CONSULTANCY SERVICE FOR CONSTRUCTION CONTRACTORS ASSOCIATION OF ETHIOPIA (CCAE) TO CONDUCT BASELINE SURVEY ON THE LOCAL CONSTRUCTION SECTOR OF ETHIOPIA

Client:CONSTRUCTION CONTRACTORS ASSOCIATION OF ETHIOPIA (CCAE)

HABCON CONSULT has contracted with construction contractors association of Ethiopia (CCAE) and HABCON CONSULT, on March 30/2011, and conducted baseline survey on the existing constraints of the construction sector that are affecting the growth and performance of construction companies. The survey is conducted throughout all regions of the country including the two Administrative cities and on contractors registered at Federal Level; the survey has involved a sample of 244 contractors from different category and grades working in different regions of the country, the assessment have also included the view of 13 consultants and 9 major clients .The assessment was very comprehensive that last for about 8 months through involving more than 30 enumerators and different professionals from disciplines of civil engineering, construction management, economics, statistics, ethics and governance.

The main purpose of the baseline survey is to determine and analyze:

  • The status quo of the building and road contractors in Ethiopia (numbers, types and sizes of companies, capacities, categories as per Government grading system, specialization, regional distribution, types of heavy equipment owned – the consultant is expected to specify the details of the data to be collected and to propose additional data, if required, in his bid);
  • Current constraining factors for company growth (e.g. turnover of the companies) and the quality of the works, such as – but not limited to – public procurement, availability and qualification of staff, availability of equipment, etc. It is of particular interest to ascertain influencing factors for :-
    • Successful participation in bids
    • Performance of contracts
    • Payment procedures
  • The potential IO services required from IOs such as CCAE to overcome the constraints found under item ii, above. Additional or other services that would retain existing and attract potential members should also be ascertained. It is important for the consultant to verify if the companies are members of an association or not and what their reasons are.
  • Experiences, potential and interest of contractors regarding international cooperation and specifically regarding forming joint ventures with international stakeholders. Precise data and tangible, concrete aspects responsible for success or failure of such cooperation needs to be reflected.
FINDINGS UNDER THE FIRST OBJCTIVE OF THE BASELINE SURVEY

Under the first objective of the baseline survey, we have managed to identify the total population of contractors with their regional distribution in the country registered in different category, specialization, capacity and grades. The types of heavy equipments that exist in the sector is also identified based on their registration in the Ministry of Urban Development and Construction(MoUDC) as well as based on the recent import statistics from the Revenue and Custom Authority, this has helped us in identifying equipments imported to the country but not registered under MoUDC. Accordingly, the total number of heavy construction machineries in the country with the trend of increment in the last 10 years (from 1993 to 2003) is also documented.

Assessment is made to look at the contractors upgrading status by comparing their current level with that of the previous year. Trend of upgrading/growth matrix that briefly depicts the upgraded contractors by category & grade is computed. Availability of construction /design professionals and practicing professionals is also assessed to measure the construction capacity of the country. The survey has also assessed the legislation and enforcement of a regulatory frame work that ensures safety and competitiveness in the industry which are crucial for achieving the Growth and Transformation Plan (GTP) of the country.

FINDINGS UNDER THE SECOND OBJCTIVE OF THE BASELINE SURVEY

The wide coverage of the baseline survey has focused on the second objective of the survey. Various constraints at all stages of the project cycle that affect growth and performance of construction companies are identified and we have given recommendations to overcome the constraints based on the best practices successfully implemented in the construction industry of different countries.

The following explanation is given inorder to show how, the identified main constraints that affect growth and performance of construction companies at different stages of the project cycle.

a) CONSTRAINTS AFFECTING SUCCESSFUL PARTICIPATION OF CONTRACTORS IN THE BID PROCESS

Constraints affecting successful participation of contractors in the bid process are identified through assessment of risks in the pre-tendering phase and at the tendering phase. The major constraints identified include Non compliance of the bid process with the public procurement requirements, Non transparent and corrupt practice in setting qualification Requirements which favour specific bidder, Unattainable or unfair legal requirements, Unattainable, unfair and non practical license requirements, Inadequate capacity of local contractors to meet the bid requirement, Poor Specifications and lack of clarity in the bid documents which lead to fixing unpredictable price, The evaluation and award process that are not objective, transparent and do not base solely on the criteria published in the bid documents and External factors & market characteristics. The survey has also identified and assessed the influence of contributing factors which caused the constraints.

b) CONSTRAINTS THAT AFFECT THE AWARD PROCESS

Participants of the survey are asked the question for existence of constraints interms of refusing award of a project after meeting the evaluation requirements stated in the bid document. The major constraints identified under this stage include practice of rebidding the project due to unavailability of budget, Setting improper evaluation criteria and procedure which leads to rebid, New requirement set by the client after the bid evaluation such as clients’ assessment on the performance of the contractors’ previous project , issue of capacity for handling the project, etc, Resistance of clients to award more than one project at similar time while this was not mentioned as requirement in the bid document, Refuse for award by the client because of very low and unpractical contract price for executing the project effectively and failure of the client/consultant to disclose evaluation result of the technical proposal which in turn limit or deprive the contractor to file any complain.

c) CONSTRAINTS THAT LEAD TO FAILURE OF CONTRACTORS TO SIGN CONTRACT AFTER BEING AWARDED

The survey has assessed the specific constraints that lead to failure of contractors to sign contract after being awarded. Accordingly the major constraints identified under this stage include quoting very low and unpractical contract price that cause difficulty for executing the project effectively, Unable to meet the high requirement of performance bond, Unable to meet the high requirement of advance payment/ collateral & cost of premium/, Late awareness about the complexity of the project, inaccessibility of the site, unavailability of labor, material or equipment etc., Unexpected financial crisis faced by your company, Rise of price on construction materials, labor, equipment and other inputs after submission of bid, which will not be entertained for price adjustment due to absence of provision in the bid document and Fear of adverse working relationship with the client/consultant.

d) CONSTRAINTS THAT AFFECT PERFORMANCE OF CONTRACTORS FOR COMPLETING PROJECTS WITHIN CONTRACTUALLY AGREED TIME

The survey has assessed the specific constraints that affect performance of contractors for completing projects within contractually agreed time including the reason for not meeting these performance requirements and the true cause for these constraints. Accordingly the main constraints are identified in the following three groups:-

i. CONSULTANT RELATED CONSTRAINTS

  • Delay caused by variation works
  • Delayed response for clarification of request’
  • Delay in responding for price adjustment requests and insufficient compensation
  • Failure to clearly specify what products or materials are required and prolonged dispute or delay in the approval process
  • Poor contract administration practice

ii. CLIENT RELATED CONSTRAINTS

  • Poor contract management of the client
  • Change in requirement of the client
  • Poor project financing( in terms of budget, payment)

iii. CONTRACTORS RELATED CONSTRAINTS

  • poor contract & project management of the contractor
  • Failure for timely supply of material
  • Failure for timely supply of equipment
  • lack of adequate finance to run the project
e) CONSTRAINTS AFFECTING PERFORMANCE OF CONTRACTORS FOR QUALITY DELIVERY OF PROJECTS

The survey has assessed specific constraints that contribute to the failure of contractors for completing Projects with the required Quality including factors that contribute to the prevalence of the constraints. Accordingly the following factors are identified under two major groups of constraints:-

i. DESIGNER AND REGULATORY BODY RELATED CONSTRAINTS

  • Lack of clarity in specifying quality requirements, lack constructability and standardization of the elements specified by designers.
  • Unavailability & high cost of products faced due to design requirements that specify "tailor made" elements
  • Lack of specialized knowledge on product specification by the designers
  • Use of obsolete technical specification which doesn’t address quality requirements of all works and materials included in the contract
  • Lack of clients’ participation in the design process to select quality of products which meets their need
  • High and unattainable quality requirement specified by the consultant
  • Absence or limited number of testing agencies/laboratories in the country to ascertain required conformances

ii. CONTRACTORS RELATED CONSTRAINTS

  • Unavailability of competent professionals and skilled labor which resulted in poor workmanship
  • Using poor quality of equipment and inferior quality products to minimize cost
  • Poor quality assessment system in organization
  • Low investment on quality training
  • Low level of management commitment
  • Attitude of the management and professionals that meeting the required quality will result in an Increase of production processes costs and reduction of productivity
  • Lack of uniform material quality from the stock of suppliers
  • Laboratory test results are manipulated by the contractor and do not represent the actual quality of the material
f) CONSTRAINTS AFFECTING PERFORMANCE OF CONTRACTORS IN MEETING HEALTH AND SAFETY REQUIREMENTS

The survey has assessed specific constraints that contribute for failure of contractors to comply with health and safety requirements including factors that contribute to the prevalence of the constraints. Accordingly the following factors are identified under two major groups of constraints:-

i. DESIGNER AND REGULATORY BODY RELATED CONSTRAINTS

  • Unavailability of enforcement practice for health and safety of workers will affect competitiveness of the contractor in investing for prevention and control of accidents
  • Insurance policies are not effective in covering risks of accident and health hazard
  • inadequate supervision of the consultant or inspection of regulatory bodies which contribute to the occurrence of accidents on construction sites
  • Lack of strong health and safety provisions to prevent any possibility of occurrence of accidents on construction sites
  • Lack of approval/certification requirements for compliance with loading, ground movement and disproportionate collapse

ii. CONTRACTORS RELATED CONSTRAINTS

  • High cost of Providing personal protection equipment to workers exposed to hazard and other staff, Provision of drinkable water and proper sanitary facilities according to legal and contractual requirements is not considered in pricing your bid
  • There is no organized system in contractors’ organizations for preventing causes of health and safety problems in workers such as conducting safety meeting, recording and reporting encountered accidents
  • Lack of knowledge and awareness on the issue of safety by the contractor
  • Resistance and low awareness level of workers’ to use accident protective equipments
  • Unavailability of professionals (safety officers) in the area of health and safety to enforce requirements of the regulation.
  • The use of inappropriate construction techniques in relation to safety on site
  • The use of poor quality materials lead to the occurrence of accidents
g) CONSTRAINTS RELATED TO THE CURRENT PAYMENT PROCEDURE

The survey has assessed constraints related to the current payment procedure and their influence on performance and growth of contractors. Accordingly the following constraints are identified in relation to the current payment procedure:-

  • The existing 30-days of provision to effect payment by the client is too long
  • Indefinite delay of the consultant to process and approve payments for executed work & materials supplied to site
  • Delay of the client to effect approved payments beyond 30 days
  • Resistance of the consultant to approve equivalent value of the executed work and resistance to pay for materials supplied to site

NOTE: - The survey has also identified a number of factors that contribute for each of the constraints listed under all of the above constraints including the degree of influence by each factor in affecting performance of contractors to complete projects as per the contractually agreed time, quality and requirements of health and safety. Moreover valuable recommendations are given to overcome the constraints, improve performance and growth of construction companies as well as for improving the performance of the construction industry.