Chinese firms lower road construction rates

The entry of Chinese firms into road construction in Uganda has seen the billing rates per kilometer brought down as compared to the past when the work was dominated by European and American firms.

According Uganda National Roads Authority (UNRA) head of Corporate Affairs, Mr Dan Alinange, four years ago the agency would spend $1.2m (Shs3.1billion) on a kilometer but this has now dropped to about $800,000 (Shs2.1 billion), following the entry of several Chinese firms in the construction sector.

“We advertise our tenders internationally and receive responses from all over the world. Many of the Chinese companies are technically competent and financially cheaper,” said Mr Alinange in an interview over the weekend.

There have been reports that government agencies like UNRA favour Chinese firms over local and other international firms yet their quality of work is wanting at times.

“The Chinese firms are competent and do work of similar quality like the Europeans and Americans,” said Mr Alinange. “The people bad-mouthing Chinese firms are just finding it hard to compete with them.”
He added: “Our only fear is that these prices will escalate after the Chinese have kicked out all the other competitors. We have to find a way of keeping other competitors around.”

However, the dean of School of Engineering at Makerere University, Eng Umaru Bagampadde, said despite government favouring Chinese firms, their quality of work does not compare with counterparts from Europe and America.

He said Chinese firms are only interested in dominating the market but the reality is that they do not make profits out of these contracts.
“Most of these Chinese firms are owned by government of China and they are assisted by Chinese banks which give them money and time.

They want to establish local dominance and after that they will hike their prices. They only care about breaking even now, not making profits,” said Mr Bagampadde.

The Soroti Municipality MP, Capt. Mike Mukula, who has interests in construction, said Chinese firms have formed a cartel and are now difficult to defeat.

“They are cheaper and everything is shipped from China and this gives them advantage over other firms that depend on bank loans to buy equipment,” Capt Mukula said.

‘UNRA projects on track and corrupt-free’

The Daily Monitor caught up with Mr Dan Alinange, the head of corporate affairs at UNRA one of the government departments that are allocated large sums of money on reports of fraud and corruption surfacing among leading taxpayers to question how these funds are utilised.

What are the criteria employed in picking which road to construct?
The public needs to know that before a road is selected for upgrading, studies are carried out to assess the social, economic and environmental viability of the project.

The yardstick indicator for economic viability is the Internal Rate of Return which has to be above 12 per cent especially if we are seeking for Development Partner or donor assistance. In looking at the economic returns we consider the agricultural, tourism, minerals and regional connectivity issues.

Our current focus for road development is on areas that support the primary growth sectors of tourism, agriculture and oil production. We are currently working with the Finance and Energy Ministries to look for money to implement about 250km of roads necessary for the development of the Albertine Region for Oil Production by 2017.

This newspaper has done a breakdown before of UNRA’s roads and it shows that majority projects go to western Uganda. Is the region favoured?

The allegations that there is regional imbalance in the way our road upgrading programme is being implemented are unfounded and based on ignorance. We are currently implementing road upgrading projects in all regions of Uganda. Our records show that in terms of kilometer coverage of road projects we have designed and implemented 1,332 kilometers since 2008 or 29 per cent of road projects are in eastern Uganda, 1,190km or 26 per cent in northern Uganda, 954km or 21 per cent central region, 928 kilometers or 20 per cent western, and 203km or four per cent south western Uganda.

The events surrounding the award of the Mukono-Katosi road contract perhaps best illustrates the rot in allocation of projects. No due diligence, quack firms winning contracts then sub-letting to other firms. Has UNRA lost the plot?

UNRA has not lost the plot and no money has been lost on this project. The contract for Mukono-Katosi was awarded to Eutaw, an American road construction firm, after an international bidding process. This road was procured at the same time as Hoima-Kaiso-Tonya, Moroto-Nakapiriprit and Mpigi-Sembabule roads. Unfortunately it was shelved for over a year because government did not have enough money at the time.

UNRA made an advance payment of Shs24 billion to Eutaw after the company had submitted the required securities from financial institutions. We carried out the necessary due diligence to confirm the legitimacy of submitted instruments.

As part of our routine risk management strategy, our Internal audit carried random due diligence a few later on a number of new projects. It was discovered guarantees submitted by Eutaw had a problem. UNRA immediately informed the contractor of this anomaly. The contractor has since submitted the required replacement guarantee.

Why do you advance money to international companies?
The purpose of this advance payment is to allow the contractor mobilise equipment and commence works. The contractor has fully mobilised, there is active equipment on site, the site camp is ready and works have commenced. These advanced monies are deducted from each interim payment certificate under the contract until it is all recovered. The investigations can continue as long as our money is safe and works are ongoing. The people have waited for this for long and we can’t make the mistake of stopping the contract.

Why have the American subcontracted a Chinese company to do the job?
Who told you the contractor is subcontracting? What is wrong with an American company buying Chinese equipment and hiring Chinese workers? The international bidding processes often expose government to a wide range of eligible bidders for road construction contracts.
Internationally reputable contractors bid and win contracts following well drawn procurement procedures. On paper, these companies can equal the best in the world but when they get the contracts they look for ways of saving money.

Why would government agencies think Shs24b was lost when works are ongoing?
It is true mistakes may have been made by the local representatives of the contractor and that has to be investigated. Unfortunately government agencies are now being used to make the project fail. They are threatening the financial institutions that have now given the contractors the required securities to secure government money.

Also, last year was one of our most productive years and some people are not happy. We procured and awarded over 10 major road contracts that are going to transform the condition of roads in this country.
While donors have cut funding to other sectors, they have increased funding to the roads. There are people building a mountain out of this because they want to see donors cut funding to the sector.

Then allegations that your staff, well knowing where a major road project will pass, connive or buy land in advance and thereafter bill you with astronomical compensation claims. How true is this?
That is totally false. The speculators are the land dealers and local officials at the districts. Our staff don’t have money to engage in land speculation. We have a case being investigated by IGG on Entebbe Expressway where district officials are alleged to have allocated themselves forest land in order to get compensation. These are the kind of dangers we are exposed to when executing these projects. We are working with the Ministry of Lands to start gazetting this land well before the projects commence. This has already been done on the proposed new Kampala-Jinja Expressway.

Entebbe Express Highway was designed as a six-lane road, we now see only four lanes being built, where have the other two lanes vanished to?
Where did you get that kind of information? It is unfortunate that our people believe you can ‘eat’ (misapproprate money meant for) two lanes of a 51-km-road and continue walking these streets of Kampala. Kampala-Entebbe Expressway was designed as a four lane dual carriageway; the six lanes will only be on the approaches to the toll booths.

How come, Chinese constructors are the majority in road construction?
We advertise our tenders internationally and receive responses from all over the world. Many of the Chinese companies are technically competent and financially cheaper. The Europeans and Americans are finding it hard to compete with the Chinese prices. The cost of one Kilometer of a highway road has actually gone down from $1.2m (Shs3 billion) four years ago to about $800,000 (Shs 2 billion) now. Our only fear is that these prices will escalate after the Chinese have kicked out all the other competitors. We have to find a way of keeping the Europeans around.

Roads awarded to Chinese firms

Nyakahita-Kazo 68Km
Kazo – Kamwenge 75km
Fort Portal -Lamia 103Km
Mbarara – Murongo Bridge 75Km
Gulu-Atiak 74Km
Vurra – Oraba 92Km
Nakapiriprit – Moroto road 93Km
Kampala-Ebb Express 51Km
Kamwenge-Fort Portal 65km
Kiryandongo - Gulu 123km
Atiak –-Nimule 37km
Mbarara-Bypass 40km

PROJECTS AWARDED JUNE 2014
Kanoni -Villa Maria 120km
Musiita-Busia/Majanji 104km
Acholi Bur – Musingo 86km
Olwiyo - Gulu 70km
Gulu – Acholi Bur 86km
Ntungamo-Kakitumba 37km