Mediation model for minimizing transaction costs of bidding that affect construction firms in public procurement system in Nigeria

Abstract

Nigeria’s public procurement Act 2007 is a major activity of government that safeguard capital misappropriation and important financial resources that leads to leakages in government treasury. This is part of a wider reform agenda targeted at reducing corruption and improving public financial management. However, despite the above mentioned advantage, the additional limitation attributed to PPA 2007 is the expenses incurred during the transaction, due to solicitation documents required by public sector organizations. Such eligibility documents are associated with significantly higher transaction costs in public sector projects. They are among the factors responsible for high building expenses, less indigenous companies participation and economic drain in the industry. The aim of the study is to develop a mediation model that can minimize the effect of such transaction costs (TCs) on construction firms in Nigeria. A structured survey questionnaire was used in collecting data from the federal contractors and services providers of 143 randomly selected from the Bureau of Public Procurement database based on their interim report registration (IRR) number in North West states of Nigeria. Advance Analysis of Covariance (ADANCO 2.1.1) was used for the mediation analysis and the result proved that, the mediation effects of proactive and reactive mechanism on eligibility documents costs that affects construction firms activity was both partial complementary and competitive mediation totally different from zero; the bootstrapped confidence intervals within which the mediating effects occur did not involve zero either. These signify mediation occurrence in the study mediation model. The study recommends the adoptions of proactive and reactive strategies by both government and construction firms in order to cushion the impact of the eligibility documents in tendering process. The study re-echoes the need for training procurement personnel in all public organization by the Bureau for a healthy competition among construction firms

Keywords: Bidding, Construction firms, Eligibility documents, Mediation, Public Procurement Act and Strategies