Construction siphon billions

The National Assembly Monday agreed the construction industry is infestedwith numerous gray areas and is wasting government money in billions.

The main fallouts identified in the sector were fronting, illegal sub-contracting, collusion and formation of syndicates among contractors.

The health minister, Lyonpo Zanglay Dukpa, said fronting and syndicate of contractors is a problem, and it is hampering the quality of works. An MP said the collusion between contractors and engineers is also rampant.

Ugyen Wangdi, an MP from Mongar, said the two major problems in the sector are fronting and sub-contracting and said there are no strict rules to monitor it. He said the existing rules impose just Nu 2,000 on those who violate them.

The MPs proposed for stricter rules to be implemented. They said defaulting contractors should be penalized and the licenses cancelled. Proposing the existing rules to be reviewed, the MPs said the rules have failed to create an enabling environment for contractors and the contracting agencies.

The works and human settlements minister, Lyonpo Yeshey Zimba, said works on rectifying lapses in the construction sector have reached an advanced stage.

The past problems, he said, were not because of the absence of rules. It was the difficulty in implementing them. Sometimes, responsibilities of the ministry outweighed its capacity and expertise.

The health minister, Lyonpo Zanglay Dukpa, said some construction companies could not even interpret the construction designs and ended up floundering projects. He said the designing capability was poor in the absence of experts. According to Gasa MP, Damchoe Dorji, a major problem in the industry is between contractors and the government. Sometimes supervising engineers certify the work, and contractors are implicated even after their liability period, when the work is audited.

Legally, he said, the supervising agency that certified the work should be responsible and not the contractors, “or the auditing should be done within the liability period.” The labor minister, Lyonpo Dorji Wangdi, disagreed. He said the contractors should also be held responsible in meeting requirements of the contractual agreement. “If the supervising engineers are held solely responsible, then there is no use of a contractual agreement,” he said.

Lyonpo Yeshey Zimba said rules are being reviewed outlining clear roles and responsibilities of contractors and contracting agencies to address problems related to procurement, tender and contractual agreements.

Finance Minister Lyonpo Wangdi Norbu said the rules have been changed twice. This time, he said, new international standard Procurement Manual has been framed involving the relevant stakeholders: contractors, the Anti-Corruption Commission and the Royal Audit Authority.

Further, the MPs pointed out that fronting with foreign companies has affected the growth of the construction industry. They said fronting should be considered a serious corruption offence. The issue was discussed after the Public Accounts Committee of the National Assembly presented the Annual Audit Report (2007) Review. The Review pointed out deficiencies, ambiguity and impracticalities of rules and regulations in the construction sector. Lapses in the industry range from planning, defective contractual agreements, and inadequate supervision and monitoring of works, states the Review. Another problem is “abnormal variation in costs in different places for similar works and inadequate system of check and balance.” In the 9th Plan, the construction sector recorded a wastage of 46% of the total cost amounting between Nu 4.37 to Nu 7.06 billion.

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