NE housing projects: Local builders under Rehab Ministry bulldozer
The Government’s initiative to build 65,000 houses for the displaced in the North and East has run into more controversy, this time from the construction industry.
The Construction Association said the Ministry of Rehabilitation, Resettlement and Hindu Religious Affairs (which called for bids) had shut out all local companies from prequalifying for the controversial project by insisting on making it one big contract instead of several packages.
The association appealed to the Ministry to review this requirement with a view to accommodating the large Sri Lankan construction companies which are “quite capable of undertaking this project”.
It is the latest criticism of an initiative that envisages the construction of 65,000 houses for people affected by the conflict in the North and East.
According to official documents seen by the Sunday Times, Jaffna and Kilinochchi are tipped to receive 38,000 housing units; Mannar, Mullaitivu and Vavuniya 17,000; and Trincomalee, Ampara and Batticaloa 10,000. None of the district secretaries in charge of these areas has yet been notified of the project.
|This is a billion-dollar project; not for small players |
A Cabinet-appointed tender board and a procurement committee are still evaluating and finalising the award of the contract to build 65,000 houses for war-affected communities in the North and East, an official from the Ministry of Rehabilitation, Resettlement and Hindu Religious Affairs told the Sunday Times.
“There are sections of people who are saying various things based on pre-judgement but the process has to be carried out on a concrete basis,” he said, requesting anonymity. “Otherwise we would be prematurely jumping into conclusions.”
When confronted with the allegation that the ministry had precluded local companies from qualifying by lumping all of the houses into one big project and by placing hefty conditions in the Request for Proposals document, the official said the project was not a simple construction initiative but came also with a financing arrangement.
“Whatever the company or contractor has to come with a financing arrangement,” he explained. “There’s no funding from the Government.
They have to find funds from national or international sources at the cheapest cost, with low interest, a grace period and a long repayment period beneficial to the national economy.”
“Local contractors coming and asking for a small share does not go with this concept,” he continued. “They also have to come up with that type of financing arrangement. No funding, no contract. People have not understood this. Small players cannot come up with that magnitude of funding. It’s a billion dollar project.”
“I do not say we don’t have contractors,” the official said. “I agree that we have good contractors and we need to support them. But they struggle and they usually even ask a mobilisation advance from the Government.
They can’t do any construction without it. Most people were unable to submit the bid bond. There’s a practical aspect which needs to be looked at. We are not discriminating or being exclusive.”
The tenders are being evaluated from a technical and financial viewpoint. Whoever wins the bid must have the capacity to get the funding. This means it has to be a sizeable company. “This is not a construction tender but more of a financing-oriented process,” he said.
The official also pointed out that the North and East needs a total of 137,000 houses. Not even 50 percent of the requirement has been met.
“Even if the army releases the land, most people are unable to resettle because they have no houses,” he said, stressing the urgency of the project.
Last week, civil society groups questioned the estimated cost of each house — a steep Rs. 2.1 million — and the “fast-track” process by which a builder was selected out of several bidders.
The Luxembourg-headquartered ArcelorMittal is tipped to receive the contract and has offered single-story units with imported steel frames and prefabricated panels.
The Construction Association said this week that dividing the contract into four or five packages would have been advantageous to local companies as they would have been able to offer the design and funding proposal.
“The construction of such a large volume of houses would be impracticable for one construction company no matter how large the company may be due to the sheer implications it would face when operating from so many places at the same time,” the association told the Sunday Times.
Industry sources pointed out that the project was funded by the Sri Lanka Government. Most of the funds would be from the Treasury – taxpayers’ money — and they saw no reason why the Ministry had to “lump this project into such a huge contract for such a low technology project of this nature”.
The Sunday Times read a copy of the ‘Request for Proposals’ issued by the Ministry to prequalified bidders. It included several exclusionary conditions that were deemed by the construction industry to be “completely disproportionate to the complexity of the work” which is basic housing.
Industry sources charged that the conditions appeared to have been deliberately included to favour one contractor and block out several capable contractors.
These conditions include a minimum single job of Rs. 25 billion completed in the last five years; a bid bond of Rs. 650 million; and a contractor funding letter of more than US$ 1 billion.
“We are now made to understand that the project is to be awarded to a company which intends to import pre-fabricated housing units with no local value addition at a price several hundred million dollars higher than would have been possible under a transparent properly structured tender condition,” a source said.
“It is also a violation of procurement guidelines to award this tender unless there are at least 3 responsive bids.”
Civil society groups have also opposed the initiative on the grounds that it follows a “contractor driven” approach that does not involve the beneficiaries in the designing or building of their houses.
A statement signed by more than 100 persons including well-known professionals and researchers this week called for more discussions with communities before the project was proceeded with.
“A housing project of this magnitude must be structured in a manner that can stimulate the local economy,” it said. “Indeed, the post-war regions are in crisis due to the lack of employment opportunities and local production.”
“Large housing projects, as with the Indian and other housing schemes, created demand for local labour and, in the process, provided livelihoods; particularly in the context of falling demand for labour in agriculture and fisheries due to problems in those sectors,” it elaborated.
“Furthermore, a well-planned housing project can stimulate small industries in the production of bricks, roofing and house-fittings, creating further local employment. These are only possible if the scheme is owner driven and community driven and not contractor driven.”
The signatories called upon the Government to keep the project on hold until the respective war-affected communities were consulted. It urged the Government to find out what type of housing the displaced were seeking.
They said such community consultations would highlight pressing issues such as landlessness and solutions to resolve issues arising through owner driven housing. They added that a house in the respective regions would need about Rs. 800,000 to one million rupees to build — not Rs 2.1 million each.
Amila de Mel, an architect working with Habitat for Humanity in Sri Lanka, expressed concern about the type of housing envisaged under the Government’s proposal.
“Environmentally friendly building practices are those that respond best to site-specific climatic and social conditions, using materials and designs that maximise local adaptability,” she said. “They avoid a cookie-cutter approach and over-construction and enable owners to build and modify incrementally.”
“Such practices also help nurture local skills and industry and allow for reviving and continuing traditions of making homes, places and communities,” she added.