Fight over road contracts

By Ian Katusiime

Local contractors say they are tired of `eating’ crumbs

Uganda is on a road construction binge. The first priority on the National Development Plan is to improve the condition of roads through tarmacking and maintenance. In the 2015/16 Financial Year, up to 400kms of roads are to be bituminised, 2,600kms of unpaved roads and 120km of urban paved roads are to be maintained. Currently, there are 16 road projects under way totalling to 1,143 kilometres. Major modern highways are to be built with public expenditure on roads expected to hit Shs2.3 trillion (approx. US$630 million).

However, amidst this boom, there is grumbling that the bulk of the work is being done by foreign contractors, mostly European and Chinese-owned firms. This point was made by the Deputy Chairperson of the National Planning Authority, Abel Rwendeire when he spoke at the 13th Annual Construction and Interiors Exhibition in Kampala.

A few days later, on Sept.9, the Chairman of the Association of Consulting Engineers, Michael Daka, made the same point during his testimony at the on-going Commission of Inquiry into alleged corruption at the Uganda National Roads Authority (UNRA).

“There is some informal blacklisting of local engineering firms by UNRA,” Daka told the Commission headed by Justice Catherine Bamugemereire.

In reality, the conditions of winning a tender to construct say a 20km road are complex and too tedious for the average local contractor.  For a company to get such a job, they should have accomplished three projects of a similar nature which is already too much to ask considering that they never get these juicy contracts anyway.

The other issue is the bid securities required by the Ministry of Works/UNRA in the tendering process. Many Ugandan firms, in terms of revenue, do not make even a quarter of the amount for which the Kampala Express Highway was tendered.

As a result of such practices, several renowned local contractors, including Zzimwe, Nicontra and Multiplex say they have been left to fighting for crumbs in the road sector. Most can only do petty jobs on projects of 20km. The main beneficiaries of the discrimination, it is alleged are foreign firms like China Communications Construction Ltd, Mortal Engil , Dott Services, and others.

Even when UNRA, which is the road sector regulatory body, suggested the big foreign-owned firms always sub-contract work to Ugandan firms, indigenous firms complained that they are handed drainage channels and other petty jobs.

Multiplex Ltd was only given a job of expansion of the shoulders of the 21km Mukono-Jinja Road a few years ago.   Zzimwe Construction Limited, in its glorious days, did 3km roads such as the Nakulabye-Namungoona road. Most of these 5-10km roads only involved resealing the surface with new tarmac.

In a bid to avoid the negative image and access more business, local road construction firms have been pushing for the Uganda Construction Industry Commission (UCICO) Bill to compel foreign companies to at least share work with them.

The Bill, which is still before Cabinet proposes that for every contract awarded to a foreign company, the latter should sub-contract 20% of the work to one of the local construction companies.

The Bill also proposes that any company that gets a Ugandan contract should pay 2% of the monies it receives to the Construction Commission as a way of growing the industry.

Sam Mutabazi, the Executive Director of Uganda Road Sector Support Initiative (URSSI), a road sector NGO, wants UNRA to ring-fence contracts for middle companies under an arrangement called ‘Term Contracts’. Basically, this covers maintenance and development.

“For example, get a Ugandan construction firm to do maintenance work for the Kampala-Masaka road every three years, that will keep them going for some good time,” he says.

Mutabazi says Ugandan companies should be exclusively awarded a section of tenders to grow their capacity.  He says since, under local government law, all main streets of municipalities should be tarmacked, local contractors should be given such opportunities for them to thrive in the market.  The main streets of many municipality towns in Uganda are not more than 10km long.

Briefcase companies win

To facilitate this, in 2012 UNRA did a study to establish the scope of the road construction industry. The study categorised the companies in three layers. First is the ‘small companies’, second is the ‘medium’ which comprises most Ugandan contractors and third are the huge players which are mainly the foreign-owned contractors.

Unfortunately, most of the small companies, which are mostly local, are described as shady `briefcase’ companies with dubious reputations and no physical addresses.

On such company, Eutaw Construction which successfully bid for the construction of the 74km Mukono-Katosi road was later exposed as a non-existent company.

Mutabazi says that the construction industry in Uganda is riddled with such phoney contractors bent on making quick money through their network of lobbyists. There are over 800 briefcase contractors, he says.

According to him, briefcase contractors have easy access to credit, have liaison offices, and easily edge Ugandan contractors when jostling for road projects. He says that such companies are never known to bid for projects but the industry just learns of the contract after it has already been awarded and construction is underway.

The failure to advertise contracts is sometimes designed to protect local companies.

“When you advertise the bids, the foreign contractors will obviously outbid the local ones. So the option is therefore to identify a pool of companies from Uganda for which to award the contracts,” Mutabazi says.

Evarist Asiimwe, the Managing Director of Aevar Engineering Services, agrees with Mutabazi about the tendering business being subject to secretive bidding and excessive lobbying.

“Ugandans do not have enough money to hire these lobbyists and connected people,” he says, “Did you ever hear of the announcement of the Katosi bid?”

Asiimwe, whose company made structural designs for a military training school and a medical centre in Somalia says the government should value Ugandan companies not only for patriotic reasons but also to boost vocational skills in the country.

Asiimwe suggests that if big projects are handed to local companies, some mishaps would be avoided.

“If they had given the Katosi road contract to a Ugandan company, we would not have had any tales about a contractor vanishing”.

Asiimwe says the government needs to rescue Ugandan firms sooner than later. According to him, Ugandan firms should be paid commissions for the work they do in spite of their inexperience.

Those pushing for more local involvement in road sector construction contracts say the marginalisation of local contractors hurts the economy.

“When Ugandan firms are given these contracts, they do not have to go abroad to source for technical people. They have their own road engineers and overseers,” says Joseph Ajuna, the Chairman of Uganda Road Work Plants Operators Association. He says even the profits made by local companies remain at home while those of foreign companies are shipped out.

Even the Minister for Finance, Matia Kasaija, recently made the same point. He said starving local contractors of work weakens the shillings because the foreign firms will still buy back dollars when they are paid in local currency.

“No wonder your shilling is suffering,” Kasaija said.

“Even as they are rated highly, the foreign contractors have in some cases delayed projects and done shoddy work. Some of the foreign firms have also been accused of violating labour laws and paying local employees peanuts. Whereas the Chinese do the designing of the projects and the administrative work, the grader operators, the porters, the people who do the essential work are Ugandans and they cry out due to their unfavourable terms of employment.

“For example on the Fort Portal Kamwenge Road, every truck driver earns Shs8000 a day, you cannot even buy food, people are not benefitting anything,” Ajuna says.

Fortunately, when he spoke recently, the NPA’s Rwendeire said the government was aware of these frustrations and was developing new guidelines that will compel foreign construction firms doing work in Uganda to subcontract part of the work to local contractors. “This will not only help in the capacity building of the local construction companies in the Country but it will reduce the incidences of profit repatriation,” Rwendeire said.