The House of Representatives has resolved to investigate the failure of Government Ministries, Departments and Agencies (MDAs) to release retention funds to contractors at the end of their work.
This was sequel to the adoption of a motion by Abubbakar Yalleman (APC-Jigawa) at plenary on Tuesday in Abuja.
Moving the motion, Yalleman said that in the last 10 years, MDAs had held unto retention funds running into billions of naira meant for contractors in spite of issuing Certificates of Completion to the contractors.
According to him, the practice is inimical to the growth of Small and Medium Scale Enterprises (SMEs) as it denies contractors the needed capital to stay afloat.
“The global best practice in Retention Fund is to release half of the fund after the issuance of the certificate of completion, while the balance is released upon the attainment of the defect liability period which is usually 12 months after completion and handover of the projects.
“The withheld funds are never captured by MDAs as generated revenues, accounted for, or appropriated in a subsequent budget while beneficiaries are made to go cap in hand begging and lobbying for the release of the funds which rightfully belong to them.
“With the harsh economic climate in the country, low–profit margins, runaway inflation, high lending rates and difficulty in accessing funds by MSMEs, the 5 to 10 per cent retention fees oftentimes constitute a significant portion of the contractors’ profit, especially as payment schedule is skewed in favour of the MDAs.
“Concerned that the actions of MDAs amount to gross infraction of Section 37(1–4) of the Public Procurement Act, 2007 and its overall objective of harmonising existing government policies and practices to engender probity, accountability and transparency in the procurement process,” he said.
Speaker of the House Femi Gbajabiamila directed that the committee should report back within six weeks for further legislative action.