COMMENTARY: Outfitting the construction sector

After reading the article which paraphrased Kendell Johnson’s address, and the comments posted thereafter, one can say finally it seems some people understand what is going on.

The situation is not all that gloomy though.   The EU-funded projects generally allow better opportunity for growth, as there is a wide range of projects and relatively small contractors can tender and do get project work.  A big part of the issue with EU-funded projects is that the tender documentation is generally arduous, one of the most arduous at present.

Caribbean Development Bank (CDB) also has a simplified system under the Basic Needs Trust Fund Programme geared towards small consultants and contractors.  So to be correct, there is a little bit of crumbs available.  From experiences at DOWASCO I also recall that some of the CIDA funding allowed terms which provide equal participation with local contractors and Canadian contractors.

But it is true that especially for CDB-funded large projects, to get growth in the local industry from these projects is like climbing a building on bare elevator cables.   It is virtually impossible.  For a long time now, CDB is referred to in some quarters, and has ably earned the reputation, as the most colonial of all the funding agencies!   This may be shocking, but CDB has very little Caribbean in it except its name.

That aside, given this re-fresher of knowledge what can be done?  This is where governance should involve some strategic method to overcome these threats.  What has been done and what can still be done?  It is not a time to let our hands go limp – that sense of apathy that seems to emanate from the readers of the article.

Preparation of our local construction sector

Government strategy has to include support for the local sector if it has to meet these and other challenges, if its players have to move throughout the region.  Leadership in governance, not politics, is often our issues.

a.    Construction and Exports: While the European Union and other developed countries view their engineering and construction sectors with much export potential, in Dominica we see them as just another cottage industry.  But every time a local company wins a tender that was open to foreign contractors, there is import substitution.  Every time a local contractor is engaged as major sub-contractor on a large project contracted to a foreign entity, we retain money and skills that would otherwise been expatriated after the completion of the work.   Many countries provide export subsidies for their contractors and consulting firms.  In fact, every time those larger donors prepare funding packages, it involves an export component, which is clearly tied to the financing instruments.    The OECS Export Development Agency told me a few years ago that the sector was not seen as having export potential!  When a local company undertakes work in another island and repatriates profits, what is that?

b.    Fiscal Policy And Incentives: Even though the local construction sector has been one of the most productive sector for years, it does not secure the mammoth fiscal incentives that the tourism industry enjoys. The construction sector is the second highest contributor to GDP for many years now, being not too far from the first.  Local players invest quite a lot of money back into the sector.  The shameful thing is that none of it is considered investment in the strict sense of the Invest Dominica Authority style.  If these same firms were to take their profits and invest into some business in St Lucia or  in US stocks, what benefits would the county enjoy?  In fact, we are taxed just as much, whether we take all profits as dividends or we re-invest all of it.   Any serious financial incentive package must recognize the value of reinvestment and therefore reduced corporate taxes on the portion of profits re-invested.

c.    Packaging Works: This is often trumpeted as a cure-all-remedy for the woes of large contracts and large projects within the context of having small contractors participate.  Whereas it is possible to split projects in any number of lots, it is not always wise as the packages have to make economic sense to the players that are being targeted.  The aim should be to ensure that sizable local contractors participate while at the same time not necessarily rendering the project uninteresting to foreign contractors from the funding agents.  It is understandable that the foreign firm coming into the country on a project basis would have more overheads, hence a project has to be large enough to be attractive.  Usually, the developing local contractor wants to win one or two of the lots while the large foreign firm aims at taking all so as to spread its overhead.   That having said, the local public sector investment programme should consider a range of project packages to ensure that a range of contractors are serviced and developed to take their place at the higher levels.

d.    Local Practice: DOWASCO has over the years been the public entity which has allowed the most growth by packaging.  However, in recent times it has been too lax with enforcing or developing tender criteria which should have win deliver to it the most economical tender.  Unfortunately, in recent times it has itself suffered for this short-coming by having many contractual, quality, delay and incomplete project issues.   Procurement and contract management has to go hand in hand in developing a good and robust growing construction sector, as one can have an abundance of the undesirable and unfit.

e.     Training and Technical Support: Large construction firms are owned by businessmen, who no more function as technical specialists.  They hire specialist to manage the firm.   However, specialists have to be available to fit these roles, and in this slowly growing sector and economy, they are not readily available.  Many of the local contractors do not have the technical skills to grow, and often even placing a proper tender is beyond them.  There is a lack of able young engineers to develop a proper management team.  It is true some of the available  young engineers do not fit the bill owing to questionable higher education institutions that they attended!  Of recent times there are a few short courses sponsored by the EU, but these are too limited and too short.    The State College would have been of more value to the sector if it had continued along the lines of the technical college and expanded in more industry relevant courses.  But short courses in preparation of tenders for EU, CDB and other funding agencies would help local contractors to grow in meeting these requirements.

f.    Local Funding: But what better way to simulate growth than with a strategic method of packaging works that have local or unattached funding so that indigenous contractors can face the challenge and aspire to have the technical and financial houses in order to meet project requirements?  That is where the packages can be made relevant towards the ideal of stimulating growth.   I even advocate allowing OECS contractors to compete for the larger works along with the government owned entities like PWG.  Unfortunately that is where the trouble begins – our politicians of  today want to have control of who gets which jobs.  Construction is a large political tool and an even larger political funding resource.    So there lies the dilemma – the party, personal gain, or the country?

g.    Contractor Partnering:
One has to face the fact that we will never be able to undertake all the projects let out in Dominica.  In fact, there are still many projects in the region that no regional contractor can qualify for.  Therefore, it is the responsibility of the players in the local sector to, in spite of the odds, position themselves to enter into meaningful partnerships with larger regional and international players.  Even local partnering has to be looked at as well.   However, one drawback of packaging is that it reduces the incentive to partner when each contractor hopes he will get a lot.

h.    Public Sector Funding: As far as possible therefore, our governments should review its available sources of public sector funding to include the ability to allow local participation in construction work at various levels.   It is amazing how different levels of restrictions operate simultaneously.  There is the EU grants in which all ACP states can participate; on the other extreme there is the Chinese grant funds that is like a package gift – no allowance for local participation except for a small percentage of local purchases and employment – usually under duress.    But loan funds should be weight for economic advantage –  a small rate of interest as is said to be the case of the Chinese funding, may not make up for the economic disadvantage of lost opportunity for real capital and economic growth in the Construction and other allied industries, employment and related social improvement.    Where projects are not urgent or considered part of essential services, probably timing can be reviewed to explore other available sources of funds and thereby possible reap greater economic returns in the sector.  When the Chinese ties its loans to mandatory Chinese-contractor-built export enhancement programme, we import Chinese skills that we pay for over many years.  Then again, it all depends on who has priority in determining value and benefits – and to who.

In conclusion, I believe that we have gotten more real growth in the construction sector from EU and some other externally-funded projects than from our locally funded or administered project.  There is a greater guarantee that if you fit the bill you will be engaged and grow.   But few of us are set to take advantage of the opportunities  … and it is perceived that government policies are too politically blindfolded to lead us anywhere.

We need to be proactive in helping to take ourselves there.

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26 Comments

  1. Lizavier4Jesus
    November 25, 2010

    @Reasoning

    I like that attitude.    It is good to know that there are still a few of us who can reason together, until we are finanally in agreement or in one accord.    Let us keep it up, instead of the way so many of us bark at each other, through our senseless disagreements and verbal insults.    Thanks to you as well!

  2. fitzroy Armour
    November 25, 2010

    Good article.
    However I recall the days of EO Leblenc when major projects were undertaken by locals which were much larger that we see today.
    For example the west coast road was done and funded as smaller link roads from one village to the next. The British Government did not realize that it was in fact the one large project that was being done as shorter roads linked to form one longer road.
    I know it because many a day my father would take me out of school to accompany him as a local contractor literally building roads from scratch.
    Are we folding our hands and giving up?
    And yes he could have cared little for his fellow Dominicans by doing some of the acts of genocide that I see being done by the French companies and sanctioned by the Government but he chose not to.
    For example: tearing down mountains immediately up wind of villages like layou, Collihuat loubiere. And erecting toxic Colas plants next to food sources, villages and tourist attractions
    These firms are in fact exploiting and destroying our human and physical resources to enable them to have the financial resources while impoverishing and destroying the health of Dominicans to be eligible to apply for the “large” projects.
    Do they actually have the indigenous knowledge and are they actually better qualified than us? How many have a 1st class Honors masters degree in civil engineering like Anthony Leblanc? Does the quality of the works done reflect this? Would Ace engineering have dumped the hundreds of thousands of tons of clay down stream at Antrim valley which now has created one of the worst impending (Man made) disasters in our history?

    My father chose to give back by using his equipment and profits to do community projects like cutting village roads, playing fields and clearing sites for schools to be constructed… Rather than greedily mining the layou river until the river bank collapsed just so get the contract to erect a sheet piling wall. .

    If more could have been done with less in the 70,s then I refuse to accept what is happening today.

  3. Reasoning
    November 24, 2010

    Okay Chief and Lizavier4Jesus

    I/we got it. Its nice to have a dialogue to some vain once in a while or better yet, all the time.

    Thanks for your input/feed back.

  4. jim
    November 24, 2010

    All these articles is just a waste of time, 27 million dollars to build a statehouse, that’s the main point jerry is talking about. Let’s look at the truth, 3 million can build a huge statehouse. All our farm access roads are in bad condition or abandon, hence many of our farmers are leaving their farms because of lack of access to their farms. Can 5 million out of the 27 be used to improve farm access. Dominican has 365 rivers and our farmers were severely affected by dry weather earlier this year, can 2 million go towards the development of irrigation systems for farmers in order to increase production and reduce the effects of dry weather. Can 1 million be used to strengthen the capacity of the ministry of agriculture, not just. In distribution of fertilizer but equipping the staff with continuous trainings and resources such has vehicles in order to better serve the farmers. There are a lot of young farmers that wants to increase their production and the government get grants from the EU, why can the government give young people grant funding to development their farms. If all these I have said is not an priority for the government, why they didn’t use this money and add it to the money that was spent in airport and build an international airport. These would have make a better impact on our economy and development. Than $27000000 dollars to make one
    man happy, then our local contractors will be told that they are too small to bid. So how will a f
    farmer in grandbay benefit, how does a taxi driver benefit ands how does colleges graduate benefit, apart from the boys getting contracts to order stuff for the state house and then they will just hide all the huge profits in a bank. Show me how this 27 million dollars will be sustainable and provide jobs for the next five years.

  5. albe
    November 24, 2010

    These are the type of informative articles we should be seeing in the media not the emotional political biases we are bombarded to daily. Good Article Tony! However, I have been advocating that our Engineers, Project Managers and other associated disciplines form registered companies to be able to take opportunities in order to compete for these infrastructural projects-the Financial institutions need to positively assist in that regards. Capacity Building in Dominica is taken for granted, ie, human and accompanying equipment/machinery cash flow etc..

  6. Anthony Ismael
    November 23, 2010

    @yep: I do to, but I have learned to be more realistic over the years. I follow these projects closely and over the years I know of only two local construction companies that are normally employed as sub-contractors on major government projects at home. They are, E.H Charles and Company Ltd. and Luke Construction.

  7. Anthony Ismael
    November 23, 2010

    This issue is far more in depth than the mere lack of education and training and appropriate financial resources to satisfy the tendering process. As a small third-world nation, our economy does not allow young people to become experts in certain fields and earn a living simultaneously.

    For example, there are approximately five buildings with elevator systems on the island. Therefore, if one were to seek training in elevator repair, there are not enough elevators on the island to make that profession viable.

    As patriots at home and abroad, we often respond with emotional zeal whenever these topics arise because of love of country and the genuine desire to see our land of beauty move forward. However, these issues are financial first and everything else after.

    If you are unable to present a viable repayment plan to a lending institution in conjunction with qualified personnel in the field, monies will not be loaned out to those who are seeking such funding.

    Additionally, applying the same expectations to a small third-world nation when compared to more developed nations, is tantamount to placing a square peg in a round hole.

  8. Chief
    November 23, 2010

    LOL, guys sorry for swaying the discussion into a different direction. I got tempted since the matter I raised has generated much debate among Dominicans at home and abroad.

    However I want to briefly respond to REASONING. Organizations such as the EU and the like don’t depend on individuals to shape its policies and lending practices to any country (by the way the EU don’t lend money as it is NOT a lending institution. However it gives grants). When giving grants the EU depend on the UN, Transparency International, reports from the US State Department and other international observer agencies to shape its opinion. So in essence the letter writing was a grand waste of time.

    Anyway, enough of this going in a different tangent. lol

  9. Lizavier4Jesus
    November 23, 2010

    @Reasoning:

    Local people (we in Dominica) need to be trained and qualified before we can be asigned to the operation of those equipments. It is not the problem of Financial resource. A contractor will receive financial aid to buy or rent equipment that is needed to do the project. But, his workers must know how to operate those equipment that must be used to complete the contracting project.

  10. Lizavier4Jesus
    November 23, 2010

    @Anthony Ismael:

    I can see where you are coming from. And that is just what I believe Mr. Kendal tried to explain to us yesterday. He did not say that monetary aid is not available; he said that a contractor applying for monetary aid is asked to show evidence, to prove that him and his workers have the qualification and ability to go into the planned, contracting project. But at present, these qualifications and ability are lacking among our local people–as you also pointed out.

    So what we need to hear about now, is the plans to solve the problem of lack of qualification and ability to perform work duties among our local people? We need local and experienced contractors and other workers, so that we do not have to pay outsiders, who will spend their money at the place outside, where they belong.

    Henceforth, teaching, learning, training or practice, is desparately needed among our people; and that is what our government, along with those who desire to improve their standard and status, should focus on, starting now. Slowly, but surely, Dominica and her people can definitely move from our lowly level of today.

  11. The Third Side
    November 23, 2010

    So Tony why didn’t you come out with that information long in advance and tell big head Jerry why its difficult for you and those half-way contractors in Dominica to win CDB and EU grants and loans.

    This could have saved Jerry the embarrassment he is going through now.

  12. Reasoning
    November 23, 2010

    @ Chief,

    Get it straight. This is the same EU that someone wrote to asking to be more vigilent in its lending practices and policies. That that not amount to urging an institution to stop its assistance. I thought we were trying to stay clear of been bias.

  13. Reasoning
    November 23, 2010

    @ Anthony Ismael,

    Adequate financial resources should cover the cost of the equipments and operators required for any job. So I don’t see where Anthony E. Leblanc is lacking in that vain.

  14. mouth of the south
    November 23, 2010

    @Chief: so u had to try n sway the topic at hand eh,,,,i can’t believe u i had to give u a thumbs down 4 dat!!!!!!

  15. yep
    November 23, 2010

    @Anthony Ismael: totally agree…no change in the immediate future… sad i see no change in the distant future….i want to see my ocuntry men benefit from these construction projects

  16. yep
    November 23, 2010

    @Chief: going off on a TANGENT ARE WE?

  17. Trevor Johnson
    November 23, 2010

    Excellent article.

  18. mouth of the south
    November 23, 2010

    i don’t want to say much,,,,this was a great insight to the solutions available n how to address them,,,so all contractors or prospective ones take note,,,,,,besides they probably on the project working so they won’t see it,,,,

  19. pedro
    November 23, 2010

    A very well written document! However the bottom line is the government organization does not see that big picture, nor would it ever have that kind of strategic intent where one deliberately designs a system that stimulate economic growth in various quarters, builds on skills and experience and encourages local consumption and pride in development from within. Sadly, like many other islands, DA is warped in the small island miopic and self serving politics rules the day. The government structure probably does not give incentive for deliberate collaboration from the financial and technical arms to develop such policies and influence the politicians appropriately in ming government policies that are less self-serving. Also, there seems to be a gap regarding negotiation and even appropriate designs for public works in general, in a way that makes it of excellent quality, value and function (eg Mhall airport terminal). I am not sure its that we don’t think big enough, or simply use the past as a yard stick going forward. Nonetheless there is great talent and room to grow in Dominica’s construction sector if we only give it a chance. This has to be a deliberate effort though, not a flash in the pan, after thought…be it design, procurement or services.

  20. A George
    November 23, 2010

    Mr LeBlanc, thanks for commentary. THat sheds some light on the related article relating to the COntruction contracts as it affects Dominican contractors.

    I think it is first up to the local contractor to decide whether they want to be serious players in this process. Then they need to take serious steps to ensure that they learn the ropes. If that company may not be able to secure a lot, then it may be more strategical to partner or subcontract with the winning firm. I don’t think (hope not) there is anything that precludes contractors from competing for lots, but once a winner has been determined, it should be up to the losing co. to seek partnership opportunities.

    Then since government has all the requirements from CDB, Japaense, Chinese, CIDA funding sources, then government should sponsor courses through the State college. These courses can be in Construction management, project management, tendering, contracting, negotiating, etc, etc. I think these would serve companies well. Because as I see it, the projects will only get bigger and bigger. So Dominican companies cannot always sit on the sidelines and say they are too small or experienced to worth the try.

    For the Dominican companies that can, it’s time they start seeking contracts outside of Dominica to get exposure to different political/economic/geographical areas.

    But government needs to encourage this and set up a framework where our local companies can grow, compete and succeed. BUT, it should not be left up to the government. There are lots of local companies that are successful, despite a lack of gov’t support in their respective industries…

    So, we also need to bring our engineers, business folks, legal folks home. We have too much of a brain drain… Again, they’d need incentives… we’ll need to be creative. I’m tired of hearing the success stroies in St Kitts, St Lucia, Antigua and where have you.

  21. Construction/Engineering professionals & Gov't Leadership
    November 23, 2010

    Anthony has addressed a lot of issues that needs discussion with government technical staff, local contractors, Engineers and foreign construction companies. Nothing is carved in stones and as Engineers one of our objective is to solve problems, and the discussion needs to continue locally. Anthony, thanks for this invaluable information it certainly helps.

  22. britbob
    November 23, 2010

    In much the same way that systems which do not suit our local circumstances (developed for much larger markets) are being applied to us in Dominica (legal, political etc) so it is in the construction industry. Because our economies in the Caribbean (indeed , throughout the developing world ) are so diverse, not even a regional model can be worked out so as to package large projects down to sizes to make for efficient execution and value for money , both to the country and the donors. I can say that with the developed counties current need to reduce deficits, the impetus to make work more accessible to local firms is only going to reduce further.
    In the short term Anthony’s point g ‘Partnering’ has to be the avenue which provides most scope to alleviate this problem… and I would like to see this on a regional level. In the advancing information age , where location of decision making is less important than it used to be, regional construction partners should be able to develop with inbuilt local knowledge of the logistical problems, common heritage and reasonable government help.
    I agree with Anthony that a passive ‘acceptance’ of the status quo should not be an option , but the work of setting up solutions for this should be a government priority even if the beneficiaries are private sector (not counting tax revenues!).

  23. Chief
    November 23, 2010

    I have to admit this is one of the best, if not the best, article I have read on DNO. It has managed to stay clear of the bias that, inadvertently perhaps, creep into basically everything that is going on in Dominica these days.

    I have to point out that I find it rather surprising that the construction industry, although being the second highest contributor to GDP, has attracted little or no fiscal incentives from the government through the years. This is something the authorities must look into and seriously consider

    Now to something that relates to something everybody is talking about. The author stated, “I believe that we have gotten more real growth in the construction sector from EU and some other externally-funded projects than from our locally funded or administered project.” Now this is the same EU that someone had written to, urging it not to assist Dominica.

    If the construction industry is the second largest contributor to GDP on the island and we have seen more growth in that sector from EU funded projects, can you imagine what would happen if the EU decided to cease funding projects? Who is going to suffer? Who would feel the consequences?

  24. Anthony Ismael
    November 23, 2010

    While all these points are great, they are unable to address the major issue at hand. Besides having adequate financial resources and technical expertise, most of our local contractors do not have modern equipment and operators capable of undertaking major projects in Dominica.

    There are no equipment rental outlets in Dominica that rent modern heavy equipment at reasonable prices. Forget the Cat D9 or backhoe for a second. In developed nations, most of the equipment is either rented or leased because of the prohibitive cost of operating these machines. Only the major construction companies actually own their heavy machinery.

    With the dynamics as they are, I do not see any major change in the immediate future. Furthermore, the type of construction that is undertaken locally often differs from what is required on major projects.

    For example, how many local contractors can erect a steel building in Dominica with a glass facade?
    Do we have adequate iron workers and welders to erect such buildings?
    Do we have a local elevator company in Dominica capable of installing and maintaining elevators in Dominica?

    The answer to these questions is no.

    Ultimately, lack of technical expertise, know-how, trained and talented workers and equipment leads to additional cost and poor workmanship which small nations like Dominica cannot afford in the first place.

  25. SUM FING WONG
    November 23, 2010

    eccellent artical make sence.

  26. wey-hey...
    November 23, 2010

    Great article!

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