Contractors facing insurance problems, says NWA

BY ALPHEA SAUNDERS
Senior staff reporter
saundersa@jamaicaobserver.com

Thursday, May 17, 2018

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Contractors are having difficulty financing the public liability insurance requirement set out by the Government in order for them to carry out road works, according to National Works Agency (NWA) Chief Executive Officer EG Hunter.

Hunter made the disclosure yesterday as he appeared before Parliament's Public Administration and Appropriations Committee (PAAC), describing the problem as “systemic”.

“There are significant difficulties with a large number of the smaller contractors for them to meet the minimum Government requirement of public liability insurance for these jobs… that is a big problem in the industry. Even for the bigger projects, a lot of the contractors who are required to produce insurance and bonds, once they have done one or two jobs they get to their limit very quickly. That is something that we need to look at in a holistic way,” he said.

The NWA, Hunter said, is contemplating dialogue with insurance companies and other stakeholders to examine options such as an insurance pool for contractors.

Hunter further told the PAAC that the pool of contractors to which the agency could “comfortably” award large contracts, with the expectation that they will be able to meet the Government prerequisites, is limited.

He also explained that notwithstanding the issues with so many contractors not being able to meet certain requirements, there is nothing in law to block contractors from getting contracts from Government, once they are duly registered by the National Contracts Committee (NCC), and are tax compliant.

“That does pose a problem because, unless in the evaluation criteria for a particular bid there is an expressed criterion regarding past performance, then once you go to tender you have to treat with all the contractors who respond,” he stated.

The CEO said, however, that the NWA does not have any major concerns with the proficiency of contractors.

“Where there is an issue would be capacity… if the contractor starts getting a lot of work and he does not make the internal adjustments to beef up his capacity, then you're going to get declining returns,” he said.

Hunter pointed out that as the work load increases for smaller contractors, they are expected to grow their internal capabilities to be able to take on a larger portfolio. He explained that there are provisions in place to annul contracts if a contractor does not meet requirements within a specified time. He also noted that where the contractor begins a project but does not make good progress, the owner of the contract may still terminate and only make payment for work done.

“I don't have an issue with a contractor reaching out to get a multiplicity of contracts; what I would expect is that that contractor will grow the capacity of his firm in tandem with the work that he has gotten — whether by partnerships [or] joint ventures. That is the way our small contractors can grow [because] it has been observed that Jamaican contractors have no footprint outside of Jamaica because capacity has not been expanded sufficiently,” he stated.

Hunter also said that of the 167 roads islandwide which were selected for rehabilitation under the Government's $1. 5 billion programme in January, only 58, or 35 per cent, are so far complete. The allocation was made in the supplementary budget.

“That could, of itself, sound like a bad number, but how it works in reality is that we don't recognise the progress until the work is 100 per cent complete and payment made, but it is eminently possible that a lot of the projects on the ground would have been significantly advanced but we don't report on fractional completion for programmes of this nature,” he explained, adding that that within another couple of weeks, a number of other projects could be completed.

The average price of the contracts under the rehabilitation programme is $8 million, and just over 90 per cent of the works have so far been contracted.

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