Tackling scourge of failed contracts and contractor payments

The payment of N2.4 billion to 17 contractors who failed to execute the projects, as recently reported, epitomises a bad practice that has unfortunately become pervasive in the Nigerian public sector. It is an issue that is manifesting corruption in high places, and aggravating the steady failure of the state, given, in particular, that the failed contracts ultimately deny the populace of the dividends of democracy and good governance. To that extent, the dirty habit sets the country back whenever it occurs.

Failed contracts in Nigeria hinder development and erode public trust. A significant contributor to this problem is the troubling phenomenon of contractors being paid for projects that are never completed or are poorly executed. This practice not only wastes public funds but also perpetuates a cycle of corruption and inefficiency.

Several factors contribute to this problem, most especially the lack of transparency and accountability in the contract awarding process. Favouritism, nepotism, and bribery often play a role, leading to contracts being awarded to unqualified or unscrupulous contractors. There are stories that some contractors only exist on paper; no physical office and they are awarded humongous contracts, some of them as compensation for particular political lineage.

Some of these contractors duly lack the technical expertise, financial capacity, or commitment to complete the project, resulting in substandard work or outright abandonment. The report on the 17 contractors is worrisome and should not be accepted. These contractors should be identified and appropriately sanctioned.

The report emanated from TRACKA, BudgIT’s service delivery promotion platform, which allows citizens to collaborate, track and give feedback on public projects in their communities, disclosing that 17 contractors with 15 projects across nine states are yet to do anything as far as the contract is concerned. Some of the payments and projects include the payment of N401 million to contractors in December 2023 under the Federal Ministry of Works and Housing for the Rehabilitation of Welcome-Nasarawa-Farewell from Nasarawa, linking the Northern and Southern parts of Nigeria in Nasarawa LGA, Nasarawa State.

Others are N153 million to another company between August and November 2023 under the National Institute for Construction Technology, Uromi, for the fencing, landscaping and completion of Onicha-Uku Town Hall and Event Centre at Aniocha/Oshimili in Delta; and N88 million to yet another named contractor in December 2023 under the Pharmacist Council of Nigeria for the Construction and Equipping of PHC Centre in Adedeji community in Ikirun, Osun State.

These and other payments, worth N3.9 billion for abandoned projects nationwide were highlighted in Tracka’s 2023/2024 Report, titled: “Achieving National Development through Efficient Service Delivery.”

Expressing concern over the non-execution of critical public projects despite the disbursement of funds, BudgIT’s Country Director, Gabriel Okeowo, lamented that despite the clamour for increased allocations to capital expenditure by the Federal Government and sub-nationals, BudgIT’s tracking exercise revealed that capital projects were the largest conduits of embezzlement and misappropriation.

Already, the Socio-Economic Rights and Accountability Project (SERAP) has sued President Bola Tinubu and Attorney General of the Federation and Minister of Justice, Lateef Fagbemi (SAN) at the Federal High Court sitting in Lagos State over failure to direct the Minister of Finance and Coordinating Minister of the Economy, Olawale Edun, to name and ensure the prosecution of the contractors, who collected over N167 billion from 31 Ministries, Departments and Agencies (MDAs), but failed to execute any projects.

In the suit, SERAP argued that the allegations of corruption involving many companies and contractors, who collected over N167 billion from 31 MDAs, have continued to impair, obstruct and undermine poor Nigerians’ access to public goods and services. The body also posited that holding the companies and contractors, who collected over N167 billion from 31 MDAs but disappeared with the money will prevent and combat waste, fraud and abuse in the spending of public funds.

According to SERAP, there is a legitimate public interest in not shielding or allowing ingrained wrongdoing by companies and contractors to go unpunished. SERAP argued that the consequences of corruption are felt by citizens daily, as corruption exposes them to additional costs to pay for health, education and administrative services.

The Minister of Works, Dave Umahi, the ministry, both at the federal and state levels, and other stakeholders within that space have much to do in ensuring that projects are completed adequately well as and when due and also ensure that contractors that failed to complete given projects are sanctioned no matter whose ox is gored.

One of the causative factors of abandoned projects in Nigeria is weak oversight and monitoring of project execution. Government agencies responsible for supervising projects often lack the resources or capacity to effectively monitor progress and ensure compliance with contract terms. This allows contractors to cut corners, use substandard materials, or divert funds, leading to project failure.

Further, the payment system itself can be flawed, when contractors receive substantial upfront payments or milestone payments before completing significant portions of the work. This creates an incentive for them to abandon projects, knowing the culture of non-accountability.

The consequences of this situation are far-reaching. Failed contracts result in the loss of public funds, delayed or non-existent infrastructure development, and a general sense of disillusionment among citizens. It also discourages reputable contractors from bidding for government projects, as they cannot compete with those who engage in unethical practices.

Addressing this problem requires a multi-pronged approach. First, there is a need for greater transparency and accountability in the contract awarding process. This can be achieved through competitive bidding, clear evaluation criteria, and public disclosure of contract details. Stricter due diligence should be conducted on contractors to ensure their suitability and capacity.

Second, project monitoring and oversight must be strengthened. Government agencies should be adequately staffed and equipped to conduct regular inspections and enforce contract terms. Independent audits and public feedback mechanisms can also help to ensure accountability.

Further, the payment system should be reformed to align payments with project milestones and deliverables. This will reduce the risk of contractors abandoning projects after receiving substantial payments. Performance-based contracts, where payments are tied to the achievement of specific outcomes, are worth being considered.

Lastly, there must be consequences for contractors who fail to deliver. Blacklisting, legal action, and recovery of funds should be pursued vigorously to deter unethical behaviour. The fight against failed contracts and contractor payments is crucial for Nigeria’s development. By addressing the underlying issues and implementing effective reforms, the government can ensure that public funds are used wisely and that projects are completed to the benefit of all citizens.