The state will soon determine fees in the construction industry for design and supervision works, ending a competitive market applied to date.

The rare move in attaching value to a professional service comes in the wake of a study jointly commissioned by the Construction Management Institute and the Ethiopian Consulting Engineers & Architects Association. Price-based competition is apparent in the construction industry, manifesting a trend of poor quality design work and subpar supervision activities, says a study conducted by HABCON Consult Plc.

The Institute and the Association, representing over 1,000 companies in the construction industry, held discussions on the study's findings. It concludes that unfair and cut-throat competition tempts architects and consultants to collude with contractors landing in contracts at low fees that are insufficient to cover direct costs associated with consultancy services. The Institute formulated a guideline for consultants` fees, sent to the Ministry of Urban Development & Infrastructure last week.

The Ministry is expected to forward the guidelines to the Ministry of Finance to be used as a reference during public procurement processes. Although the guideline will be used mainly by public offices, the private sector is also expected to follow suit, says Tamrat Mulu, director of the Institute.

The construction industry prefers cost-based over a quality-based selection of architects and consultants, say industry observers. The lowest bidder usually bags contracts, mainly from public offices.

“With this guideline, we can be certain that consultants can’t take advantage by offering low and off-market fees,” Tamrat said.

The project's cost and level of complexity are also used to determine the floor price. Fees for the design works of roads vary based on distance, between 25Km to 400Km. Terrain and type of roads are factors to be considered in setting fees. The Institute proposed a minimum fee of 380,000 Br a kilometre for remote road projects of up to 25Km on hilly terrain and 10,000 Br less for project locations designated as 'near.'

Location is one of the criteria used to determine threshold fees for road and building projects. Projects within 100Km from where the consultant is based are considered 'near'. Sites farther than 350Km have been termed 'remote.' Fees vary in proportion to distance. The fee drops as road distance increases, setting at around 277,500 Br a kilometre for remote road projects of up to 400Km.

Estimating project costs without considering their complexity, cost and size have been the trend, causing problems in the construction industry, noted Abebe Dinku (Prof.), chairperson of the construction materials and management department at the Addis Abeba Institute of Technology. He applauds the efforts to set a baseline for consultancy fees.

“If consultants are paid well and design the projects properly, it'll help in lowering construction costs,” Abebe told Fortune.

The construction industry, which contributes nearly a fifth of the country's GDP, has been growing by a yearly average of 11pc. It is a source of employment for five percent of the national workforce of over 41 million.

According to Tesfamariam Teshome, a senior architect at BET Architects plc, similar initiatives have been introduced by the government in the past.