Dead End for INTELS Pilotage Contract

finance & economy - January 14, 2022

Eromosele Abiodun posits that the battle by INTELS Nigeria Limited to retain its service boat contract, which expired on August 8, 2020, has met a dead end with President Buhari’s cancellation of the January 2021 directive to restore the contract

On October 11, 2017, THISDAY exclusively reported that the federal government has directed the Nigerian Ports Authority (NPA) to void the boats pilotage agreement it had with Integrated Logistics Services (INTELS). INTELS, a logistics and facilities services provider in the maritime and oil and gas sectors, was co-founded by Gabriele Volpi, an Italian national, and Atiku Abubakar, former vice president of Nigeria.

According to the report, Attorney General of the Federation (AGF) and Minister of Justice, Abubakar Malami, said the contract was void ab inito.
Malami had relayed the government’s decision to the Managing Director of the NPA, Hadiza Bala-Usman, in a letter dated September 27, 2017.

The letter was entitled, ‘Request for Clarification of Conflict Between Executed Agreement and Federal Government Treasury Single Account Policy’.
Malami said the agreement, which had allowed INTELS to receive revenue on behalf of NPA for 17 years, violates sections 80(1) and 162(1) and (10) of the constitution.
The AGF wondered if the management of the NPA and INTELS did not take cognizance of the relevant provisions when negotiating the agreement in 2010.

Facing the reality of losing several millions of dollars in commissions for the pilotage services it handles on behalf of NPA on Nigerian coastal waters, Volpi, founder of INTELS apologised to the federal government over the dispute that resulted in the termination of his company’s pilotage agreement with the NPA.

Reacting to the incident, Volpi had said INTELS would “comply with the directive of government” and transfer all the revenue collected from the boats monitoring and supervision services in Nigerian maritime waters to the TSA.
Two years after the purported apology, INTELS and Volpi never fulfilled their promise to the federal government.
Consequently, after about two years of bickering, the NPA gave a notice of termination of its boats pilotage monitoring and supervision agreement with INTELS.

In a letter dated March 27, 2019, addressed to Bala-Usman, NPA’s Executive Director, Finance and Administration, Mohammed Bello-Koko, had accused INTELS of non-compliance with the presidential directive and circular on implementation of Treasury Single Account (TSA) and Article 4.1 of the executed supplemental agreement by refusing to remit the sum of $145, 849,309.33 being outstanding service boat revenue generated from November 1, 2017 to October 31, 2018.

Expiration of Contract
Early 2020, THISDAY exclusively reported that the NPA and INTELS settled out of court wit the understanding that the contract was going to expire in August that year hence the need not to spend government resource in legal services.
Contrary to claims in a section of the media, there was no court order existing at the time of the expiration of the boat pilotage contract between the NPA and INTELS by on August 8, 2020.

INTELS was engaged as Managing Agents of the NPA for oil industry related activities in the compulsory pilotage district within the Exclusive Economic Zone of Nigeria. The contract commenced in June 2007 with a review of an extension of 10 years in 2011 to culminate in August 2020. As stated above, the NPA had in 2017, served INTELS with a notice of termination for its refusal to comply with the Treasury Single Account policy of the federal government.

Following the receipt of the termination notice, the company complied with the Policy. A supplemental agreement was signed to recognise the compliance to TSA and the notice of termination was accordingly withdrawn. In compliance with the Public Procurement Act, the NPA in December 2019 initiated a public tender process in anticipation of the expiration of the contract in August 2020. The tender was for the appointment a contractor to provide the service for NPA for which INTELS charges the NPA 28 per cent service charge.

INTELS Disqualified
However, INTELS was disqualified because it violated one of the criteria advertised for the tender process. THISDAY checks revealed that INTELS, alongside other companies submitted bids to qualify for the tender in line with the criteria spelled out in the public advert.

INTELS, it was learnt, violated one of the criteria advertised for the tender process and was accordingly disqualified.
“The tender process proceeded accordingly and the companies that scored the highest were prequalified. The outcome of the transparent tender process was forwarded to the Federal Ministry of Transportation for onward transmission to the Federal Executive Council (FEC) for its consideration.

“Upon disqualification from the tender process, INTELS initiated a court action to prevent the Authority from proceeding with the tender process citing a debt owed one of one their sister companies, Deep Offshore Nigerian Ltd for the development of Onne 4B,” a source at the NPA told THISDAY.

Amaechi’s Intervention
However, early February 2021, the Minister of Transportation, Rotimi Amaechi acting on a purported presidential directive ordered the NPA to restore the contract to INTELS.
However, according to a THISDAY report, a source at the Transport Ministry had volunteered that Buhari actually withdrew his approval for the reinstatement of INTELS’ contract after Bala-Usman wrote to President’s Chief of Staff, Prof. Ibrahim Gambari, to explain NPA’s position.
Gambari, the source said, forwarded her response to Malami, for a legal opinion.
The source said Malami wrote to the president to state that the NPA was right and that no contracts were terminated or violated.

Buhari Cancels Contract
Following advice from the Attorney General of the Federation (AGF) and Minister of Justice, Director General Bureau of Public Procurement (BPP), and Acting Director-General, Infrastructure Concession and Regulatory Commission (ICRC), that unanimously advised the president against the restoration of the contract, President Muhammadu Buhari cancelled the restoration of the contract.

According to industry sources, the development was seen as major victory for the suspended Managing Director of NPA, Hadiza Bala-Usman whose alleged sin was failing to honour a presidential directive on the said contract.
The Minister of Transportation, Rotimi Amaechi had listed failure to honour a presidential directive on the restoration of INTELS pilotage contract as terms of reference for the panel of enquiry set up to probe the NPA.
This was despite Bala-Usman’s explanation that the president had withdrawn the directive pending further advice from the Attorney- General of the Federation and the Bureau of Public Procurement (BPP).

The terms of reference read: “Examine and investigate issues leading to the termination of pilotage other contracts of NPA and confirm compliance with the terms of the respective contracts, court ruling and presidential directive.”
However, in a letter addressed to the AGF and the Minister of Transportation, with reference number: SH/COS/23/A/229, dated January 7, 2022, and singed by the Chief of Staff (COS) to the President, Prof. Ibrahim Gambari, seen by THISDAY, the president directed that the procurement process initiated by the procuring entity, NPA, that was submitted to the Federal Ministry of Transportation be forwarded immediately to the BPP for action.

The COS in the letter stated: “The president has also directed that upon receipt of the No-objection approval from the BPP, a memorandum be presented by the Ministry of Transportation to the Federal Executive Council for consideration, that the Ministry of Transportation should ensure that the process is concluded within 60 days of the president’s directive to avoid further loss of revenue by the federal government.

“That NPA should ensure that the sanctity of the agreements with respect to Onne 4 (Berths 9, 10 & 11) be maintained, as there is no subsisting contract with INTELS for their utilisation.”

Buhari also directed the AGF to ensure quick determination of the cases in court in view of their economic importance, stressing that the above set of directives prior approval dated January 22, 2021 granted on the matter.
THISDAY learnt that Buhari decided to act after reading the submissions of both the AGF and BPP who expressly warned of the danger of further litigations if the pilotage contract is restored.

AGF, BPP Writes Buhari
The AGF had two months ago written to the president after a review of submissions by the NPA and INTELS.
In the letter dated November 18, 2021, with reference MJ/DSD/23/VII, seen by THISDAY, the AGF had stated that the NPA neither suspended nor terminated any of its contracts with INTELS,

“which therefore obviates the need for any restoration.”
According to him, “There is certainty in the duration of the contract and the position of the law remains clear that a written contract freely entered into by the parties is binding on them. “Accordingly, the contract for Managing Agent awarded to Messrs INTELS in 2007 validly came to an end and extinguished pursuant to the terms of agreement between the parties, which specified an end date of August 2020. The agreement did not provide for any further extension of the contract in favour of INTELS.

“It is also to be noted that NPA pursuant to the expiration of the contract, kick-started the procurement process to appoint another managing agent in order to forestall any break in the service being rendered.
“NPA submitted that it concluded the tender/bidding process and forwarded the result to the Minister of Transportation for same to be presented for FEC’s approval.”
INTELS, the AGF added, resorted to litigation to frustrate the conclusion of the procurement process based on its grievance on a different subject-matter.

The development, the AGF added, had created a vacuum in the provision of this critical service in the maritime sector with its attendant loss of revenue from service boat operation to the federal government.
The AGF also stressed that the approval granted by the president in January last year, which Bala-Usman was said to have disobeyed, was based on insufficient information at the time.
The purported termination, he concluded, could not have occurred since the contract came to an end in 2020 based on the agreement by the parties.

In the same vein, the BPP denounced claims by the Ministry of Transportation and urged the president not to restore the contract to avoid further litigation.

The BPP in a letter addressed to the COS to the president, with reference, BPP/DG/2021/007, dated March 9, 2021, had stated that the decision by the NPA to initiate a procurement process in anticipation of the expiration of the contract for boat operation managing agent was in order.

The BPP in the letter signed by its Director General, Mamman Ahmadu, concluded that, “There is a compelling need to ensure that contractors and service providers do not take undue advantage of government agencies and do not obtain contracts from government agencies through the court rooms.

“The correct procedure is that contracts should be won through a proper procurement process that complies with the provisions of the PPA, 2007. Furthermore, there is need to avoid the kind of monopoly currently enjoyed by Messrs INTELS which has cascaded into entitlement mentality being demonstrated by the firm.
“Also, monopoly will inevitably result in charging a higher price to the consumer/client than what is obtainable from a competitive market, thereby eroding value for money.”

The NPA and INTELS have since 2020 disagreed over the renewal of the pilotage or boat service contract.
The NPA insisted that the 10 years contract with INTELS expired on August 8, 2020, after which it initiated procurement processes for the contract.

The NPA thereafter submitted the outcome of the procurement process, which the Authority says INTELS participated in, to Amaechi who, rather than forward same to BPP, sought the approval of the President to restore the contract to INTELS. This situation has brought the boat pilotage service operations to a standstill for about 16 months, with attendant revenue losses to the nation.

INTELS Replies FG
Meanwhile, INTELS doesn’t look like it wants to give up the battle to retain its service boat contract in the pilotage district of Lagos, Warri, Bonny, Port-Harcourt and Calabar, which expired on August 8, 2020.
In a strongly worded statement in reaction to THISDAY exclusive report, which revealed that Buhari has cancelled the restoration of its service boat contract with the NPA, the company stated that it has received no communication from any quarters on the matter.

INTELS said it does not consider the process of awarding the Pilotage contract at all closed.
INLTELS argued the service boat contract has been carried out by it for over a decade with excellent results both in terms of the service rendered and the revenue generated in favour of the NPA and by extension, Nigeria.

According to the statement, “The reasons for this position are based on three fundamental points: the first is that INTELS is relying on a freezing order issued by the Federal High Court, which confirmed the continuity of operations of the pilotage activity even after the date of 8 August 2020, based on the clear wording of the agreement between the parties. It is also the subject of a pending arbitration.

“This continuation is in the best interest of the country, the NPA and the managed clientele, especially given the ability of INTELS to oversee the pilotage districts/revenue centres for the NPA, thus guaranteeing the certainty of monitoring all the movements generated. This has resulted in a significant and constant financial benefit for the NPA.”

The second point, the statement added, concerns the debt ratio between IINTELS/affiliate and the NPA.
“As is well known, INTELS/affiliate is owed over $700 million by the NPA, the repayment of which is guaranteed by the pilotage agreement though a mechanism of repayment of part of the revenues received by INTELS as agent and paid to the NPA.
“This mechanism has worked perfectly well even after August 2020 and therefore it is not clear why it should be discontinued, to the benefit of other competitors that have no claim on the NPA, placing the NPA itself in a state of default that is difficult to sustain before international markets, economic operators and stakeholders, “INTELS said.

It added, “The third, and perhaps most important point is that the NPA would receive an immediate benefit of $100 million from the proposed settlement by INTELS, a very substantial amount, as a result of the debt write-off that INTELS is prepared to grant to the NPA if the proposal is accepted. To this amount would be added approximately a further $300 million, representing a change in the current contractual debt interest rate of 6.5 per cent to 3 per cent per annum. That is, approximately $20 million per year for the 15 years set out in the settlement proposal.

“At this point the question arises, who takes responsibility at whichever level to waive an economic benefit of such magnitude that would provide an enormous boost to the NPA’s budget and resolve years-long dispute with costs and expenses that could be allocated to other initiatives? It remains to be seen whether common sense and the country’s interests will prevail in this case as well.”

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