So much is riding on President Lazarus Chakwera’s flagship road infrastructure projects set to transform the infrastructure footprint of the country.
It is part of the long- and medium-term national multi-sectoral vision of interventions in the transport and buildings sector. Interventions in the transport include the construction of more than 1500 km of climate-resilient physical road infrastructure serving district administrative and trading centers along the routes and a comprehensive framework for giving the urban road network a modernizing face-lift.
At a ground breaking ceremony of the M1 Road rehabilitation projects, President Chakwera warned the engaged contractors about delivering substandard works while the Minister of Transport and Public Works at a Press Briefing in Lilongwe on 24 on-going road infrastructure projects across the country warned that he is willing to ditch the current contract award model that places disproportionate weight on bid price to a non-bid price driven model more suited for identifying contractors who can perform to the desired standard and requirements of the work.
I am in total agreement with the Minister and must hasten to add that it is the only remedy to a broken procurement framework that has become known more for engaging incompetent and unscrupulous contractors and unable to screen out contractors having low capabilities than identifying competent contractors who can perform and deliver without undue cost overruns and schedule delays.
It is the only way to salvage President Chakwera’s programme from the jaws of failure and the earlier this is done the better. This is in-spite of Government employing very aggressive and innovative local financing arrangements and a string of financing agreements with European Investment Bank, OPEC Fund, Africa Development Bank and World Bank to fund these projects.
In the construction sector, it is crucial for owners to select the most appropriate contract award model to achieve desired performance. Under the low-bid model, contractors may win the bid by deliberately tendering an abnormally low bid.
Audits have consistently shown that unscrupulous contractors will adopt deliberate strategies to compensate for the abnormally low bid by cutting corners and bringing up bogus claims against the owner in the project execution phase and make ‘non-contractual profits‘—commonly referred to as ‘beyond-contractual reward’ (BCR) to the detriment of the project. Actually unscrupulous bidders extensively review bid documents, ‘noting mistakes, cataloguing ambiguities, and looking for future change orders or claims’. These bidders can lower their bid prices with the knowledge that on subsequent change orders or claims they can recoup what was initially sacrificed for the award and more.
BCR seeking is the natural behavior of contractors with low capabilities who have no incentive to invest in becoming competent. They will tend to expend more effort on BCR seeking than on improving technical and management skills or innovative construction methods that can lower their operational costs. The low-bid system is not designed to find qualified and competent contractors but lowest bidders with BCR seeking behavior who, ultimately, deliver poor project quality, cost overruns and schedule delays. Surviving on BCR seeking behavior has an empowering and reinforcing effect that keeps the contractor gaining confident expectation of more BCR and intensifying contractors’ bidding opportunism and adverse effects and, ultimately, not caring about delivery or project quality, cost overruns and schedule delays.
On the other hand, once a contractor’s past performance and the non-BCR seeking behavior become important criteria to evaluate a contractor’s qualification for contract award, contractors are incentivized to minimize corner-cutting behavior and bogus claims, so as to improve their performance record and competitiveness which ultimately will have positive long-term impact on contractors’ competitive behavior and the performance of the whole construction sector.
A contractor selection process based on non-price criteria (such as the contractor’s past performance, work experience, technical and management skills, non-BCR seeking history, etc) has a better chance of delivering desired performance and rescuing President Chakwera’s flagship projects.
Contribution by: Chisala, Maxwell L.
The author is a permanent resident of the beautiful island of Likoma (Malawi) with unmatched passion for writing on critical issues affecting the legal, social and economic development trajectory of the country he loves (Malawi).
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