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Construction Industry

Capacity development and involvement of local stakeholders in the construction sector for economic development Arch. Dr. Moses Mkony. Construction Industry.

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Construction Industry

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  1. Capacity development and involvement of local stakeholders in the construction sector for economic development Arch. Dr. Moses Mkony

  2. Construction Industry • Construction industry in Tanzania remains a large and dynamic one; made up of a diverse collection of companies and organizations with broad skills base, with vitality and energy that makes it a unique and stimulating environment in which to work. • Construction industry is characterized by the fact that most work consists of unique physical projects that are site specific. It is also characterized by a wide range of projects varying from minor to complex infrastructure projects.

  3. Key roles in the construction industry Construction industry is engaged in a wide variety of activities including; • Design and erection of buildings • Civil engineering projects • Design and manufacturing of special component and equipment • Maintenance of building and other structures

  4. Role of construction industry in economic growth. Tanzania has experienced relatively high economic growth, averaging 6 to 7 per cent a year with the construction sector playing a key role in this growth. Figure 1 shows the gross domestic product (GDP) in percentage growth rates and the annual growth of the industry and construction sector.

  5. Scope of industry and their relationship to the key parties involved • employer/client • contractors and subcontractors • suppliers of materials and building products • consultants

  6. Changes in Construction Industry In Tanzania there is a significant change in the construction industry over the past 10 years or so in terms; • composition • Increased competitiveness • Advanced technology • Reduction in its capacity due to economic down turn experienced across much of globe

  7. Challenges of the industry among others, • inadequate capacity of local contractors and consultants; • inadequate and erratic work opportunities; • Inefficient procurement systems; • occasional financial mismanagement in public/private sectors; • poor working environments; • low-technological equipment; • Lack of skills; • inadequate capital; • Unfavorable donor conditions; and • application of inappropriate delivery practices.

  8. Government direct intervention Government intervention in building process by doing business with its public institutions and introduction of “force account” has the following negative impact to the industry. Positive Impacts: • Creates a control mechanism for Project financing and accountability. • Many parties and institutions are involved during the project supervision process. • Shortens the bureaucracy in the Procurement system and hence shortens the delivery of the project. • Decreases Corruption monster in the local governments. • Increases accountability of local authorities.

  9. Negative Impacts of government intervention to private firms in the Construction industry; • Constraints availability of government projects in the market and henceforth threatens the closure of private consulting and construction firms. • Increase in unemployment of graduate and registered professionals who are normally employed in private firms for fieldwork and on-job training. • Training institutions have deviated their focus from training to provision of consultancy services henceforth affecting the quality of tertiary professional education in architecture and engineering. • Indirect effects on quality, time and cost of most projects due to bureaucracy in decision making process. • Polarization of the construction industry by politicians without following contracts henceforce creating fear, lowering quality of performance and increased staff turnover.

  10. In response to the above challenges service professionals in the Tanzanian construction industry i.e. Architects, Engineers, Quantity Surveyors, planners etc., must respond to these changes to remain in business by; • Being flexible in their business planning by re-structuring their business models. • Instituting effective project management techniques during project execution. • Enhancing local human resource capacities and experiences through academic and industrial training. • Improving professional capacities through Continuing professional development (CPD) conducted by allied professional institutions. • Keeping abreast with the government intervention system.

  11. What should be done by design and construction professionals and other stake holders; • Focus on design and construction quality while maintaining tight control on cost. • Embrace emerging information technology and Building Information Modeling(BIM). • Increase capacity and competitiveness through collaboration among professions during procurement of projects from the international competitive market. • Negotiate with government through reinforced construction professional institution so as to create sustainable construction policies

  12. Contracts and procurement Building procurement methods are founded on the allocation of risks between • Employers • Contractors • Down the supply chain to subcontractors and suppliers • Somewhere in the middle are construction professionals who traditionally protect the employers with contractual relationship and liability to them. N.B; When things go wrong between the above parties in the contract, it is difficult to apportion liabilities and in most cases the blames go to consulting professionals and creates a layer of commercial tension between consultants and clients.

  13. PRRA procurement regulations PRRA procurement regulations governs the procurement of works and services in Tanzania to reflect the drive by public and private sector clients to; • Find efficiencies, • increase value for money • Improves quality in construction output and • Monitor just and fairness to competing parties in the industry. • Creates a competitive market of available projects in the industry.

  14. Share of construction cake in Tanzanian procurement system . • More than 70% of construction contract are procured by foreigners in infrastructure project financed by donors i.e. world bank, African development banks etc. Only 30% of contracts go to local contractors. • This translates that 70% of profit accrued from borrowed and donated money for building and infrastructure projects went back to international contractors particularly the donating countries. • The local professionals neither get required experience nor capital to develop the required local capacity. • Henceforth the local professional capacities stagnates and affects sustainability of the local firms.

  15. Corruption monster in the construction industry • Of the estimated 3o% value of projects procured by local professionals 10% or more is further exposed to corruption during procurement with the following consequences to the industry; • Personalized experience and development of few blessed individuals with conducive network. • Affects delivery of quality construction products • Affects cost and timely delivery of construction contracts • Decrease in value for money of donor and government funds • Increase high risks to project manager • Add a layer of commercial tension and ultimately loss of donor and Government funds.

  16. Differences in forms of construction contract There are three forms of Contract current in use in Tanzania for Construction works. These include: • Design and Build • Traditional PPRA form of contract. • Project Management Form of Contract.

  17. The different forms of contract provide differing degrees of control over the three key performance indicators for building works • Cost • Program / time • Quality Performance target needs to be found in order to best meet the requirements and expectations of the employer. Each procurement method places different emphasis on the relatives importance of the above targets. • The differing methods have in turn shaped the direction, structure and organization of the construction industry. • Unfortunately, the majority of local Professionals are not informed or competent with the technology of procuring design and build projects or project management contracts. Therefore most of the projects following these systems favor foreign companies.

  18. Change in paradigm to procurement system of Consultants • Consultants have traditionally acted to represent the interest of client. • Due to introduction of the new procurement systems of construction described above, consultants often work as service providers to contractors as the latter takes the design liabilities. • This complicates the project delivery process and creates dilemma to consultants trained under the traditional system. • Therefore for sustainability, service professionals are required to adapt to different roles and different types of clients including contractors.

  19. Contractual arrangements • Contractual arrangement between the key parties in the industry are increasingly complex. • Today the roles overlap to a greater degree. • Some contractors are becoming developers, architects and quantity surveyors are becoming contractors and are taking projects before completion of design. This is further facilitated by the computer technology during the design and construction. Communication among parties is enhanced and the approval mechanism of clients is reduced. • However, this phenomenon allows the employers to transfer more of the risk to the consulting team and henceforth there is a need of procuring professional indemnity insurance which will take the required risk.

  20. Building capacities of local players • To build capacities of the local players the following future trends need to be observed by local industrial player; • The importance of equality and diversity in the work force. • Elimination of all forms of corruption in the bidding process. • Understanding the importance of managing risks. • Technological advances. • Reliance on electronic means of communication and social networking • Consolidation of businesses. • Training of sustainable design solutions and project management techniques in professional and allied institutions. • Globalization outlook .

  21. Strategy for Development and involvement of local stakeholders in the construction industry. • Selection of innovative construction team; consultant, contractors and material suppliers. • Improvement of procurement system by enhancing e-procurement • Discouraging a fraudulent expression of interest in procuring consultant and contractors. • Encouraging equality and diversity in the workforce of construction professionals • Effective risk management of the building process • Enhancement of training and skill development of all professionals in the industry. • Global context

  22. Sustainable selection of a consulting team Innovation and invention in design ideas should be of core importance in selecting consulting teams and contractors so as to bring effective competitions and quality output because of the following reasons: • It gives commercial and value for money advantages • Provides analysis of site safety before contract award • Provides environmental quality to projects. • Provides three dimensional understanding and insight of projects to lay clients. The current system of procurement of consultant using expression of interest and RFP in selection of consultants is inept and mismanaged by some procurement entities leading to poor quality of consultants and project output. The system also encourages corruption during the Procurement and thus affects the overall quality of many projects in Tanzania.

  23. Improvement of procurement system • Professional institutions should form a taskforce with government and create sustainable policies with special preference to local players in the construction industry. Special preference should be obligatory and not optional. • Local consultants and contractors should be encouraged to team-up with international bidders to increase capacity, innovation and skills to deliver complex and international projects. • International contractors should be forced to associate with local consultants/contractors when tendering for donor funded projects with restrictive conditions.

  24. E-procurement • e-procurement system should be mandatory to avoid personal fraudulent contacts during procurement of contracts. Expression of Interest (EoI) • Occasionally misused by procurement entities and encourages corruption. • EoI should not be a mandatory in procuring consultants but an option in very special cases. • Consultants should be allowed to bid for services without going through a tedious and a restrictive Expression of Interest. This is tedious and costly to clients and consultants in the long run. It does not provide quality assessment method to enhance the output of the expected consulting team. • Design innovation and quality assurance and experience should be pivotal in assessment of consultancy bids.

  25. Encouraging equality and diversity in the workforce of professionals There should be a mix of young and older professionals which has the following benefits including; • Diversity in innovation due to a wider talent base. • Employees especially young professionals feeling respected, valued and engaged in their work providing enhanced creativity and innovation. • Team work reduces the cost of staff turnover and absenteeism. • Improve knowledge of different cultures with different clients • Enhance the practice’s of reputation • Creating opportunity for disadvantaged young professionals and other disabled groups and building social cohesions.

  26. Application of the Sustainable Project Management concepts throughout the life cycle of projects; The Life cycle of the projects should be audited to ensure the following project management concepts are place in all projects. • Scope management • Time management • Quality management • Cost management • Human resource management • Procurement management • Risk management • Personal management –health and safety, fitness and improved quality of life

  27. Recommendations: • Sustainability of the Tanzanian construction industry is directly related to development of the local capacity of professionals who are the key stakeholders of the industry. • Effort should be made to develop and enhance diversity and innovation of construction professional skills to ensure qualitative output of construction products. • Participation of local stakeholders can be achieved through a just competitive bidding adhering to international e-procuring concepts. • Although Government intervention in procurement of its projects is advantageous to its course, it is discriminatory to local firms.

  28. 5. To enhance growth, sustainability and reduce unemployment of young professionals employed by local firms, the government should create a system which integrates local firms in “force account” system. 6 Discriminatory and fraudulent expression of interests system with bulky RFP documents in selection of consultants is tedious and discourages innovation and design concepts. This should be abolished or restructured to ensure quality professionals are selected through innovative and design competitive selection. This will improve the quality of consultancy output, encourage innovation, and discourage corruption monster in the industry. THANKYOU

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