Financiers ignore 30% local subcontracting
National Construction Industry Council (NCIC) says some major financiers of projects do not include in their bidding documents that foreign bidders should comply with the 30 percent subcontracting rule.
The sentiments come against a background of a case in the upgrading of the M1 from Kacheche in Mzimba to Chiweta in Rumphi where NCIC has written the consultant RSK Environment Ltd and contactor China Henan International Corporation to fulfil the requirement.
In a written response yesterday, NCIC spokesperson Lyford Gideon said the council advises parties to fulfil these obligations as stipulated in the Subcontracting and Joint Venture Regulation as well as the Practice of Foreign Consultants during the bidding process.
He said: “First and foremost, on the particular contract mentioned, the contractor and consultant were advised before they went on site to fulfil the joint venture and subcontracting regulations as well as the Practice of Foreign Consultant Regulation.
“As matter of fact, they were written letters that were copied to their client on 23rd February 2023. Thus, they were informed in good time and the delay is from their end.”
In some instances, Gideon said, some bidders are aware of the requirements, but the conditions may not have featured as a requirement in the contract documents, as such, they did not take them as a priority.
He said: “The challenge arises due to how these financing agreements are framed. Suffice to say the council has made strides in mitigating this issue and we expect to see some improvements on the same.
“The major issue was the misunderstanding of the aim of these regulations which upon proper interaction with other institution agreements have been formed. Therefore, the council hopes that in the near future international bidding process will include these issues.”
Due to non-compliance with subcontracting requirements, the K6.7 billion Ntcheu-Tsangano Road has stalled as the contractor, China Geo Civil Engineering, has not complied with the 30 percent subcontracting rule.
Gideon said the benefits of fulfilling the regulations go beyond the contractor and consultant as the arrangement ensures that some foreign exchange remains in the country.
He said: “Furthermore, they will provide employment opportunities to Malawians at all levels. In addition, involvement of Malawian firms ensures that the technology and skill remains within our borders, as such, should there be need for similar infrastructure or repair of the same infrastructure, there will be little or no need for foreign teams to come.”
During an appearance before the Parliamentary Committee on Transport and Public Infrastructure in Lilongwe on Wednesday, Roads Authority (RA) acting chief executive officer Francis Dimu said road projects are facing various challenges.
He said: “The delays in projects have been associated with various challenges ranging from financial capacity, disasters, rains, failure to meet the 30 percent subcontracting requirement by NCIC.”
But Malawian Building Contractors and Allied Trade Association (Mabcata) former president Weekly Mhango said government needed to get serious on the matter by ensuring that the regulations are followed.
In a 2021 ruling, High Court of Malawi Commercial Division Judge Ken Manda slapped China State Construction Engineering Corporation Limited with a $2 million fine for breaching contractual agreements over two projects with local firm Fisd Company Limited in relation to the 30 percent regulation.
The NCIC Subcontracting and Joint Ventures by Foreign and Malawian Firms Order of 2014, under section 10, stipulates that a Member Practice, whether in a joint venture or subcontract arrangement shall be responsible for 30 percent of works by volume and value.
