering effective
implementation of the procurement act

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1.6 SIGNIFICANCE OF THE STUDY
The results of the study will create awareness on processes required towards the adoption of
Public Procurement Act of 2007 for the procurement of public projects. Contractors, Consultants
and the general public will be aware of the activities of the procuring entities whether they are
complying with the provisions in the Public Procurement Act 2007 as regards compliance, and
also the challenges facing the operation of Public Procurement Act 2007 will be made known
and also, it will proffer solutions to the government on ways of tackling the challenges faced by
this Act since there will be compliance indicators that could be referenced.
The outcome of the research would be insightful to academia, as it would make significant
contribution to the body of knowledge by outlining the essence and advantage attached to the
adoption and/or compliance to the Procurement Act of 2007 (PPA, 2007) in the construction
industry. It is expected that this study will contribute a great deal to the growing list of literature
on the subject matter upon which further areas of study may be based. The study will also help
the economy by providing means to assert efficient procurement options hence having an
economic effect on project outcome in aggregate. The study will also favour contract
procurement processes and will therefore favour the adoption of the best practice with less use of
shady methods towards selection. It will give the client satisfaction in terms earning value for
their money. It is envisaged that this study will also provide another pedestal upon which further
studies and future research will be conducted.
1.7 SCOPE OF THE STUDY
The study evaluates the level of compliance with Procurement Act 2007, the scope of the study
will be limited to the activities of the procuring entities in the Nigerian construction industry, due
to time constraints in this research, the procuring entities within the tertiary institutions in Lagos
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state will be visited, and information will be obtained from the procuring officers within these
institutions. Lagos state is chosen as study area because of its closeness to the study area.
1.8 DEFINITION OF KEY TERMS
PROCUREMENT: Procurement is the acquisition of new buildings or space within buildings
either by direct buying, renting or leasing from the open market, or by designing and building the
facility to meet a specific need.
WORKS: Is associated with the construction, reconstruction, demolition, repair or renovation of
a building or structure or surface and includes site preparation, excavation, erection, assembly,
installation of plant, fixing of equipment and laying out of materials, decoration and finishing,
and any incidental activity under a procurement contract.
PPA 2007: Public Procurement Act 2007
PUBLIC: Simply means the body of people that constitute a community, a nation or country.
PUBLIC PROCUREMENT: Means acquisition of goods, works and services for the benefit of
the members of the public.
COMPLIANCE: A stipulated number of provisions which must be complied with to avoid the
wrought of the laws.