Bureau Endorses Fixed Rate Contract System

The directive comes months after the Bureau suspended 116 contractors for the delay and lack of quality

The Addis Abeba Construction Bureau has introduced fixed-prices to the contracts it awards through a directive. Prices are henceforth calculated and fixed by the Bureau for every part of a project and are given to contractors who are willing to accept the rates.

The directive is drawn out in a bid to alleviate delay of construction projects, wastage of materials and low quality work, according to Elias Kebede, acting deputy manager of the Bureau. It also enables the bureau to take measures and provide necessary support for contractors unable to continue, by either making financial adjustments or giving them expert advice.

The directive comes months after the Bureau suspended 116 small and medium-sized contractors for the delay and lack of quality.

“The fixed rate unit price is subject to revision on a quarterly basis,” said Elias. “It allows us the opportunity to manage price variations after the construction commences.”

Although a fixed rate has been applied before there were no such directives to administer the selection and hiring criteria’s, according to Yonas Ayalew, head of the Bureau. Contractors used to be selected only according to their grades, without assessing their competence, according to him.

The adaption of the fixed-price contract system raises issues for Fasil Tsigehana, a contractor who owns a company with the same name as his and has 14 years of experience in the industry. He says the unpredictable nature of construction projects may make such contracts unworkable.

“It will be useful for projects that are more common such as condominium houses; otherwise, it will be difficult,” said Fasil. “Although, the quarterly revisions by the Bureau on the project will benefit contractors.”

The directive is part of the six directives and two regulations that have been in the process of being drafted by the Bureau for the past two years. They are focused on the code of ethics, infrastructure integration, outsourcing and sub-contracting of projects for SMEs, project auditing, bidder pre-qualification criteria and building construction and maintenance.

The six directives were enacted after being announced by Abate Sitotaw, deputy mayor of Addis Abeba, last month during an event organised by the Bureau at Global Hotel. The two regulations on the code of ethics and infrastructure integration have not been approved yet.

All of the regulations and directives are new except the directive that focuses on building construction and maintenance, which was amended. A team of 15 have participated in drawing up the directives and regulations. Among them are electrical, civil and mechanical engineers and architects.

“Government institutions such as the National Planning Commission have also participated, and the Bureau’s clients have given feedback and opinions verbally and in writing,” says Elias.

Challenges encountered in the fast-growing construction industry have necessitated the devising of the new directives and regulations, according to Amare Mekonnen, communication affairs process leader of the Bureau.

Some of the challenges are the violation of the code of ethics by professionals, unfair job distribution within SMEs and non-integrated operation between infrastructure providing institutions, according to Amare.

The Addis Abeba University’s (AAU) Institute of Technology, School of Civil & Environmental Engineering, was hired by the Bureau for a million Birr, to consult the bureau during the drafting of the directive for bidders’ pre-qualification criteria for building projects.

The directive enables the employer to assess the suitability of firms to carry out a particular contract before being invited to submit a bid.

Mesele Haile (PhD), consultant and lecturer for over three decades at AAU, believes that there are disadvantages to the fixed-price contract system.

“It was implemented in the construction of universities and condominiums 11 years ago, and has helped in fighting corruption,” he told Fortune.


Published on Apr 28,2018 [ Vol 18 ,No 939]



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