Fortune News | Jun 29,2019
A housing and office complex designated for the Ministry of Foreign Affairs is up for bidding for prospective construction firms five months after a contract awarded to Afro-Tsion Construction Plc was cancelled over performance concerns.
The Ministry of Urban Development & Infrastructure has reissued a bid to select a construction firm for a 1.13 billion Br housing and office space project. Afro-Tsion Construction, a grade-one contractor, was awarded the project comprising an 11-storey office building and an 18-storey housing complex in January 2018. The company was expected to complete the project in three years. Located on Joseph Tito Street, next to the Ministry of Women & Social Affairs, the buildings will be erected on a 7,172sqm plot.
The project progressed at 14pc three years after it was launched, according to Tekletsadik Teklearegay, head of the Government Buildings Construction Project Office, which reports to the Ministry of Urban Development.
“This prompted the project office to consider taking the project away from the contractor," he said.
Construction continued while the Office weighed its options. In July last year, Aisha Mohammed, then minister of Urban Development & Construction, approved the contract termination upon recommendation from the Office.
Incorporated two decades ago with an initial capital of 50,000 Br, Afro-Tsion Construction manages 20 projects with a total value of nearly 10 billion Br. Last year, the company, founded by its major shareholder, Sisay Desta, was hit with termination notices on four projects in Addis Abeba and Adama, while an additional three projects received stern warnings.
The Project Office claimed 451.5 million Br from four commercial banks of guarantee bonds issued on behalf of Afro-Tsion Construction for public projects with a combined cost of a little over two billion Birr.
Afro-Tsion Construction is hardly alone in this. Many big names in the construction industry are struggling. Last year, the Project Office terminated contracts with Tekleberhan Ambaye Construction Plc (TACON) and Beha Construction Plc for projects in the capital. These were among the 15 major public projects which saw contracts terminations.
The construction industry, which accounts for 21pc of Ethiopia's gross domestic product (GDP) and is growing by an annual 11pc, is a source of employment for five percent of the national workforce of over 41 million. There are 335 grade-one contractors in the country.
Afro-Tsion Construction had appealed to the Office for price adjustments before the contract termination, claiming cost escalations on construction materials.
“We asked for up to 40pc price adjustment,” said Laychelu Metegia, general manager of Afro-Tsion Construction. “Our requests were based on evidence.”
The cost of construction materials has been ballooning over the past two years, exhibiting a 14pc annual upsurge, according to the Ethiopian Statistics Service. The depreciation of the Birr against major currencies has inflated prices for the import of inputs.
Aspire Aecom Architectural & Engineering Plc was hired to provide design and supervision services on the Foreign Affairs project in 2017. Its Manager, Samuel Alew, blames inefficiency on the part Afro-Tsion Construction for the delay.
“We'd written seven letters to the contractor up until November 2020, noting the poor progress of the project,” he said.
Others in the industry say the problems are more nuanced. The unexpected fall of construction companies, especially those with grade-one licenses, is the result of the government's lowest bidder policy, according to Haben Abraha, a construction expert with over a decade of experience.
“Because they offer low prices, well-known contractors have been allowed to take and execute up to 10 projects at a time," he said.
The former Ministry of Urban Development & Construction had been working on a directive that puts a ceiling on the number of projects a contractor should handle at a time. The directive also includes guidelines that emphasise track record and performance as the basis for awarding. Following the restructuring of the administration of Prime Minister Abiy Ahmed (PhD) in October, the task of finalising the draft has been transferred to the Ministry of Urban Development & Infrastructure. The directive is still in the making.
The Project Office expects the tender for the Foreign Affairs project to be opened by the end of next month.
“The evaluation and selection process might take up to three months,” Tekletsadik disclosed.
PUBLISHED ON Jan 22,2022 [ VOL 22 , NO 1134]
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