‘Agreement default stalls $20m re-fleeting exercise for NCAT’
The contract to acquire 20 new training aircraft for the Nigerian College of Aviation and Technology (NCAT) at the sum of $20million has lately been enmeshed in controversies, with allegations and denials that the contract bypassed due process and might have been inflated. At the middle of it all is the contract awardee, Interjet Nigeria Limited, whose its Chief Executive Officer, Seun Peters, explains to reporters why none of the aircraft has been delivered till date among other sundry issues. WOLE OYEBADE was there.
Background to the refleeting exercise
NCAT for a long time since 2005 has been trying to re-fleet its aircraft because what they had were very old aircraft. They had gone to several aircraft manufacturers like Bell, Cessna Aircraft and all over United States, but their research kept leading them back to Diamond Aircraft in Austria, because we have the safest aircraft and the most easy to maintain. Interjet Nigeria Limited is their authorised representative in West Africa.
Sometime in 2013, they approached Diamond directly to say that they wanted to buy from them. That was during the time of the immediate past rector of NCAT. Diamond, however, referred them back to us (Interjet) as their representative. More so, we are based in Nigeria.
They (NCAT) came to us and we submitted documents to change their old fleet to new one. We went back and forth till they contacted us in 2014 that they have gotten approval from the Bureau of Public Procurement (BPP), and a letter of award issued to us. We believed they were being proactive and it is not our business to ask whether or not they got presidential approval. The letter just stated that we have been awarded the contract.
The actual figure of the award is $20million for 20 aircraft, split in four tranches; 15 of the DA40 and five of the DA42. It was supposed to be five aircraft delivery every 12 months because production takes between five to six months.
I’ll like to emphasize that even in the BPP’s letter, it was stated that we were agents to Diamond. We were not an emergency company that just surfaced or a middle-man company. We represent Diamond as their authorised agent.
We were given the contract but there was a lien on the part payment of 15 per cent. It was not until after the presidential approval in April 2015 that the money was released to us. Meanwhile, we had placed the order in November 2014 for production. Aircraft is not like cars that you just pay and collect; it has to be produced on request. Production lasts between five to six months. We placed the order and they have started the production of five aircraft – three DA40 and two DA42, while we made the down payment to them based on what we were paid by NCAT.
Does the payment cover the whole sum or part payment?
Based on the agreement we had, it was supposed to be 15 per cent of the total sum, but what was paid was less than that 15 per cent. Yet, we went ahead in good faith based on the trust we have in NCAT to start production.
So far, we produced five aircraft. Subsequently, we’ve sent several letters to NCAT to come and make further payments so that they can collect their aircraft. We did not hear from them. Diamond had to take a position since there are demands waiting. And the unique thing about aircraft is that once you produce and it is on ground, the time starts running for maintenance.
Diamond was forced to sell three out of the five aircraft produced; the DA40s after seven months of waiting. They kept the two DA42. When they saw that we were still not coming, they had to sell one DA42 that has some special avionics for the Nigerian terrain. But they had to sell it at the price of an ordinary aircraft because the aircraft was just sitting there amidst its maintenance and all that.
There is just one aircraft waiting for NCAT now, for which the down payment paid to us covers but Diamond is already asking for penalties since it has been kept for 14 months. We are appealing to NCAT for specific performance on the contract to make payment so that we can continue.
There is already an allegation challenging the due process of the contract and the legal status of your organisation too.
Yes, we are aware. This is a company that has been in business since 2010. We are not just registered. The question those faceless petitioners should ask themselves is that can BPP or even NCAT do business with a company that is not registered and does not have a certificate of incorporation? Or will the Air Force, our client that we have dealt with successfully and supplied their two aircrafts and a simulator, deal with an unknown company? These are the questions they should ask themselves.
They have alleged that we do not exist when NCAT gave us the contract in 2014. The change of name really has nothing to do with the company itself. We did not even change ‘Interjet’ that was the name and style we have always operated with. We changed ‘maintenance’ to suit our new engagements and to that effect, we got a new certificate issued, but with the same old number. Anyone in doubt can be referred to the Corporate Affairs Commission. The allegation that our company was not in existence is malicious.
Was it these allegations that caused the breach in agreement on the part of NCAT?
I don’t think so. Even the manufacturer had written series of letters to NCAT, to say that they should come and perform or tell us what is going on and why has additional payment not been made. In the last letter, they told Diamond that they have only one plane left and kept for them based on what their payment covered. The agreement we signed with NCAT is that at this stage, they are supposed to have made at least 85 per cent payment.
But why is the initial payment less than 15 per cent that was agreed?
That may be partly due to the foreign exchange variation at the time. The payment was made in 2014, but funds released in 2015. The contract was awarded when the exchange rate was N184 to $1. When the contract was awarded, they paid us a part payment of N320m that didn’t cover the 15 per cent agreement. But given the organisation we are dealing with, we gave a personal guarantee to Diamond to go ahead and produce. I think what delayed them was that they have not gotten the presidential or FEC approval, which came in April 2015. Like I said, though they paid us, we did not have access to the money because they put a lien on it.
Why would your parent company sell four out of the five aircraft given the part payment already made?
The payment made was like a down payment and more payment was expected as agreed. But the five aircraft have been produced and waiting for about seven months. That was the case because they respected the source of the award, being the Federal Government and with the bank guarantee.
The agreement we had with NCAT says on signing the agreement there shall be payment of 15 per cent as advanced payment guarantee; payment of 20 per cent upon issuance; payment of 50per cent upon submission of final inspection. NCAT officials have gone for inspection and they had seen the aircraft but they did not release the money, so right in front of them they started selling them off. Aircraft is not something that is kept on ground.
What exactly do you want now, if the project is still valid?
We want specific performance of the contract signed. We want NCAT to pay all that is due because we are owed now about 85 per cent of the sum. The first five aircraft should have been delivered since last year, if they had paid us. In event that they fail to comply with the terms of the agreement, we may have to resort to legal action.