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Performance Of Ghanaian Contractors Vrs Foreign Ones, What Are We Really Comparing & Whining About?
 
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11-Aug-2017  
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A shoddily Executed Road Project-Who should be blamed? is it the building contractor, who though did a bad job, managed to have the project certified and paid for and handed it over at the end of defects liability period. Or its due to inadequate design, non-durable material, poor supervision by the Supervising Engineer or what? Such incidents must be investigated and recommendations made for sake of posterity.
 
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·         “I Believe in Ghana”- President Nana Akufo-Addo

·         “Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.” - Samuel Beckett 

·         “Construction is big business with huge budgets and many people rightly see it as an avenue to earn or make or steal money”

“President Nana Akufo-Addo, when you were campaigning for office, you once complained of the Kasoa Interchange Project having been inflated. As a private citizen then, you had nowhere to go, outside government, to have your claims investigated and verified.

There are so many other Ghanaians who have such concerns, but have nowhere to go to have them addressed. Please Sir, now you are in power and your Ministers are still whining on the deficient performance (inflation of contract prices, shoddy work etc) by Ghanaian Engineers/Contractors as compared to foreigners. Oh yes, even your Ministers seems helpless about whom to whine to, for their concerns to be addressed.

This is an opportune time for you to set up an independent GENERAL BUILDERS COUNCIL to regulate all Built Environment Professionals and their work. It should be such that if every citizen has a genuine concern that a project has been shoddily done, it's cost inflated, paid for, when work is not done etc, they can lodge a complaint for it to be investigated.  If the allegation is verified, sanctions like banning for a period, can then be applied to culprits as pertains with the GENERAL LEGAL COUNCIL.

This is one of the means, by which, you can assist competent hardworking Ghanaian Engineers/Contractors build capacity to compete with their foreign counterparts.”

Secondly, President Nana Akufo-Addo, “if you believe in Ghana”, do try some of the good Ghanaian Engineers/Contractors who once designed and built the likes of State House, Dansoman Estates, SSNIT Housing at Sakumono & Adentan, Adentan -Dodowa Road, Kumasi -Sunyani Road, Shippers House, some MIDA Infrastructure etc, If you try them and they don’t perform, report them to a Regulatory Authority to ban the non-performing ones. Then, you and every other Ghanaian can count on the performing ones to work with, into the future. Please give us an opportunity also, and do not ignore us in preference of expatriates, as suggested by Hon Atta Akyea. .“

Since the NPP government Ministers complained of the WORK ETHICS and PRODUCTS of Professionals in the built environment; in this article Engineers/Contractors; refers to Professionals like Architects, Planners, Engineers, Quantity Surveyors, Technicians, Building and Roads Contractors and Artisans who are always at the forefront in the execution of contract works, such as (Buildings, Roads, Drainage, Agricultural Infrastructure, Water Supply, Electricity Supply etc).

On the 26 July 2017- City News Reported the following:

Locals untrustworthy, foreigners to get gov’t projects – Atta-Akyea

(“Priority will be given to foreign engineers on key government projects because of the inability of local engineers to execute projects to the required qualitative standards”, the Minister of Works and Housing, Samuel Atta-Akyea has said.

The Minister had some harsh words for local engineers as he intimated that they were preoccupied with making money, as opposed to ensuring lasting projects.

On the other hand, he noted that foreign contractors were preferred “because they have distinguished themselves.”

Mr. Atta-Akyea made these remarks at the Engineering Council as part of a one day working tour, where he acknowledged the need for local content and Ghanaian involvement in key projects.

“…after all, you go and bring engineers from Israel to do a major project here and you are enriching the Israelis,” the Minister noted.

“But there is a problem,” he added. “If you hire Ghanaian engineers, they wouldn’t want to do the work right. They cut corners, they inflate figures.”

“For the engineer, who is outside, it is a legacy, so that your name is permanently written… but for the Ghanaian engineer, it’s not like that. He is trying to look at situations to make good money and leaving us a shoddy job,” the minister added.

Mr. Atta-Akyea also urged engineers to increase their capacity to generate income, explaining that “the reason why we are saying this is that the national kitty is challenged – one of the things economists wouldn’t want us to say, but that is the fact of the matter.”)

Hon. Atta Akyea’s statement was buttressed with another one by the Senior Minister, and a Fellow of the Ghana Institution of Engineers (GHIE) on Friday, July 28, 2017 12:50 pm, reported by City News as follows:

 Don’t blame politicians for shoddy infrastructure – Osafo Maafo

 These are excerpts of comments by Hon.  Osafo Marfo at capacity building conference organized by the Ghana Institute of Engineers, Planners and Surveyors on Friday.

 “Politicians should not be held responsible for the sub-standard infrastructural projects littered across the country, according to the Senior Minister, Yaw Osafo Maafo. Senior Minister, Yaw Osafo Maafo believes the blame should be laid squarely on the door steps of the country’s engineers, whom he accused of not effectively supervising those projects”.

Wow! these are very serious statements from two prominent Government Ministers, one of whom is a Cabinet member. These statements, sets one to question what Government officials have seen about the performance of Ghanaian Engineers/Contractors as compared to foreign ones. And what policy, might have been discussed and proposed at cabinet level, between choosing Ghanaian or Foreign Engineers/Contractors for the development of Infrastructure under their watch? Or is this the usual Ghanaian talk on radio, where everyone knows the problem, but seems helpless on how to solve it. If Cabinet Ministers are crying and whining about our problems and can’t pass legislations to solve them, what can the ordinary citizen do?

When the Anas expose on the Judiciary occurred, there wasn’t a call for the importation of Judges, but the Judiciary System was able to clean itself. But can Built Environment Professionals count on any regulation to do same with the rot and exploitation of the public purse associated with it?

Our Ministers shouldn’t throw their hands in despair; One of the things Government of Ghana(GoG) can do to cure this problem is to:

i.            Have a database base available on a website similar to the U.S. government SAM.gov website (System for Award Management (SAM), where an entity can only be eligible for Federal Awards, if SAM registration is active). All Ghanaian Engineers/contractors who wants to undertake government contracts, aside the contract works certificates issued by relevant Ministries, should register online on this website. Built Environment Professional bodies like Ghana Institution of Planners, Surveyors, Architects and Engineers can also upload their active list of members unto this website. If an Engineer/Contractor is found culpable not to have performed on a contract by a Regulatory Authority, he should accordingly be banned from that website.

ii.            Online procurement of works and monitoring of projects should also be mandatory, to enable GoG and all citizens have easy track of projects
 
iii.            Oh Yes, some Ghanaian Engineers/Contractors have performed abysmally now and in the past. Some have had every opportunity thrown at them through government assistance or by their powerful political Godfathers to boost their capacity in the execution of government infrastructure, but have failed to deliver. Some even take advance payments and refuse to set foot on site. We even have unconfirmed reports of some deliberately inflating contract prices, which is professionally unethical. Oh yes, some sees construction as a conduit to steal money from the public purse, and they seem to have their way. Let an independent Regulatory Authority investigate and sanction them.

iv.            But there are other Ghanaian Engineers/Contractors who are hungry for success and good name as their foreign counterparts.  Why is it that on donor funded projects where contracts are respected, there are rare occasions, where Ghanaian engineers have failed to deliver competitive, good and timely projects. In my opinion; this is so, because funding agencies like Kfw, EU (European Union), USAID, World Bank, AfDB (African Development Bank), USAID etc insist on fair, stringent and competitive procurement of services/works/goods. They look out for competence of the Ghanaian instead of his political colour. If they require key professionals to lead and implement a project, they insist on it and the Ghanaians doesn’t disappoint. Also, when these funding agencies state in their contracts that they will pay for certified work done within 7,14,21 ,30 or 90 days, the Ghanaian contractors and consultants are paid on time in accordance with their performance. Periodic audit of projects by external auditors, employed by funding agencies, ensures timely rectification of non-performing consultants & contractors”. GoG should do as these funding agencies do on their projects.

Now, I will pick on some key concerns raised by our Ministers for discussion:

1)      Capacity of Local Engineers/Contractors to execute government Infrastructure.

2)      Poor Qualitative Standards/Shoddy work of Infrastructure executed by Ghanaian Engineers/Contractors, due to poor supervision.

3)      Inflation of Projects Cost by Local Engineers/Contractors.

4)      Politicians are not to be blamed for inflated contract prices, shoddy work etc

Let us discuss, compare these issues under the regime in which Ghanaian and Expatriate firms operate and make appropriate recommendations towards alleviating these problems:


1)      Capacity of Local Engineers/Contractors to execute government Infrastructure.

The successful construction of any infrastructure according to an Engineer’s/Contractor’s work plan depends on availability of competent and experienced expertise for design and site supervision, good and efficient works men (artisans), required tools and equipment and good approved construction materials. An Engineer/Contractor can only be successful, if he has ready and adequate funds to procure these resources as scheduled. In a situation where one is found wanting in the supply of cash for these items, there will be breakdown of work and order in the implementing of the project.

If work done is in a state, where it will be affected by the weather, human or vehicular use etc, the work done will deteriorate and the contractor will have to repair/restore the works at a cost, upon restart of work. It is therefore important for an Engineer/Contractor to have all required resources available for the successful execution of a contract.

Now let’s look at the funding regime under which most expatriate firms operate in the country. Most expatriate firms come to work in the country through long or short-term credit facilities arranged through e.g.  their Governments or Financial Institutions in their country in favour of Government of Ghana.

Their Project and funding is normally discussed and secured in our Parliament with our Sovereign Guarantee as collateral. In a situation where its design and build like the newly Built Ridge Hospital, Circle & Kasoa Interchanges etc.

The Expatriate Engineer/Contractor dictate the type of design. This is so, because Ghana does not have a strong Built Environment Regulatory Institution to, tow all in line, to design infrastructure suitable for our environment.   

In some cases, as cited by Architect Tony Asare in his article (“Let’s read in between the lines”, 31 July 2017, Graphic online), the design may not be suitable for our environment. Architect Tony Asare cited the newly built Ridge Hospital as a temperate design with a lot of non-openable windows, to allow for ventilation, built in a tropical environment. Operation of Ridge Hospital will therefore need 24hr Air-conditioning, which is not cost effective for our already under resourced Health Sector. 

Another design build gone bad example by a foreign consultant, cited by Tony Asare , is the abandoned/rusting away Accra  Sports Stadium Steel Supported Stands, due to the use of cheap corrosion susceptible steel, instead of concrete or Hot-dip galvanized Steel, by the Expatriate Design Engineer, in a saline environment like Accra. We may go on and on.

If Parliament approved such contracts, what can the Ghanaian Engineer/ Contractor do about it?

Anyway, lets come to back to the core issue of access to credit by expatriates and local firms.
With a secured source of payment of their contract, guaranteed with the Sovereign State of Ghana, and since Ghana has never defaulted in settling its external debts, the Expatriate firm can easily raise credit at very competitive interest rates in their country of origin or elsewhere to enable them to execute their contract without interruption.

 “A Chinese Project Manager once confided in me that, his company raised 50% of the value of works of their contract at 1% interest rate per annum, from their home country as loan to support the execution of their contract. This was even a timely paying Kfw (Kreditanstalt für Wiederaufbau, a German government-owned development bank, based in Frankfurt) funded contract that I was then supervising as a Resident Engineer”.

Meanwhile the Ghanaian Engineer/Contractor will have to grapple with raising credit at rates of 33% plus from local Banks. In most cases, if it’s a GoG contract, the Banks frown on advancing loans to the Ghanaian Engineer/Contractor. Even if the local Banks will advance a loan to the Ghanaian, they will require the Ghanaian Engineer/Contractor to back the loan with collateral equivalent to one half the value of the loan. What value of collateral can a Ghanaian Engineer/Contractor raise?

Even if the Ghanaian has property to use, he may not have Title to the property, due to numerous land litigations and our chaotic land tenure system.

Meanwhile, the foreign firm can use his guaranteed payment contract, track record and expertise in the field as collateral to raise credit at competitive rates, of sometimes less than 5% per annum. The Ghanaian will however struggle, sometimes without positive results to raise credit from Banks. This is so, because the Ghanaian contractor has no secured source of payment from his employer, GoG, as compared to that of his expatriate counterpart.

Some Ghanaian Engineers/Contractors eventually fall on non-Bank Financial Institutions like Micro -Finance companies etc, to get loans at interest rates of 5-10% per month.

Yes, the Ghanaian must grapple with raising credit at 60-120% per annum, backed with equivalent required collateral in movable or unmovable assets. If the collateral is a movable asset like a vehicle/heavy equipment, some Micro Finance companies insist on using a vehicle/equipment which is not more than 8 years old as collateral, and may even ask you to park it with them, until you pay back the loan. Since the regulator, Bank of Ghana hasn’t complained, I assume they have sanctioned this practice by Microfinance companies. All the above facts are based on my experience in the industry.

I will not blame delayed GoG payment alone, as the only reason why Ghanaian Banks frown on advancing credit to our Engineers/Contractors. Some of our Engineers/Contractors friends, contributed to this situation. In times past, they failed to pay back loans granted them by Banks, even after they have received payment.  Though this might have happened because, the payment that they received fell short of paying off their loan principal plus accrued interest.

The collateral requirement for getting Bid -Securities, Performance and Advance Payment guarantees from local Banks is the same as afore mentioned. These guarantees are what local Engineers/Contractors are mandated to provide for bidding, signing a contract and getting advance payments respectively, for the execution of contracts.

From the above facts, is it fair to compare an entity borrowing at 33-120% p.a. to another, that borrows at less than 5% p.a.?

Meanwhile what is the GoG default rate in paying local contractors? Sometimes it takes years. Some local contractors have unpaid claims dating back to Kufuor’s government. Because NDC government decides to ignore payments due on projects undertaken by NPP and vice versa.

Some Recommendations to Help Build Capacity of Ghanaian Engineers/Contractors

i.            Government officials, shouldn’t award contracts without secured funding. This will alleviate the problem of delayed payment of claims due on GoG contracts. The delayed payment problem has shattered the confidence of financial institutions to take risk advancing credit for GoG projects. If this confidence is regained, performing local Engineers capacity will obviously be boosted, since they would have ease of access to credit from our Banks.

ii.            I quote: “Mr. Atta-Akyea also urged engineers to increase their capacity to generate income, explaining that “the reason why we are saying this is that the national kitty is challenged – one of the things economists wouldn’t want us to say, but that is the fact of the matter.”

Why can’t our economist admit that the national kitty is challenged when it comes to funding of GoG Infrastructure. They should admit it and come out with innovative financial regulations and products and be ready to back it with our sovereign guarantee, as they do for foreigners. This will empower local Engineers and Banks to also source long term internal/external funds at competitive rates to pre-finance our much-needed Infrastructure.

iii.            Our current Infrastructure procurement regulations and contract requirements places too much emphasis on ownership of assets or having access to cash. If there is, say a U.S. $ 5million dollar project. The bid security on this project could be set in the form of a Bank guarantee at 2.0 % of contract price over a period of say, 180 days. This amounts to U.S.$100,000. Ghanaian contractors who wants to bid for this project will be required by their local Banks to deposit the U.S.$ 100,000 as collateral over the 180 days and also pay 1.5-3% of this amount plus taxes as service fees to the Bank. This places too much burden on the already cash strapped Ghanaian Engineer/Contractor. Therefore, the call by Mr Rockson Kwasi Dogbegah (in his article “Replacing Bid Securities with Bid Securing Declaration Forms”, Page 28, Daily Graphic, 2 August 2017.), is a call in the right direction.  Our procurement system should encourage the use of Bid Securing Declaration to replace the Monetary Bid Security. The Bid Securing Declaration, is a form of non-monetary affidavit by the bidder not to withdraw his bid during the bidding process or refuse to sign the contract if he wins. This will help build capacity of our local Engineers/Contractors. In this regard, there should be severe sanctions through banning over a period for defaulting contractors by a Regulatory Authority.

iv.            I will rate expertise, track record and discipline to execute a contract as the utmost priority in a bidding process. However, our current procurement process tilts towards Annual Turnovers and equipment ownership as priority. Construction Equipment’s’ are generally very expensive and it is not economically wise to encourage contractors to own them. This is one of the reasons why most Ghanaian contractors are perpetually in bad debts. The use of rented equipment from Plant Pools on hourly bases, should be encouraged. This will make firms who lease or rent out equipment be efficient in their business and will ease the financial burden on our local Engineers/Contractors.

Huge annual turnover requirements in a bidding process, automatically disqualifies most local firms from participating. The foreigners then take over, and when it comes to implementation, they rightly bring in a few Experts as Project Managers and having a strong financial base, they efficiently outsource most of the works to locals. This is even the case in most consultancy services. They are right, because construction is business and they must make the maximum profit out of it.


2)      Poor Qualitative Standards/Shoddy work of Infrastructure executed by Ghanaian Engineers/Contractors, due to poor supervision.

What is Shoddy Work?

I will define shoddy work as a certified and paid for built infrastructure which fails, deteriorates etc before its design life span elapses or failed to be used by the intended beneficiaries. That is, though an infrastructure was designed to serve for say 5 years. It deteriorated within a year or two. This may be due to below required standard design, use of substandard construction materials, it was poorly constructed, inappropriate use of facility (excessive axle loads on our roads, dumping of refuse in open drains leading to floods etc).
 
Some projects were also formulated, designed and built, but have never been used by the beneficiaries. Examples are: some of the wash rooms built under Ghana at 50, the U.S $ 2.5 Packing House built at Vakpo, many unused markets littered along our highways, there is one before Mankessim, on Accra -Cape Coast road. 
Some Recommendations to help Minimize Execution of Shoddy Works
                                
i.            I will not defend any Ghanaian or foreign engineer/contractor or Project Planner/ formulator on this matter, because there are so many instances of unused, shoddily designed and executed or poorly maintained infrastructure in town.   But what I don’t understand is, there is no Regulatory Authority to sanction culpable Engineers/Contractors. The legislation to set up such regulatory authority lies in the in the ambit of politicians.
                              
ii.            Sometimes when politicians are eager to please voters, they hastily formulate projects and have them built, without thorough assessment of the project’s economic benefit or whether the intended beneficiaries will even use the facility. Such practice should seize.
                             
iii.            Due to economic difficulty and because we want to spread our financial resources thinly to serve many people, we tend choose designs that fits this objective. In recent times, our Vice President Dr Bawumia supported the call, by the Ghana Charismatic Bishops’, for the design and building of concrete paved roads. Though this may not be the only major reason, why our roads fail, I believe it’s a call in the right direction. Some concrete (paving block) paved roads like the one behind and around the Kaneshie Market, built in 1996/97, has stood the test of time. Such designs can be used for busy inner-city roads, road intersections, markets, lorry parks etc.

3)      Inflation of Projects Cost by Local Engineers/Contractors.

All things being equal, an ethical Quantity Surveyor will not append his signature to any contract cost or claim that he cannot justify. But we live in a country that has no fool proof easily accessible historical information on unit cost of key projects. So, it may be easy for the powers that be and their associates to bend rules by doubling, tripling, etc the cost of projects. Professionals in the built environment have many stories of such nature to tell, but where will they go on the quiet and report this matter without victimization?

How can one determine whether the cost of a project is inflated? One of the means is to compare the as built unit cost to another of similar scope, built at competitive market price. Which Regulatory Authority’s website in this country, publishes the unit cost of all key similar government projects undertaken over the years, for easy comparison? I haven’t seen any. So long as, the country has no independent Project Cost Regulatory Authority to collect and publish historical data on the unit cost of Key government projects, politicians will continue to accuse each other of inflating project costs.

I will therefore plead with Hon. Osafo Marfo and Atta Akyea that, they should back their claim that Ghanaian Engineers/Contractors unethically inflate project costs with tabulated data, to prove their case. They should also prove that of President Akuffo Addo’s, when he was campaigning for the presidency that, the Kasoa Flyover’s cost is inflated. Ghanaians will be glad to know.

4) Politicians are not to be blamed for inflated contract prices, shoddy work etc

From the discussions above, if politicians who are mandated to pass legislations to regulate the Built Environment industry, have not done so, why are they complaining to Ghanaians about problems that they haven’t made any attempt to solve?


 
 
 
Source: Theophilus Annan, Ghanaian Engineer/Contractor Supported by UST Civil Engineering Class of 1994
 
 

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