- Infrastructure: Why international firms are taking all the road construction deals
- How local companies can build capacity
With juicy road deals coming up for the taking, local contractors have continued to shy away. Joel Ogwang looks at why they are shying away.
The Ugandan construction industry has over the last fi veyears emerged fertile, profi table and competitive, attracting even the world’s best contractors.
However, local contractors have been relegated to spectators, instead of competitors, in the goldmine that roads development has become. Even with sh2trillion up for grabs for upgrading 1,900km of priority roads under the Contractor-Facilitated Financing (CFF) mechanism, none of the 100 local contractors bided.
A total of 46 international companies, 16 from China, nine from India, five from Turkey, three from South Africa, two from the
US and two from Spain, one each from Egypt, France, Portugal, Israel, Ireland, Netherlands, Malaysia, Switzerland and the UK bided.
UNRA selected 20 of the 46 firms for evaluation. With donors against force accounts – where agencies use their own machines for routine and periodic maintenance work instead of contracting them out to private companies – the Government’s decision to procure road units off a $100m Chinese government loan for each of the 111 districts and 22 municipalities for routine maintenance of their roads in June 2012 was a vote of no confidence in the local contractors.
“By procuring the equipment, the Government is taking away business from us. It should help us develop more capacity,” says Eng. Fredrick Lwanga, the director Kagga and Partners consulting engineers.
Industry players blame this on the weak local construction industry laden with contractors who lack capacity and the requisite resources.
Works state minister, Eng. John Byabagambi, notes that, driven by profit motives, local contractors often get jobs unprepared, lacking workers, equipment, managerial and financial management skills.
“About 60% to 70% of local contractors are bad. They are non-performers,” he says.
None of the 100 local contractors bided for the sh2trillion
“They are good at designing documents that can compete even internationally, yet they can’t deliver when contracted. Unfortunately, those who perform don’t get jobs yet non-performers can have three or four jobs at ago.”
Local contractors have also been accused of inflating costs and creating many firms under one ownership.
“Sometimes we award a contract to a local contractor who doesn’t even own a hoe,” says Ssebugga Kimeze, the acting
UNRA executive director.
“We have situations where we can give out a contract of sh900m, yet what the contractor has on ground is sh150m.
We need to improve the way we work or we will perish. We can’t develop by relying solely on foreign contractors.”
Byabagambi wants a contract termination clause in the PPDA Act made simpler to weed out non-performing contractors.
“Right now, the process of terminating a contractor is the same as procurement.
You can’t have another contractor on site until you terminate another. We have blacklisted some contractors, but want to go through the same procurement process. We want the powers to say enough is enough, get off!”
What local contractors say Gumisiriza Birantana, the Uganda National Association of Building and Civil Engineering Contractors chairperson said local firms have limited equipment, resources and capacity.
“Few of our local firms have adequate collateral for such deals, but we will enter joint-ventures with international companies. Our biggest problem is finance. No bank in Uganda is willing to give 100% mortgage on $100m. They only give 60% of the value of collateral in loans.”
Vivian Simoli Baguma of Principal Engineering said: “We can’t bid for every project that comes around. By the time we got to know about the project, it was a bit late. Otherwise we would have bided.”
Factoring in local content
In a bid to develop local content, UNRA is undertaking the classification of local contractors. This, UNRA hopes, will propel
them to scale-up their performance.
With in-house trading - where civil and public servants award themselves contracts - cited in most districts, the Government is looking to implement the new Construction Industry Policy that seeks to award 20% of construction and 30% of consultancy services to local contractors to build their capacity.
“Unfortunately, we don’t have enough contractors to absorb the 20% contracts,” says works and transport minister, Eng.
“I have directed UNRA to encourage local contractors. We can start with awarding them 3-5% of the development works and progressively increase this when they perform well.”
Kimeze argues that with road maintenance a preserve of local contractors, local content is being developed. “International contractors have not expressed interest in road maintenance,” he says.
“We also want to see that in the development work, international contractors partner with the local ones.”
UNRA is also urging local companies to enter joint ventures with their international counterparts since they lack funds and capacity.
“International contractors who emerge successful will offer onjob practical training when they sub-contract local companies,” says David Luyimbazi, the UNRA director of planning. “There is a provision to evaluate them based on local content.”