CHAPTER ONE 1.0                              INTRODUCTION   1.1 BACKGROUND OF THE STUDY

Construction Contracts are no more awarded because of the need of the society but motivated by greed and shameful intention to perpetrate fraud.

We know that fraud and corruption are international problems. They happen daily all over the world and it is not peculiar to Nigeria. In 2001 the United Kingdom government (National Audit Office) found that not less than 10% of the Euro 65 billion spent in the construction industry annually is lost to fraud.

In Nigeria fraud and corruption have reached epidemic state and Construction contracts carry a lion share of it. While the proceeds of corruption in developed nations remains in their countries those of Nigeria are taken out of the economic activities of the Nation and deposited in foreign accounts thereby dealing a ‘double blow – double tragedy’ on the country. Why are construction contracts so prone to fraud and corruption? 

Spirited efforts are being made from different quarters to ensure that Nigeria is purged of corruption. In a bid to rid the country of corruption, stringent measures, laws and agencies have been set up to ensure that the system is sanitized. This gave rise to the Public Procurement Act, which was signed into law by President Umaru Musa Yar’Adua in 2007.

The Act became imperative because public procurement is one of the biggest sources of government expenditure, and is easily prone to abuse and accompanying corruption, as past experience has shown. The procurement Act 2007 is to provide the legal and institutional framework for the enthronement of transparency, accountability, value for money and efficiency in the procurement of works, goods and services in Nigeria.

The overall impact of public procurement in governance, government perception and national development cannot be overemphasized, because if mishandled, it can impact negatively on the lives of ordinary Nigerians. On the other hand, if it is properly spent, the results would be long lasting as it would tinkle down to positively affect the welfare state of all Nigerians, especially at the grassroots.

Construction is an easy target because of the ways contracts are administered by Governments. It is no secret that road construction costs more to build in Nigeria than any other African country. 

 The point of call is the process involved in the contract award, procurement and the contract administration. In all these, no element of cost control is observed nor due process followed. It is this anomaly that made the former Minister for works Senator Ogunlewe to cry out during the public hearing on the Procurement bill. He said ‘“We are talking of Due Process, shouting Due Process. What is Due Process? In the Federal Ministry of Works where I preside as the Minister, I don’t believe there is anything that is Due Process. How can there be Due Process when the Engineer designs the roads, estimates the costs of the roads, selects the contractor, constructs the roads, supervises the construction, recommends payment for works done, approves the payment, certifies the quality and quantity of work! All these by one person! Haba! This cannot be Due Process. Not until roles are assigned to relevant professionals like the Quantity Surveyors, Architects, and Builders and so on to be in charge of cost control and management of public buildings, roads and highways, and the procurement of the necessary goods and materials in their field can there be any Due Process in Nigeria construction industry. Fraud in Construction contracts revolves around three major issues; namely:-

1.     Payment methods

2.     Quantity verification

3.     Quality specification and execution

It is only on construction contracts that businesses are set up and funded for the proprietors through advance and mobilization payments. Without any track record, a contractor can be given more than 70% of the contract sum even before he is shown the site just because he has procured an Advance Payment or Performance Bond that is more than the share capital of the issuing company and for which the receiving administrator has no respect or intention of enforcing.

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