IMPACT OF PUBLIC PROCUREMENT SYSTEM ON CONTRACT PERFORMANCE OF PUBLIC BUILDING PROJECTS DURING IMPLEMENTATION

IMPACT OF PUBLIC PROCUREMENT SYSTEM ON CONTRACT PERFORMANCE OF PUBLIC BUILDING PROJECTS DURING IMPLEMENTATION

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CHAPTER ONE:

Introduction

1.1              Background of the Study

Public procurement system has been utilised as an important tool for achieving economic, social, and other objectives (Arrowsmith, 1998). Public procurement system is broadly defined as the purchasing, hiring or obtaining by other contractual means of goods, construction works, and services by the public sector (Kipchilat, 2006).

However, it’s a complex system with a set of rules that guide governments purchasing

of construction works and services. Indeed, governments have used public procurement to meet development objectives such as the provision of public buildings and other services (Rege, 2003 as cited in Mutava, 2012). In Nigeria, public procurement system accounts for 80% of its budget expenditure (Aketch, 2005). Public procurement plays a critical role in the Nigerian economy and is an important factor in economic growth( Kadima et al., 2013). The Nigerian economy at the moment is experiencing growth with the public as well as the private sectors being engaged in numerous development building and construction projects with expected socio-economic and governanceimpacts (Abiodun., 2014). Public building works completed in main townsincreased from 86.9% in 2012 to 103.7% in 2013 (Abiodun., 2014). Since thepublic procurement of projects contributes a significant proportion of a country’seconomic growth in terms of jobs creation, capital formation and provision ofinfrastructure services, non-performance in terms of cost, time and quality tocompletion results in delayed economic growth (Baradyna, 2008). Nigerian procurementsystem continuous transformation is expected to address inefficiency in public buildingprojects delivery among others in the country but this has not been the case (Juma,2010). Moreover, public procurement is full of evidence of poor project procurementpractices, (Owegi&Aligila, 2006) as cited in Langat (2012). Munano, (2012) indicates that, only 34.9% of contracted public building projects were completed in the financialyear 2007 to 2011, the rest 65.1% have stalled or are experiencing delays, and costoverrun. Afred (2008) affirmed that public procurement of works suffers fromirregularities in the selection process of contractor that could be linked to, stalledprojects, delay in project completion, cost overrun, and poor quality of work.

Consequences of this underperformance have attributed to delay in project completion,cost overrun and poor quality. It’s therefore worth noting that, contract performancecan be achieved by identifying public procurement-related factors and describing themat early stages of project procurement (pre-tender/contract award process) thus creatinga conducive performance during project implementation as predictors of contractsuccess.

1.2              Statement of Problem

The adoption of Public Procurement Act (PPA) of 2007 introduced procedures for public procurement system to allow forefficient procurement of building works. It additionally aimed at strengthening theprocurement process in order to achieve: transparency, cost effectiveness,competitiveness, fairness and equity with primary focus to support projects delivery onbudget, time schedule, required quality, and to client satisfaction.Despite the enactment of the Public Procurement Act, 2007 the building projects performances are repletewith: delay in project completion, cost overrun, and poor quality of work as establishedby various studies (Munano 2012; Langat, 2012, Afred 2008; Büchner, Freytag, González, ,&Güth,. 2008; Owegi and Aligila 2006). Munano, (2012) affirmed that, only 34.9% of contracted public building projects were completed in the financial year 2007 to 2011, the rest 65.1% have stalled or are experiencing delays, cost overrun and a number of these projects may be linked to irregularities in contractor selection. Study commissioned by Public Procurement and Oversight Authority (PPOA), it was established that contract management of projects was weak, providing multiple opportunities for transgression in contract implementation (Organisation of Economic Co-operation and Development, 2007). Further, the legal framework and procedures that support success performance of project during implementation were not adhered to, thereby affecting and influencing contract performance (BPP, Annual Reports and Accounts, 2010).

The literature reviewed by the researcher did not identify such study in construction project management that examines the public procurement-related factors that influence the building contract performance. This study endeavours to find whether public procurement-related factors contribute to inadequate contract implementation and performance of public building projects in the Federal Capital Territory (FCT) - Abuja.

1.3              Research Questions

The research addresses the following questions:

i.                    What are the public procurement success factors that have significant influence on building project construction performance?

ii.                  What is the extent to which the public procurement indicators of success influence the building construction performance?

iii.                What is the relationship between the public procurement predictor of success factors and building construction performance?

iv.                What are the key project performance indicators of success?

1.4              Purpose of the Study

The main objective of the study is to evaluate the impact of public procurement system on contract performance of public building projects during implementation. The specific objectives of the study are;

i.                    To examine the public procurement success factors that have significant influence on building project construction performance.

ii.                  To examine the extent to which the public procurement indicators of success influence the building construction performance.

iii.                To find out the relationship between the public procurement predictor of success factors and building construction performance.

iv.                To identify the key project performance indicators of success.

1.5              Scope of the Study

This study investigates the influence of public procurement-related factors on building construction performance. The variable covered includes public procurement-related factors and the contract performance. The study covered the public procurement process of the publicbuilding projects under implementation in the Federal Capita; Territory (FCT) Abuja procured between January 2010 and December 2013 three years after operationalisation of the legal framework andregulations in 2007. Two years later was a good grace period for project implementers

to acquaint themselves with the new law. Additionally, study focused on building worksprocurement carried out by procuring entities as open tenders in Class A and Bprocuring entities as provided in First Schedule of the Regulations (PPA, 2007). TheRegulations allow for threshold of works expenditure for procurement methods (PPA,2007). The researcher focused on works with level of expenditure above 20million naira requiring use of open tendering.

1.6              Significance of the Study

The study will contribute valuable knowledge to Construction industry policy makers;

the government especially the procuring entities may use the study to develop or improve their policy on building project procurement; improve contractor selection and; other researchers will use the same in future research for literature review and for further studies in Nigeria.

An effective and efficient public procurement system is important in evaluating the

performance of government (Hunja., 2001). This is because deficiencies in procurement system contributed to huge losses in public procurement. For instance, the deficiencies led to poor public building projects and other physical infrastructure (Akech, 2003).

This study’s result and recommendations will contribute to improved procurement workmanual, which shall be simulated to current public procurement, works policy manual.

1.7              Plan of the Study

The study report is organized in five chapters: -

Chapter 1 comprises background of study, problem statement for which the study is to be conducted, aim and objectives of the study. It also includes the study justification, scope and significance of the study and definition of terms; Chapter 11 contains the literature review which details the various aspects of public procurement system, social and economic responsibility of public procurement, factors influencing performance, contract formulation, and theoretical framework; Chapter 111, discusses the research methodology which include research design, nature and source of data, target population and sampling frame, sampling methods, method of data collection, instruments and method of data analysis; Chapter 1V of the study present data analysis and results observed and; Finally Chapter V present the summary of findings, the conclusion drawn from chapter four and the recommendations based on the conclusions.



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