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The procurement process for public-private partnerships in Nigeria

Procurement process

Relevant procedure

What procedures normally apply to a PPP procurement? What evaluation criteria are used to award a PPP transaction?

The procedure generally used for PPP procurement is the competitive bidding procedure. Section 24(1) of the Public Procurement Act 2007 and section 4 of the Infrastructure Concession Regulatory Commission Act endorses competitive public bidding as the procurement procedure of choice. Section 4(2) of the ICRCA goes further to state that the concession contract will be granted to the bidder who has satisfied the pre-qualification criteria and submits the most technically and economically comprehensive bid. Competitive bidding is a two-stage bidding process.

Pre-qualification stage

  • publication of the request for quotation document;
  • submission of query by the perspective bidders;
  • pre-bid meeting;
  • authority response to queries;
  • application submission due date;
  • opening of technical proposal;
  • technical capability evaluation and report; and
  • acceptance of technical evaluation report by the procurement committee.

Bid stage

  • sale of bid and request for quotation document to short-listed applicants;
  • submission of query by the perspective applicants;
  • pre-bid meeting;
  • authority response to queries;
  • bid submission due date;
  • opening of bids;
  • letter of intent; and
  • contract signing.

The evaluation criteria used to award a PPP transaction may either be on a least cost approach or on a quality cum cost-based selection.

The national PPP policy states that the procurement process is devised to allow bidders to maximise value for money in their bids, within constraints of transparency and fairness, rather than just achieving the lowest cost.

However, section 5 of the ICRCA waives the requirement of competitive bidding if after advertisement only one contractor submits a bid or if only one contractor meets the pre-qualification requirements. Also, the Public Procurement Act 2007 permits exemption from competitive bidding when there is an urgent need for the goods, works or services because of unforeseeable circumstances or as a result of a catastrophic event. However, the procuring government authority is required to justify its decision.

Consideration of deviating proposals

May the government consider proposals to deviate from the scope or technical characteristics of the work included in the procurement documentation during the procurement process, without altering such terms with respect to other proponents? How are such deviations assessed?

Yes. The government may consider proposals from the private party to deviate from the scope or technical characteristics of the PPP contract. Most PPP contracts specify conditions in which modifications are allowed and what the adjustment process will be. Although the private party’s technical schedule is binding on it, the output specification of government takes precedence. Therefore, if either party becomes aware that the contractor’s design, method statements or specifications will not meet the output specifications, these will be changed at the contractors’ cost until they comply with the output specifications. The private party will have to submit a proposal to the government stating the details of the proposed change, the likely impact on service delivery and the PPP contract. The government will decide whether to accept the proposal. If the proposal is accepted, the government will decide how the payment regime will be modified in line with the proposed change.

Unsolicited proposals

May government parties consider unsolicited proposals for PPP transactions? How are these evaluated?

Yes. Government parties may consider unsolicited proposals for PPP transactions. The ICRC published its guidelines for implementing unsolicited proposals for PPPs in Nigeria. An unsolicited proposal is evaluated as follows:

  • the unsolicited proposal is submitted to the relevant government authority for preliminary review. The authority checks to ensure that:
    • the proposal is up to outline business case standard;
    • the proposal serves the public interest;
    • the proposal is viable;
    • the proposed project can be classified as critical infrastructure; and
    • the project proponent has the competence to implement the project;
  • the proposal is then forwarded to the ICRC for review and the issuance of ‘no objection’ (if approved). Proposals submitted to the ICRC attract a service fee, which is a percentage of the project value;
  • technical and financial due diligence is conducted to ascertain the capacity of the proponent to implement the project if awarded;
  • ministerial approval is awarded;
  • the project proponent is issued with formal acknowledgement as project author;
  • competitive bidding commences;
  • if the project proponent is not successful at competitive bidding, it will be given a chance to submit a best and final offer, along with the preferred bidder; and
  • the successful bidder is finally chosen, based on the most economically and financially viable submission.

Government stipend

Does the government party provide a stipend for unsuccessful short-listed proponents or otherwise bear a portion of their costs?

Not in all cases. The government authority may decide, in its discretion, to reimburse the project proponent of an unsolicited proposal for its project development costs. However, this is purely at the discretion of the government authority.

Financing commitments

Does the government party require that proposals include financing commitments for the PPP transaction? If it does not, are there any mechanisms during the procurement process to ensure that the applicable PPP transaction, once awarded, is financeable?

The financial proposal is one of the bases for selecting the preferred bidder. The government carries out due diligence on the credibility of the preferred bidder’s proposed financing to be confident that the bidders can reach financial closure. In fact, the preferred bidder’s financial proposal is incorporated into the concession contract. One of the conditions precedent to the signing of the concession contract is the provision of performance security by the preferred bidder.

Legal opinion

May the government ask its counsel to provide a legal opinion on the enforceability of the PPP agreement? May it provide representations as to the enforceability of the PPP agreement?

Yes. The government may ask its counsel to provide legal opinion on the enforceability of a PPP agreement because the government requires legal due process to be followed for any form of procurement and enforceability of PPP agreement involving the government.

The government may also provide representations as to the enforceability of the PPP agreement. This may take the form of a warranty clause stating that its obligations under the PPP agreement are valid, binding and enforceable. The PPP agreement may also contain a clause of waiver of sovereign immunity whereby the government authority waives any right of immunity, which it or any of its assets may have in proceedings arising from the agreement.

Restrictions on foreign entities

Are there restrictions on participation in PPP projects by foreign entities? May foreign entities exercise control over the project company?

Foreign entities are allowed to participate in PPP projects. However, they must comply with the provisions of the Nigerian Investment Promotion Act and the Companies and Allied Matters Act, which require that foreign companies must incorporate local subsidiaries or branches to be eligible to do business in Nigeria. Foreign companies can exercise control over the project company, as 100 per cent foreign ownership of a Nigerian business is permitted under the law. The exception to this is within the oil and gas sector, where the Nigerian Local Content Act 2010, which seeks to promote local participation in the industry, applies. In practice, foreign companies will often partner with local companies to provide the wide range of services required in a PPP project.

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