Public Infrastructure Contracts and Corruption
Infrastructure,
including roadworks, water supply, sewerage, and road drainage has historically
been the 'feeding tree' of Jamaican politics. What the taxpayer sees on the
physical surface of a project is typically a fraction of the total work done.
Most is underground. This allows shoddy work to be done quickly and
covered up, away from prying eyes. The road foundation layer that should be 12 inches thick, is laid 4 inches thick, only to be discovered when it fails. A building is very different. It has a
superstructure and a substructure. The part you see above ground is typically a
significant portion, if not most of the work done (especially for buildings of
a few storeys). It's easier to measure and test after the fact.
The truth is that Jamaican construction industry is in
a 'goldie-locks sweet-spot' for corruption and overpricing. It is not small enough for one or
two local contractors to be shamed by repeated failed projects, eventually getting forced out by a foreign entrant. Neither is it large enough for competitive forces to take over. It's just the right
size. There is enough overpriced work to go around, keeping everyone with the
right level of experience happy, and the rest can't overcome the barriers to
entry. In the technical areas of construction, the anti-corruption framework is
young, unsophisticated and largely ineffective. So that when a particularly
egregious theft of taxpayers' money occurs, all the local contractors in the
top-tier have to do is keep silent, awaiting their turn at the trough.
There are large
corporations in Jamaica that have no idea how much they are overpaying for
construction work. The traditional business families and ethnic groups take a
different approach. They typically came from a merchant small business culture
that forced them to understand the details of how their money was being spent
in order to survive. They weren't about to allow their grandchildren to blow
millions on an inflated construction contract. This is evidenced as well by
the fact that they have almost all entered the construction industry. One
assumes they have seen the opportunities, and having access to capital from
their traditional merchant relationships, were able to overcome the barriers to
entry. I suspect this overpricing is also part of the reason the state Chinese
contractors have been able to 'clean-up' in the local construction industry.
Laying claim to a dominant position not only to public contracts they fund
themselves, but to private sector projects. It may well be that they simply see
no need to charge such a hefty premium, not only that they underprice because
they need ways to keep their people and equipment employed.
It is not the government's responsibility to police
the terms of private sector construction agreements, however something must be done about
the way public sector projects are priced for local contractors. Currently, a
quantity surveyor (or QS) puts together a BQ, or bills of quantities. The BQ
includes measured quantities pulled from a set of design drawings, as well as
calculated rates priced per unit of measure. The rates include profit, so
the grand total in a BQ is the contract price submitted by the contractor to
the client. For each line item therefore, the quantity multiplied by the rate
gives you the price of that item. The problem is that only the QS knows how
those rates are arrived at, and in many cases the incentives of the QS and the
taxpayer are not aligned.
That needs to change. The BQ has its
place, but a QS should also submit a simple schedule of base costs with columns for materials,
labour and equipment, and line items corresponding to each item listed in the
BQ. They should have all this information at hand, as it was presumably
used to create the BQ. Further, costs for materials, labour and equipment are
easily verified. For example, one can simply call any hardware for material
prices because that industry is large enough to be competitive. The equipment time to dig a pipe trench is known. The cost of the pipe itself, the volume and cost of fill material needed after the pipe is laid, cement, steel, lumber, trade labor, supervisor, enginerr, surveyor; all known and easily verified.
The difference between the grand total on the BQ and that of the cost schedule is the profit. Why should that number vary materially from an international construction standard of say 15% of the total base costs? The government anti-corruption bodies need to be strengthened as well. Who is monitoring implementation for the OCG? Is there a separate technical arm? Are they experienced construction professionals? Are they ensuring independent material testing is done? Are they conducting site visits to stop dishonest practices in real time?
The difference between the grand total on the BQ and that of the cost schedule is the profit. Why should that number vary materially from an international construction standard of say 15% of the total base costs? The government anti-corruption bodies need to be strengthened as well. Who is monitoring implementation for the OCG? Is there a separate technical arm? Are they experienced construction professionals? Are they ensuring independent material testing is done? Are they conducting site visits to stop dishonest practices in real time?
-RG
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