Lenworth Kelly | Level construction playing field
As construction industry professionals, we are not given to random, uninformed declarations about matters concerning the sector and their ultimate effect on the national interest. Our roles are to appropriately analyse and provide solutions to issues that occur in our various spheres of operation.
Local contractors in our industry currently face challenges symptomised by the growing presence of large foreign contractors with huge financial and material resources on our shores, often to the detriment of our local contractors (particularly in, but not exclusive to, the private sector).
This situation has been aided and abetted by government decisions (knowingly or unknowingly) and policies inimical to the interests of Jamaican contractors and workers, and exacerbated by a general lack of enforcement of laws and observation of practices that serve to protect our people, industry and subsequently our nation.
Prime Minister Andrew Holness, in the presence of representatives of China Harbour Engineering Company (CHEC), recently made comments regarding the performance of local contractors. The timing and place of his comments may be questionable, but we wish to respond to the substance of his address.
While we agree that performance issues may arise during construction, the structure within which the government’s contracts are administered must also be examined, including project planning, procurement, and contract administration. There is no shortage of events, well documented by the media, demonstrating less-than-stellar management of procurement by public officials
The contractor is part of a team during the construction phase of a project and the performance of the other parties prior to, and during, execution of the construction phase contribute significantly to the outcomes of a project.
The scale, support and resources available to state-owned Chinese construction companies, coupled with the concessions granted to those operating locally, render comparison with Jamaican-owned construction firms of little value.
It is instructive to note that CHEC is a subsidiary of China Communications Construction Company, one of the 10 largest construction companies worldwide. CHEC is currently undertaking projects in excess of US$30 billion ( http://www.chec.bj.cn/pub/chec_pc/en/AboutUs/History/), an amount almost five times the Government of Jamaica’s Budget for the 2019-2020 financial year of approximately US$6.4 billion.
Access to seemingly unlimited financial resources at cheaper rates of interest positions foreign contractors to be able to finance even partially (if not completely) the projects on which they work.
Jamaican construction companies are at a disadvantage in this area.
Customs duties and GCT exemptions for equipment and materials are granted to these large foreign contractors, while local firms bear the burden of financing desired equipment and tooling, which attract significant costs in duties and taxes. Such concessions give these foreign contractors an unfair advantage, thus making the market less competitive and near-monopolistic for major projects.
LEVELLING THE PLAYING FIELD
The Incorporated Masterbuilders Association of Jamaica (IMAJ) has long agitated for fair competition and a level playing field for local contractors. Some recommendations towards achieving these objectives are adumbrated below.
- Margin of preference – Include a margin of preference rule as obtains in other countries that are interested in protecting their locally owned businesses. This rule is to be applied on all projects involving international bids.
- Locally funded projects – All tenders on locally funded projects must be by majority beneficially Jamaican-owned construction companies.
- Labour laws and work permits –Monitor and enforce labour laws, including the process of granting work permits to others when the expertise resides here.
- Labour rates and wages – Gazette the schedule of rates and conditions agreed in the Joint Industrial Council Labour Management Agreement which provides rates and wages for all classes of labour in the construction industry. This document is widely used among government agencies and departments. Government should guarantee these minimum wages and working conditions for those employed on public-sector projects.
- Duty and tax concessions –Allow a window for customs duties and tax exemptions to be granted to local contractors, specifically for re-equipping and retooling.
- Technology transfer and capacity building – Introduce policies that compel foreign entities to partner with locals in order to build capacity and develop expertise.
- Local resources – Commence and sustain efforts to engage local resources (human and material) on construction projects, and, where necessary, package projects to ensure local involvement.
- Joint ventures – Give special credit to joint-venture bids involving local and foreign contractors.
- Sureties and guarantees – Reduce or eliminate sureties and preference guarantees for certain low-risk public sector contracts. Guarantees (as an example) can be reduced to five per cent instead of 10 per cent.
- Construction Industry Policy –Complete the documentation and required processes necessary to implement the Construction Industry Policy, which, as stated in the draft document, will bring about radical changes and continuous improvement in the way the sector operates.
- Vision 2000 objectives – Implement the Vision 2030 Plan, which was developed by all stakeholders and charts a path for the industry to effectively contribute to the nation’s goals outlined in the country’s Vision 2030 documents.
- Leadership National Development & Economic Growth – There attends with the elevation to leadership a responsibility, and a paired challenge to do the right thing, to listen to stakeholders, and consider their concerns and ideas for development and improvement, not just in the construction sector but in all spheres of our national interest.
Wisdom is not invested solely in political and public administrators, neither is it distributed in accord with election cycles.
It is universally accepted that national development (in its varied forms) is generally a good objective. However, there can be no such national development without the development of the Jamaican people, industries, MSMEs, and institutions. What becomes of the value of our people and their abilities to participate in our growth? We can’t get ahead as a nation by leaving so many behind. Put Jamaicans first.
Any fair and balanced attempt to improve the performance of Jamaica contractors and the other practitioners whose roles and responsibilities impact the outcome of construction projects will have the full support of the IMAJ.
We stand ready to engage and contribute in the development of such a process.