NATIONAL COUNCIL FOR CONSTRUCTION - OTB Africa LTD



213360020002500NATIONAL COUNCIL FOR CONSTRUCTIONREGULATORY IMPACT ASSESSMENT STAKEHOLDER CONSULTATIVE REPORT FOR CONTRACTOR REGISTRATIONSUBMITTED TOThe Business Regulation Review Agency (BRRA).November 2019LUSAKA.INTRODUCTION AND BACKGROUNDThe National Council for Construction (NCC) is a statutory body established under the NCC Act No. 13 of 2003, and is charged with among other functions, to provide for the Regulation, Coordination, Development, Promotion and Capacity Building of the Zambian Construction Industry. In regulating the construction industry, the NCC also provides for the Registration of Contractors and building capacity through among others, providing training to persons engaged in construction industry. The Registration of Contractors is one of the key primary functions of the NCC that provides a platform for rest of the regulatory and industry development functions of the National Council for Construction.With the unprecedented growth the Zambian Construction industry has experienced over the years from 2005 to 2015, averaging 17.5% GDP growth rate with an average contribution of 6% to the GDP (CSO, 2017), we have seen the industry face numerous challenges, in the implementation of infrastructure development projects in Zambia, both government sector industry players and the private sector in the construction industry value chain. The continued massive capital investment in infrastructure projects in the country has propelled the industry to continue in this trajectory. These challenges related to inadequate capacity in the execution of construction works due to lack of machinery and equipment, lack of access to Finance, technical knowhow surrounding Project Management and Contract administration, skills and technology gaps, and Occupational Safety and Health procedures among others.This has also posed a challenge on the National Council for Construction in the implementation of its mandate as industry regulator. It was clear therefore, that the NCC needed to strengthen its regulatory framework by adjusting one of its regulatory instruments, this being the Registration of Contractors regulations. It is envisaged that this will enhance the operations of the NCC in implementing its objectives by taking measures to intervene in the construction industry to ensure sustainable capacity building and better performance of all industry players.However to make any such adjustments in the regulatory framework, the BRRA provided guidance as per the provisions of the Business Regulation and Review Act No.3 of 2014, for the need for the NCC as a government regulator to conduct a regulatory Impact Assessment (RIA), with the likely impact of adjustments or changes to the proposed regulation weighed through a Cost Benefit Analysis. The RIA had a major component of carrying out Stakeholder Consultative Meetings, which the NCCC carried our around the country.OBJECTIVES OF THE STAKEHOLDER CONSULTATIVE PROCESSThe following objectives were set for the consultative process:-To fulfill part requirement of the Regulatory Impact Assessment as required by the Business Regulatory Review Act No.3 of 2014;To share NCC experiences in regulating and capacity development of the construction industry;To obtain stakeholder input on how the proposed regulation would affect their business operations and economic opportunities;To get input on how best to optimize benefits from the proposed regulatory intervention.METHODOLOGYSelection of StakeholdersNCC’s stakeholders are streamlined in the Strategic Plan 2019 to 2021.However, for purposes of maximizing input, a further screening process was undertaken from the stakeholder’s list on a matrix scale of 1 to 5 using parameters of “degree of influence” and “interest” in NCC. Only stakeholders who scored the highest on each side were earmarked for engagement as this entailed that their interest and influence were directly affected by changes in NCC regulation. These stakeholders were the found to be the following whose details are attached in annex I:-Contractors and suppliers of construction materials-Foreign and Local;Procurement EntitiesGovernmentConsultantsSampling SpaceStakeholder engagement meetings were held in 8 out of 10 provinces due to budgetary constraints. To maximize input, 50 representatives were targeted for each consultative process. The meetings were held from 30th October to 8th November 2019.Lusaka held 2 separate meetings for foreign contractors and local contractors respectively. The attendance is summarized in the table below:ProvinceDistrictEngagement DateTargetActual AttendedLusaka(Foreign Contractors)Lusaka7th November 20195046Lusaka(Local Contractors)Lusaka8th November 20195042SouthernChoma31st October 20195043CentralKabwe4th November 20195027EasternChipata5th November 20195043LuapulaMansa31st October 20195048NorthernKasama2nd November 20195055CopperbeltKitwe30th October 20195094North-WesternSolwezi1st November 20195034TOTAL400432It can be noted that the targeted attendance was exceeded by 32, implying that maximum inference was derived from which to get significant input.WORKSHOP PROCEEDINGSFor each workshop, NCC’s Regulatory Impact Assessment was communicated via a power point presentation whose details are as attached in annex II. Issues raised were then disaggregated into thematic areas for purposes of simplicity and identificationISSUES RAISED IN THE DISCUSSIONSCitizen Participation on ProjectsNCC should ensure that the 20% sub-contracting government policy is reduced into a Statutory Instrument to be effectively enforceable to benefit many local contractors; The NCC should ensure that procurement agencies separate 20% in value of the works and let the local contractors compete among themselves in tendering for the works and once selected, should only be introduced to the main contractor.Contractor were given award letters for sub contracts by RDA and yet the main contractors refused to engage them insisting that the jobs for subcontracts have been exhausted.Foreign contractors have a tendency of pricing the works that they knew would be subcontracted very low so that the local contractors fail.Further the 20% subcontracting should be done in a transparent manner and the list of all Zambians subcontracted should be published as a measure of transparency. This may prevent the same contractors getting jobs while others were not.The 20% empowerment initiative should be law and imbedded in the tender documents whereas it should even go up to 40%.NCC must ensure that subcontractors under the 20% subcontracting policy were paid advance payment as this was not the case currently despite main contractors being given advance payment by government. NCC to ensure that local contractors were not being disadvantaged by main contractors when it comes to the execution of projects.The NCC should do more on Partnerships and Joint Ventures by taking responsibility of guiding and helping contractors makeResolution / Guidance providedProposals and suggestions were in line with Option 2 for Government Intervention through the NCC and were taken on board for consideration in the intervention measures. The NCC was currently engaging main contractors and procurement agencies to resolve these challenges, but more need to be done towards legislating the 20% sub-contracting policy which was pronounce by government.Capacity Building of Local ContractorsThe NCC should not only consider skills training alone under capacity building but also help contractors with access to finance and acquisition of equipment through special arrangements with banks and equipment manufacturers and suppliers. Access to jobs including reservation schemes and preference procurement as well as the 20% must be implemented for real sustainable growth of the local industry.Resolution / Guidance providedProposals and suggestions were in line with Option 2 for Government Intervention through the NCC and were taken on board for consideration in the intervention measures. Skills TrainingNCC needs to come up with advance levels of modules for provincial training workshops rather than have the same content for all the provincial training workshops.More training needed in the provinces as not all contractors are able to travel to Lusaka.Resolution / Guidance providedProposals and suggestions were in line with Option 2 for Government Intervention through the NCC and were taken on board for consideration in the intervention measures. Registration of ContractorsForeign Contractors must pay much higher fees because they take the larger market share at 84% of the value of construction works in the industryProcessing of the Certificates must be done faster and must be immediate as the contractor make payment, as is the case with the RTSA Road Tax.The EIZ also registers contractors, while the NCC already does so and regulates the contractors. EIZ should instead be concentrating on regulating engineering professionals, as there action has caused a conflict and duplication of regulations and registration fees, hence pushing the cost of doing business high thereby straining the contractors. The NCC should protect the contractors and do something about this matter.When would the adjustments in the fees be effected?NCC to ensure the validity of registration certificate is one year from the date of issuance.NCC should upgrade contractors based on some form of appraisal or scorecard other than what was provided for in the current upgrade forms.Resolution / Guidance providedProposals and suggestions were in line with Option 2 for Government Intervention through the NCC and were taken on board for consideration in the intervention measures. Concern have been taken note of, however it must be noted that the NCC registration process needs due diligence as the risk associated with non-performance on projects is high because government invests huge sums of money, so there is a minimal period of processing the applications required which may not be as simple as the RTSA Road Tax processing. The NCC will however continue to streamline the registration process.Several meetings have been held to resolve the EIZ conflict and duplication of roles with BRRA, EIZ and the Ministry of House and infrastructure, as well as the Mnistry of Justice. At this stage, it is being dealt with and resolved at Ministry of Justice and a lasting solution is expected soon.The dates for effecting any adjustments in Registration fees will be advised following approvals by the BRRAThe Current law provides for annual registration with the NCC Certificate validity dates extending from January to December of each yearContractor performance assessment criteria being developed which will feed into upgrading of contractors. Due diligence is necessary to verify contractor qualification for upgrade, whereas contractor must decide to apply for upgradeMonitoring, Inspection and compliance / TenderingNCC needs to do more to help contractors who were awarded government projects in new districts, which projects have stalled due to the delayed payments while also affected by currency fluctuations on projects awarded as far back as 2013Feeder roads should be reserved for Zambian Citizen owned construction companies.NCC must intervene in situations where engineers estimates for projects were disadvantaging contractors, such as when similar projects being implemented in Northern Province may be estimated to cost same as the one in Luapula Province without taking into account the different challenges that the areas may pose and the uniqueness of a project.RDA must not always award routine maintenance works to the same contractors and particularly to those outside a particular province as is the case currently. further RDA must communicate to the unsuccessful contractors with reasons once selection has been done for the routine maintenance works.Contractors in higher grades were undertaking works meant for small scale contractors. NCC must ensure that there were regulations aimed at curtailing big contractors from taking up works that were supposed to be undertaken by small scale contractors. NCC should participate in the Tender process to ensure transparency and that the right contractors are awarded the jobsNCC must protect local contractorsContractors need to be provided with information on tenders being floated and other industry related information and education, especially the new entrantsTenders were not being advertised but contractors would be seen mobilizingResolution / Guidance providedProposals and suggestions were in line with Option 2 for Government Intervention through the NCC and were taken on board for consideration in the intervention measures. NCC will continue taking steps to engage Government to ensure that contractors are paidSubmissions are noted; contractors must communicate in writing to seek NCC advise when faced with challenges on contracts and projectsRegulations are in place and guidance for tendering thresholds has been provided. The NCC in the process of scaling up inspections and monitoring activities to enforce these issues hence the need for stakeholder supportProvincial Presence and Administrative OperationsNCC must speed up the decentralization to the provinces to make it easy for most contractors to process documents.The presence of the NCC in every province will help address real issues and challenges faced by contractors on the ground. North-western is a busy mining province with a lot of construction activity which demands NCC presence Eastern Province must not be neglected as it has a history to the organisation and development of contractors and would like to have an office for the NCC Resolution / Guidance providedSubmissions have been taken note off and are in line with the intended intervention measures. However, Online registration was launched and is under review for improvement to enable contractors to use the system wherever they may be. 6. CONCLUSIONIn conclusion, it was generally agreed from all stakeholders in provinces that most of the challenges raised by the contractors called for Government Intervention (Option 2) and it was adopted as the desired option going forward.It was further advised that the fees would take effect subject to further review by the Business Regulatory Review Agency and communication would be made appropriately.ANNEX IPROVINCIAL ATTENDANCE LISTINGANNEX IIPOWERPOINT PRESENTATION TO PROVINCES ................
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