The High Cost of Federal Procurement

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THE PUBLIC SPHERE with Chido Nwakanma

Firms and individuals seeking to do business with Ministries Departments and Agencies of the Federal Government must scale a high barrier. The Government requires that they secure a “certificate of compliance” from no fewer than seven government agencies. Without those certificates, they cannot offer services.

The mandatories are CAC certificate of business registration, registration with the Federal Inland Revenue Service for VAT, withholding tax and corporate tax and registration and payments with the Nigerian Social Insurance Trust Fund. The firm or consultant should also have three years’ tax clearance certificate, PENCOM registration certifying a minimum of three staff and pension payment for those minimum three staff for at least three years at a minimum of N180, 000 per head.

The rule is that “All organisations must provide proof of compliance with the provisions of the Pension Reform Act, 2014 (PRA 2014) by obtaining the compliance certificate”. An “authorised official” of the applicant organisation must provide a certified list of employees dated the last fiscal year. She should also provide a certified rate of monthly pension contributions specifying employer and employee rates. The rates are ten (10) per cent by the employer and a minimum of eight per cent by the employee.

If an organisation has existed for five years, it must show pension contributions for all employees for at least three fiscal years. Organisations of less than three years in existence would show evidence of payments from the date of incorporation, registration and license with PENCOM. PENCOM or its agent would have to review the contribution and certify it. Then the organisation must have a Group Life Insurance Policy for staff specifying the number of lives and sum assured.

There is more. Each firm must get a certificate from the Industrial Training Fund. It will show that it has paid one per cent of the total staff compensation for one year and do so every year. The count is from 30 June 2011, the commencement of the scheme. The older the company, the more the back payments it would make.

Note also that if it is for a consultancy pitch, the firm would need proof f membership of the relevant professional body. Then the firm would procure a Contractor Certificate from the Bureau of Public Procurement.
The Bureau of Public Procurement introduced this barrier to entry to minimise incidents of unregistered and incompetent firms seeking and getting jobs and then disappearing. It is thus a Nigerian corporate governance remedy to a Nigerian malady. It appears all well-intentioned, as most policies in Nigeria often seem.

There are many benefits. The Federal Procurement Requirements are compelling many firms to pay closer attention to statutory requirements and corporate governance. Small and medium scale enterprises, in particular, are finding that they need to do the needful in compliance. Such firms have a predisposition to ignore these requirements ostensibly or actually because of the more pressing demands of survival.
The requirements also help to strengthen some government organisations and policies. For instance, how many firms ever bother about the Industrial Training Fund unless they are in training, human resource management, or technical trades? Many firms ignore the Pension Act 2014. Their observance is more in the breach until they see a tempting federal RFP or get an invitation to render service at that level. It also strengthens our professional bodies, as it compels members at the business end to do the needful by their associations.
The “demands of survival”. That is the rub. For many SMEs, the Federal Procurement Requirements are a tall order. There are many not-so-pleasant stories about the route to meeting these requirements for many such firms. The negative side of the equation is creating an opening for corruption.

Many states have joined in rolling out tall requirements for doing business with them or even doing business at all in the state. These are happening even as the federal and state governments speak loudly about the “ease of doing business”. Note that these are legal barriers. When you consider the many other human factors that surface, you wonder about the “ease of doing business”.

I invite the relevant agencies to take another look at these requirements. The BPP should also expand its list of professional associations. Many bodies with charter status are yet to get on that list. It presents challenges to professionals in those groups. BPP should pay attention to the increasing fragmentation and atomisation of professional associations. It may need a desk to watch the trends to keep pace and not unduly delay the listing of such bodies.
Could we make the qualification process for federal procurement less lengthy and cumbersome?