QS001 - A STUDY OF BARRIERS TO THE IMPLEMENTATION OF PUBLIC PRIVATE PARTNERSHIP (PPP ) PROJECTS IN NIGERIA (A CASE STUDY OF SELECTED PROJECTS IN LAGOS-STATE)

CHAPTER ONE

1.0       Introduction

1.1       Background to the Study

Public Private Partnerships (PPP) emerged over twenty years ago as a popular strategy for infrastructural development and the delivery, this system is adopted by Governments Worldwide, primarily to meet ever-growing aspirations of its citizens. Thus developed and developing countries are increasingly using the various forms of PPP in the face of increasing limitation in capital resources. National budgets derived from revenue and taxes are often insufficient to meet the huge investment required to build the much needed public infrastructure projects or renew the fast decaying ones (Ahadzi and Bowles, 2004). As a result of the insufficiency of the national budgets derived from revenue and taxes necessitates the need for an alternate source of finance to capital projects. As public private partnership (PPP) offers rapid and effective way of offsetting the capital cost of infrastructural projects delivery and of meeting

immediate infrastructural delivery needs, it became necessary for Nigerian Government to embrace similar funding methods for the funding and delivery of her infrastructural projects. As a result, the application of public private partnership (PPP) system in Nigeria the delivery of infrastructural projects and maintenance of old facilities is becoming more effectively delivered to the citizens and to the advantage of the government.  PPP involves partnership between the public and the private sectors for the purpose of delivering facilities and/or operation of service traditionally provided by the public sector. It involves the private sector partner in design, financing, construction, ownership and/or operation of public infrastructure.  Blackwell (2004) maintained that the main aim of public private partnership (PPP) was to deliver public services of high quality which are more cost effective. Garvin (2009) defined PPP as a long-term contractual arrangement between the public and private sector where mutual benefits are sought and where the private sector provides operating services and/or puts private finance at risk. If a PPP properly formulated and managed, it can provide a number of benefits to the public sectors such as: alleviating the financial burden on the public sector due to rising infrastructure development cost; allowing risk to be transferred from the public to the private sector; and increasing the “value for money” spent for the infrastructure services by providing more efficient, lower cost, and reliable services (Kwak, et al 2009). Efficient project delivery under PPP is however complex due to presence of uncertainty and risks affecting virtually all aspect of project life cycle; complex project composition and associated functional integration; complex network of relationship among various stakeholders; multi project operation and increased public participation. Doloi and Jin (2009).

In Nigeria, the legal framework for PPP in Infrastructural Development is the Infrastructure Concession Regulatory Commission (ICRC) Act of 2005. The Act empowers the ICRC to monitor and regulate PPP related projects and, also specifies the requirements for the participation of the private sector in government infrastructure projects such as in financing, construction, development, operation and maintenance through various contractual arrange-ments. However, for foreign investors, there is an additional requirement in compliance with the provisions of the Nigerian Investment Promotion Commission (NIPC) Act of 1998 which is Nigeria’s principal investment law. This Act governs entry of foreign direct investment into Nigeria. Under it, and in order to do business in Nigeria, foreign companies are required to incorporate local subsidiaries or branches. They are also subject to the Foreign Exchange (Monitoring and Miscellaneous) Provisions Act of 1995 on the free movement of foreign exchange directly attributable to the specific investment. Since the establishment of the ICRC and its variants in some of the States in Nigeria, various infrastructure projects have been embarked upon in power and energy, water supply, road construction and other transportation facilities, health care, housing and agriculture. And in the most recent in the tend of public procurement in Nigeria was the public procurement act of 2007, The objective of the procurement act 2007 is to ensure accountability, fairness, openness, and integrity in the probity and transparency in the procurement process of public infrastructural facilities (Ekpenkhio, 2008). It was observed that prior to 1999 public procurement process in Nigeria was uncoordinated and disorderly with the result that government at the Federal, States and Local Government Levels and their Agencies were purchasing or procuring apparently the same goods and services within the same budget period at price differential as wide as 1000% (Moneke, 2011). It was obvious that procurement exercises were seen as opportunistic vehicles through which the public office holders siphon the public fund with the result that projects were poorly implemented; with consequential huge costs and hardship on the citizenry. The Public Procurement Act 2007 was initiated to ensure that the gains of the Due Process Office were not lost or reversed with his exit. The Act came into being on 4^th June, 2007 following the assent of the Bill by President Umaru Musa Yar’Adua. Also in the trends of public procurement system in Nigeria is establishment of The Bureau of Public Procurement (BPP), The Bureau of Public Procurement (BPP) plays an important role in ensuring due process in the procurement of public works and services. It uses techniques such as benchmarking to ensure that the prices paid for goods and services are fair and reasonable. The integration of different elements of a project into a single contract makes benchmarking difficult, however, and there is a risk that it may slow down the procurement timetable and increase costs for bidders as well as the authority.

1.2       Statement of the Problem

Over the years the delivery of infrastructural projects in Nigerian construction sector has suffered a lot of failures and down turns, such as: financing problem, variation, time and cost overrun, abandonment of project as a result of cultural and political issues and sometimes the contractual method adopted, building collapse leading to loss of lives and wastage of recourses, etc. It was observed Moneke (2011), that prior to 1999 the delivery of infrastructural project in Nigeria was un-coordinated and disorderly, and came up with the finding that government at the Federal, States and Local Government Levels and their Agencies were purchasing or procuring apparently the same goods and services within the same budget period at price differential as wide as 1000%. Moneke (2011), he is of the opinion that over the years the delivery of infrastructural facilities has suffered a lot of failures and down turns.  Ayodele and Alabi, (2011) also stated that the unceasing abandonment and failure of infrastructural projects is so shocking in the developing countries such as Nigeria. It is for this reason that this research is being proposed to address the barriers of Public Private Partnership method in the delivery of infrastructural projects in Nigeria.

1.3       Research Questions

1.            What are the factors hindering effective delivery of Public Private Partnership (PPP) projects in Nigeria?

2.            What are the challenges facing the adoption of Public Private Partnership (PPP) in Nigeria?

3.            What are the advantages of PPP in project delivery.

1.4       Aim and Objectives of the Study

1.4.1    Aim

The aim of the study is to investigate the barriers to the implementation of Public Private Partnership (PPP) in Lagos-State with a view to improving project delivery.

1.4.2        Objectives

1.      To identify the factors hindering effective delivery of PPP projects in Nigeria.

2.      To examine the challenges facing the adoption of PPP in Nigeria.

3.      To evaluate the advantages of PPP in project delivery.

1.5       Justification of the Study

Several works of research have been carried out on the factors that influence the delivery of infrastructural projects in Nigeria. To be specific Babatunde et al, (2013) investigates developing public private partnership strategy for infrastructure delivery in Nigeria, and focused on providing stakeholders within the construction industry with tools for making decisions and guidelines to enhance institutional capacity with a view of inducing confidence in both local and foreign investors for investing in the Nigerian PPP infrastructure projects. Abdulhamid and Lawal (2015) examined the viability of the Private-Public Partnership in the Nigerian rail transportation sector, using the PPP system, and concluded that the initiative of PPP in public service delivery is rooted in the system of a mixed economy with emphasis on the use of economic markets as a model for resource mobilization and utilization. (Nehemiah, et al 2016) carried out a review of public private partnership for building and infrastructure procurement in Nigeria and concluded that adequate consideration has not been given the identified critical success factors by both parties (public and Private) to ensure successful implementation and to boost the prospects of PPP as a delivery model. The investigation will bridge the in our understanding of the barriers of Public private partnership in the delivery of infrastructural project in Nigeria and the finding from the study guild effort to consider the factors affecting the effective delivery of PPP projects in Nigeria and the challenges affecting the adoption of PPP in Lagos State, Nigeria.

1.6       Scope and Limitation of the Study

The research covers the barriers of public-private partnership in delivery of infrastructural projects in Nigeria.  Information will be collected from Contracting firms, project management firms, quantity surveying firms consultants and contracting, companies, government agencies and other professionals within the construction, this work will involve public private partnership (PPP) projects carried out within Ajah Local Government in Lagos State.

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