Five contracts up for grabs under contractor financing

Mar 04, 2013

There is stiff competition for lucrative multibillion contracts under the recently introduced contractor-facilitated financing mechanism.

By Joel Ogwang                                                                    

KAMPALA-There is stiff competition for lucrative multibillion contracts under the recently introduced contractor-facilitated financing mechanism.

However, whilst several international companies expressed interest in the contracts to upgrade 1, 900kms of roads from gravel to paved standards there are only five contracts up for grabs.

Some of these roads include; Kapchorwa- Suam, Mukono- Kyetume- Katosi,  Rukungiri- Kihihi- Kanungu, Olwiyo- Gulu- Kitgum, Soroti- Katakwi- Moroto and Musiita- Lumino- Busia/ Majanji, among others.

The 19 priority roads will be improved under a Public- Private Partnership (PPP) over the next three to five years, said Eng. David Luyimbazi, the Uganda National Roads Authority (UNRA) director of planning.

“It (evaluation) is going to be a very competitive process, which is good for us because only the best contractors will emerge winners,” he said. “All the 46 companies that expressed interests are vying for five contracts.”

UNRA advertised requests for expression of interest in local and international media on July 12, 2012, attracting 46 international companies.

However, whilst Uganda boasts over 100 local contractors, none of them tendered in their interests, compared to 16 from China, India (9), Turkey (5), South Africa (3), USA (2), Spain (2) as well as one each from Egypt, France, Portugal, Israel, Ireland, Netherlands, Malaysia, Switzerland and the UK.

In expressing interests, applicants must demonstrate a minimum average annual construction turnover of $200m as well as submit audited balance sheets and other financial statements acceptable to the employer for the last five years.

The government is undertaking the contractor-facilitated financing scheme to reduce its expenditure on roads by ensuring contractors express interest in road projects and source for their funding from financial institutions.

Over $1b (about sh2.6 trillions) will be raised when contracts are awarded in a scheme intended at boosting Uganda’s primary growth sectors of tourism, agriculture and oil & gas starting this 2012/ 13 FY.

Once completed, it is anticipated that the roads will go a long way in reducing the costs of doing business which is one of the inhibitions to investment growth and development in Uganda.

As it stands, the state will evaluate the best bids and agree terms with financiers who offer reasonable interest rates, longer repayment periods and limited demand for counter-part funding.  

“We closed it (bidding). We are now evaluating the expressions of interests but some two roads- Apac- Lira- Kitgum and Nabumali-Butaleja- Namutumba-will be advertised differently,” said Dan Alinange, the UNRA publicist.

Luyimbazi warned of a tight evaluation process, adding that banks will undertake due-diligence on their ability to finance the contractors.

“Contractors will have to provide us with method statements and work programs,” he said. “Part of the evaluation is assessing contractors’ ability to deliver quality work in time.”

Whilst the contracting will be phased-out, with each implemented over a three-year period, the finance ministry, cabinet and Parliament will determine the speed and pace of roll-outs, preceded by clearing borrowing and terms of borrowing.

Unlike in the past where international contractors imported labour from their countries, there is a provision under the scheme seeking interaction between international and local contractors, employment of Ugandans, procurement of inputs locally and any other proposal critical in stimulating Uganda’s economic growth.

“International contractors who emerge successful will offer on-job practical training when they sub-contract local companies,” said Luyimbazi. “There is a provision to evaluate them based on local content.”

UNRA is urging local companies to enter joint ventures with their international counterparts since they lack funds and capacity.

“All the 19 roads will cost sh2trillions,” said Alinange. “The only institution that can finance this is the National Social Security Fund (NSSF), sitting on sh3trillions but I don’t think it would finance local contractors under its current.”

 

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