I’d like to comment on the fact that the Federal Ministry of Works did not execute any Capital projects in 2017. As always, my comments will be from a technical, rather than political, angle.
First, some basics. The way it should run is that the annual budget runs from January to December every year. Quite often, it doesn’t get passed until the May or June of its year of operation (5 or 6 months late). Naturally, this makes nonsense of any plans it should fund.
Whose fault is it that the budget is late? We like to blame the legislature and they deserve part of the blame. Sometimes they deliberately delay the budget to extract things from the Executive. However, they are not a rubber stamping function and must have time to scrutinize budgets.
However, I think the bulk of the blame for the late passage of the budget lies with the Executive. Most times, they don’t submit the budget to the Legislature until Nov/ December. What magic does one expect from them for a 2,500-page document that should start on 1st January?
Perhaps late submission may have been forgivable if you had carried the Legislature along in the preparation phase. That way, they don’t get any nasty surprises or misunderstand genuine budgetary proposals. Also, nobody is shouting “Suspicious Item! or “Padding!” every January.
In order for the government not to shut down, government is allowed to continue spending Recurrent at the same level as last year for us to 6 months. For Capital, it is treated as running for 12 months from the date of last year’s budget passage until the new budget is passed.
This flexibility is absolutely essential, otherwise government could simply stop. Disaster of unimaginable proportions. Those that mouth off that government does nothing would repent and take penance if government were to stop for just 1 day. But flexibility leads to complacency.
So, every single year, we behave as though we didn’t know we would need to prepare a budget. What should happen is: There should be a Medium Term Plan and Budget (say 3 years), supported by rolling Fiscal Strategy Papers & Medium Term Expenditure Frameworks, adjusted annually.
Now what happened was that the current government wanted to improve the budgeting system, which was absolutely necessary. It introduced a new Zero Based Budgeting system in 2016 for the Capital budget. It basically meant that all Capital proposals must be justified from scratch.
Naturally, there were teething problems, which I won’t go into now. It was better for the 2017 budget but not perfect at all. Suffice it to say that changing a budgeting system, budgeting personnel and budgeting templates is not easy. Perhaps govt underestimated the difficulty.
Anyway, by the time the 2017 budget was passed, it was June. Money wasn’t released against it until August, and only for priority ministries. The Power, Works Housing Ministry should have been prepared. It wasn’t. I’ll tell you why when I continue this thread
Now, before the 2018 budget, there was no Medium Term Plan on which to base the budget. The Economic Recovery and Growth Plan filled that gap. So we now at least have a plan to 2020. That’s good.
What’s even better is that the 2018 budget was tied to the ERGP. This wasn’t happening before. The absence of a link between budgeting and planning is what led the government to merge the Budget Office with the National Planning Commission to form Ministry of Budget and Planning.
Someone has pointed out that the issue was that no NEW projects were started in 2017. Of course, that’s what I meant. The why is what I am trying to explain. Now let’s get to the meat of the problem. As I said, the Budget was passed late. No releases until August.
Nigeria has a Public Procurement Act, 2007. The Act codified the work of the Due Process Office and established the Bureau Of Public Procurement. The law accords to international standards as set out in an IMF template. It was absolutely necessary. But there are problems.
The primary purposes of the law were to stop Procurement fraud and to ensure a level playing field for all potential bidders. It has benefited the country a lot and has saved government in excess of N700 BILLION in the 10 years it’s operated. But, as I said, there are problems.
For any new projects over N2.5 million, the law requires advert in at least 2 national newspapers. Quite often, this can be a problem. For a contract of N3 million, you can spend N2 million on adverts. Where’s the value for money, you would ask? But don’t forget the twin purposes
You must allow bidders at least 6 weeks to submit bids. Then you need to properly evaluate the bids. That can take a while, sometimes it can take just 2 weeks, but at other times, up to another 6 weeks, depending on complexity. Why should it take that long, you may ask? Valid.
You see, the Public Procurement Act is a brutal Law. As a former Accounting Officer (someone that was responsible for “writing cheques” for Government money), I am responsible for ALL procurements in my time in office FOR THE REST OF MY LIFE! I can go to jail. You can’t rush it.
In a Ministry, the Perm Sec (not the Minister) is the Accounting Officer and the Chairman of the Tenders Board. Civil Servants are naturally cautious. Senior Civil Servants, Like Perm Secs, are also very busy, believe it or not, going from meeting to meeting. It takes time.
Then you need to do due diligence to make sure the preferred bidder is legit, is properly registered, has 3 years tax clearance, ITF registration, is registered with PENCOM, etc. then you start negotiating with your preferred bidder. If over N100 m, you must get FEC approval.
To even get it on the agenda of FEC, a lazy SGF can frustrate you. Oh, don’t forget: you cannot award any contracts until you have cash backing. You can’t have cash backing until the money is released by the Ministry of Finance. Before you know it, 6 months have passed.
So, when you have all these issues, plus the late passage of the budget, December 2017 is already upon you. You haven’t even negotiated with the preferred bidder or obtained a Certificate Of No Objection from BPP. This happens every year. Many blame the PPA 2007 and BPP.
Now, the law is that you mustn’t award a contract without cash backing, NOT that you can’t start the procurement process before you get cash backing. You can do everything other than award while waiting for cash backing. This is what Ministry of Power, Works and Housing didn’t do.
To be honest, many Accounting Officers don’t want to go through the entire process without knowing what will eventually be approved in the budget or what will be released by the Ministry of Finance. The wahala* of getting it all revised is a major headache that you want to avoid. As I said, the purpose of the PPA 2007 is to stop procurement fraud and provide a level playing field for bidders. These are lofty goals, but, as you can see, it can rub off against the goal to deliver projects speedily. I think that 10 years since its passage, it’s time for review.
Coupled with late passage of the budget, and the ambition of government to reset the budget calendar to ensure that the budget year starts properly in January, you can see why 2017 projects could not be started. So, what do we do to avoid future occurrences?
Here are my thoughts
We need to pass the “Organic Budget Bill” that is before the National Assembly. That Bill when passed into Law, will provide a deadline by which the Executive MUST submit the budget proposal and a deadline when NASS MUST pass it, failing which it becomes law.
Secondly, review PPA 2007 to focus on DELIVERY, while still providing protection against contract fraud and ensuring a level playing field. So, is Fashola to blame? Perhaps as Chief Executive of the Ministry, a member of FEC and a senior lawyer.
But, hopefully, you can see that he’s (Fashola), somewhat, a victim of “the system.” Could he have got the Permanent Secretary to start the procurement process sooner? Yes. Would it have made much of a difference? Maybe. Maybe not.
* Dr Joe Abah is the Country Director, DAI Nigeria, and a visiting lecturer, Maastricht Graduate School of Governance, Maastricht University, and a Former Director-General, Bureau of Public Service Reforms Nigeria.