Liberia Infrastructure: Potential Risk of Misconduct Due to ‘Single Sourcing’ of Proposed US$536.4M Coastal Corridor Road Construction Project
This article seeks to analyze the potential risks regarding the ‘single sourcing’ or hiring of the Joint Venture Consortium of MAEIL Liberia Construction Company and an unnamed major Chinese Engineering, Procurement and Construction Company as contractor to implement the USD $536.4 Million ‘Costal Corridor Development Project’ of constructing 505.3 kilometers of roads, referenced by the Loan Agreement between the Government of Liberia (GoL) and ETON Finance PTE LTD of Singapore, currently before the Liberian National Legislature for ratification. From all indications, the proposed ‘procurement’ arrangement within the agreement poses a high risk of fraud, corruption and overall failure in project delivery to minimum acceptable quality standards. The recommendations are intended to help the government minimize the risk of project failure.
By Garmondyu Zogar
Introduction: Snapshot of Development Projects and Corruption in Africa
IT IS NO DOUBT THAT CORRUPTION REMAINS A SERIOUS CHALLENGE undermining infrastructure development and economic growth on the African continent. Road projects are more culpable to fraudulent practices due to the high associated construction costs. According to the World Bank, about $2.7 billion dollars are globally paid as bribes to government officials in return for contracts (Kramer, 2012). Corruption in construction projects becoming more sophisticated and come in many forms that even donor-financed projects are not immune, at least to say government projects. Roughly one-fourth of the 500 World Bank-funded roads projects over the past decade were associated with allegations of fraud, corruption, or collusion (World Bank, 2011).
THE MOST COMMON METHOD OF FRAUD is demanding a 10% kickback as a prerequisite for contract award (Kramer, 2012). For example, with the USD $536.4 M Road Construction Project under scrutiny, MAEIL Construction Corporation JV will have to pay up to USD $53.6 Million Dollars as bribes to officials and the project team. Optionally, government officials could secretly own companies that are hired on the project which increases the possibility of higher profit margins than kickbacks. Some receive material items and favors for contracts like constructing their personal homes, financing expensive travel vacations, or buying luxurious cars while the project is being implemented. These chain of events lead to the hiring of unqualified contractors, untimely delivery of projects within budget and overall half-completed development projects.
Why is this important to the USD $536.4 M Elton Financing Loan Agreement?
SIMPLY PUT, because the ‘single sourcing’ of MAEIL Liberia Construction Company JV (mentioned within the agreement) without any competitive and transparent bidding process is not only a misconduct but also violates Part 1 Section 1 of the Public Procurement and Concessions (PPCC) Act 2005 of Liberia. Two recent specific cases of fraud and corruption on major road infrastructure projects in Africa are mentioned. The question now remains, what can be done to prevent this situation? Or How is a contractor hired under such project in Liberia?
Case Studies of fraud in road construction projects in Africa
IN KENYA, public officials and senior managers were persecuted for fraud and bribery allegations over the World Bank-funded Mau Summit-Kericho-Kisumu Highway at a cost of USD $138 Million in 2010. It involved the Israeli Construction Group through its foreign subsidiary Solel Boneh International Holdings (Ngugi, 2018).
IN SOUTH AFRICA, Lubbe Construction was illegally paid USD $18 million before even commencing the works in 2017. The investigation uncovered allegations of fraud in the process (Ndaba, 2017).
What are the criteria for hiring a Contractor for a major development project?
SINCE THE ESTABLISHMENT OF THE PPCC IN 2005 UNTIL NOW, all major road construction projects in Liberia have conformed to the World Bank ‘Guidelines Procurement of Goods, Works, and Non-Consulting Services Under IBRD Loans and IDA Credits & Grants’ that secured the services of major companies such as CICO, CHICO, and SSF among others, to implemented various road construction projects around Liberia. However, according to the ‘Bank Guidance Thresholds for procurement approaches and methods by country’, for works projects within the threshold greater than USD $5 Million, there should be opened International Competitive Bidding (IBC). Similarly, for projects less than USD $5M, there should be National Competitive Bidding (NBC); and for projects less than USD $200,000.00 there can be Request for Quotation (RFQ) or Shortlisting of National Pre-qualified companies (World Bank, 2016). In the case of the ‘Coastal Corridor Development Project’ loan agreement, this was not the case. The approval or ratification of the loan agreement National Legislature will mean that they consent to the single sourcing of MAEIL Construction Company Joint Venture without any competitive bidding process.
DURING A TYPICAL COMPETITIVE BIDDING PROCESS, bidders (potential contractors) undergo preliminary and detailed evaluation by a panel of experts comprised of senior project team members, engineers, procurement experts and representatives from relevant government authorities. Bidders undergo detailed evaluation based legal requirements, financial standing, project experience, the technical capacity of staff, equipment and machinery, followed by due diligence to ascertain the authenticity of all information provided by the company during the bidding process. Since hiring a good contractor is the first step to the success of a project, further elaboration is provided on specific considerations for hiring a ‘good contractor’, even if the project should be awarded ignoring established laws.
WHAT IS THE EVIDENCE OF SIMILAR PROJECT EXPERIENCE? The name MAEIL Liberia Construction Company is new to the construction of roads in Liberia. However, the Ministry of Public Works registers MAEIL as a foreign company in Category A1 (General Road Works) with certification #99, but their certification expired as of 18th May 2018 according to the updated contractor listing published by Ministry of Public Works. A demonstration of successful implementation of at least three (3) projects similar nature and complexity would be a good criterion for evaluation.
WHAT IS THE FINANCIAL STANDING OF THE COMPANY? Understanding the monetary value of the company’s annual turnover in the last 5 years will show whether they can manage up to USD $500M in 4 years. This should be authenticated by an audited financial statement from a recognized and credible accountancy firm. Investigations should uncover whether or not the company has any arbitration or litigation cases.
DO THEY HAVE THE EQUIPMENT AND COMPETENT STAFF?
Works like these are very resource demanding. How many experienced professional technicians (civil engineers, geotechnical engineers, geologist, quality control experts, health and safety experts, environmentalists etc.) do they have and how many are Liberians? What is the equipment and machinery capacity (motor graders, asphalt mixing plant, excavators etc.)? Understanding all these factors will give a clear picture of the readiness and capacity of the company.
Conclusion and Recommendations
PREVENTION IS ALWAYS THE BEST POLICY. Sustainable development does not come by ignoring established standards, code of practice and regulations. Well planned, properly maintained, and safe roads are critical for economic growth and overcoming poverty in developing countries (World Bank, 2011). The following recommendations should help the Government of Liberia reconsider the procurement and contracting of companies to implement the much-talked-about ‘Coastal Corridor’ project.
REDUCE PROJECT IN MANAGEABLE CHUNKS: Instead of single sourcing one barely known company with a project with such nature and complexity, the project should be divided into ‘manageable chunks’ called lots. Procurement experts and engineers to categorize the project components considering the project type and locations to enable feasible implementation among different contractors.
HIRE INDEPENDENT PROJECT MANAGEMENT AGENCY: The hiring of independent consultants to manage the project creates the avenue for transparency and accountability. They will ensure that the project is implemented according to the quality standards within the specifications. They help the project creates savings while controlling the cash flow and following project timelines.
EQUIP THE PDU TO SERVE AS TECHNICAL PROJECT TEAM: Projects like these and the Military Hospital should be considered as “Presidential Priority Projects” and should be on the radar of a technical team of engineers, development planners, architects and financial experts within the Presidents Deliver Unit to give regular update and advice on the progress of implementation.
Above all, the pro-poor Agenda for Transformation under the leadership of President George Weah of Liberia has the opportunity to implement projects sustainably, only if projects become more professionally standard-driven than politically driven. Hopefully, this article may help drive the development agenda in a sustainable direction. “As a professional, there’s nothing I believe in more strongly than getting people interested in doing the right thing, leading by example, and setting the pace for the sustainable infrastructure development of Liberia”
About the Author:
Garmondyu Zogar, is a Liberian architect, engineer and development planner who has worked the World Bank, United Nations, Liberian Government and many reputable multi-national companies in senior technical positions implementing a variety of infrastructure projects for the past 10 years. He is currently a Chevening scholar at the University of South Wales undertaking graduate studies in Safety, Health and Environmental Management in the United Kingdom. He also holds a Master of Engineering (honors) degree in Architecture and a BSc (magna-cum laude) in Building Construction Technology, with many professional certifications in areas of project management and works procurement