Grappling with the rising cost of government contracts
Despite the prevailing global economic recession, the construction industry in Nigeria is currently one of the fastest growing industries in the world, according to the latest 10- year forecast from Global Construction Perspectives and Oxford Economics.
The report, which named Nigeria as ” global hotspot from now till 2020” says the current level of growth in the nation‘s construction industry is even faster than that of India, reflecting increased wealth and urbanisation resulting from the massive oil-generated revenue.
However, experts say that the much expected growth in the construction industry may be hampered by the rising cost of contracts , especially in the public sector . This is against the backdrop of the fact that the government controls over 80 per cent of construction activities in Nigeria.
The Federal Executive Council , two weeks ago, lamented that construction and procurement contracts in Nigeria were between 20 to 30 per cent higher than what obtained in other parts of the world. Consequently, it had set up set up a committee to identify the cause of this anomaly and make recommendations to the government for necessary action.
Stakeholders in the public and private sectors, have, however, pointed accusing fingers at the government, saying that it, directly or indirectly, contributes in no small measure to the rising cost of contract, as well as numerous scams that have become the trademark of most of the contracts that have been awarded by the government in the recent past.
In a letter to President Goodluck Jonathan, dated June 22, 2010, the NSE President, Engr. Olumuyiwa Ajibola, had blamed high cost of construction projects and procurement in Nigeria on inadequate time for planning, feasibility studies and designs and adoption of wrong procedures during the tender and contract award processes.
Other factors listed by the NSE include, ”Reliance on foreign construction companies which have high overhead costs; and uncertainty concerning availability of contracts; high cost of transportation and haulage, unstable and inconsistent government policies, delay in payment; multiple taxations, cost of construction materials; high cost of labour; and corruption.
According to the NSE, ”The current practice of procurement in Nigeria does not allow for adequate time for technical input, feasibility studies and designs. This is partly due to the directive of the government to procure infrastructure using inadequate in-house technical capacity, given the magnitude and the number of projects being procured at the same time.
“In many cases, the multinational contractors are engaged to perform the design and the construction, on the basis of inadequate preliminary documentation. This has the potential of increasing project costs. The best industry practice is to separate planning and design from construction, and assign adequate time for the former before going to tender, and commencing the construction.”
Another problem is the fact that when the government is conceiving a project, they do not do it according to the budget.
The National President, Federation of Construction Industry, Mr. Mobolaji Williams, stressed that the government does not carry out adequate research on the cost estimate of projects before awarding contracts.
He said,” The government does not usually carry out the necessary survey concerning the cost elements of infrastructure before contracts are awarded. Even when a tender has been given, all the tender documents should be made available to avoid manipulation”
In order to address this problem, he suggested that, ”The Federal Government should apply best practices during infrastructural procurement by the engaging qualified and registered indigenous consultants for all technical projects.
He added that ”Cultivating and nurturing indigenous capacity is the surest way of reducing cost of projects on both the short and long run. The government should , through deliberate policies, facilitate the building of capacities and access to funding by indigenous construction
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