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Reviving local construction

Thursday, June 23, 2011

The local construction industry has for many years been linked to the stimulation of the local economy. Although it is considered to be a volatile and therefore high risk form of employment, it provides approximately 79,000 jobs, according to a newspaper article published in August 2010. The industry, however, has been bombarded with many challenges which have affected its overall performance.
The Government, in the early part of this year, said that it intended to stimulate the sector and create more jobs through the construction of additional Housing Development Corporation (HDC) homes, which, according to the Prime Minister, would provide approximately 30,000 unemployed people with jobs.

Perhaps, this may be a good plan which will help to boost the local construction industry, but it seems almost short-term and, in fact, not much has happened. This delay in the start up of construction has impacted on another group, namely, persons waiting on HDC homes. Further, there are a number of existing HDC homes which have not been distributed, but, according to reports emanating from the Government, many of these homes are uninhabitable due to flaws or in a state of disrepair, so that it is impossible to allocate them.  So, what about these HDC houses which have not been allocated to potential home owners and which are in desperate need of repairs? Fixing these properties will create additional opportunities for the local construction sector, especially small businesses and independent tradesmen.

Squatting in public houses
Earlier this year, a newspaper article focused on an abandoned HDC site in Chaguanas, on which 231 housing units were built at a cost of $156 million. Squatters, among them illegal immigrants, had inhabited and, at times, vandalised some of the abandoned buildings. These housing units, not only in Chaguanas, but elsewhere, have been left susceptible to the elements for two years and more.
While it is obvious that the HDC may want to pay particular attention to the finalisation or renovation of such housing units which have been abandoned close to completion, it must find a way to do so in a prudent manner since it is unlikely to recover monies spent on such projects. No doubt, these units need to be allocated as soon as possible to avoid the State having to carry any additional expenses to secure and further repair them—and with more than 110,000 citizens awaiting homes, it becomes even more imperative to speed up the process.  

As the HDC is the vehicle being utilised for the delivery of housing units, a significant amount of work needs to be done to improve both the efficiency and effectiveness of the corporation. We welcome the close oversight by the HDC’s current chief executive officer as proper governance will ensure that keen attention will be given in preventing mistakes made previously. The recent issue of remedial works to the tune of $100 million to be done by Water and Sewerage Authority (WASA) on one of these housing sites is a prime example. There must be proper planning before construction begins. This means ensuring that drainage, sewage, road access, etc, are well established and laid out.

Proper project management
In addition, projects should not commence until land acquisition, design, and approvals are finalised.
In other words, there must, above all, be proper project management and continuous quality control and oversight to completion. Cost overruns and delays in completion of housing projects can be avoided, once these fundamentals are in place. Additionally, the Contractors Association of T&T has identified the delayed payout by the Government to local contractors, as one of the main reasons for the sluggishness of the industry. Although some of this money has been paid, there are still bills to be finalised and settled. Attention must be paid to this issue since contractors will be depending on the money owed to mobilise their new projects. 

The reality is that when payments are made late, contractors have no choice but to demobilise from their contract sites, possibly keeping only a skeleton staff until payments are back on stream. This expectedly affects completion times and costs. Having funds in place prior to commencement of construction and knowing that changes made after the start of the project will incur additional costs are important if the project is to run smoothly and keep to schedules. After all, as the saying goes, “time is money.”

Incentives to home buyers
As a step towards addressing the issues which are obstacles in the path towards improvement in the future development of the industry and stimulation of the sector, the Government could consider, for example, giving incentives to purchasers of the aforementioned HDC properties, perhaps by tax exemptions, lotteries, or reduced prices, with the understanding that the new owner takes on the repairs.
Correcting these deficiencies will help to further stimulate the sector. Another possible solution might be significantly dropping mortgage rates at government lending agencies for houses constructed at low cost, which may promote land or home ownership, thereby increasing the opportunity of some to have a home of their own.

Apart from this, long-term stimulation can be generated from ongoing repairs and maintenance of government and public sector buildings, historical sites, schools, etc. This is almost always a continuous process essential not only for esthetics, but also for health, safety and long-term cost effectiveness. Equally important and already on the legislative agenda is public procurement focusing on transparency, accountability and equal opportunities to secure contracts. This needs to be addressed urgently. Only by realistically dealing with the challenges of the local construction sector and seeking out possible solutions, can we derive an effective plan which will help to revive and boost the industry.


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