Reps indict NNPC over $24.11 million contract

The House of Representatives Committee on Due Process has indicted the Nigeria National Petroleum Corporation (NNPC) for not following due process in the award of contracts totaling $24.114 million to effect dry dock repairs on a Nigerian vessel - MT Tuma.

In a report signed by its chairman, Yusuf Tuggar, and secretary, Margaret Okoro, the committee said the corporation violated the Public Procurement Act in the award of some of the contracts and also mismanaged the project through incompetent management.

Consequently, it recommended that the Economic and Financial Crimes Commission (EFCC) should investigate the level of involvement of all persons and companies in the "unfortunate waste of public funds". The report is yet to be debated by the House in plenary. The committee investigated the contracts after complaints and recurring petroleum products shortages in the country as well as huge sums of public funds expended on demurrage for imported products.

MT Tuma, a 136,000 metric-tonne dead weight Nigerian vessel acquired in 1985, was dry-docked in 1998 and was due for another dry dock repairs in 2003. But due to some delays, the repairs were not carried out as a result of which she lost her classification. It was then decided that the vessel must be reclassified as a storage tanker for petroleum products.

The dry dock contract was approved by former president, Olusegun Obasanjo, in favour of Messrs Sermetal Estalerious of Rio De Janeiro, Brazil, on May 24, 2007 at a lump sum of $21.114,680.35 with a completion period of 90 days - while an additional provisional sum of $3 million was also approved for pre-voyage works/certification.

While the management and manning contract was given to Messrs Royal Marine and Spares Ltd, the consultancy contract went to Messrs Mare Maritime Ltd.

Lawmakers' findings

The committee said it met with NNPC officials, requested for comprehensive documents concerning the various contracts and reviewed them by segmenting its investigation in six sub-heads.

It added that it discovered that Messrs Royal Marine and Spares Limited (the manning contractor) and Mare Maritime Limited (the consultant) are either closely affiliated or, most likely, owned by the same group, stressing "this is contravention of Sections 16 (24), 57 (10) and (12) (b), (d) and (e) of the Public Procurement Act which forbids any person or entity engaged in preparing for a procurement or cooperating with bidders." It also said that the NNPC did not obtain any certificate of "No Objection" from the Budget Monitoring and Price Intelligence Unit (BMPIU) before awarding the consultancy contract to Messrs Mare Maritime Limited.

The "NNPC, therefore, breached the provision of S.19 (h) of the Act which mandatorily requires the certificate before the award of such contracts. This act could fall within the meaning of bid-rigging as stated in S.16 (1) (c), (d), (e) and (f) since the award of the contract was not preceded by a transparent open bid." The committee also noted, among other things, that the corporation did not establish a proper legal framework for the dry dock contract through comprehensive dry dock agreement with Messrs Sermental. Instead, it simply signed a Letter of Intent (LOI) pending the execution of the contract; negligently extended the duration of the contract in the LOI to one year, contrary to the presidential approval of 90 days duration; and did not execute any formal contract with James Industrial Services Ltd, the spare parts supplier which probably explains why it is possible for the contractor to supply the parts at will.

The panel also accused the NNPC of not holding the consultant contractor liable for gross negligence "for failing to advise the NNPC in advance about the extensive class society's re-classification requirement.

"At the end of its activities, the committee found that NNPC violated due process in the award of some of the contracts; NNPC did not put proper legal framework to protect government interest in the contract," the committee explained in the 24-page report.

Recommendations

Apart from recommending the invitation of the EFCC to carry out further investigation into the matter, the committee also urged the federal government to terminate the manning and consultancy contracts for gross incompetence, gross negligence and gross misconduct; compel the manning contractor and consultants to refund all monies paid for services not rendered satisfactorily or at all; compel the consultant to indemnify the NNPC for loss and damage suffered owing to its failure to advise on the re-classification requirements of the class society for which the corporation lost substantial amount of money in dry dock charges.

"The committee believes that NNPC does not have the requisite management capability to manage a vessel the size of MT Tuma. Consequently, the committee recommends that upon completion of the dry-dock repairs, MT Tuma should be sold through international competitive bidding to interested buyers or it should be incorporated as a limited liability company and handed over to competitively selected reputable international ship managers on the most favourable terms to the country," the report said