THE INFLUENCE OF PUBLIC PROCUREMENT SYSTEM ON CONTRACT PERFORMANCE OF PUBLIC BUILDING PROJECTS DURING IMPLEMENTATION

THE INFLUENCE OF PUBLIC PROCUREMENT SYSTEM ON CONTRACT PERFORMANCE OF PUBLIC BUILDING PROJECTS DURING IMPLEMENTATION

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ABSTRACT

Public procurement system account for significant percentage of GDP and has a directimpact on Kenya economy. Indeed, the Nigerian government has used public procurementsystem to meet development objectives such as the provision of infrastructure forinstance public building projects. Public procurement system is regulated by PublicProcurement Act which specifies the rules under which the public procurement systemcan be performed and set conditions of award procedures of public contracts. Moreover,the law aims at strengthening the procurement process in order to achieve: transparency,cost effectiveness, competitiveness, fairness and equity with primary focus to supportcontract performance. Therefore, the quality of performance is affected by theirregularities in the selection process of contractor thereby influencing the contractperformance. Accompanying the foregoing, cost effectiveness(budget) allocation, time,quality, and client satisfaction must show success of the project.However, despite the enactment of the law, various studies have found that contractmanagement of projects was weak providing multiple opportunities for transgression incontract implementation. The study aimed at coming up with applicable works manualfor procurement of public building works in Nigeria. Towards the realization of thisobjective, a descriptive research-based study using a cross-sectional survey design on 48randomly sampled projects in the Federal capital territory. This research is a survey of knowledge andinformation through semi-structured questionnaires and interview schedules whereprimary data was collected from procurement officers, project supervisors, andcontractors. Data was analysed for reliability, descriptive statistics, correlation andmultiple linear regression.The study recommends that cost effectiveness and transparency procurement relatedfactors should be addressed so as to improve building contracts performance. The studyfindings will not only contribute to body of knowledge and the improved works manualwill also be simulated in the current PPA Works Manual as a way of enhancing procurement procedures. The study concluded that, all the identified publicprocurement-related factors are significant in predicting contract performance at earlystages of project procurement as well as at implementation.


CHAPTER ONE:

Introduction

1.1            Background of the Study

Public procurement system has been utilised as an important tool for achievingeconomic, social, and other objectives (Arrowsmith, 1998). Public procurement systemis broadly defined as the purchasing, hiring or obtaining by other contractual means ofgoods, 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 procurementto meet development objectives such as the provision of public buildings and other services (Rege, 2003 as cited in Mutava, 2012). In Nigeria, public procurement systemaccounts for 80% of its budget expenditure (Aketch, 2005). Public procurement playsa 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 growthwith the public as well as the private sectors being engaged in numerous developmentbuilding 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.

Odhiambo and Kamau (2003) asserts, the root cause for these inefficiencies over manyyears is persistent lack of compliance with procurement procedures that ensure

competition, fairness, cost effectiveness, and transparency in the procuring process. It istherefore evident from various studies that, despite the enactment of Public Procurement Act, 2007 Act (PPA, 2007) public building projects are marred with irregularities in the contractor selection.

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 year2007 to 2011, the rest 65.1% have stalled or are experiencing delays, cost overrun and anumber of these projects may be linked to irregularities in contractor selection. Studycommissioned by Public Procurement and Oversight Authority (PPOA), it wasestablished that contract management of projects was weak, providing multipleopportunities for transgression in contract implementation (Organisation of EconomicCo-operation and Development, 2007). Further, the legal framework and proceduresthat support success performance of project during implementation were not adhered to,thereby affecting and influencing contract performance (BPP, Annual Reports andAccounts, 2010).

The literature reviewed by the researcher did not identify such study in constructionproject management that examines the public procurement-related factors that influencethe building contract performance. This study endeavours to find whether publicprocurement-related factors contribute to inadequate contract implementation andperformance 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 influence 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 thecontract 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 orimprove their policy on building project procurement; improve contractor selection and;other researchers will use the same in future research for literature review and forfurther 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 procurementsystem contributed to huge losses in public procurement. For instance, the deficienciesled 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 tobe conducted, aim and objectives of the study. It also includes the study justification,scopeand significance of the study and definition of terms; Chapter 11 contains the literature review which details thevarious aspects of public procurement system, social and economic responsibility ofpublic procurement, factors influencing performance, contract formulation, andtheoretical framework; Chapter 111, discusses the research methodology which includeresearch 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 ChapterV present the summary of findings, the conclusion drawn from chapter four and therecommendations based on the conclusions.

1.8     Definition of Operational Terms

The following are the definitions of the basic technical terms used in this study: -

Procurement: Refer to the process of acquiring goods, works and services in theaward of contracts under which payments are made in theimplementation of projects (Hibberb, Merrifield, & Taylor, 1990).

Contract: is an agreement between two or more persons or entities in which there ispromises to do something in return for a valuable benefit known asconsideration (The Aqua Group 1999).

Performance: is defined as, the outcome of a process or an activity (Turban, 2001).

For this study the main project performance parameters is limited totime, cost, quality, and client satisfaction.

Project implementation: The execution of a project through construction operations

(Bennett, 2003).

Project success: is measured both in terms of product success (objectives andpurposes) and project management success (input and output)(Bacarini, 1999).

Contract Management: is the process that enables both parties to a contract meetstheir obligations in order to deliver the objectives from the contract(The Aqua Group 1999).

Construction: is defined as ʹthe mobilization and utilization of capital and specializedpersonnel, materials, and equipment to assemble materials andequipment on a specific site in accordance with drawings,specifications, and contract documents prepared to serve the client(Merrit, Loftin, & Ricketts, 1996).

Public entity: The government or any department of Government (PPA 2007).


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