Change in the construction industry

While economic indicators remain mixed at best, I have a strong fee-ling that we may at last be on the way out of a construction-industry recession that has had a very negative impact on many people. Part of the reason for my sudden burst of optimism is that there is quite simply nowhere left to go but up. There has to be movement at some point and hopefully people will start to see that this is now a good time to start building again. The other reason, from a personal point of view, is that I have been bidding for several jobs over the past few weeks.

Perhaps, I have just become better at identifying opportunities but I am starting to see the glass half-full again and suspect there are quite simply more tenders being launched or jobs available. The glass, however, still remains a bit murky. I know that there are at least five other bidders for one of the jobs for which I’m submitting a bid.

There’s a lot of smart talk these days, from smart cities to smart transport and even smart agriculture but smart cities can only be delivered if the whole industry acts smartly, which is far from the actual case. It also needs the authorities to act smartly after years of inaction. As things stand, various professional associations have sent suggestions both to the Ministry and the Central Procurement Board, proposing remedies to various issues that need addressing but correspondence has gone unanswered. Time and again, expert international bodies have commented on the inefficiency of the public sector. Without proper reform and a strong ministerial lead, it is difficult to see how the country is going to achieve its full economic potential.

A letter sent by the Association of Consulting Engineers to the Minister of Public Infrastructure in July 2015 has never been answered. The Construction Industry Development Board (CIDB) is battling to cope with a flood of registration applications from consultants and contractors.

Problems abound in the industry. There is a shortage (sometimes a complete lack) of skills and competence, a lack of competition among suppliers and contractors in parts of the markets, low cons-truction quality, poor performing buildings, low levels of research and innovation, a lack of green materials, poor health and safety on construction sites, inefficient procurement systems, delays and disruptions. Several contractors are being forced out of business; others are struggling with high levels of debt. Many other countries have faced similar issues in the past and resolved them well but it seems we are not keen to learn from them.

We should start at the very apex of the construction industry: developers, government and individuals. Most clients understand little about how the industry operates and how the whole construction procurement system works, and don’t seem very bothered about learning. The result is that expectations and goals don’t match the actual service delivery of the industry as a whole and disputes arise. Clients are often not fully aware of the role of the various actors in the industry, for example confusing the roles of architects and engineers with those of contractors. Perhaps the main message the client needs to understand is that, for any construction project, he needs to make adequate provision for supervision, for someone to be on site to ensure that all aspects of works are undertaken as he would wish.

To add to that, clients, particularly in the private sector, are negotiating as hard as they can, forcing contractors to further reduce prices, despite theirs already being very low. With a carrot at the end of the stick – the possibility of further work or heading off a rival – contractors themselves are lured into a false sense of security. All this is unsustainable. Many clients are undiscriminating and still equate price with value, selecting designers and constructors almost exclusively on the basis of the price in an initial quotation. This tendency is widely seen as one of the greatest barriers to improvements in quality standards.

Major problems also exist within the construction procurement system. In the public sector for example, the conditions of contract imposed on construction consultants have been severely criticised as unfair. Unfair payment terms, a lack of sufficient remedies in the event of disputes with a client, unfair treatment in the case of variations, no explicit compensation provision for contract overruns…

The procurement document for construction works is another area which needs radical revamping. Introduced by World Bank adepts, the set of procurement documents for construction works are more confusing than useful. Its proper use is beyond the comprehension of many procurement officers, not because of incompetence on their part but because the inherent complexity of the documents results in their improper use. Unfair terms are drafted, which in some cases are of doubtful legality. The inadmissibility of provisional sums and the appointment of nominated sub-contractors have caused more harm than good to the industry.

The absence of designers and consultants in the assessment of tenders and the selection of contractors in the public sector have exacerbated the problem. The assessors appointed by the CPB are very often unable to understand the intricacies of a project and, as a result, recommend an inappropriate contractor. This leads to poor performance, disputes and, in some cases, termination of the contract with the job far from being completed.

Unfair payment terms and practices between clients and contractors and contractors and sub-contractors are nearly killing this industry. Many powerful and reliable contractors, who were very active in the past, have been forced to close down in the last five years because of payment problems. The market is today dominated by a handful of contractors, which is a threat to the competitiveness of the industry.

The reliance on foreign consultants in various major public projects has often turned out to be a mistaken strategy – but there is no change in sight. Several current tenders are still aimed at foreign consultants. This lack of confidence in local consulting competence is often damaging to a project and does nothing to help often highly qualified local consultants. Money that could accrue to the local economy is sent abroad.

The lack of skilled workers at all levels is another major problem, one that the industry has been fa-cing for many years now. Unfortunately not much has been done to redress the situation; rather we have opened our doors to a flood of foreign workers. No national programme on construction skills improvement was put in place. The MITD is already overloaded.

If it is to rise to the new challenges of the smart cities and other projects, there is a serious need to create a better working environment in the industry. It will have to cope with increasingly complex projects and higher demand, higher levels of performance and reduced construction times – Heritage City is to be built in three years. Not only that, where there is a client from overseas, he may have a different, sometimes exploitative, working culture.

There needs to a clear demonstration of a will to solve the various problems in the industry. The CIDB alone will take years to do so and we are short of time. So the Ministry needs to show it is serious about tackling these issues. It would be naive to believe that the CIDB alone will ever be able to do so. Indeed, the CIDB has not brought unanimity among the various actors as far as its role, functions and capabilities in current circumstances are concerned. It only really began functioning many years after it was created and it is only recently that a director was appointed.

The construction industry deserves more consideration. It employs thousands of people and is an important pillar of the economy. This consideration could and probably ought to be through a separate ministry or a stronger body, bringing together all the stakeholders, currently
operating in a fragmented manner. This includes construction clients, the professional associations, the contractors and the Central Procurement Board. Indeed, as it stands, we have to ask ourselves whether the CPB has the necessary expertise to be involved in construction procurement.

To put it simply, the way forward is for the authorities to spend more time talking to leading local professionals, understanding the professions involved and the problems they face. Above all, all the players need to learn to respect each other and systems need putting in place where they can work together in the interests of the country.