Road infrastructure pricing in Zambia gives one a feeling that a design was not there, but estimations were made, meaning that bidders for specific projects determine the price, says economist Professor Oliver Saasa.

Speaking when he gave his keynote presentation at the Economic Association of Zambia (EAZ) public discussion forum in Lusaka, Prof Saasa, the Premier Consult Limited chief executive officer, said one of the road cost escalation factors in Zambia was that government had been floating bids for road construction without prior designs, among others, making bidders to determine their desired costs.

The key road infrastructure project that is currently being assessed among an array of stakeholders is the controversial Lusaka-Ndola Dual carriageway project, widely tipped to cost government US $1.2 billion.

“One of the well-established facts is that, Zambia seems presently to be a high-cost country in the road sector construction compared to other regional countries. Essentially, we are saying that, constructing a road per kilometre, for example, in Zambia is not competing on average very favourably meaning that road construction in Zambia is quite pricey. We have seen that government has quite often floated bids for road infrastructure projects without prior designs or plans that should provide indicative estimation of cost. Quite recently, you have heard us debating about the cost of like, for example, the dual carriageway between Lusaka and the Copperbelt (Ndola),” Prof Saasa told stakeholders at Pamodzi Hotel, Thursday evening.

“Recently an explanation was given as to why the price of about US $1.2 billion/$1.3 billion should really be the price, [but] if you compare it to other countries, is it real? And the explanation has been that ‘well, this is a an estimation and we have been looking around and we may cut-off a few things.’ It gives you a feeling that a design was not there, estimations were made and that when you do it that way, then it means that those that bid for that project, if you have not provided the designs and an estimation as the government that is commissioning that, you may end up with a situation, whereby, the bidders determine the price. You will end up with a price that even you will not be able to defend. Everything is comparative and, of course, as Zambians, you see what is happening everywhere because you are not a closed island. Essentially, what that means is that you raise the political controversy. The dual carriageway; we have had statements from government, from the Honourable Minister of Finance, that, there should be some revisions and as it is now, we are not yet sure as to what really [will] be the ultimately cost.”

He also cited single-sourcing as one of the cost escalation factor for big road projects in Zambia.

“RDA in some instances to pay contractors on time has led to escalation of costs because if you do that, then you find that sometimes the company has already mobilized, is on-site and you fail to provide the requisite resources, part of which must be an integral part of the procurement that is needed. And if you delay in finalizing that road it means that the cost also escalates because there will be triggers that will be cited as a result of failure to meet the timelines. There is also an issue of single-sourcing. There are exceptions, and exceptions are usually applied for can be acceptable, but under the normal circumstances in terms of how procurement guidelines, single-sourcing should be discouraged. It must be an option of last resort. When it becomes a rule, it means that you are avoiding the competition that plays a pivotal role in the determination of the best offer wins the bid. And we have seen, unfortunately, many big projects that have been run after single-sourcing of the contractor,” Prof Saasa noted.

He said his research discovered that there had been cases of variations after a contractor had won the tender of between 50 per cent to 400 per cent.

“One of which is price variations above what is allowable. The guidelines from the Attorney General provide that all price variations should not exceed 25 per cent of contract price. After you have won, usually there is an assumption that there may be certain things that might happen during that period that will lead to change the price. Those are the general regulations that are supposed to govern what happens. Unfortunately, we have had cases of variations after a contractor has won the tender of between 50 per cent to 400 per cent. These are not our figures from our study; these are the figures from the Auditor General’s Report that have been audited. What that means is that you are opening opportunities in terms of variations for corruption because if someone has won at a price that is very favourable in terms of determination at the time of bidding, and then suddenly you increase it by 400 per cent. It means you have literally [rendered] the procurement process itself academic because somebody who probably could have offered much better price would have lost,” he explained.

He observed that roads with lower economic returns, also referred to as “political roads,” were constructed outside the budget.

“We are also looking from our study that roads with lower economic returns are also constructed. We sometimes refer to these as political roads and you will see that the escalation of this category of roads is in proportion with the number of by-elections. So, the more by-elections, the more promises of new roads that were not an integral part of the plan come on the scene. If you look at the road infrastructure as an integral part of the requisite that are needed to grow the economy and value for money is not taken into account in the determination of what to put your money on, then you have lost. You are politicizing where the road must go. The other factor is that the focus on road construction is at the expense of maintenance and rehabilitation. And this has remained a major problem. Constructing new roads is politically sexy; it is interesting. Rehabilitating already-existing roads may not be that visible when it comes to political capital emanating from that,” Prof Saasa revealed.

He observed that it was also not legislative that 20 per cent of road construction should go to local contractors.

“And there is a 20 per cent, which many people mistake this. They think it’s legislative, no, it’s not. It is just a general guideline [that] in a big contract for a foreign [company] like AVIC, 20 per cent of that must go to the locals. What we have established is that firstly, that is not legislative. Secondly, we have also discovered that there is a lot of political discrimination as to who the ‘small guy’ is awarded. If you do not belong to the right party, for example, forget it! So, essentially, what we are saying is that, if we are really seriously about how we must empower the small-to-medium scale contractors in the road sector, let us avoid doing very efficiently wrong things,” said Prof Saasa.

Meanwhile, Zambia Institute of Policy Analysis and Research (ZIPAR) research fellow Zali Chikuba said there was need for benchmarking of construction material costs across the country.

“We brought the road infrastructure to about 75 per cent, which is fair-to-good and that was slightly commendable, but then again, we thought that the pace at which this economy was growing was a little bit subdued and we sought to accelerate this growth and embarked on provision of more road lengths. As we speak, the primary feeder roads in this country, their conditions are worsening! About 2012 or 2011, there we had about 76 per cent of that road in bad condition, but now we are in the excess of 80 per cent,” disclosed Chikuba.

“You know, Zambia is a very vast country and you can have a contract in Lusaka. The cost of providing that road in Lusaka may vary significantly from the cost of providing the similar road in Western Province because of variations in materials. I think as a country we need to do a benchmarking of materials cost across the country so that even when the contractors are bidding to provide these roads they are using [the] same estimates so that you don’t have contractors that will give lower estimates and then they begin to work on the road, and they realise that the gravel cost has gone up higher than they had estimated and then they start to push for variations. And you have heard that the Auditor General’s office has picked up these variations.”

The EAZ public discussion forum tackled the topical issue of road infrastructure financing under the theme: “Road Infrastructure Development In Zambia – Are we doing it right?”