Port Harcourt- Maiduguri Railway Rehabilitation : Contractor Alleges Fraud, Drags FG to Court

Why we Head to Court -Kuchi

Leadership: Musa Ibrahim Kuchi is the project development coordinator of Insight Dynamics Resource Ltd. He recently addressed select journalists where he alleged serious breaches in the award of contract for the rehabilitation and reconstruction of the Eastern Line Railway project among other issues.

In your recent press interview you accused the Transportation minister and the director-general, Bureau of Public Procurement (BPP) of irregularities in the handling of the contract for the rehabilitation and reconstruction of the Eastern Railway Line. What exactly are the issues?

What we are saying is that the Hon. Minister acted in breach of the law in seeking a no objection certificate to award contract for the rehabilitation and reconstruction of the Eastern line and that the BPP acted ultra vires in issuing such a certificate. Sections 16 & 40 of the Public Procurement Act 2007 clearly stipulates 5 years imprisonment without option of fine for such an infringement. The Federal Executive Council was misled into approving the contract by reliance on a defective certificate issued by the BPP.

Recall that the Federal Executive Council recently granted approval for the award of a contract to the Chinese contractor, CCECC, for the rehabilitation and reconstruction of the Eastern Line in the sum of $3.1bn. The papers forwarded to the BPP by the Ministry are irregular in many respects and calls to question the motivation of the minister. Furthermore, the minister wants to take a loan for the project from the Industrial and Commercial Bank of China Ltd ( a private financial institution) to be backstopped by a sovereign guarantee at an interest rate of more than 3% whereas the US Eximbank offers a cheaper interest rate of 1.8% which the ministry spurned.

But why should the minister be interested in taking loan for rail development project from a non government private bank?

Good question especially when government to government arrangements are possible offering concessionary loans at lower interest rates such as offered by US Eximbank. Usually loans such as the Chinese ICBC one are backstopped with a Federal Government sovereign guarantee and one danger of it is, that the sovereign guarantee may be discounted at 75-80% of its face value thereby allowing the contractor to receive money upfront while leaving Nigeria exposed. This may explain why the minister has been misleading the government and the public by claiming that there is no alternative to China for funding of the railway projects even after US Eximbank has written over 80 mails to support railway development in Nigeria. Note that only Lagos – Ibadan Rail project is being finance by Chinese Eximbank, all other projects are Chinese private commercial Bank, and that is wrong especially where Nigeria’s sovereignty guarantee is involved.

But you also claim the BPP acted ultra vires?

Yes, the BPP may have succumbed to political pressure and said it appears that only the Chinese company (CCECC) price assessment was used. That would be a clear violation of Section 16 and 40 of the Public Procurement Act. The minister apparently foreclosed any opportunity for other companies to bid openly and competitively, therefore there is no transparency in the process. The tender was not advertised. The documents submitted to BPP by the Ministry reveals that the process of deal preparation appears deeply flawed with the contractor/concessionaire appearing to play the role of technical advisor as well which portends a conflict of interest.

The contractor should not prepare the feasibility study that forms the basis of the Outline Business Case (OBC).. Such items of work should be undertaken by an independent consultant acting as transaction advisor who should also be procured through an open tender. Prior to a OBC, there should be a scoping study incorporating a condition survey and also include a Bill of Quantities for the tendering contractors to price. Such an independent consultant would also produce an estimate of the scope of work that would form the benchmark for assessing bids. There is no justification or basis for assessing the contractor’s price in the manner used whereas it is a fundamental principle of the Public Procurement Act, that open and competitive tenders provide the best price assessment and value for money. You can’t be a referee and a player in the same game.

What is the ideal benchmark for awarding railway rehabilitation contract?

Look, rehabilitation contracts were awarded on the Eastern Line in 2011 for about $500m and by 2018, with about 70% of the contract sums expended/committed, the contracts appear to have been effectively abandoned by the government for no discernible reason. Railway services from the South East that commenced at the end of 2014 to the North had effectively stopped because the contracts were not completed and tracks vandalised. Now the question the ministry has to answer is why is it now coming forward to award the same scope of work for over three times the price of the original contracts ($1.84bn) comparatively and when an aggregate of 70% of the original scope of work may have been completed just a few years earlier.

So, are you now saying there are discrepancies in the ministry’s report?

Absolutely, they need to explain why the same scope of work is proposed to be awarded to CCECC at $1.8bn or (N650bn) instead of the balance of about N15bn required to complete the existing contracts. The same CCECC that rehabilitated the narrow gauge railway from Lagos to Jebba with N12bn ($80m) or $200,000 per km is now proposing to rehabilitate Port Harcourt–Maiduguri with $1.4m per km. That is a 700% cost inflation! Call it daylight robbery if you will. How is this possible?

For a nation that intends to diversify its economy from being oil dependent to now be contemplating narrow gauge rail alignment is the last thing a sincere ministry would undertake in the 21st Century as the narrow-gauge railway does have numerous disadvantages: When transporting goods, the cargo needs to be reloaded at transshipment stations for onward transportation by regular-gauge trains, signals and aerial lines are largely done away with, and elaborate automatic switches and block modes are rarely used. The narrow-gauge railways are also less smooth than normal railways, meaning jolts and vibrations are felt more intensely..

What do you intend to achieve by going to court ?

We want the right things to be done. Let the court direct them to go and comply with the law and stop doing back door procurement.

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