Speech by
HIS EXCELLENCY OLUSEGUN OBASANJO
At the Public Procurement Bill Workshop
Abuja, July 12, 2004
It gives me great pleasure to deliver this address at this epochal workshop on Public Procurement Reforms. The comprehensive reform agenda of our administration demands considerable work in order to consolidate and deepen economic development, particularly in the area of management of public resources. Good governance of public resources is the central pivot of the current economic reform agenda that aims at wealth creation, employment generation and poverty reduction. A Public Procurement System that is transparent, effective and efficient and delivers value-for-money in public expenditure is mandatory for such good governance.
Our procurement or contract award system once worked very well to the satisfaction of all in the society. There used to be a time in our history when the principles of openness, competition and cost reasonableness attended the expenditure of public resources. Many of us could remember the era of announcement of public tenders for public goods, works and services to which anyone so desirous could reasonably expect patronage of government if they emerged clear winners.
However, as we began our drift during those seasons of bad governance, these principles were compromised or simply abandoned. Sadly, principles of transparency, fair play, accountability, and open competition were replaced with a broken down contract system that entrenched opaqueness, inefficiency, influence peddling and inflated costs with the attendant high incidences of corruption.
Over the past two decades, as current estimates suggest, a considerable portion of our public treasury was lost due to the poor contracting system. Evidently, a corrupt economic arrangement can never produce a political system that is stable, just, inclusive, and democratic.
Since 1999, my personal commitment to plug sources of leakage of the public treasury has remained paramount and unwavering. Such a task naturally required a firm handle on the contracting procedure and thus led to the introduction and implementation of the now widely known Due Process Reform Mechanism through which we have managed to reduce the aggregate contract cost of various Federal Government projects by over N102 Billion in two years,
In practical terms, we have saved almost one-third of the annual capital budget (using Budget 2004 capital provision). Even more graphic is that such an amount represents about five times the capital budget for Health in any given year, three times the budget for Water and two and half times the budget for Works on an annual basis.
It is important to further show how such wasteful charge on the public treasury impacts on the ability of government to deliver goods and services of governance to the people. Such inflated costs will create a large fiscal deficit. The fiscal deficit will require public borrowing by government to finance. This would of course crowd out private sector borrowing implying that the productive sector would have a hard time finding money to borrow, as Government would have picked up most of what is available.
Worse still, the borrowing will increase the stock of our domestic debt that has grown over the past two decades into its current levels of over N1.5 trillion. It is the fact that we must service this stock of domestic debt every year at current estimates of nearly N180 billion that inhibits our ability to widen the boundaries and size of our annual Capital Budget for development projects.
Thirdly, Due Process prevents the usual lack of competition and also prevents reward for inefficient execution of government contracts.
It is a matter of regret that most contractors in Nigeria have formed the attitude of entitlement to the public treasury. It would certainly have continued to entrench the rent seeking culture of our political, technocratic and business elite that has relegated hard work and production to the background, preferring the quick fix culture of illegitimate and corrupt wealth accumulation.
Furthermore, public confidence in governance is partly a function of how much confidence the citizens have in the procedure through which contracts are awarded. I am aware that we still have a long way to go in this regard, but permit me to state that the Administration has through the Due Process and other related reform initiatives began to rebuild confidence of participants in advertised bids for Federal Government contracts. These days, different thresholds of contracts require different medium of advertisement as a mandatory requirement. I am pleased to note the gradual emergence of a new culture where clearly stated objective parameter of best competitive responsive bid determines the ultimate winners.
To build on the success of tile Due Process so far, we must go beyond the current transitional arrangement. This requires a strategic introduction of a codified, policy-driven and institutionally organised procurement system that should be embraced by all. As the largest buyer in the country, government has a responsibility to ensure that its procurement policy supports its overall economic objectives, and serves as an instrument for attaining those objectives. National legislation Should prescribe a procurement framework that regulates procurement procedures, practices, policies, documentation, preferences and control measures in all organs of State. A National Procurement Compliance Office whose functions should be to ensure that procurement agencies comply with the national procurement legislation should exercise procurement control and monitoring and associated regulations.
The time has come for us to develop both legislative and institutional frameworks for an efficient and effective public procurement system. Currently, over 70% of developing countries have embarked on procurement reforms to meet with international best practice of transparency and competition. This has been done largely through passage of legislative and in some cases constitutional provisions to guide public spending on goods, services and works. Public procurement is thus now globally considered as more than just purchasing of goods, works and services, but rather as a policy tool to achieve social, economic and political objectives.
In real terms a changing environment of technological advances, international trade agreements, changes in business practices, and increased demands by various stakeholders is forcing major changes in public procurement function. We also must embrace the change and partake in the new global trends of public procurement reform that seeks to maximise the benefits of innovation and creativity powered by competition.
This Workshop is, therefore, intended to foster democratic dialogue that is necessary to enhance public and specialised input into the Bill that we shall be submitting to the National Assembly. This particular Workshop is designed for aggregating the views of the entire public sector that encompasses the Executive, Legislative and Judicial arms. A second workshop slated within the week for Lagos will capture the views of civil society groups and the private sector.
It is particularly heart warming for me that a number of the members of the National Assembly and the Judiciary having been invited are present at this event. The democratic nuance of consultation on issues of governance requiring the different but complementary roles of the three arms of government will be nurtured by workshops like this.
Hopefully, by starting off early to involve the Honourable Members of the House and Distinguished Senators in this process of articulating the Bill on Public Procurement, it would make the process of its enactment into law very participatory and therefore easier.
Once this bill is passed into law, we intend to implement it to the letter as part of our overall commitment to transparency accountability and openness based on due process. I know that our usual band of cynics will imagine that the reverse will be the case. Let me reassure you that we shall disappoint them roundly.
I hope that everyone at this Workshop will seize the great opportunity offered to share best practices, discuss issues of concern and exchange work experiences. Should this be the case, I am convinced that at the end the best value will emerge through the system of public procurement that helps us maximise value from expenditure while minimising costs but not compromising quality.
I wish you all very fruitful deliberation and God's blessings.