Alike Ejiofor
24 November 2008
Lagos — The Lagos-Kano Rail contract awarded by the immediate past administration and which Federal Government plans to revoke was inflated by a whooping $800 million, THISDAY has learnt.
Information made available to THISDAY showed that the last administration allegedly awarded the contract at the cost of $8.3 billion, but the Chinese firm handling the project claimed that the contract was awarded to it for $7.6 billion.
THISDAY gathered that this discrepancy may have informed the decision of the government to revoke the deal, in addition to legal issues.
It was also gathered that the contract was not presented to the National Assembly for appropriation before the past administration went ahead in 2007 to make an advance payment of $250 million to the Chinese Civil Engineering and Construction Company (CCECC) that was awarded the project.
The government is said to still be investigation the account from which the quarter of a billion dollars was paid to the Chinese company as it was not appropriated by the National Assembly.
THISDAY checks revealed that the government would soon revoke the contract and execute the project on Built, Operate and Transfer (BOT) basis, under a Public Private Partnership (PPP) initiative.
Already, French companies have indicated interest to be part of the new initiative that will soon be worked out by government.
Government had hinged its decision to revoke the contract on the inability of the past administration to follow due process and the rule of law.
The Chief Economic Adviser to the President, Dr. Tanimu Yakubu, declared the contract illegal at the Abuja Business and Investment Roundtable last week.
"For an administration that prides itself in the rule of law, I don't see how an illegality will be strictly adhered to in the name of continuity," Yakubu said.
He stated that since the administration of former President Olusegun Obasanjo did not present the budget to the National Assembly, the present administration would revoke it in view of the administration's commitment to the rule of law and due process.
The contract, which has duration of 48 months was awarded as a turnkey package for the design, construction and maintenance of about 1,315kilometres of standard gauge double track rail line to run from Lagos to Kano.
Most of the over 200 locomotives that ply the 3,505 kilometres (2,178miles) network of narrow-gauge single-track railway lines, covering nine states in the country are in state of disrepair.
The railway line modernisation project, which passes through eight state capitals and the Federal Capital Territory, was the first phase of the country's 25-year railway modernisation project embarked by the past administration to increase the traveling speed of passenger trains in the country to 120-150 kilometres per hour.
The previous administration disclosed that about $2 billion soft loan would be obtained from the Chinese Government to finance the project, but the Minister of Transport last year stated that an inter-ministerial committee had been set up to review the contract with a view to finding the modalities for the funding.
However, in September this year, the House of Representatives resolved to set up an ad-hoc committee to investigate the $8.3 billion railway modernisation project.
This followed a motion on "state of the Nigeria's Rail Transport System" by Hon. Ike Chinwo (PDP Rivers) and 41 other members praying the House to "mandate the Committee on Land Transport to conduct an investigative public hearing on the railway modernisation project and report back to the House within six weeks".
The motion expressed concern that the first phase of the project spanning 1,315 kilometres from Lagos to Kano, estimated to cost $2.5 billion in line with international per kilometre rate for railway modernisation project was awarded for $8.3billion to CCECC for take-off of the project.
THISDAY gathered that members of the House Committee on Land Transport led by Hon. Benard Udoh may have travelled to China yesterday for their investigation.
As part of its oversight function, the committee last week visited the corporate headquarters of CCECC to ascertain the reason behind the slow pace of work on the project.
It was gathered that during the visit, the project co-ordinator, Mr. Karl Leo, expressed the readiness of the Chinese firm to execute a world-class contract in accordance with the terms of agreement between it and the Federal Government.
He however stated that the efforts of the company had been slowed down by paucity of fund.
Leo noted that rather than being paid the sum of $1.13 billion being the agreed 10 per cent of the mobilisation fee, the company was paid only $250million, representing 3 per cent of the value of the contract.
The project coordinator disclosed that the company had spent over $250 million on the project in anticipation that government will release more funds.
According to him, equipment worth over $100 million had been purchased for the project.
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Then do it, instead of all these procrastination. Geez!!! They have been saying this for over one year, now, that the issue becoming a sign-song unless yar wants to score another political point with all these dribs & drabs. But whoever is the decision maker on this effort better make sure they get the project started and completed on time b4 another global crisis affects the value of the project. If the Nigerian govt has a credible Attorney in their Contracts Office to read and interpret contracts legalese vis-ŕ-vis counter-offers to realize that modifications and revocations of a fully-executed, two-party agreement cannot be one-sided but bi-lateral. If one party revokes any part of its obligation, it relieves the other party from its entire obligation until the 2 parties reach a new agreement or a meeting of the mind to modify by removing the inflated portion of the original agrmt. For instance, if the Fed Govt proposes plan B (a counter-offer), it is up to the Chinese govt to either accept or reject Nigeria's counter offer. The Chinese may come up with their own counter-offer and so forth….. Moreover our Negotiator should also read the fine prints of the agreement for Liquidated Damages which may impose penalties on a party that reneges on its side of the agreement - that is how our $5 Billion Loan ballooned into a $36 Billion debt within a span of 20 years of procrastination on our debt repayment. Also, has the Fed Govt shopped around for a better deal b4 it cancels this? Nobody says Yar should not revoke an inflated contract but has he done due-diligence and adequate research to see if he could get a better deal elsewhere?
Moreover, it’s not necessarily the cheapest offer that matters but the most cost effective. It is one thing to do a shoddy work at lower cost; it is another to complete a project that would last a lifetime with little maintenance works, afterwards. It is one thing to get commitment from a supplier that would have the materials for you upon demand, it is another to order and have to wait till the supplier is ready for your demand while we burn our idle labor cost while waiting for the materials to arrive from the supplier. Those are some of the parameters (among others) that go into 3-bids' Comparative Analysis b4 you select the most cost-benefit offeror. What I would recommend for future contracts negotiations is to ensure that our negotiator prices out usage of foreign workers (except expertise that we lack at home) so that the bulk of the workforce on this project would be Nigerians. This way, we can utilize our unemployed youth from which they can gain practical experience that could be applied to future projects. Having Chinese laborers imported to Nigeria to do the work that Nigerians can do while our youth stand idle is counter-productive. The govt could tax Nigerian laborers' income that could be used in their job training and/or for the purpose of funding other projects. That way, we get good return on our bids yet keep our youth busy in productive work from which they can learn by doing other than brainless jobs like being Okada drivers. Good Luck.