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Directive to Place New Limits on Projects Contractors Take


June 19 , 2021
By BERSABEH GEBRE ( FORTUNE STAFF WRITER )


Construction companies will not be allowed to take on more than six projects at a time unless they outperform the conditions and expectations stated on their contracts, if a new directive comes to force some time next year.

Drafted by officials at the Ministry of Urban Development & Construction, the directive dictates stringent guidelines for contractors taking public projects.

The directive was in the making since September, under the directorate for Construction Industry Law Framework. The draft has come about with the overall target of reducing delays on public projects and the additional costs associated with contractors biting off more than they can chew. Contractors win a number of bids but multiple projects fall behind schedule as a result of them being stretched thin.

"Contractors offer low bidding prices for projects that they can't handle," said Medina Ahmed, head of the directorate.

The directive in the making will compel project owners to check on a contractor undertaking projects to ascertain a completion rate higher than what is stated on the contract before awarding an additional project.


"The directive aims to give other contractors, especially beginners, a chance," Medina told Fortune.

Once approved, the directive will apply to the 23,000 contractors of all grades licensed, including foreign firms limited to seven projects at a time, and the state-owned Ethiopian Construction Works Corporation, one of the 335 grade-one contractors.

Industry leaders see the directive as a positive step.

Tewodros Shimeles, CEO of TABU Construction Plc, in business for a decade, believes the directive helps to avoid concentrations of projects in few hands and motivates contractors to complete projects within contract periods.


The directive "will do wonders" for smaller contractors excluded from big public projects, said Zeratsion Girmay, CEO of Bright Construction, in business for two decades.


"Contractors with connections get all the public projects, sometimes one would take on more than 40 at a time," he said. "This is while many weren't able to get enough work to sustain their business."

The Ethiopian Contractors Association, the industry lobby group, has a concern.

Admitting the importance of a limit for fair competition in the construction industry, which grew by 10pc last year and by 15pc during the year before, Girma Habtemariam, president of the Association, believes the proposed limit overlooks the contract amount, an important factor he says has been ignored.

"A single project may amount to as high as the cost of six projects," Girma says. "Analysing the cost and scope of the project is equally important and must be taken into account during evaluation and awarding of new contracts."

Evaluations on progress will be conducted three times during a project's lifespan by a team from the employer institution, the draft directive dictates. A contractor's eligibility for additional projects will be based on recommendations from the evaluators, according to the drafters. The directive wants to set a maximum of a quarter of the total project lifespan to contractors which fail to wrap up their work on time, after which, their contracts will be terminated.


The Construction Work Regulatory Authority is the federal agency supervising and evaluating progress on public projects.

The directive is open to amendment and the Directorate has been collecting feedback from the parties involved, holding discussions with the Ethiopian Contractors Association and the Federal Attorney-General's Office last week, Medina disclosed.

"We hope the draft will be effective next year," Medina told Fortune. "We'll give an opportunity to the stakeholders to give us feedback and incorporate it before approval."



PUBLISHED ON Jun 19,2021 [ VOL 22 , NO 1103]


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