Past due

February 5, 2018

DEMAND AND SUPPLY by Boo Chanco

Philippine Star | February 5, 2018

 

Talk to construction industry people and you get the feeling the excitement over Build Build Build is surprisingly muted at least among the bigger players. They have been burned badly before by government’s bad payment habits and they would rather deal with private sector proponents or Japanese ODA.

One major contractor still has receivables in the millions of pesos for public works projects done during the Arroyo administration yet.  One major project under P-Noy took two years to collect. Another major project costing a billion pesos under P-Noy’s DOTC had long been completed but only the 10 percent deposit had been paid for the longest time.

 This is the real reason, not a shortage of skilled workers, why Duterte’s Build Build Build projects will find it difficult to get capable Filipino contractors to get involved. The workers will be there, I am told, if they have more confidence they will be paid.

The bigger contractors also don’t like the rigged lowest bidder approach. They are happy President Duterte made it known that he does not think the lowest bidder approach in government procurement will work for Build Build Build.  The crooks at DPWH and their favorite contractors have perfected the art of rigging biddings based on the lowest bid.

I checked with Lito Madrasto, a long time construction industry leader and yes, politics is the biggest deterrent for serious contractors to consider government projects. “The bigger issue is that it’s quite hard to work on government projects as there are too many political and administrative variables that can derail a contractor’s set program and financial viability.”

Lito, who used to run the Philippine Constructors Association (PCA) explained that “the PCA never believed in the ‘lowest bid’ but rather promote ‘lowest responsive bid’. It connotes that the project owner wants a project that meets all specifications and standards and project completion target shall be met. Hence bid amount submitted comply with it.

“Price differences would most probably be due to differences in engineering or technical approaches or better logistical management or better project financing or a mix. However, very low government estimates more often come out of thin air.

“Because RA 9184 limits the bid ceiling to the government estimates, most large contractors do not believe such estimates and thus avoid government projects. In the end, the winning lowest bidder comes out with projects that are not finished on time or are done shabbily using substandard materials or not in accordance with specifications.”

As for ODA financed projects, one contractor said they “will only take Japanese ODA projects. The Japanese guys do their homework, preparing all the studies and identifying local partners. They have been operating in the Philippines for a very long time. The Chinese are newcomers in this game. Our experience with the Chinese has not been good.”

That’s why the bigger contractors are not sure about doing work for Chinese financed projects as subcontractors. China doesn’t have the track record of the Japanese. The Japanese also go by the honor code of the Samurai in their business dealings, one big contractor observed, while the Chinese act like “commissars”.

The story is told of how the Japanese paid their local contractors in the building of Terminal 3 even if the Philippine government withheld payment because of the controversy. The Japanese company said the subcontractors signed a contract with them and not with the Philippine government.

As for GAA-financed infra projects, the contractors yearn for the days of Ping De Jesus. Ping was successful even if he was not an engineer, one big contractor said, because he made sure the contractors got paid.

 Then again, contractors are also choosy about local private sector proponents. They have had bad experiences too with some of the bigger local conglomerates. Some taipans are not known to be good payers. As one contractor puts it… their attitude is “binigyan ka na ng negosyo gusto mo pang mabayaran?”

It’s really difficult to know if Duterte and his economic managers know what is going on with the implementing agencies of Build Build Build.  DPWH Sec. Mark Villar and DOTr Sec. Art Tugade are giving mixed impressions to the construction industry.

Villar is seen to be doing much better than Tugade because he has taken over from Babes Singson who really did a good job fixing procedures at DPWH during his six year tenure.

As for Tugade they see his short temper and bloated ego as his serious shortcomings. It also didn’t help that he took over a department run successively by Mar Roxas and Jun Abaya. There are just so many things he has to fix immediately. Poor guy!

 Skills gap

 I received this reaction from former DPWH Secretary Toto Estuar to my column on the jobs/skills gap problem.

“To respond to the impending shortage of craftsmen and professionals for the engineering and construction industry, I think we have to take the drastic move to change the business model of the industry.

“Instead of the usual “build at site mode”, the industry business model should shift to a “manufactured off-site” and install at site” mode, or a “manufactured mode”.

“It has been my observation, triggered by the now evident shortage of skilled talents to support the growth opportunities of our design and construction engineering industry, we need to reconfigure the way we build engineering structures…

“There are already efforts to develop components that will lead to the greater use of prefabricated steel or concrete elements, manufacturers of prefab or container-based buildings, tack-on arch elements, as well as, the use of drones and mapping apps in surveying, the use of BIM technology, etc.

“The rise of Megawide was built on, among other things, their decision to have a strong pre-casting capability. But the industry as a whole is not yet laser-pointed to moving to that manufacturing mode and the use of IT as a development tool. 

“Not one entity can put it together and may take the industry associations to lead the way and catalyze the integration.”

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco