PERFORMANCE AUDIT REPORT ON ROAD WORKS
The Ministry of Infrastructure Development and TANROADS’ Performance in Controlling Road Construction Time, Cost and Quality
A REPORT OF THE CONTROLLER AND AUDITOR GENERAL OF THE UNITED REPUBLIC OF TANZANIA March, 2010
Controller & Auditor General National Audit Office Samora Avenue/Ohio Street
P.O. Box 9080, Dar es Salaam Tanzania Telephone: +255 22 2115157/8 Fax: +255 22 2117527 E-mail: [email protected] Website: http://www.nao.go.tz
TABLE OF CONTENTS
PREFACE...iii ABBREVIATIONS... v LIST.OF.TABLES.AND.FIGURES... vi EXECUTIVE.SUMMARY...vii Chapter.One... 1 Introduction... 1 1.1 Background ... 1 1.2 Focus of the conducted study ... 2 1.3 Audit scope and performance ... 3 1.4 Structure of the report ... 6 Chapter.Two... 7 The.Road.Works.System... 7 2.1 Responsibility and policy ... 7 2.2 The operative system ... 8 2.3 Key players outside MoID/TANROADS ... 11 2.4 Additional time and costs ... 13 Chapter.Three... 17 Time.variations.in.Road.construction.projects... 17 3.1 Original, revised and actual time of road projects ... 17 3.2 Factors Contributing to delays ... 21 3.3 Consequences of the Delays ... 25 Chapter.Four... 26 Cost.Deviation.and.Cost.Overrun... 26 4.1 Introduction ... 26 4.2 Original and revised budgets and actual costs ... 26 4.3 Revised budget and actual costs ... 29 4.4 Requested and granted request for additional costs ... 30 4.5 Factors contributing to cost overrun ... 31 Chapter.Five... 34 Quality.Control.of.Road.Works... 34 5.1 General standards for planning and conducting road works ... 34 5.2 The system of quality control ... 355.2.1 The design phase ... 35
5.2.2 The construction phase ... 35
5.3 Quality assurance in practice ... 37 5.4 TANROADS and its engaged consultants ... 41 5.5 Consequences ... 42 Chapter.Six... 43 Conclusions... 43 6.1 Organization of the work ... 43 6.2 Management and quality control ... 44 6.3 Conditions for transparency and self improvements ... 45 6.4 Working systems to address delays, cost overrun and quality problems of road construction ... 45 Chapter.Seven... 47 Recommendations... 47 7.1 Institutional improvements ... 47 7.2 Project planning and design ... 49 7.3 Project management and quality control ... 50 REFERENCES... 52 APPENDICES... 53
Appendix 1: Genaral Information of the Audited Projects ... 54
Appendix 2: Organization Structure of the MoID ... 55
Appendix 3: Organization Structure of TANROADS ... 56
Appendix 4: Time Variations ... 57
Appendix 5: Reasons for the Delays ... 58
Appendix 6: Reasons behind revision of programme of works for each road project 61 Appendix 7: Reasons behind cost increase for each road project audited ... 62
Appendix 8: Partial Deductions of Liquidated Damages ... 62
Appendix 9: Cost Variations ... 65
PREFACE
The Publc Audt Act No. 11 of 2008, Secton 28 authorzes the Controller and Audtor General to carry out Performance Audt (Value-for-Money Audt) for the purposes of establishing the economy, efficiency and effectiveness of any expenditure or use of resources n the MDAs, LGAs and Publc Authortes and other Bodes whch nvolves enquiring, examining, investigating and reporting, as deemed necessary under the crcumstances.
I have the honour to submit to His Excellency the President of the United Republic of Tanzania, Dr. Jakaya Mrisho Kikwete and through him to Parliament the first Performance Audit Report on MoID’s and TANROADs’ Performance in managing road construction time, Cost and Quality of Road Works in Tanzania.
The report contan conclusons and recommendatons that drectly concern the Ministry of Infrastructure Development (MoID), Tanzania National Roads Agency (TANROADS) and Financiers on ensuring that our roads are completed on time, wthn set budgets and also n requred qualty and standards.
The Ministry of Infrastructure Development and TANROADS have been given the opportunty to scrutnse the factual contents and comment on the draft report. I wsh to acknowledge that the dscussons wth the audtees have been very useful and constructve.
My office intends to carry out a follow-up at an appropriate time regarding actions taken by the audtees n relaton to the recommendatons n ths report.
In completion of the audit, the office subjected the report to the critical review of the following experts namely, Professor Theophil Rwebangira, Dr. Damas Nyaoro from the College of Engineering and Technology of the University of Dar-es-Salaam and Eng. Kmambo from K & Assocates Professonals Servces Ltd (KAPSEL), who came up wth useful nputs n mprovng the output of ths report.
This report has been prepared by George Haule, James Pilly, Wendy Massoy, Michael Malabeja and Elizabeth Augustino under the guidance of Gregory G. Teu with support from the experts of the Swedish National Audit Office, Mr. Tony Angleryd and Ms. Elsabeth Carlsund. I would lke to thank my staff for ther assstance n the
preparation of this report. My thanks should also be extended to the auditees for their fruitful interaction with my office.
Ludovick S. L. Utouh
Controller and Audtor General Dar es Salaam,
ABBREVIATIONS
ADB - Afrcan Development Bank CAG - Controller and Audtor General CRS - Crushed Stones Aggregate
FIDIC - Federation International Des Ingenious Conseils GOT - Government of Tanzana
KAPSEL - K & Assocates Professonals Servces Ltd LGAs - Local Government Authortes
MDAs - Mnstres, Departments and Agency
MoID - Mnstry of Infrastructure and Development
MLHSD - Mnstry of Lands and Human Settlement Development NCC - Natonal Constructons Councl
PFF - Price Fluctuations / Adjustment Formula PWD - Public Works Department
SAI - Supreme Audt Insttutons
TACECA - Tanzana Assocaton of Cvl Engneerng Contractors TANESCO - Tanzana Natonal Electrcty Company
TANROADS - Tanzania National Roads Agency TRA - Tanzania Revenue Authority TSh - Tanzanan Shllngs
TTCL - Tanzana Telecommuncaton Company Lmted UWSS - Urban Water Supply and Sewerage
VOP - Varaton of Prce
LIST OF TABLES AND FIGURES
Tables
Table 3.1 : Total number of tme revsons n programme of works per stage Table 3.2 Original and actual time for the ten examined projects
Table 3.3 : Dfference between revsed and actual tme for road constructon Table 3.4 : Request for extensions of time granted to contractors by
TANROADS (days)
Table 3.5 : Factors influencing delays and their frequencies (official version) Table 4.1 : Revised budgets during the construction stage
Table 4.2 : Revised budgets during the construction stage (Billion Tshs) Table 4.3 : Original budget and final Costs (Billion Tshs.)
Table 4.4 : Revised budget and final costs (Billions Tshs) Table 4.5 : Requested and granted cost increase (Billion Tshs)
Table 4.6 : Effect of each category to cost increase of the road projects Table 5.1 : Supervsng, montorng and nspecton actvtes among the ten
examined projects
Table 5.2 : Conducted evaluatons of the qualty of studed road works
Figures
Figure 2.1 : Systems Graph showng relatonshp between dfferent actors Figure 2.2 : Key stages n the process of road constructon
Figure 2.3 : Procedure for approvng a clam for addtonal costs Figure 2.4 : Procedure for Extension of Project Timeframe
EXECUTIVE SUMMARY
Road construction uses 13% of the national budget
Road sector is an important sector in the economy of any nation due to ts mpact on the welfare of ts ctzens and the nvestment nvolved. Good qualty of road works s mportant for both safety and economc development reasons n any socety. Ths mportance s propounded by the fact that the transport sector has a major role to play in the socio-economic development of a country as it provides access to markets, production, jobs, health, educaton and other socal servces.
Constructon and repar of roads utlzes a great part of government expenditure. The estimates for roads construction amounts to almost TSh. 800 bllons, equvalent to 13% of the natonal budget. The Mnstry of Infrastructure Development (MoID) and Tanzania National Roads Agency (TANROADS) have a major influence on the road construction industry as sponsors, regulators and procurers of road projects.
Problems with delays, cost overrun and quality
The road constructon sector n Tanzana s evdenced from many studes to experience mainly three kinds of extended problems.
One problem concerns time management, i.e. road works are not completed within the agreed time and benefits of the works to the public are delayed. Second problem concerns cost overrun, .e. addtonal but avodable costs to the decded budgets for varyng reasons, and
A thrd problem concerns the weaknesses n qualty control system of the road works whch results nto early wear and tear necesstatng repar and mantenance.
Purpose of the audit
The purpose of the conducted performance audt study s to assess whether the Government, through the MoID and TANROADS, has an effective system of road works in the country. This includes assessing the extent the system s workng to mnmze delays, cost overruns and qualty problems on road works.
Audit scope
The audt scope was ntally lmted to the post-contract stage of the 12 road construction projects which were completed in the financial years 2004/2005, 2005/2006 and 2006/2007. Due to failure in obtaining sufficient data for two projects, the examination in the Performance audit study had to be confined to the ten road projects.
Major findings, Conclusions and Recommendations
Audit findings
The major findings of the audit are as follows:
Extension of time is common in most road projects
It is common with time revisions for the road works project plans. These time revsons have been done as requested by the contractors when comng across different problems which prompted them to request for the extension of time. For example from the selected ten projects, all of them were revised during the construction phase and seven (7) or two thirds at the design phase.
Review of extension of working days is granted as requested by contractors
MoID/TANROADS has a role to play when it comes to both reviewing and recommending extensions of time. The consultant is required to review the contractor’s extension of time request and give his recommendations. Also, MoID/TANROADs are required to review consultant’s recommendations and grant their own recommendations on time extension. However, MoID/ TANROADS have approved almost all requests for the extension of time as requested by contractors and approved by the consultants. Our findings indicate that MoID/TANROADS and its consultants did not carry out any ndependent analyss to verfy the adequacy of the tme requested.
Inadequate design results into cost overrun
According to the project files, a number of factors causing cost increase were new design and new specifications, inadequate project management and/or quanttes and varaton of prce factors. A huge part of the ncreasng costs were related to ms-calculaton of some knd already n the desgn stage.
Others factors like changed conditions, values; priorities etc. have also affected the outcome.
Quality control system needs to be improved
Despite the fact that TANROADS’ officials insist that the quality control system s workng very well, our audt has found that there s stll a need for mprovement. The qualty control n the desgn phase s obvously not effectve. There are also several problems n the constructon phase. Inspectons and montorng are not conducted as planned, documentaton s not n order and the engaged consultants are given conflicting tasks without any proper follow up by TANROADS.
Conclusions
We conclude that the road works system in Tanzania is not managed efficiently and timely. Road works project plans and budgets are often revised, resulting in significant delays and cost overruns. Engaged consultants are determining ther own schedule, have multple roles and are not beng managed well. There s serous lack of ndependent analyss to verfy the adequacy of the time extension requested by contractors. Design works is not done properly and efficiently which resulted into redesigning leading to inevitable cost overruns. All put together ndcates that ten roads bult and audted were not produced n a way that best serves the publc nterest.
Management of Consultants by the client (MoID/TANROADS) is not adequate. There s lack of montorng mechansm of these consultants who are nvolved n plannng, preparaton and desgn and n controllng actvtes of the road constructons lke supervson, montorng, nspectons and evaluaton of the works done by contractors. There are obvious conflicts of interests in the nvolvement of the same consultant n several steps of the process. Qualty assurance system does not function well. The MoID/TANROADS inspections and evaluatons were obvously not able to detect certan weaknesses of the road works. All ten studied road projects were approved at the final inspections though most of all the roads started to undergo repar and mprovement soon after the road have been approved. Sanctons were not properly used for addressing and correcting the frequent and extended delays, cost overrun and also qualty assurance problems.
Recommendations
Basing on the findings and conclusions, we recommend the following to MoID/TANROADS:
• The Ministry of Infrastructure Development and TANROADS need to improve the process of the start-up activities, such as fulfilment of loan condtons and procurement processes.
• TANROADS need to have a budget covering the whole project period and strong budgetary control throughout the project. For each project it s mportant that clear roles and responsbltes among varous partes are set regardng tme, cost and qualty ssues. Moreover, measures need to be taken to enhance TANROADS capacity in identifying and managng rsks.
• Files must be kept in better order and MoID/TANROADS should establsh regster to record the performance of contractors and consultants for each road project.
• MoID/TANROADS should, therefore, take proactive steps to reduce tme and cost overruns by contnung ts efforts to mprove coordnaton with utility companies (eg. TANESCO, DAWASCO) and other parties who are nvolved n the road constructon stes.
• MoID/TANROADS should recruit and keep their own independent strategc competent professonals who wll act wth full professonalsm and integrity for monitoring and inspections even if MoID/TANROADS wll contnue engagng specalsts or consultants for the actual follow-up of mplementaton of varous knds of work.
• Government should ensure that MoID/TANROADS have the leadership and capacity required to manage its functions. We recommend that the Government and the Mnstres concerned to set up a commsson which will be responsible for finding solutions to these shortcomings as this will be cost effective to make TANROADS properly equipped wth human resources for ts tasks.
• MoID/TANROADS should have a discussion on how far it should go n supervsng contractors. There are rsks wth too much nvolvement by TANROADS. It may undermine and confuse the contractors’ mplementaton responsbltes on one hand and the oversght role of
TANROADS on the other hand.
• MoID/TANROADS should specify the responsibilities for the consultants they use. If for instance a consultancy firm is engaged for design work, it’s advisable to clarify in the contract that the firm is financially responsible for mal practice.
• The Government should revew the possblty of makng vtal road constructons documents be made avalable to the publc. Desgns and final inspections could perhaps be made available or disclosed as soon as they are approved by the partes nvolved.
• The Government should give TANROADS clear instructions on how to manage consultants. Ths nclude the settng up of a commsson to review and strengthen MoID/TANROADS’ integrity and professionalism and its performance of strategic functions, and examine transparency and accountablty ssues
• The Government and TANROADS should deliberately take steps on the pre-contract stages of projects implementation to ensure that the designs are improved to reflect the reality on the ground and avoid unnecessary alteratons durng the mplementaton stage. The Mnstry of Infrastructure Development and TANROADS need to institute a mechanism to review the designs and estimates of the project as they are prepared by the consultants before they are mplemented.
• TANROADS should significantly improve project management and qualty control system n order to avod delays, cost overruns, to avod beng forced to conduct repar works and mantenance servces soon roads are opened to the traffic.
Chapter One
Introduction
1.1 Background
Road sector is an important sector in the economy of any nation due to ts mpact on the welfare of ts ctzens and the nvestment nvolved. Ths importance is propounded by the fact that transportation sector has a major role to play n the soco-economc development of a country as t provdes access to markets, production, jobs, health, education and other social servces.
The Tanzanian Road construction industry is also a significant contributor to the natonal economy accountng for 8 per cent of Gross Domestc Product (GDP) and employng more than 1.9 mllon people.
The Mnstry of Infrastructure Development (MoID) and Tanzana Natonal Roads Agency (TANROADS) have a major influence on the road construction industry as sponsors, regulators and purchasers of road projects. These road projects are ranging in size from repair works to large road projects. Road construction industry’s turnover is mainly funded by the Government and donors.
Construction and repair of roads utilizes a great part of government expenditure in the 2007/2008 budget. The estimates for roads construction amounts to almost TSh. 800 bllon, equal to 13% of the natonal budget.1
The country’s road network is estimated to be 85,000 km long and includes trunk, regional, district, feeder and urban roads. Urban, district and feeder roads whch are estmated to be over 56,000 km are managed by Local Government Authortes (LGAs) whle regonal and trunk roads (29,000 km) are managed by TANROADS. In addition to this, some road networks which are in National Parks and Game Reserve Areas are managed by the Tanzania Natonal Parks (TANAPA) and other nsttutons.2
Irrespective of the importance and expenditure recorded above, the road construction sector is evidenced from many studies to experience extended problems. These problems are manly grouped nto three types.3 One problem
2007/2008 Budget of Tanzania
MoID
Documentation and studies from the Annual Roads Convention 2008 “Road Financing and investment: Opportunity and Challenges”.
concerns tme management, .e. road works are not completed wthn the agreed time and benefits of the works to the public are delayed. Another problem concerns cost overruns, .e. addtonal but avodable costs to the decded budgets for varyng reasons. A thrd problem concerns the qualty of the road works, .e. rates of deteroraton are hgher than antcpated whch mples early repar and mantenance.4
Tanzania’s underdeveloped transportation network remains a key structural weakness. Nearly 80% of the populaton stll lve n rural areas, engaged n agrcultural actvtes. These rural areas are not adequately served by the transportation system. Moreover, the country’s transportation system also serves to handle transit traffic for Tanzania landlocked neighbours including Burundi, Malawi, Rwanda, Uganda and Zambia.5
Gven the mportance of the road constructon sector and the above mentoned problems a Performance Audit (PA) study on the management of Road Works has been conducted by the National Audit Office of Tanzania (NAOT).
1.2 Focus of the conducted study
Purpose and audit questions
The purpose of the conducted performance audt study s to assess whether the Government, through the MoID and TANROADS, has an effective system of road works in the country, i.e. to what extent the system is working to mnmze delays, cost over runs and qualty problem on road works.
In short, the audt questons used n ths study were as follows:
(1) To what extent are problems with delays, cost overrun and lacking quality of road constructions common in executed road projects n Tanzana?
(2) What are the possible causes of delays, cost over runs and qualty problems of road constructons?
(3) Are there workng systems n place to address delays, cost overruns and qualty problems of road constructon?
From the Work Plan, p. 3-4
National Population Policy, Mnstry of Plannng, Economy and Empowerment, 2006
Assessment criteria
For answering the above mentioned audit questions, the following criteria was used:
MoID and TANROADS ought to have a documented performance measurement system regardng tme delays, cost overruns and lackng qualty for dfferent steps of road constructions. TANROADS should also have a policy on how to deal wth these ssues.6
MoID and TANROADS should take all necessary actions to reduce problems of tme delays, cost over runs and lackng qualty of road constructons. Ths mples the followng actvtes:
• the contracts should be well desgned when t comes to ssues lke phasng of works, requrements to the contractor, tme frame, budget and qualty assurance system as well as responsbltes and sanctons.
• the implementation process should follow a timely manner. Where alteratons to the orgnal contract are nevtable, acton should be taken to prevent undue tme delays, cost overrun and lackng qualty. • sanctons should be appled when approprate.
1.3 Audit scope and performance
The audit objective
The objectives of the audit has been to study whether MoID and TANROADS are dentfyng problems of delays, cost over runs and qualty n the system of road works and mnmze these problems wthn avalable actvtes.
The PA study is focused on development projects that are administered from the TANROADS head office and MoID. The selection of development projects is based on the fact that the investment involved per project is relatively higher than for other road projects.
The audt scope was lmted to the post-contract stage7 of the development
projects that was completed in the financial years 2004/2005, 2005/2006 and 2006/2007.8 This selection covered 12 roads projects. However, the
examination in the Performance audit study is based on the following ten road projects:9
• Butiama – Kyabakari Roadworks (phase 2) • Morogoro – Dodoma Road maintenance works • Mutukula – Muhutwe Road upgrading project • Nzega - Tinde - Isaka Road Upgrading Project • Songwe - Tunduma Road Rehabilitation Project • Tinde – Mwanza/Shinyanga Border Upgrading project • Muhutwe – Kagoma Road Upgrading project
• Mwanza Region Transport Project • Shelu – Nzega
• Kyabakar – Butama
Design and methods
The audt work was desgned by dvdng the above audt questons nto sub-questons. For performance of the study, the audit team used varying methods.
The formal pcture of management and performance of the selected cases was studied from MoID/TANROADS documents. This information was further analysed through nformaton provded by ntervews wth audtees and different stakeholders. Thus, the audit office has strived to get a picture as comprehensve, relevant and relable as possble of the studed road constructons.
Many knds of documents were revewed n order to get the formal pcture of the agreement between MoID/TANROADS and the contractor and the performance of each road project. The following kinds of documents were revewed:
• Contracts between MoID/TANROADS and contractors for roads construction as well as for MoID/TANROADS supervision of road constructon
Post contract stage refers to the perod after sgnng of contract to the completon of works This selection of road projects was executed during the period 2001–2007.
Muhutwe – Kagoma Road and Mwanza Region Transport Project were the last two road projects that were administered by MoID until December 2007 when they were eventually handed over to TAN ROADS.
• Addenda (nstructons to approve changes) to the contracts
• project documents such as progress reports, quarterly and annual progress reports and final completion reports
• Minutes for Project Site meetings
• Planning documents such as MoID Strategic Plan 2007/2008– 2009/2010 and Tanzania’s Construction Industry Policy book, 2003. Reports from other Supreme Audit Institutions (SAI’s) and other documents were also used in order to get a context and references for assessment of the provided picture of Tanzanian road construction projects.10
A lot of ntervews were conducted for many reasons, manly to • confirm or explain information from the documents reviewed;
• gve clues to relevant nformaton n cases where nformaton n the formal documents was lacking or missing; and
• provide context and additional perspectives to the picture from MoID/ TANROADS documents.
Intervews and dscussons were thus carred out wth representatves of • executives as MoID, TANROADS (including consultants), National
Constructon Councl (NCC) and contractors
• experts like professional Associations11 from the road sector or
unverstes n Tanzana12
• development partners representing the financiers.13
Finally site visits were conducted on five of the ten studied road projects.14
The purpose of these visits was specifically on assessing conditions of the road works and also to gather evdence and opnon on qualty ssues.
0 PA – Managing Procurement, Road Construction and Restoration Contracts, a report by the Auditor General of Malta; Roads and Traffic Authority of New South Wales- Planning for Road Maintenance by the Audit Office of New South Wales, 1999; Country Roads Division audit report by the Board of Supervi sors of the country of Santa Clara.
Association of consulting Engineers of Tanzania (ACET); Contractors’ Registration Board (CRB); Tanza nia Roads Association (TARA); Tanzania Association of Civil Engineering Contractors (TACECA). The College of Engineering Technology (COET) of the University of Dar es salaam (UDSM); Civil Engi
neering consulting firms;
African Development Bank (ADB); World Bank (WB); Danish International Development Agency DA NIDA); Japanese International Cooperative Agency (JICA); European Union (EU)
The MoID and TANROADS directly concerned with this report have been given the opportunity by the audit team to comment on the figures and information presented in this report. They confirmed the accuracy of the figures used and information presented. Also, external experts and scientists in the field have gone through methods, evidences and findings.
1.4 Structure of the report
The remanng part of the report covers the followng:
• Chapter two gves the account of the audt area wth the constructon polcy, system set up, procedure for approving time extension and addtonal costs and the actors.
• Chapter three, four and five present the findings on time variations, cost overrun and qualty respectvely.
• Chapter six provides conclusions and chapter seven narrates recommendatons whch can be mplemented n order to mprove the stuaton.
Chapter Two
The Road Works System
2.1 Responsibility and policy
The MoID has the responsblty for nsttutng the system for road constructons. The MoID s also responsble for management of the system. Ths mples overall actvtes as formulaton of polces, plans and strateges, as well as development of Constructon ndustry, transport, communcatons and meteorology servces.
According to the Establishment Order GN No. 293 2000 of TANROADS under the Executive Agencies Act, 1997, the role of MoID is to concentrate on ts prmary responsbltes of polcy formulaton, strategc plannng and regulaton of roads sub-sector.
TANROADS should take over from the MoID the day to day management of the roads and ferres n Manland Tanzana and operate as a sem-autonomous Executive Agency. TANROADS thus enters into contracts with Contractors and Consultants n ts own name.15 The MoID was stll drectly admnsterng
some of the road projects until December 2007 when they eventually were handed over to TANROADS.
The Construction Policy guides roads constructions. The following objectives stipulate the government’s intentions on the road construction sector:16
• To develop an efficient and self sustaining roads network that is capable of meetng the needs for constructon, rehabltaton and mantenance of civil works for trunk, regional, district and feeder roads network; • To ensure efficient and cost effective performance of the construction
ndustry that wll guarantee value for money on constructed facltes in line with best practices; and
• To mprove co-ordnaton, collaboraton and performance of the nsttutons supportng the development and performance of the constructon ndustry.
The MoID was still directly administering some of the road projects until December 2007 when they eventually were handed over to TANROADS
2.2 The operative system
TANROADS enters into two Performance Agreements each financial year: one with the Roads Fund Board for the provision of road maintenance and the other wth the Mnstry of Infrastructure Development for the provson of project management services for road projects funded by Government and Donor Agences. An over vewng graph of the system set up s shown n figure 2.1.
Figure 2.1: Systems Graph showing relationship between different actors
MoID and TANROADS are responsible to liaise with the authorities responsible for publc utltes to ensure that constructon works s not nterfered wth by delayed relocation of the utilities. The sources of funding for the projects were from governments own sources, funding by development partners or joint
financing by the two sources. The Treasury is responsible for coordinating the fundng.
Figure 2.2: Key stages in the process of road construction
The process nvolves a number of varous steps as detaled hereunder:
Project planning TANROADS/ MoID strategy Consultants, interested governmental institutions • Feasibility study
• Detailed engineering design • Preparation of Tender Documents
Design review by MoID/ TANROADS Procurement regulations Packaging and development of contracts Application for funding Evaluation of tenders Call for tenders
Award of tenders (lowest evaluated) meeting Contract variations Quality control of works Extension of time frame Payments to contractors Completion works Payment of retention money Compilation of Evaluation report Receipt of tenders Project implementation Consultants, interested governmental institutions and utilities
Funding approved
TANROADS
Contractors
Public utilities e.g. TANESCO, Water and Sewerage Authorities, and TTCL MoID Consultants Donors Treasury FINANCING ERB CRB NCC PPRA REGULATORY AUTHORITIES Parliament LGAs OTHERS ACET, TARA, UDSM
Key implementing actors within TANROADS
At TANROADS, two key directorates deal with the implementation of projects, the directorate of projects and the directorate of maintenance. This audit focused mainly on the projects that fall under the directorate of projects.
Directorate of Projects
Ths Drectorate has the overall responsblty for the delvery of road and bridges construction projects set out in the annual plans.
At the national level, Project Managers are responsible to the Director of Projects for the delivery of projects assigned to them. The Project Managers are assisted by senior project engineers and project engineers. The assignments of the projects to the various Project Managers are on the basis of the sources of finance. These sources might be Government of Tanzania, multlateral17, blateral18, Prvate or combnatons of these sources.
At the regional level, Project Engineers in the “Projects Section” are responsible for monitoring of major projects that are not delegated from the headquarters, being outside the limits of delegation. For the purpose of the Public Procurement Act 2004, this Directorate is the “user” directorate for all major works that are directly procured at TANROADS’ headquarters.
Directorate of Maintenance
The role of this Directorate is to implement the annual maintenance plan; .e. that the roads of all types are beng mantaned n accordance wth the guidelines set down and; that maintenance contracts are providing value for money.
This Directorate takes care of the products of the Directorate of Projects, .e. mantanng the newly bult or upgraded roads n accordance wth the agreements on road maintenance. This is further described in chapter five.
IDA, AfDB, EU and Nordic Fund NORAD, DANIDA, and JICA
2.3 Key players outside MoID/TANROADS
Besides MoID and TANROADS, there are other important actors in the audited road construction projects.
The consultants
MoID/TANROADS hire consultants who are responsible for preparing designs and for supervising the implementation of the road works. MoID/TANROADS s of course responsble for all ts tasks, also even when they are conducted by consultants. This means that MoID/TANROADS is also responsible for supervsng and montorng the work done by the consultants.
Consultants are engaged in all phases of road projects. They are for instance engaged n makng desgns as well as safe guardng ther qualty. They are also engaged in supervision of construction work; serving the interest of clients (MoID/TANROADS) as general supervisors and advisors throughout the whole construction periods of road projects. In that capacity they are expected to safeguarding the correct implementation of the designs, while keepng the cost low. Ther supervsng dutes nclude montorng of the contractors actvtes on ste, performng dfferent tests to check the qualty of the works. They are also expected to examine and approve the contractors clam for havng the desgns, the plans or the budgets changed. In addton, they prepare progress reports and final accounts of the projects. Moreover, consultants are also engaged in intermediate and final inspections or evaluatons.
The same consultant or at least the same consulting firm may in fact be involved in all functions and activities mentioned above. The consultant’s roles and tasks are regulated in a contract between TANROADS and the consultant n accordance wth the Publc Procurement Act.
The contractors
MoID/TANROADS procures contractors who are responsible for the actual constructon of the roads. They manage people, materals and equpment n order to be able to produce the ntended results. Contactors enter into contracts with the client (MoID/TANROADS) who is responsible for payng them. Contractors perform ther dutes under the supervson of the consultants.
Utility Bodies
These are enttes responsble for provson of publc utltes. They nclude: Urban Water Supply and Sewerage (UWSS) which are responsible for water supply and waste water disposal; TANESCO which is responsible for generation and supply of electricity; and TTCL who deals with landline telephone servces. Sometmes, especally when the road works are n urban areas, these utltes need to be relocated to gve way to the contractors to do their job. Arrangements for relocation must be done prior to contractors’ moblzaton at ste to avod constructon delays.
Ministry of Lands and Human Settlement Development (MLHSD)
The MLHSD s responsble for communcatng wth land owners when there s a need for relocatng them. The mnstry normally collaborates wth the Local Government Authortes whch are close to the land owners.
Regulatory Authorities
Regulatory Authorities are government’s watch dogs who monitor professional conducts of the parties involved in the construction projects. They include: Contractors Registation Board (CRB), who authenticate and monitor professional conduct of the contractors; Engineers Registration Board (ERB), who certify the engineers and engineering consulting firms and keep an eye on ther professonal conduct.
Local Government Authorities
The Local Government Authortes (LGAs) come nto play when there s a need to relocate people and arrange for compensatons to gve way to the project.
Financiers and others
Financiers provide funds for implementation of the project. They include the Treasury and Development Partners. The most important issue on project financing is the timeliness of approvals and disbursement of funds to the beneficiaries since delays may paralyse the project delivery.
Other stakeholders with vested interests in the road sector include Assocaton of Consultng Engneers – Tanzana (ACET), the Assocaton of Civil Engineering Contractors, Tanzania Roads Association (TARA) and the University of Dar es Salaam (UDSM). These entities share a lot of information dealing with road projects construction directly.
2.4 Additional time and costs
The contract documents spell out rghts and responsbltes of varous partes involved in the contracts. Responsibilities for additional costs in these projects can be summarzed as follows:
Roles and responsibilities
The client, MoID/TANROADS, is generally responsible for additional costs of executing the works in a project whenever the reasons for additional costs are beyond the control of the contractor and the supervsor.
The contractor has the responsblty of delverng the works on tmely and n accordance with specifications. If the works do not meet set standards and specifications, they are supposed to be rejected until adequate remedies have been carried out at the expense of the contractor.
The consultant s only lable to pay compensaton to the clent arsng out of or n connecton wth the agreement f t s establshed aganst hm that he dd not exercise reasonable due care and diligence in performing his obligations. The consultant’s liability can be insured upon request by the client and the cost of such insurance is at the expense of the client.
Implementation of a road construction project is guided by the programme of work whch s prepared by the contractor and approved by the supervsor (consultant). Dependng on the crcumstances that arse durng the implementation of the project, the programme of work may be revised from tme to tme wth or wthout affectng the agreed completon date and the project budget (i.e. by extending the project duration).
When it comes to responsibility there are mainly four categories of extension of tme and cost overrun:
a. One category is when there is an extension of time due to the default by the contractor though the orgnal agreement between the clent and the contractor is still valid. This extension is a responsibility for the contractor – who has sgned the agreement n the contract – to pay the lqudated damage.
b. Another category is when extension occurs within the origin formal contract condtons though the contractor, for good reasons, can clam that the real condtons have been changed n a way that was not predctable. If the contractor for good reasons can clam that the changed condtons are caused by the clent, the clent wll be responsible to pay for the extension.
c. A third category is when there is an extension caused by a changed procurement and contract. Ths s also caused by the clent who wll be responsible to pay for the extension.
d. A fourth category s caused by condtons that no one can be blamed for. This is force majeure.
Contractually, alteratons mght also be compared to the orgnal programmes or the revsed and approved program. Devatons from the revsed programmes without approval of time extension are contractually not acceptable. Non-completon of the works wthn the agreed tme frame thus formally s assumed to result nto sanctons beng mposed to the contractors and are requred to pay the client (MoID/TANROADS) for every additional day beyond the agreed completon date.
Procedures for approving a claim for time extension and additional costs
The procedure for approvng of addtonal cost covers the followng steps: 1. Contractor rase clam to consultant.
2. Consultant evaluates the clam and makes recommendaton to the client (normally MoID/TANROADS) to justify the genuinity of the clam.
3. Employer after revewng and assessng the genunty of the revewed clam by the consultant after satsfyng themselves the approved claim is forwarded to the financier (If it is donor funded project to seek for approval) but if it is financed by GoT then, the claims will be forwarded to the TANROADS Tender Board for approval.
4. After approval, either from the Tender Board or Donor, MoID/ TANROADS will prepare Addendum for variation. The addendum should be sgned by the clent, the contractor and the representatve of the Donor if it is donor funded project.
5. Lastly, after sgnng the addendum, the document s normally returned to the financier to be used as a basis for payment of addtonal cost.
Figure 2.3: Procedure for approving a claim for additional costs
MoID/TANROADS Management requests authorization for variation to Tender Board MoID/TANROADS Management instructs Supervisor to prepare details of variation Application of new rates Application of existing rates New rates recommended by Supervisor Contractor suggests the new rates Supervis or checks rates Variation works recommended by Supervisor No Objection is granted by the Financier Donor
funded Locallyfunded
Variation is approved
Figure 2.4: Procedure for Extension of Project Timeframe
Chapter Three
Time variations in Road construction projects
Ths chapter provdes detals on the tme varatons n road constructon projects compared to original or revised time. Roads can be finalised before set tme, but n most cases tme varatons means delay.
Delays may be measured in different ways. One can for instance measure delays n relaton to orgnal set tme, regardless of whether ths has been altered by later decson. It can also be measured n relaton to revsed tme set; and if several revisions are made, in relation to the final revised time set.
The content n ths chapter s presented n the followng order: • Time variations among the examined road projects • Causes to the tme varatons
• Consequences of delays
3.1 Original, revised and actual time of road projects
In a single road project the time for completion of a road construction is stated in the contract between MoID/TANROADS and the contractor. This time might be revised by MoID/TANROADS once or a couple of times dependng on dfferent reasons.19 The tme revsons mght occur at dfferent
stages of the project implementation. But most of the time revisions have been experienced at the mid of the project implementation and towards the end of the project.
Snce ths audt s amed at analyzng the system for the management of road projects, delays of road constructions are analyzed related to original as well as revised time. In projects where the time was revised more than once the measurement of delays s related to the last revson of tme.
The decision to revise the completion time is done by TANROADS upon receiving the contractor’s requested which normally reviewed by Consultants and later on passed to TANROADS for decision. See secton 2.4.3.
Contractor requests extension for the completion of works
to supervisor
Supervisor analyses the reasons given
Supervisor’s stance Does not support extension Supports extension Supervisor informs the contractor End MoID/TANROADS tender board approves extension Contractor notified of terms of extension End Supervisor recommends to MoID/TANROADS on period of extension
Decisions of revised time might imply delays for road construction projects. The mpact on delays can be referred to both the frequency of tme revsons and the extent of time revisions.
Time revisions
According to project and contract documents between MoID/TANROADS and the contractors, it is common with time revisions for the project work plans. These tme revsons have been done as requested by the contractors when comng across dfferent problems whch prompted them to request for the extended time. This is illustrated in table 3.1 below.
Table 3.1: Total number of time revisions in programme of works per stage
Road Project Number of revised plans Total Number of revisions Design
stage Construction stage
Somanga – Matandu 0 1 1 Kyabakar–Butama 0 1 1 Mwanza Town 0 2 2 Shelu – Nzega 1 1 2 Tinde–Shinyanga /Mwanza 1 1 2 Morogoro–Dodoma 1 1 2 Nzega–Tnde–Isaka 1 1 2 Muhutwe–Kagoma 1 2 3 Songwe–Tunduma 1 3 4 Mutukula–Muhutwe 1 4 5
All road projects 7 17 24
Source: Project Files and Contract documents of the ten road projects
audted20
The table above shows that all projects had undergone time revisions of their work programmes. All of them were revsed under the constructon phase and two thrds durng the desgn phase.
Delays in relation to the original plan
The work programme s a mutually approved part of the contract between MoID/TANROADS and the contractor. The work program outlines the activity plan and set date for the start and completion of the road project.
0 Reasons for extension of time See Appendices 6 and 10
An assessment of delays n road constructons can be based on four dmensons of tme perods.
• One dimension is the original time period for completion as stated in the contract between MoID/TANROADS and the contractor.
• Another dmenson s the revsed tme whch s the tme perod, according to MoID/TANROADS decisions on revised time.
• A thrd dmenson s the actual tme perod for completon of the road construction project.
• A fourth dmenson – f that occurs – s the addtonal tme after the revsed tme for completon.
The dfference between orgnal tme and actual tme s shown n Table 3.2.
Table 3.2 Original and actual time for the ten examined
projects
Road project Time to complete the road
Difference between original and actual time
Planned months Actual months Months Percentage
Kyabakar – Butama 16 17 1 6
Somanga – Matandu 30 32 2 7
Shelu – Nzega 31 36 5 16
Morogoro – Dodoma 24 32 8 33
Mutukula – Muhutwe 34 46 12 35
Nzega – Tnde - Isaka 30 42 12 40
Tinde – Shinyanga/Mwanza 30 47 17 57
Songwe – Tunduma 24 39 15 63
Muhutwe – Kagoma 12 23 11 92
Mwanza Town 30 58 28 93
Total 261 372 111 43
Source: Data from project files and reports from MoID/TANROADS.
As seen in the Table 3.2 above, all projects have exceeded the original set time. The extension is quite significant for most projects. This was also the case for those projects (Somanga–Matandu and Shelui–Nzega) that were completed after a decision to reduce the scope and ambition for the projects. If those two projects are disregarded it means that the actual time exceeded the contracted and originally set plan by more than fifty percent (51%).21
The original set time for the remaining eight projects were in total 215 months. It took 110 additional months to finalise them.
Time variation in relation to the last revised plan
The pcture s thus somewhat dfferent when the actual tme (calendar months to build the road) is compared to the last revised time approved by MoID/ TANROADS. In table 3.3 the actual time is compared to the last revised time for each one of the studied road construction projects.
Table 3.3: Difference between revised and actual time for road construction
Contract Name
Approved and actual total production time in months
Difference between revised and actual time Last revision Actual Months Percentage
Nzega – Tnde – Isaka 54 42 -12 -22
Kyabakar – Butama 19 17 -2 -11 Morogoro – Dodoma 32 32 0 0 Shelu – Nzega 36 36 0 0 Somanga – Matandu 32 32 0 0 Tinde – Shinyanga/Mwanza 47 47 0 0 Mutukula – Muhutwe 43 46 3 7 Songwe – Tunduma 35 39 4 11 Muhutwe – Kagoma 17 23 6 35 Mwanza Town 40 58 18 45 Total 355 372 17 6%
Source: Data from project files and reports from MoID/TANROADS.
As seen (Table 3.1) revisions were done in all projects (sometimes two tmes or more durng the constructon stage) durng the overall process. The revsons were often done n the mddle or later stages of the constructon phase; still it’s common with deviations. In some cases the differences were quite significant.
Only in four out of ten projects the revised plan was followed. Two projects were ready ahead of tme, and four were delayed. Ths may be nterpreted as an ndcaton of shortcomngs n plannng and montorng.
Review of extension of working days
As described (section 2.2–2.3) MoID/TANROADS has a role to play when it comes to both reviewing and recommendation of time extensions. Table 3.4 shows the extensions of time granted to contractors by MoID/TANROADS as per ther request.
Table 3.4: Request for extensions of time granted to contractors by TANROADS (days)22 Road project Request for extension of time Reviewed and recommended time Granted by MoID/ TANROADS Muhutwe – Kagoma 450 450 450 Shelu – Nzega 175 175 175 Kyabakar – Butama 58 58 58 Mwanza Town 180 180 180 Somanga – Matandu 45 45 45 Mutukula–Muhutwe 175 175 175
Nzega – Tnde – Isaka 720 720 720
Morogoro – Dodoma 228 228 228
Tinde – Shinyanga/Mwanza 312 312 312
Songwe – Tunduma 324 324 324
Total 2667 2267 2267 (100%)
Source: Information from the project files and contract documents23
According to the table above, MoID/TANROADS have approved almost all requests for the extension of time as requested by contractors and approved by the consultant. The figures above indicate that MoID/TANROADS and its consultants dd not carry out any ndependent analyss to verfy the adequacy of the tme requested.
3.2 Factors Contributing to delays
Knowledge and understandng about factors contrbutng to the delays s of importance for possibilities of preventing and limiting delays. Of the same reason t s mportant to know where and when n the road constructon procedures the problems occur and how they affect the procedures for the road constructons. Thus problems connected wth the delays have been examined for the ten studied road construction projects.
There are six working days per week. However, all weeks do not consist of six full workings days and addng to that there are vacatons. In short, calendar tme n days or months s not the same as workng tme. 365 calendar days mght for nstance mean
less than 300 days of workng tme.
Though delays related to the orgnal tme were domnatng, delays related occur to both the original and the revised time for completion. The examination of factors contrbutng to delays has thus covered devatons from both the orgnal and the revsed completon tme. Ths mples that reasons for approval of revised completion time also have been examined.
The examination of factors contributing to delays is based on the projects files as well as interviews with MoID/TANROADS officials – including the consultants – and the contractors. In most of the projects extension of time has been approved based on a number of reasons.
Factors influencing the completion time and the responsibilities
There are many factors influencing the completion time of road constructions. The responsibility, however, is always the Government’s and its authorities or the contractor’s, if problems occur. The responsibility of the Government and ts authortes mples reasons caused by the Government authortes or other crcumstances that the contractor cannot be responsble for, lke force majeure, e.g. earth quake, heavy rains or flooding.
MoID/TANROADS (with consultants) is responsible for planning and preparaton, ncludng the qualty of the desgn or redesgn works, conducted before sgnng of the contract. The contractor can thus take a proper conducted plannng and preparaton for granted, before sgnng of the contract. Delays caused by MoID/TANROADS can be affected by having to redesign part of a project or to somewhat change the scope of the quantities required. It could also be caused by shortcomings in MoID/TANROADS management, lke delayed nformaton, late decsons, poor supervson and montorng etc. Delays could occur as a result of other factors, lke late payment by the financiers, processing time for approval of tax exemptions or force majeure. Lack of coordnaton wth local authortes may also be a factor that causes delay. Some utltes are requred to be relocated before the start of the construction projects (telephone lines, water piping etc.) MoID/TANROADS is not in itself responsible for this. However in relation to the contractor MoID/ TANROADS have to take a responsibility for this situation by liaising with the Mnstry of Land and Human Settlement whch s responsble for relocaton. The contractor also has responsbltes. The contractor s responsble for conductng the work accordng to the applcable standards and the requirement set by the design and the contract. Insufficient skills or lack of expertise competence of staff is an example of a factor that may hamper the contractor’s performance and which the contractor is responsible for. Lack
of capacty n moblsng plants and equpment s another. Poor management by the contractor is a third example, such as a poorly developed system for supervsng and control.
Factors influencing the revision of plans and causing delays
In the table below the factors explicitly referred to by MoID/TANROADS as motves n the documents for revsons of plans are presented.
Table 3.5 Factors influencing delays and their frequencies (official version)
FACTORS INFLUENCING DELAY NUMBER OF PROJECTS CONCERNED Man categores Sub categores
Redesign/new specifications 9
• Change n scope of work 4
• Weaknesses in design 3
• Addtonal desgns 9
Changes in scope without redesign 10 • Addtonal quanttes 10
• Other changes 3
Management issues 2 • Inadequate projects’ supervision 1
• Inadequate Contract management 1
Contractors’ factors 1 • Lack of skills of the contractors’ personnel 1
• Lack of adequate equpment 1
• Contractor’s work program miscalculations 1
Other factors (not influential by TANROAD) 4 • Force majeure (mainly heavy rains) 1
• Late payments/processing time for tax exemption. 3
Source: Information from the project files and contract documents
As seen above in nine out of ten projects TANROADS/MoID or the Government is seen as fully responsible for the delays. Only for one project the contractor s partly blamed as a motve for one of the two revsons done and the delay caused. But even in that project the causes were mainly considered of being beyond the contractor’s control (the main factors were late payments to the contractor, redesgn and changes n scope wthn the gven scope).
In general, the domnatng causes were changes n scope (addtonal quantities of various items were required to fulfil the design) or to make some
kind of redesign, from wishes to add new objects or things to the originally approved design. As seen it’s obvious that shortcomings on behalf of the contractor are not decisive factors for MoID/TANROADS revisions. It’s also rare that MoID/TANROADS refer to shortcomings in its own management as a cause for revson.
One reason for changing design and scope is the time lag between the design stage and the construction stage. Among the examined projects, it was qute common that t took 3-6 years after a desgn had been approved untl the constructon work actually started. Durng those years, condtons or preferences may have changed, resultng n new demands etc. Another potential explanation is of course that the original design was not properly done or safe guarded.
According to MoID/TANROADS officials, the many old designs made it necessary to revew the desgn before ts mplementaton. Accordng to the same officials, even though they know that there are going to be changes after the desgn, they allow contractors to start the work. Ths s because of the often long tme t took to secure fundng.
So far it has only been the officially stated causes to the revisions that have been presented. To get a more comprehensive picture, the Audit office has also asked the various stakeholders (officials at MoID/TANROADS, supervsors or consultants and staff among the contractors). They share most of the official version presented above, but they all claim that it does not provde a full pcture of the causes.
According to the stakeholders there were frequent delays caused by MoID/ TANROADS less efficient management. Unofficially, they also share the view that contractor’s lack of efficiency was a common cause to delays; and – just as for MoID/TANROADS shortcomings – more common than officially documented.
Moreover, all stakeholders stated that lack of coordination between MoID/ TANROADS and local authorities was a common cause to delays.24 Impact of the causes in terms of additional work days
Based on MoID/TANROADS own calculation almost all of the extra working days approved by the revsons was caused by redesgn and changes n scope wthout redesgn. A mnor part (4%) was lnked by late payment to the contractor, and another small part (4%) was stated to be caused by poor
Intervews wth dfferent stakeholders
management ´by the contractor. Heavy rans was stated to have even less (2%) mpact on the addtonal workng days requred as a result of the revsed plans.
3.3 Consequences of the Delays
Delayed completion of the road construction projects implies different kinds of immaterial and material losses and delayed benefits for the society. The socety s losng the opportunty of havng new roads whch would be able to reduce accidents, traffic delays as well as vehicle wear and tear. In material terms t s also possble to calculate on the losses.
Calculated capital costs
Delays involve capital costs. This means that a proportion of the final costs are caused by the longer than planned duration time. With a calculated nterest rate of 18% that means a total captal cost of around 31 bllon Tshs or 13 % of the total final cost, just due to the extended time in relation to the orgnal plans.25 These costs are not caused by anythng else than the tme
factor tself.
Additional administrative costs for TANROADS
Due to the extended processing time, TANROADS and its consultants need to spend more time than expected to conduct the work required. For these ten projects, it has been calculated that these additional costs are close to 5 bllon Tshs.26
Additional costs for the society in a long term perspective
The calculated captal and addtonal admnstratve costs for only these ten projects is about 36 Billion Tshs. In a longer perspective, covering a greater number of projects, these costs will naturally be much higher. Still, the cost for the society of not having the roads built in time is likely to be significantly higher than these figures. Better roads will reduce transport costs and stmulate the economy. It wll ensure safe lfe and reduce accdents. It has not been within the scope of the audit to calculate on these “savings or cost-benefits”. But in most countries which conduct such calculations it is obvious that delays or poor tme management are costly, especally for the socety as a whole n a long term perspectve.
In total the projects exceeded the original plan by 111 months and the revised plan by 17 months (see table 3.2 and table 3.3). With a calculated interest rate of 18% that means a total capital cost of around 31 Billion Tshs or 13 % of the total final cost, just due to the extended time in relation to the original plans. In relation to the revsed plans the captal cost s margnal or 0.4 Bllon Tshs or 2 % of the total costs mnus the last revsed budg-ets.
Chapter Four
Cost Deviation and Cost Overrun
4.1 Introduction
Cost overrun is defined as exceeding of the Contract sum, i.e. the agreed budget sum between the contractor and the employer, MoID/TANROADS. The contract sum is specified and based on a number of concerned items ncludng the rate for each tem and the total amount of requred money for the project. Linked to the contract sum is also a formula for updating the rates, i.e. prices per unit. The updating of rates is decided by MoID/TANROADS based on advce from ts supervsors (supervsng consultants).
The revsed budget s reached when the orgnal budget s added by other cost elements whch were not ncluded when preparng the orgnal budget. The revsed budget mght occur for many reasons and at dfferent stages of the project implementation. But frequent revisions have been experienced at the mid of the project implementation and towards the end of project completion. In a single road project, budget can be revised more than once depending on the nature and reasons for the revson of the budget.
Accordng to the contract documents, whenever there s an ncrease of the quantities/volume of materials at site (when the project is in construction stage), contractor s supposed to nform the clent through the consultant who is supervising the construction of the project on behalf of MoID/TANROADS. Then the consultant s supposed to revew the request and re-measure the quantities on question and inform the client on the matter. Then MoID/ TANROADS can review the calculations made by the consultant and then, if they are n good order, they can accept the quantty ncrease.
4.2 Original and revised budgets and actual costs
Mnor changes can be approved wthout budget revsons, but f the requests are huge or the total changes done or planned are many, t s requred to adjust the budget. In short, the number of revised budgets is an indication of how often major changes with cost consequences have occurred in the projects.
Almost all projects had their budgets revised during the construction stage, as seen n the table below.
Table 4.1: Revised budgets during the construction stage
Road Project Budget revisions
Shelu – Nzega 0
Somanga – Matandu road 1
Muhutwe – Kagoma 1
Kyabakar – Butama 1
Mwanza Town 1
Morogoro – Dodoma 1
Mutukula – Muhutwe 2
Tinde – Shinyanga /Mwanza 3 Nzega – Tnde – Isaka 4
Songwe – Tunduma 4
Source: Project Files and Contract documents
As shown above, four out of ten projects were revised two times or more. Only one project did not have its budget revised (even though that project got its time plan revised by five months).
The total amount of added fundng through the revsed budgets was qute significant, as seen in the table below.
Table 4.2: Revised budgets during the construction stage (Billion Tshs)
Road Project
Original
budget Last revised budget Change (%)
Shelu – Nzega 20.7 20.7 0 Somanga – Matandu 12.3 12.4 1 Songwe – Tunduma 10.2 11.2 10 Kyabakar – Butama 1.7 2.0 11 Mwanza Town. 16.4 19.0 18 Mutukula – Muhutwe 13.8 17.6 28 Muhutwe – Kagoma 4.4 6.2 41 Morogoro – Dodoma 25.3 41.0 62 Tinde – Shinyanga/Mwanza 28.3 53.2 88
Nzega – Tnde – Isaka 20.6 41.6 102
TOTAL 153.7 223.9 46
Source: Project Files and Contract documents
As seen above, the calculated cost for the ten projects had increased by close to 50% from the original budgets. For three projects, the changes were huge n both relatve and absolute terms.
Original budgets and actual costs
Cost varaton can be measured n varous ways, and below t s measured by comparng actual costs wth the orgnal contract sum.
Table 4.3: Original budget and Final Costs (Billion Tshs)
Road Project
Original
budget Final Cost Deviation(%)
Shelu – Nzega 20.7 19.5 -6 Somanga – Matandu 12.3 12.0 -2 Muhutwe – Kagoma 4.4 4.7 9 Mwanza Town 16.4 18.2 11 Kyabakar – Butama 1.7 1.9 12 Mutukula–Muhutwe 13.8 17.6 28 Songwe – Tunduma 10.2 14.1 38 Morogoro – Dodoma 25.3 43.9 74
Nzega – Tnde – Isaka 20.6 44.2 115 Tinde – Shinyanga/Mwanza 28.3 65.2 130
TOTAL 153.7 241.3 57
Source: Project Files and Contract documents
As shown, most of the projects had cost overrun, and in several projects to a high degree. Two projects used less money than budgeted, since these projects had been limited in scope (see under table 4.3). The largest cost overruns n both relatve and absolute terms were most common among the big projects.
4.3 Revised budget and actual costs
Cost varaton can also be measured as dfference between the last revsed budget and the final cost of each project. This is shown in the table below.
Table 4.4: Revised budget and final costs (Billion Tshs) Revised
budget Final cost
Deviation (%) Muhutwe – Kagoma 5.2 4.7 -11 Shelu – Nzega 20.7 19.5 -6 Kyabakar – Butama 2.0 1.9 -5 Mwanza Town 19.0 18.2 -4 Somanga – Matandu 12.4 12.0 -3 Mutukula – Muhutwe 17.6 17.6 0
Nzega – Tnde – Isaka 41.6 44.2 6
Morogoro – Dodoma 41.0 43.9 7
Tinde – Shinyanga/Mwanza 53.2 65.2 18
Songwe –Tunduma 11.2 14.1 21
TOTAL 223.9 241.3 15
Source: Project Files and Contract documents
As seen above, four projects were not even able to keep their cost in line with the last revised budget. Notable is that those three projects that had got their budgets revised several times were also among those who had difficulties to even cope wth the last revsed budget.
Two projects (Shelui–Nzega and Somanga–Matandu) had spent less money than the original budget, since some of the tasks were not executed. According to the contract document, payment s done as per work done, and f there s any change of scope (e.g. omsson) then contractor s not pad for that. Finally, it’s worth noting that the term final costs means final cost both in that sense that it covers the total and final cost and also equals the money being paid by MoID/TANROADS. In other words, the contractor got paid not only for the approved last revsed budget, but also for the upcomng costs thereafter,
