Challenges aplenty for the construction sector

Construction Development Board (CDB) resolved 43 disputes worth Nu 1.2 billion (B) related to construction and contractors in the past three years, CDB’s annual report 2018 showed.

Disputes related to construction increased substantially in the last three years from 10 in 2015-16 to 17 in the 2017-18 fiscal year.

However, the value of the works that resulted in disputes and settled through arbitration by the CDB dropped significantly in as many years.

The report stated that the 10 cases in 2015-16 were worth Nu 578.4 million (M), 16 cases of 2016-17 worth Nu 357.1M and the 17 cases settled in the last fiscal year worth Nu 281.5M.

The disputes arose from time extension, liquidated damages, price adjustments, variation, additional works, termination of the contract, and interest payment among other factors.

The arbitration tribunal observed that lack of proper planning and monitoring by procuring agencies and contractors, the absence of arbitration rules, and practical challenges in implementing the Alternative Dispute Resolution Act 2013 were other issues.

Some of the serious problems that the construction industry is facing today are labour efficiency, which is alarmingly low, high accident rate at construction sites, poor work quality, control of the construction site is insufficient and difficult, and drop in a skilled workforce.

The report also identified the slow implementation of automation in the construction domain. This was due to the unsuitability of the available automated fabrication technologies for large-scale products, conventional design approaches that are not suitable for automation, and the significantly smaller ratio of production quantity or type of final products as compared with other industries.

The other factors for low automation were limitations in the materials that could be employed by an automated system, the economic unattractiveness of expensive automated equipment and managerial issues.

The report stated that sometimes, the concerned institutions failed to comply with the contract award, even after the award has become the decree of the court. The compensation, penalty and damages levied and entitled are not paid or compensated on time.

“Most importantly, procuring agencies often failed to enforce arbitral awards while contractors have promptly enforced and recovered money from the government,” the report stated.

CDB suspended nine contractors for three months and downgraded 15 contractors in 2017-18 for noncompliance to registration requirements.

One of the most significant issues faced by the construction industry was delayed completion or time overrun.

“Time overrun has the greatest impact to the construction which can never be recovered,” the report stated.

In FY 2014-15, of 1,041 completed projects, 29 works or 2.78 percent were delayed, and 443 works or 42.55 percent exceeded their initial estimated costs or into cost overrun.

The following year, of 1,091 completed projects, 257 works were delayed and 485 works were into cost overrun.

Of the 719 completed projects in 2016-17, more than 64 percent of works were delayed and 585 works were into cost overrun. In FY 2017-18, out 494 completed works, 258 works were delayed and 221 works cost overrun.

The construction industry contributes about 16.28 percent of the gross domestic product and employs 2.56 percent of the labour force with 4,125 contractors, 67 consultants, 6,624 construction professionals and 804 earth moving equipment.

Tshering Palden

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