Various programmes have been proposed to develop contractors in developing countries. However, it is always recognised that contractor development programme constitutes a significant part of an integrated holistic strategy to develop the construction industry. In fact, Ofori (1980a : 463) further described contractor development as the best bulwark of any programme for improving the industry generally. This has been confirmed by the emphasis placed directly on improving the capacity and efficiency of indigenous contractors among other strategies recommended by various international agencies that have continuing interest in the development of the construction industry in developing countries. They include primarily the United Nations organs, namely, the International Labour Organisation (ILO), United Nations Industrial Development Organisation (UNIDO), World Bank, as well as United Nations Centre for Human Settlement (Habitat) ( UNCHS).
The policy and programme measures prescribed for contractor development by the ILO succinctly describe the various recommendations made by other international agencies. These include institutions such as World Bank (1984); UNCHS (1982; 1984a; 1984b); UNIDO (1969); as well as individuals including Andrews (1985); Ofori (1980a); Wells (1986); Edmonds and Miles (1984); Drewer (1980); Kirmani (1988); Ganesan (1983); and Kafandaris (1980). These measures can be classified under three headings:
- policies to improve small contractors' access to work; - policies to create a more favourable business environment; - policies and programmes for training and technical advice.
Policies to Improve Small Contractors' Access to Work
The need to improve contractors' access to work stems from the fact that continuity of work is essential to the development of resources and expertise that will promote efficiency and capacity. Measures that have been recommended by the ILO and others in this respect are:
- planning and formulating public sector demand;
- reviewing prequalification procedures; - promoting subcontracting;
- disbandment of direct labour forces; - improvements in tendering procedures; - standardisation of design;
- simplification of tender documents; - access to private sector work.
Planning and Formulating Public Sector Demand
The fact that the construction sector is usually neglected in national development plans of most countries has been previously noted. The failure to co-ordinate demand and supply of construction products often lead to some problems in construction output. For example, it often results in excessive pressure on the limited capacity of the domestic construction sector, exacerbating perennial shortages in input resources. And too high a level of demand compared with capacity can lead to inflationary overheating in the industry (Ofori, 1982). Thus imbalance between demand and supply in construction output will cause delays and escalation of project costs. These will consequently frustrate timely and economic realisation of important development projects to the detriment of economic growth.
Fluctuations in construction demand are also due to changes in political and economic policies as well as seasonal variations. While fluctuations in construction demand are normal, abrupt fluctuations in workload bedevil the commercial operations of most developing country contractors, inhibit serious commitment to the industry and render investment in improved capacity uneconomic (Edmonds and Miles, 1984). Huctuations also reduce opportunities for assisting the growth of the indigenous construction sector especially in terms of modem technologies and organised management practices (UNCHS,
1982). The development of efficiency and capacity of the domestic construction sector is therefore inhibited.
Because the public sector possesses a high degree of leverage with respect to construction demand, (accounting for as much as 70 per cent or more of total demand in the formal sector), government is in the best position to establish a central point for the
aggregation and review of total construction demand. Hence determine the share of that demand that could be met by the indigenous sector (UNCHS, 1982; 1984b). In the same vein, Edmonds and Miles (1984) also recommended establishment of an institution - the Construction Development Agency (CDA), that will, among other functions, help to even out the peaks and troughs in construction demands by acting as a channel through which government contracts are directed to domestic contractors. It has, however, been noted that improvement of construction performance is generally a slow process which must be persisted in for many years for benefits to accrue (Andrews, 1985). Thus it follows that a comprehensive programme that will promote development of the construction sector of developing countries must co-ordinate and rationalise both short- and long- term construction activities to ensure that the domestic contractors targeted for development have regular access to work for a determined period. Such continuity of work is essential to facilitate development and growth in efficiency and capacity.
Price Preferences
The policies of offering price preferences or tender biases to favour indigenous contractors is based on the premise that their access to work is in part constrained by their inability to prepare competitive tenders. The usual practice is to favour an adjudged competent indigenous contractor though he submits a tender that is greater than the estimated project cost or the lowest foreign contractor's tender. However, provided his tender is not higher than a certain specified percentage. But it is not to the best interests of the industry if the client pays above the lowest bidder (ILO, 1987). Thus it is recommended that the indigenous contractor be offered the contract on the condition that he lowers his price to that of the lowest bidder.
The advantages of price preferences include the fact that it is cheap to introduce and to administer. It also offers opportunity to specify and to reach a particular target group of contractors (ILO, 1987). However, this measure can only be effective if an efficient prequalification system exists to ensure that the indigenous contractors involved in the scheme have the technical and managerial capability to perform satisfactorily to an acceptable standard. Some contractors that benefited in the past in Nigeria from price
preferences still performed dismally. Thus government realised construction of lesser value than the more money paid.
Price preferences do not provide incentives for indigenous contractors to improve their performances or grow. Protecting them from competition from foreign contractors inhibits them from intensifying self-efforts to develop their capacity and efficiency. This approach has also encouraged inflation of construction costs to the detriment of national development by assuming that competent indigenous contractors can not present reasonable bids that will be lower than that of foreign contractors.
Prequalification Procedures
Shortcomings in prequalification procedures impose some constraints on efficiency, competence and discipline in the construction industry. An efficient prequalification system is necessary to eliminate incompetent contractors. But a poorly administered system may also deny competent contractors access to jobs by precluding them from tendering on certain jobs which they could undertake effectively. This may result from the way contractors are assessed in the prequalification process and the frequency at which the prequalification list is updated or reviewed.
Various criteria are used to prequalify contractors. These usually include: experience and past performance on similar jobs, financial capacity, number, qualifications and experience of staff as well as equipment and plant possessed. Unobjective application of some of these criteria may however, be to the detriment of new contractors who have good potentials, but may not be able to satisfy, especially, financial capacity and equipment ownership requirements. They would therefore be ranked at levels lower than their capacity. They are thereby denied access to some job opportunities that may help them to demonstrate their latent capacity and consequently promote their development. Such contractors should have opportunity to plead their case with a third party (ILO, 1987).
An efficient prequalification system should also have regular review of contractors' performance for renewal of registration, upgrade ranking if necessary as well as update contract value limits for each category to reflect inflation rates. Unfortunately, such periodical review is rarely done in many instances in developing countries (ILO, 1987; Ofori, 1980b). Thus small contractors can find themselves increasingly restricted in the
range of projects for which they can bid. Lack of review of ranking based on efficient monitoring of past performances will encourage dead woods on the register. This will restrict potential new entrants, particularly, if the number allowed on the register is limited.
Lack of effective control in the administration of prequalification system will also encourage "downward plundering" by high-rated firms (ILO, 1987; Edmonds and Miles, 1984). Dearth of jobs at the upper end of the market usually make large firms move into the cheaper end of the market. This practice adversely affects the smaller firms who are squeezed out of jobs by the larger firms who could afford to undertake such jobs at little or no profit in order to keep in employment, their invaluable work-force. It is believed that this practice can be eliminated, to protect small contractors' access to work, by specifying the lower value limits of contractor eligibility as well as the upper limits (ILO, 1987; Edmonds and Miles, 1984). That is, bids are only obtained from contractors registered in grades appropriate to the job in view. Though this is accepted in principle in Nigeria, it has not been practised consistently. Through "downward plundering", foreign contractors have been able to displace indigenous contractors on simple building projects such as school classroom blocks.
Prom oting Subcontracting
It is self-evident that the more extensive the practise of subcontracting, the greater will be the access of small firms to work opportunities (ILO, 1987). Unfortunately, most developing countries have continued in the traditional contract conditions copied from their colonial rulers or other industrialised countries. They have continued to use contracts that emphasise contractual relationship between a single general contractor and the client. The general contractor is usually expected to use his own work force to complete substantial portion of work. Subcontracting, excluding that of nominated specialist subcontractors, is usually limited to a specified level. But in industrialised countries, pervasive use of subcontracting has been necessitated by its greater economic benefits in light of increasing specialist works involved in most construction projects. Unfortunately, the large foreign contractors from the industrialised countries, have not encouraged subcontracting in their operations in especially Africa. It is said that they consider subcontracting if there do exist sufficient numbers of competent, reliable and competitive domestic firms (ILO, 1987).
The potentials of subcontracting by large foreign contractors to improve domestic contractors' access to work while also promoting the transfer of technical and managerial expertise to them can not be overemphasised. However, contract conditions and procedures have to be reviewed. First, to require breakdown of large jobs to smaller work segments that will facilitate the use of small/medium- sized domestic subcontractors. And secondly, contract conditions should mandate large foreign contractors to carry out work by subcontracting to domestic contractors and also make provision of on-the-job training for them. Some incentives may be necessary to induce effective co-operation of foreign contractors in this direction.
Subcontracting has some advantages over slicing and packaging of large jobs to smaller segments compatible with the capacity of indigenous contractors. Firstly, the responsibility of supervising the subcontractors will still be that of the large foreign contractor. This reduces demand for more government supervisory staff that will be necessary to effectively oversee the large number of small contracts involved in slicing and packaging. Subcontracting further has the advantage of skill transfer which is not available in slicing and packaging. Thus subcontracting has more potentials to facilitate development of the capacity and efficiency of indigenous contractors as well as to improve their access to work. However, subcontracting will be more effective if domestic contractors are committed to developing first as specialist contractors undertaking activities such as masonry works, concreting, form work and scaffolding, painting, tiling, and so on. This may be an easier development approach for them, rather than embarking on being general contractors right from the onset of their enterprise, as is generally the case in Nigeria.
Disbandment of Direct Labour Force
Use of direct labour force or force account has become a widely accepted way of executing public sector construction in both developing and industrialised countries. Direct labour force is usually intended to take charge of construction, repair, maintenance, and emergency works which generally are unattractive to or unlikely to attract competitive bids from contractors as a result of the nature of the work or its inherent risks (World bank,
1983). Direct labour also serves as a seedbed for developing construction skill or supporting incipient domestic companies.
However, direct labour organisations provide minimum construction capacity, albeit, at a high cost (ILO, 1987). They are not really a suitable means for the construction of large one-off projects (Wells, 1986). This is because of their minimum construction capacity as well as other problems which inhibit their effectiveness and efficiency and make them less capable of undertaking large projects at competitive prices. Because they concentrate mainly on small/medium sized repetitive projects, which facilitate their training functions, direct labour organisations compete with the domestic construction firms for the small/medium sized government projects. They usually have superior advantage being better equipped and favoured by various government concessions. Furthermore, they operate at less competitive rates. This is because they have access to financing at artificially low rates or fail to take into account depreciation on equipment or services and administrative functions performed for them by other government departments (World Bank, 1983). This introduces considerable distortions in tender prices to their favour. Thus they reduce domestic contractors' access to work. Their work load should therefore be minimised as much as possible so that they no longer jeopardise the survival of the domestic construction sector. Their activities also hinder development of a competitive market of private contractors. They also suffer from typical government bureaucracies which hinder efficiency.
In order to make direct labour organisations perform more credibly, they have been turned into autonomous enterprises in many countries. Effective commercial management practice and accountability have been introduced to make them capable of performing competitively (World Bank, 1984). Notwithstanding, as parastatal enterprises, they are not totally free from the problems which usually affect government organisations.
Improving Tendering Procedures
Though open tendering system is most preferred on government contracts, selective and negotiated tendering have also been used occasionally for certain reasons. Because hand-picked contractors are involved in selective and negotiated tendering (involve even fewer contractors), each contesting contractor's chance of winning the tender is substantially higher than the case in open tendering. The use of selective or negotiated tendering can therefore be a powerful way of improving access to work for particular target
groups of contractors (ILO, 1987). Target groups are identified according to som e characteristics such as location, size of firm, past experience, technical and financial capacity. Invitations to tender on a project are offered exclusively to members of the group most appropriate to undertake the work in view depending on the nature of the project.
However, the inherent disadvantages of either of these tendering methods have made them least acceptable on public works. Because the number of contractors involved is limited, competition is considerably minimised. This will reduce the client's chances of obtaining more competitive tenders. The chances of collusion and corruption are also high in selective and negotiated tendering. For example, there is the temptation for contractors to offer inducements for inclusion on tendering lists and the risks of small cartels being formed among groups of selected contractors, leading to price fixing and work sharing (ILO, 1987). These methods give room for blatant nepotism and political favouritism in award of government contracts. Such abuses were reported on government contracts in Nigeria in the past (Schatz, 1977). These methods will therefore increase the occurrences of these sensitive problems in view of the critical fragmented political and social structures existing in most developing countries.
Minimising the risks of abuses associated with these tender processes depend on the availability of efficient checks and controls to minimise corruption, adequate monitoring system for continuing evaluation of building costs as well as effective prequalification system to evaluate contractors' capabilities. These are generally lacking in most developing countries. Hence the use of this approach to improve domestic contractors' access to work is usually curtailed.
It is believed that provincial contractors are deprived of job opportunities that are even in their localities because they are late in hearing about work opportunities (ILO, 1987). Open invitations to tender are issued in the metropolitan centre by the public works authority or client department. The provincial contractors have to make many journeys to the metropolitan centre to collect tender documents and to later submit their tenders. This time-consuming and expensive journeys could inhibit them from responding regularly to invitations to tender, thereby, reducing their ability to achieve continuity in work.
Notwithstanding, some improvements are still required in most developing countries to ensure fair competition in tendering procedures. Despite alleged benefits of
open competitive tendering, the system does not automatically rule out corrupt practices which deny some contractors of access to work. It is just easy to cheat in the tendering game in developing countries (Wells, 1986). This is often the case when the opening of bids is not done publicly and the final selection of the winning contractor is shrouded in secrecy. Such practices encourage various forms of irregularities and manipulations to favour particular contractors for corrupt purposes. It is therefore necessary to review tendering procedures and to legislate a system that would guarantee equal opportunities and fair play.
Standardisation of Design
Use of standard design on small-scale repetitive public works such as schools, housing, health-centres, and so on will enable small, inexperienced contractors to develop skills and expertise to handle similar projects. This will make them more competent to undertake subsequent works efficiently and increase their chances of getting more of such jobs. Repetitive projects also facilitate training to improve technical and managerial capacity of indigenous contractors to handle projects of increasing technical complexity. This will further enhance their chances of survival in the industry.
Simplification of Tender Documents
A logical extension of standardisation of designs is to introduce simpler standard formats for tenders (ILO, 1987). As has earlier been observed, many developing countries have continued in the most traditional procedures instituted by their colonial rulers. These procedures presuppose a level of administrative and technical competence seldom available in these countries outside a few privileged sector (UNIDO, 1969). For example, the use of the bill of quantities (BoQ) in many African countries after the British tendering system, has constituted a major stumbling block to small contractors' ability to tender successfully on jobs. This is because pricing BoQ is where many small-scale contractors make their biggest mistakes (ILO, 1987). Hence the ILO recommended at least a summary schedule of material requirements be attached the to BoQ in order to greatly simplify matters for the