The 2021 Finance Bill and public procurement

A new and incredible precedent is being set in Nigeria’s legislative and law enactment practice. This appears to be playing out more in the economic management arena. It is the practice of using one piece of proposed legislation to engage and react to so many extant laws and policies. It is the practice of ad-hocism which reacts to what happens or is needed at a particular time, rather than plan in advance. It is reactive rather than being proactive, some form of knee jerk, not well-thought-out process of enacting laws. Such an approach to lawmaking, especially in the economic policy arena and in a time of recession and economic crisis is fraught with grievous challenges; instead of solving the problem, it may rather deepen the challenges.

The proposed Finance Bill 2021 falls into this category. It is an ambitious bill which seeks to amend and finetune the Capital Gains Tax Act, Companies Income Tax Act, Personal Income Tax Act, Tertiary Education Trust Fund Act, Customs and Excise Tariff Act, Value Added Tax Act, Federal Inland Revenue Service Act, Fiscal Responsibility Act and the Public Procurement Act. Just one bill to attend to all the challenges identified in nine extant laws. This is not right, and this is not a best practice in the consideration of issues and policies relating to extant laws.

The foregoing are very detailed laws covering various aspects of our economic and fiscal policies. Each of them has different experts and competencies needed to attend to their review after a thorough review of empirical evidence arising from their implementation to discover extant mischiefs which need to be suppressed and remedies advanced. The review should also be informed by the engagement and consideration of stakeholders’ views to guarantee that the demand and supply side are ad-idem in the new policy thrusts.

The impression created when every Appropriation Bill is accompanied by a Finance Bill is that the resulting Finance Act will expire with the Appropriation Act which expires within a period of 12 months – January to December in accordance with the 1999 Constitution and the Financial Year Act. But this is not the case as the Finance Act simply survives the financial year and continues in operation. We have enacted the Finance Bill 2020 and now it is time for the Finance Bill of 2021 to be considered and enacted. The challenge is that the issues being considered in the Finance Bill are too weighty to be rushed and decided upon within the short span of time left for the bill to accompany the legislative approved budget to the table of Mr. President for his assent. The expectation is that this should happen before the New Year. So, in the legislative haste, once a mistake or a wrong decision is taken, we must live with it until some indeterminate future time when an amendment will be proposed and considered.

It is against this background that this discourse reviews some key provisions of the 2021 Finance Bill in the field of public procurement. It is pertinent to recall that there have been so many attempts to amend the PPA which have failed because of ingrained personal interest of stakeholders from the executive to the legislature. It seems that the current attempt seeks to get through the front door what was impossible from earlier surreptitious moves. The Finance Bill seeks to amend Section 35 of the PPA to increase mobilisation fee for contractors and service providers from the extant 15 per cent to 30 per cent. This raises a lot of questions; what is the mischief in the 15 per cent extant provision that a higher fee of 30 per cent will remedy? There is no benefit inuring from the proposal for the public good or emerging from empirical evidence from the implementation of the PPA. It is also not founded on any best practice, international or comparative experience. Rather, the proposal is fraught with inherent dangers that will expose public resources to mismanagement and create a perverse incentive for contract abandonment.

Every contractor, service provider who applies for government commerce avows under Section16 (6) (a) (ii) that he has financial capacity to execute the contract and further goes ahead under a verifying affidavit to aver that all the information he has supplied is true. What is financial capacity to execute a contract? It is the financial capacity to raise the requisite funding to carry out the task and to process payment after the requisite certificates have been raised and approved. And this is a fundamental requirement that a bidder should meet before being approved as the bid winner.

The more challenging issue is in terms of profit margins as it relates to public contract implementation. If a contractor collects 30 per cent upfront as mobilisation, what will be his incentive to fully implement the contract? What are the margins available in government commerce? Are they way above 30 per cent? Assuming the profit margin is just 30 per cent or lower per cent and a contractor gets 30 per cent upfront, the temptation to abscond and get free money without sweat will be very great especially if you consider that this is just what you may get after all the sweat and challenges of implementation.

Furthermore, abridging the time for the issuance of “Certificate of No Objection” to two weeks after which the certificate is deemed to have been issued in the event the Bureau of Public Procurement delays is outrageous. Imagine the delay is caused by the procuring entity’s failure to provide the requisite documentation necessary for the Bureau to issue the certificate or the entity’s failure to comply with the requirements of the law. So the procuring entity goes ahead without complying with laid down standards and procedures? This is a dangerous proposition which should not see the light of the day.

Furthermore, requiring that all procurement process and procedures are concluded within 60 days from the date of advertisement and invitation for bids may be feasible for simple procurements that can virtually be done over the counter. But this is not possible in large complicated works and services where a lot of iteration may be necessary especially in procurement of services for unascertained needs.

The surprising thing is that the proposal for amendment refused to address key and critical procurement challenges. It was silent on the inauguration of the Public Procurement Council. It was also silent on so many budget projects chasing extremely limited funds to the extent that public revenue is so thinly stretched over thousands of projects for which available resources cannot complete.It is silent on stopping the massive procurement fraud that deprives the public of value for money.

In conclusion, the recommendation is simple and straightforward. The proposed amendments to the PPA cannot fly. They should be dropped and if the authorities feel strong enough about them, represent them as a single bill on its own. The amendments to the other eight bills should be separated into a bill for each extant law. The amendments should not be rushed. Enough time should be allowed for their consideration.

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The 2021 Finance Bill and public procurement

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