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ii Performance Audit Report on Road Works iiiPerformance Audit Report on Road Works

TABLE OF CONTENTS

PREFACE ..................................................................................................................................................iii

ABBREVIATIONS ............................ ................................ ................................. ................................ ..... v

LIST OF TABLES AND FIGURES ............................ ................................ ................................ .... vi

EXECUTIVE SUMMARY ................................................................................................................vii

Chapter One .............. ............... .............. .............. .............. .............. ............... .............. .... 1

Introduction .............................. ................................. ................................ ................................. ............... 1

1.1 Background ............................... ................................ ................................ ................................ 11.2 Focus of the conducted study .............................. ................................ ................................ 21.3 Audit scope and performance .............................. ................................ ................................ 31.4 Structure of the report ............................ ................................ ................................ ................ 6

Chapter Two .............. ............... .............. .............. .............. .............. .............. ............... .... 7

The Road Works System ............................ ................................ ................................. .......................... 7

2.1 Responsibility and policy ................................ ................................ ................................ ..... 72.2 The operative system ............................. ................................ ................................ ................ 82.3 Key players outside MoID/TANROADS ............................. ................................. ........ 112.4 Additional time and costs ............................... ................................. ................................ ... 13

Chapter Three .............. .............. .............. .............. ............... .............. .............. .............. 17

Time variations in Road construction projects ................................. ................................ ........ 17

3.1 Original, revised and actual time of road projects .............................. ........................ 173.2 Factors Contributing to delays ............................ ................................ .............................. 213.3 Consequences of the Delays ................................ ................................ .............................. 25

Chapter Four ............. ............... .............. .............. .............. .............. ............... .............. .. 26

Cost Deviation and Cost Overrun ............................... ................................. ................................ ... 26

4.1 Introduction ............................... ................................ ................................ .............................. 264.2 Original and revised budgets and actual costs ............................... .............................. 264.3 Revised budget and actual costs .............................. ................................. ........................ 294.4 Requested and granted request for additional costs ............................ ........................ 304.5 Factors contributing to cost overrun ............................. ................................ ................... 31

Chapter Five ............. .............. .............. .............. ............... .............. .............. .............. .... 34

Quality Control of Road Works ................................ ................................. ................................ ...... 34

5.1 General standards for planning and conducting road works .............................. ...... 345.2 The system of quality control ................................ ................................ ............................ 35

5.2.1 The design phase ............................ ................................. ................................ ................. 355.2.2 The construction phase ............................ ................................ ................................. ...... 35

5.3 Quality assurance in practice ............................ ................................ ................................ . 375.4 TANROADS and its engaged consultants .............................. ................................. ...... 415.5 Consequences ............................. ................................ ................................ ............................ 42

Chapter Six ............ ............... .............. .............. .............. .............. ............... .............. ...... 43

Conclusions ............................. ................................ ................................. ................................ ................. 43

6.1 Organization of the work ............................. ................................ ................................. ...... 436.2 Management and quality control ............................... ................................. ...................... 446.3 Conditions for transparency and self improvements ............................ ...................... 456.4 Working systems to address delays, cost overrun and quality problems of road

construction ............................ ................................. ................................ ................................ . 45

Chapter Seven ............... .............. .............. .............. .............. ............... .............. ............. 47

Recommendations ................................ ................................. ................................ ................................ . 47

7.1 Institutional improvements ............................... ................................ ................................ . 477.2 Project planning and design .............................. ................................ ................................ . 497.3 Project management and quality control ............................ ................................ ............ 50

REFERENCES ................................ ................................. ................................ ................................. ........... 52

APPENDICES ............................ ................................. ................................ ................................. ........... 53

Appendix 1: Genaral Information of the Audited Projects ................................ ................. 54

Appendix 2: Organization Structure of the MoID ............................... ................................ . 55 Appendix 3: Organization Structure of TANROADS ................................ ............................ 56 Appendix 4: Time Variations ............................ ................................ ................................ ............ 57 Appendix 5: Reasons for the Delays .............................. ................................ ............................ 58 Appendix 6: Reasons behind revision of programme of works for each road project 61 Appendix 7: Reasons behind cost increase for each road project audited .................... 62 Appendix 8: Partial Deductions of Liquidated Damages ............................. ...................... 62 Appendix 9: Cost Variations ............................ ................................ ................................ ............ 65 Appendix 10: Reasons for Cost Overruns ................................. ................................ ................. 66

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iv Performance Audit Report on Road Works vPerformance Audit Report on Road Works

PREFACE

The Public Audit Act No. 11 of 2008, Section 28 authorizes the Controller and AuditorGeneral to carry out Performance Audit (Value-for-Money Audit) for the purposes ofestablishing the economy, ef ciency and effectiveness of any expenditure or use ofresources in the MDAs, LGAs and Public Authorities and other Bodies which involvesenquiring, examining, investigating and reporting, as deemed necessary under thecircumstances.

I have the honour to submit to His Excellency the President of the United Republicof Tanzania, Dr. Jakaya Mrisho Kikwete and through him to Parliament the rstPerformance Audit Report on MoIDs and TANROADs Performance in managingroad construction time, Cost and Quality of Road Works in Tanzania.

The report contain conclusions and recommendations that directly concern theMinistry of Infrastructure Development (MoID), Tanzania National Roads Agency(TANROADS) and Financiers on ensuring that our roads are completed on time,within set budgets and also in required quality and standards.

The Ministry of Infrastructure Development and TANROADS have been given theopportunity to scrutinise the factual contents and comment on the draft report. I wishto acknowledge that the discussions with the auditees have been very useful andconstructive.

My of ce intends to carry out a follow-up at an appropriate time regarding actionstaken by the auditees in relation to the recommendations in this report.

In completion of the audit, the of ce subjected the report to the critical review of

the following experts namely, Professor Theophil Rwebangira, Dr. Damas Nyaorofrom the College of Engineering and Technology of the University of Dar-es-Salaamand Eng. Kimambo from K & Associates Professionals Services Ltd (KAPSEL), whocame up with useful inputs in improving the output of this report.

This report has been prepared by George Haule, James Pilly, Wendy Massoy,Michael Malabeja and Elizabeth Augustino under the guidance of Gregory G. Teuwith support from the experts of the Swedish National Audit Of ce, Mr. Tony Anglerydand Ms. Elisabeth Carlsund. I would like to thank my staff for their assistance in the

preparation of this report. My thanks should also be extended to the auditeesfor their fruitful interaction with my of ce.

Ludovick S. L. UtouhController and Auditor GeneralDar es Salaam,March 2010

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vi Performance Audit Report on Road Works viiPerformance Audit Report on Road Works

ABBREVIATIONS

ADB - African Development Bank

CAG - Controller and Auditor General

CRS - Crushed Stones Aggregate

FIDIC - Federation International Des Ingenious Conseils

GOT - Government of Tanzania

KAPSEL - K & Associates Professionals Services Ltd

LGAs - Local Government Authorities

MDAs - Ministries, Departments and Agency

MoID - Ministry of Infrastructure and Development

MLHSD - Ministry of Lands and Human Settlement Development

NCC - National Constructions Council

PFF - Price Fluctuations / Adjustment Formula

PWD - Public Works Department

SAI - Supreme Audit Institutions

TACECA - Tanzania Association of Civil Engineering Contractors

TANESCO - Tanzania National Electricity Company

TANROADS - Tanzania National Roads Agency

TRA - Tanzania Revenue Authority

TSh - Tanzanian Shillings

TTCL - Tanzania Telecommunication C ompany Limited

UWSS - Urban Water Supply and Sewerage

VOP - Variation of Price

LIST OF TABLES AND FIGURES

Tables

Table 3.1 : Total number of time revisions in programme of works per stage

Table 3.2 Original and actual time for the ten examined projects

Table 3.3 : Difference between revised and actual time for road construction

Table 3.4 :Request for extensions of time granted to contractors byTANROADS (days)

Table 3.5 : Factors in uencing delays and their frequencies (of cial version)

Table 4.1 : Revised budgets during the construction stage

Table 4.2 : Revised budgets during the construction stage (Billion Tshs)

Table 4.3 : Original budget and nal Costs (Billion Tshs.)

Table 4.4 : Revised budget and nal costs (Billions Tshs)

Table 4.5 : Requested and granted cost increase (Billion Tshs)

Table 4.6 : Effect of each category to cost increase of the road projects

Table 5.1 : Supervising, monitoring and inspection activities among the tenexamined projects

Table 5.2 : Conducted evaluations of the quality of studied road works

Figures

Figure 2.1 : Systems Graph showing relationship between different actors

Figure 2.2 : Key stages in the process of road construction

Figure 2.3 : Procedure for approving a claim for additional costs

Figure 2.4 : Procedure for Extension of Project Timeframe

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viii Performance Audit Report on Road Works ixPerformance Audit Report on Road Works

EXECUTIVE SUMMARY

Road construction uses 13% of the national budget

Road sector is an important sector in the economy of any nation due toits impact on the welfare of its citizens and the investment involved. Goodquality of road works is important for both safety and economic developmentreasons in any society. This importance is propounded by the fact that thetransport sector has a major role to play in the socio-economic developmentof a country as it provides access to markets, production, jobs, health,education and other social services.

Construction and repair of roads utilizes a great part of governmentexpenditure. The estimates for roads construction amounts to almostTSh. 800 billions, equivalent to 13% of the national budget. The Ministryof Infrastructure Development (MoID) and Tanzania National Roads Agency(TANROADS) have a major in uence on the road construction industry assponsors, regulators and procurers of road projects.

Problems with delays, cost overrun and quality

The road construction sector in Tanzania is evidenced from many studies toexperience mainly three kinds of extended problems.

One problem concerns time management, i.e. road works are not completedwithin the agreed time and bene ts of the works to the public are delayed.

Second problem concerns cost overrun, i.e. additional but avoidable costs tothe decided budgets for varying reasons, and

A third problem concerns the weaknesses in quality control system of the

road works which results into early wear and tear necessitating repair andmaintenance.

Purpose of the audit

The purpose of the conducted performance audit study is to assess whetherthe Government, through the MoID and TANROADS, has an effective systemof road works in the country. This includes assessing the extent the systemis working to minimize delays, cost overruns and quality problems on roadworks.

Audit scope

The audit scope was initially limited to the post-contract stage of the 12 roadconstruction projects which were completed in the nancial years 2004/2005,2005/2006 and 2006/2007. Due to failure in obtaining suf cient data for twoprojects, the examination in the Performance audit study had to be con nedto the ten road projects.

Major ndings, Conclusions and Recommendations

Audit ndings

The major ndings of the audit are as follows:

Extension of time is common in most road projectsIt is common with time revisions for the road works project plans. These timerevisions have been done as requested by the contractors when comingacross different problems which prompted them to request for the extensionof time. For example from the selected ten projects, all of them were revisedduring the construction phase and seven (7) or two thirds at the designphase.

Review of extension of working days is granted as requested bycontractors

MoID/TANROADS has a role to play when it comes to both reviewing andrecommending extensions of time. The consultant is required to review thecontractors extension of time request and give his recommendations. Also,MoID/TANROADs are required to review consultants recommendationsand grant their own recommendations on time extension. However, MoID/TANROADS have approved almost all requests for the extension of timeas requested by contractors and approved by the consultants. Our ndingsindicate that MoID/TANROADS and its consultants did not carry out anyindependent analysis to verify the adequacy of the time requested.

Inadequate design results into cost overrun According to the project les, a number of factors causing cost increase werenew design and new speci cations, inadequate project management and/orquantities and variation of price factors. A huge part of the increasing costswere related to mis-calculation of some kind already in the design stage.

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Others factors like changed conditions, values; priorities etc. have alsoaffected the outcome.

Quality control system needs to be improvedDespite the fact that TANROADS of cials insist that the quality controlsystem is working very well, our audit has found that there is still a need forimprovement. The quality control in the design phase is obviously not effective.There are also several problems in the construction phase. Inspections andmonitoring are not conducted as planned, documentation is not in order andthe engaged consultants are given con icting tasks without any proper followup by TANROADS.

ConclusionsWe conclude that the road works system in Tanzania is not managed ef cientlyand timely. Road works project plans and budgets are often revised, resultingin signi cant delays and cost overruns. Engaged consultants are determiningtheir own schedule, have multiple roles and are not being managed well.There is serious lack of independent analysis to verify the adequacy of thetime extension requested by contractors. Design works is not done properlyand ef ciently which resulted into redesigning leading to inevitable costoverruns. All put together indicates that ten roads built and audited were notproduced in a way that best serves the public interest.

Management of Consultants by the client (MoID/TANROADS) is not adequate.There is lack of monitoring mechanism of these consultants who are involvedin planning, preparation and design and in controlling activities of the roadconstructions like supervision, monitoring, inspections and evaluation of theworks done by contractors. There are obvious con icts of interests in theinvolvement of the same consultant in several steps of the process. Quality

assurance system does not function well. The MoID/TANROADS inspectionsand evaluations were obviously not able to detect certain weaknesses of theroad works. All ten studied road projects were approved at the nal inspectionsthough most of all the roads started to undergo repair and improvement soonafter the road have been approved. Sanctions were not properly used foraddressing and correcting the frequent and extended delays, cost overrunand also quality assurance problems.

RecommendationsBasing on the ndings and conclusions, we recommend the following toMoID/TANROADS:

The Ministry of Infrastructure Development and TANROADS need toimprove the process of the start-up activities, such as ful lment ofloan conditions and procurement processes.

TANROADS need to have a budget covering the whole project periodand strong budgetary control throughout the project. For each project itis important that clear roles and responsibilities among various partiesare set regarding time, cost and quality issues. Moreover, measuresneed to be taken to enhance TANROADS capacity in identifying and

managing risks.

Files must be kept in better order and MoID/TANROADS shouldestablish register to record the performance of contractors andconsultants for each road project.

MoID/TANROADS should, therefore, take proactive steps to reducetime and cost overruns by continuing its efforts to improve coordinationwith utility companies (eg. TANESCO, DAWASCO) and other partieswho are involved in the road construction sites.

MoID/TANROADS should recruit and keep their own independentstrategic competent professionals who will act with full professionalismand integrity for monitoring and inspections even if MoID/TANROADSwill continue engaging specialists or consultants for the actual follow-up of implementation of various kinds of work.

Government should ensure that MoID/TANROADS have the leadershipand capacity required to manage its functions. We recommend thatthe Government and the Ministries concerned to set up a commissionwhich will be responsible for nding solutions to these shortcomingsas this will be cost effective to make TANROADS properly equippedwith human resources for its tasks.

MoID/TANROADS should have a discussion on how far it should goin supervising contractors. There are risks with too much involvementby TANROADS. It may undermine and confuse the contractorsimplementation responsibilities on one hand and the oversight role of

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xii Performance Audit Report on Road Works xiiiPerformance Audit Report on Road Works

TANROADS on the other hand.

MoID/TANROADS should specify the responsibilities for theconsultants they use. If for instance a consultancy rm is engagedfor design work, its advisable to clarify in the contract that the rm is

nancially responsible for mal practice.

The Government should review the possibility of making vital roadconstructions documents be made available to the public. Designsand nal inspections could perhaps be made available or disclosed assoon as they are approved by the parties involved.

The Government should give TANROADS clear instructions on how

to manage consultants. This include the setting up of a commission toreview and strengthen MoID/TANROADS integrity and professionalismand its performance of strategic functions, and examine transparencyand accountability issues

The Government and TANROADS should deliberately take steps onthe pre-contract stages of projects implementation to ensure that thedesigns are improved to re ect the reality on the ground and avoidunnecessary alterations during the implementation stage. The Ministryof Infrastructure Development and TANROADS need to institute amechanism to review the designs and estimates of the project as theyare prepared by the consultants before they are implemented.

TANROADS should signi cantly improve project management andquality control system in order to avoid delays, cost overruns, to avoidbeing forced to conduct repair works and maintenance services soonroads are opened to the traf c.

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1Performance Audit Report on Road Works

Chapter OneIntroduction

1.1 BackgroundRoad sector is an important sector in the economy of any nation due toits impact on the welfare of its citizens and the investment involved. Thisimportance is propounded by the fact that transportation sector has a majorrole to play in the socio-economic development of a country as it providesaccess to markets, production, jobs, health, education and other socialservices.

The Tanzanian Road construction industry is also a signi cant contributor to

the national economy accounting for 8 per cent of Gross Domestic Product(GDP) and employing more than 1.9 million people.

The Ministry of Infrastructure Development (MoID) and Tanzania NationalRoads Agency (TANROADS) have a major in uence on the road constructionindustry as sponsors, regulators and purchasers of road projects. These roadprojects are ranging in size from repair works to large road projects. Roadconstruction industrys turnover is mainly funded by the Government anddonors.

Construction and repair of roads utilizes a great part of government expenditurein the 2007/2008 budget. The estimates for roads construction amounts toalmost TSh. 800 billion, equal to 13% of the national budget. 1

The countrys road network is estimated to be 85,000 km long and includestrunk, regional, district, feeder and urban roads. Urban, district and feederroads which are estimated to be over 56,000 km are managed by LocalGovernment Authorities (LGAs) while regional and trunk roads (29,000 km)are managed by TANROADS. In addition to this, some road networks whichare in National Parks and Game Reserve Areas are managed by the TanzaniaNational Parks (TANAPA) and other institutions. 2

Irrespective of the importance and expenditure recorded above, the roadconstruction sector is evidenced from many studies to experience extendedproblems. These problems are mainly grouped into three types. 3 One problem

1 2007/2008 Budget of Tanzania2 MoID3 Documentation and studies from the Annual Roads Convention 2008 Road Financing and investment:

Opportunity and Challenges.

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2 Performance Audit Report on Road Works 3Performance Audit Report on Road Works

concerns time management, i.e. road works are not completed within theagreed time and bene ts of the works to the public are delayed. Anotherproblem concerns cost overruns, i.e. additional but avoidable costs to thedecided budgets for varying reasons. A third problem concerns the quality ofthe road works, i.e. rates of deterioration are higher than anticipated whichimplies early repair and maintenance. 4

Tanzanias underdeveloped transportation network remains a key structuralweakness. Nearly 80% of the population still live in rural areas, engaged inagricultural activities. These rural areas are not adequately served by thetransportation system. Moreover, the countrys transportation system alsoserves to handle transit traf c for Tanzania landlocked neighbours includingBurundi, Malawi, Rwanda, Uganda and Zambia. 5

Given the importance of the road construction sector and the above mentionedproblems a Performance Audit (PA) study on the management of Road Workshas been conducted by the National Audit Of ce of Tanzania (NAOT).

1.2 Focus of the conducted studyPurpose and audit questions The purpose of the conducted performance audit study is to assess whetherthe Government, through the MoID and TANROADS, has an effective systemof road works in the country, i.e. to what extent the system is working tominimize delays, cost over runs and quality problem on road works.

In short, the audit questions used in this study were as follows:

(1) To what extent are problems with delays, cost overrun and lackingquality of road constructions common in executed road projectsin Tanzania?

(2) What are the possible causes of delays, cost over runs andquality problems of road constructions?

(3) Are there working systems in place to address delays, costoverruns and quality problems of road construction?

4 From the Work Plan, p. 3-45 National Population Policy, Ministry of Planning, Economy and Empowerment, 2006

Assessment criteria

For answering the above mentioned audit questions, the following criteriawas used:

MoID and TANROADS ought to have a documented performance measurementsystem regarding time delays, cost overruns and lacking quality for differentsteps of road constructions. TANROADS should also have a policy on howto deal with these issues. 6

MoID and TANROADS should take all necessary actions to reduce problemsof time delays, cost over runs and lacking quality of road constructions. Thisimplies the following activities:

the contracts should be well designed when it comes to issueslike phasing of works, requirements to the contractor, time frame,budget and quality assurance system as well as responsibilities andsanctions.

the implementation process should follow a timely manner. Wherealterations to the original contract are inevitable, action should betaken to prevent undue time delays, cost overrun and lacking quality.

sanctions should be applied when appropriate.

1.3 Audit scope and performanceThe audit objectiveThe objectives of the audit has been to study whether MoID and TANROADSare identifying problems of delays, cost over runs and quality in the system ofroad works and minimize these problems within available activities.

The PA study is focused on development projects that are administered fromthe TANROADS head of ce and MoID. The selection of development projectsis based on the fact that the investment involved per project is relativelyhigher than for other road projects.

6 Until December 2007 MoID was responsible for two of the studied road projects.

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The audit scope was limited to the post-contract stage 7 of the developmentprojects that was completed in the nancial years 2004/2005, 2005/2006and 2006/2007. 8 This selection covered 12 roads projects. However, theexamination in the Performance audit study is based on the following tenroad projects: 9

Butiama Kyabakari Roadworks (phase 2) Morogoro Dodoma Road maintenance works Mutukula Muhutwe Road upgrading project Nzega - Tinde - Isaka Road Upgrading Project Songwe - Tunduma Road Rehabilitation Project Tinde Mwanza/Shinyanga Border Upgrading project Muhutwe Kagoma Road Upgrading project

Mwanza Region Transport Project Shelui Nzega Kyabakari Butiama

Design and methodsThe audit work was designed by dividing the above audit questions intosub-questions . For performance of the study, the audit team used varyingmethods.

The formal picture of management and performance of the selected caseswas studied from MoID/TANROADS documents. This information wasfurther analysed through information provided by interviews with auditeesand different stakeholders. Thus, the audit of ce has strived to get a pictureas comprehensive, relevant and reliable as possible of the studied roadconstructions.

Many kinds of documents were reviewed in order to get the formal pictureof the agreement between MoID/TANROADS and the contractor and theperformance of each road project. The following kinds of documents werereviewed:

Contracts between MoID/TANROADS and contractors for roadsconstruction as well as for MoID/TANROADS supervision of roadconstruction

7 Post contract stage refers to the period after signing of contract to the completion of works8 This selection of road projects was executed during the period 20012007.9 Muhutwe Kagoma Road and Mwanza Region Transport Project were the last two road projects that

were administered by MoID until December 2007 when they were eventually handed over to TAN ROADS.

Addenda (instructions to approve changes) to the contracts project documents such as progress reports, quarterly and annual

progress reports and nal completion reports Minutes for Project Site meetings Planning documents such as MoID Strategic Plan 2007/2008

2009/2010 and Tanzanias Construction Industry Policy book, 2003.

Reports from other Supreme Audit Institutions (SAIs) and other documentswere also used in order to get a context and references for assessment ofthe provided picture of Tanzanian road construction projects. 10

A lot of interviews were conducted for many reasons, mainly to con rm or explain information from the documents reviewed;

give clues to relevant information in cases where information in theformal documents was lacking or missing; and provide context and additional perspectives to the picture from MoID/

TANROADS documents.

Interviews and discussions were thus carried out with representatives of executives as MoID, TANROADS (including consultants), National

Construction Council (NCC) and contractors experts like professional Associations 11 from the road sector or

universities in Tanzania 12 development partners representing the nanciers. 13

Finally site visits were conducted on ve of the ten studied road projects. 14 The purpose of these visits was speci cally on assessing conditions of theroad works and also to gather evidence and opinion on quality issues.

10 PA Managing Procurement, Road Construction and Restoration Contracts, a report by the AuditorGeneral of Malta; Roads and Traf c Authority of New South Wales- Planning for Road Maintenance bythe Audit Of ce of New South Wales, 1999; Country Roads Division audit report by the Board of Supervi sors of the country of Santa Clara.

11 Association of consulting Engineers of Tanzania (ACET); Contractors Registration Board (CRB); Tanza nia Roads Association (TARA); Tanzania Association of Civil Engineering Contractors (TACECA).

12 The College of Engineering Technology (COET) of the University of Dar es salaam (UDSM); Civil Engi neering consulting rms;

13 African Development Bank (ADB); World Bank (WB); Danish International Development Agency DA NIDA); Japanese International Cooperative Agency (JICA); European Union (EU)

14 Mwanza Town Roads; Muhutwe Kagoma; Mutukula Muhutwe; Songwe Tunduma

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The MoID and TANROADS directly concerned with this report have been giventhe opportunity by the audit team to comment on the gures and informationpresented in this report. They con rmed the accuracy of the gures used andinformation presented. Also, external experts and scientists in the eld havegone through methods, evidences and ndings.

1.4 Structure of the reportThe remaining part of the report covers the following:

Chapter two gives the account of the audit area with the constructionpolicy, system set up, procedure for approving time extension andadditional costs and the actors.

Chapter three, four and ve present the ndings on time variations,

cost overrun and quality respectively. Chapter six provides conclusions and chapter seven narratesrecommendations which can be implemented in order to improve thesituation.

Chapter TwoThe Road Works System

2.1 Responsibility and policyThe MoID has the responsibility for instituting the system for road constructions.The MoID is also responsible for management of the system. This impliesoverall activities as formulation of policies, plans and strategies, as wellas development of Construction industry, transport, communications andmeteorology services.

According to the Establishment Order GN No. 293 2000 of TANROADS

under the Executive Agencies Act, 1997, the role of MoID is to concentrateon its primary responsibilities of policy formulation, strategic planning andregulation of roads sub-sector.

TANROADS should take over from the MoID the day to day management ofthe roads and ferries in Mainland Tanzania and operate as a semi-autonomousExecutive Agency. TANROADS thus enters into contracts with Contractorsand Consultants in its own name. 15 The MoID was still directly administeringsome of the road projects until December 2007 when they eventually werehanded over to TANROADS.

The Construction Policy guides roads constructions. The following objectivesstipulate the governments intentions on the road construction sector: 16

To develop an ef cient and self sustaining roads network that is capableof meeting the needs for construction, rehabilitation and maintenanceof civil works for trunk, regional, district and feeder roads network;

To ensure ef cient and cost effective performance of the constructionindustry that will guarantee value for money on constructed facilitiesin line with best practices; and

To improve co-ordination, collaboration and performance of theinstitutions supporting the development and performance of theconstruction industry.

15 The MoID was still directly administering some of the road projects until December 2007 when they eventually were handed over to TANROADS

16 Tanzanias Construction Industry Policy, 2003

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2.2 The operative systemTANROADS enters into two Performance Agreements each nancial year:one with the Roads Fund Board for the provision of road maintenance andthe other with the Ministry of Infrastructure Development for the provision ofproject management services for road projects funded by Government andDonor Agencies. An over viewing graph of the system set up is shown in

gure 2.1. Figure 2.1: Systems Graph showing relationship between differentactors

MoID and TANROADS are responsible to liaise with the authorities responsiblefor public utilities to ensure that construction works is not interfered with bydelayed relocation of the utilities. The sources of funding for the projects werefrom governments own sources, funding by development partners or joint

nancing by the two sources. The Treasury is responsible for coordinatingthe funding.

Figure 2.2: Key stages in the process of road constructionThe process involves a number of various steps as detailed hereunder:

Projectplanning

TANROADS/MoID strategy

Consultants, interestedgovernmentalinstitutions

Feasibility study Detailed engineering design Preparation of Tender Documents

Design review byMoID/TANROADS

Procurementregulations

Packaging anddevelopment ofcontracts

Application forfunding

Evaluation oftenders

Call for tenders

Award of tenders(lowest evaluated)meeting

Contractvariations

Quality controlof works

Extension oftime frame

Payments tocontractors

Completionworks

Payment ofretentionmoney

Compilation ofEvaluationreport

Receipt oftenders

Projectimplementation

Consultants, interestedgovernmentalinstitutions and utilities

Fundingapproved

TANROADS

Contractors

Public utilities e.g.TANESCO, Water

and Sewerage Authorities, and

TTCL

MoID

Consultants

Donors

Treasury F I N A N C I N G

ERB

CRB

NCC

PPRA

R E G U L A T O R Y A U T H O R I T I E S

Parliament

LGAs

OTHERS ACET, TARA,

UDSM

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Key implementing actors within TANROADS At TANROADS, two key directorates deal with the implementation of projects,the directorate of projects and the directorate of maintenance. This auditfocused mainly on the projects that fall under the directorate of projects.

Directorate of ProjectsThis Directorate has the overall responsibility for the delivery of road andbridges construction projects set out in the annual plans.

At the national level, Project Managers are responsible to the Director ofProjects for the delivery of projects assigned to them. The Project Managers

are assisted by senior project engineers and project engineers. Theassignments of the projects to the various Project Managers are on the basisof the sources of nance. These sources might be Government of Tanzania,multilateral 17, bilateral 18 , Private or combinations of these sources.

At the regional level, Project Engineers in the Projects Section areresponsible for monitoring of major projects that are not delegated from theheadquarters, being outside the limits of delegation. For the purpose of thePublic Procurement Act 2004, this Directorate is the user directorate for allmajor works that are directly procured at TANROADS headquarters.

Directorate of MaintenanceThe role of this Directorate is to implement the annual maintenance plan;i.e. that the roads of all types are being maintained in accordance with theguidelines set down and; that maintenance contracts are providing value formoney.

This Directorate takes care of the products of the Directorate of Projects,i.e. maintaining the newly built or upgraded roads in accordance with theagreements on road maintenance. This is further described in chapter ve.

17 IDA, AfDB, EU and Nordic Fund18 NORAD, DANIDA, and JICA

2.3 Key players outside MoID/TANROADSBesides MoID and TANROADS, there are other important actors in theaudited road construction projects.

The consultantsMoID/TANROADS hire consultants who are responsible for preparing designsand for supervising the implementation of the road works. MoID/TANROADSis of course responsible for all its tasks, also even when they are conductedby consultants. This means that MoID/TANROADS is also responsible forsupervising and monitoring the work done by the consultants.

Consultants are engaged in all phases of road projects. They are for instanceengaged in making designs as well as safe guarding their quality. They arealso engaged in supervision of construction work; serving the interest ofclients (MoID/TANROADS) as general supervisors and advisors throughoutthe whole construction periods of road projects. In that capacity they areexpected to safeguarding the correct implementation of the designs, whilekeeping the cost low. Their supervising duties include monitoring of thecontractors activities on site, performing different tests to check the quality ofthe works. They are also expected to examine and approve the contractorsclaim for having the designs, the plans or the budgets changed. In addition,they prepare progress reports and nal accounts of the projects. Moreover,consultants are also engaged in intermediate and nal inspections orevaluations.

The same consultant or at least the same consulting rm may in fact beinvolved in all functions and activities mentioned above. The consultantsroles and tasks are regulated in a contract between TANROADS and the

consultant in accordance with the Public Procurement Act.

The contractorsMoID/TANROADS procures contractors who are responsible for the actualconstruction of the roads. They manage people, materials and equipmentin order to be able to produce the intended results. Contactors enterinto contracts with the client (MoID/TANROADS) who is responsible forpaying them. Contractors perform their duties under the supervision of theconsultants.

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Utility BodiesThese are entities responsible for provision of public utilities. They include:Urban Water Supply and Sewerage (UWSS) which are responsible forwater supply and waste water disposal; TANESCO which is responsiblefor generation and supply of electricity; and TTCL who deals with landlinetelephone services. Sometimes, especially when the road works are in urbanareas, these utilities need to be relocated to give way to the contractors todo their job. Arrangements for relocation must be done prior to contractorsmobilization at site to avoid construction delays.

Ministry of Lands and Human Settlement Development (MLHSD)The MLHSD is responsible for communicating with land owners when thereis a need for relocating them. The ministry normally collaborates with the

Local Government Authorities which are close to the land owners.

Regulatory AuthoritiesRegulatory Authorities are governments watch dogs who monitor professionalconducts of the parties involved in the construction projects. They include:Contractors Registation Board (CRB), who authenticate and monitorprofessional conduct of the contractors; Engineers Registration Board (ERB),who certify the engineers and engineering consulting rms and keep an eyeon their professional conduct.

Local Government AuthoritiesThe Local Government Authorities (LGAs) come into play when there is aneed to relocate people and arrange for compensations to give way to theproject.

Financiers and othersFinanciers provide funds for implementation of the project. They include theTreasury and Development Partners. The most important issue on project

nancing is the timeliness of approvals and disbursement of funds to thebene ciaries since delays may paralyse the project delivery.

Other stakeholders with vested interests in the road sector include Association of Consulting Engineers Tanzania (ACET), the Association ofCivil Engineering Contractors, Tanzania Roads Association (TARA) and theUniversity of Dar es Salaam (UDSM). These entities share a lot of informationdealing with road projects construction directly.

2.4 Additional time and costsThe contract documents spell out rights and responsibilities of various partiesinvolved in the contracts. Responsibilities for additional costs in these projectscan be summarized as follows:

Roles and responsibilitiesThe client, MoID/TANROADS, is generally responsible for additional costsof executing the works in a project whenever the reasons for additional costsare beyond the control of the contractor and the supervisor.

The contractor has the responsibility of delivering the works on timely and inaccordance with speci cations. If the works do not meet set standards andspeci cations, they are supposed to be rejected until adequate remedieshave been carried out at the expense of the contractor.

The consultant is only liable to pay compensation to the client arising out ofor in connection with the agreement if it is established against him that he didnot exercise reasonable due care and diligence in performing his obligations.The consultants liability can be insured upon request by the client and thecost of such insurance is at the expense of the client.

Implementation of a road construction project is guided by the programmeof work which is prepared by the contractor and approved by the supervisor(consultant). Depending on the circumstances that arise during theimplementation of the project, the programme of work may be revised fromtime to time with or without affecting the agreed completion date and theproject budget (i.e. by extending the project duration).

When it comes to responsibility there are mainly four categories of extension

of time and cost overrun:a. One category is when there is an extension of time due to the default

by the contractor though the original agreement between the clientand the contractor is still valid. This extension is a responsibility for thecontractor who has signed the agreement in the contract to paythe liquidated damage.

b. Another category is when extension occurs within the origin formalcontract conditions though the contractor, for good reasons, canclaim that the real conditions have been changed in a way that wasnot predictable. If the contractor for good reasons can claim thatthe changed conditions are caused by the client, the client will beresponsible to pay for the extension.

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c. A third category is when there is an extension caused by a changedprocurement and contract. This is also caused by the client who willbe responsible to pay for the extension.

d. A fourth category is caused by conditions that no one can be blamedfor. This is force majeure.

Contractually, alterations might also be compared to the original programmesor the revised and approved program. Deviations from the revised programmeswithout approval of time extension are contractually not acceptable. Non-completion of the works within the agreed time frame thus formally is assumedto result into sanctions being imposed to the contractors and are requiredto pay the client (MoID/TANROADS) for every additional day beyond theagreed completion date.

Procedures for approving a claim for time extension and additionalcostsThe procedure for approving of additional cost covers the following steps:

1. Contractor raise claim to consultant.2. Consultant evaluates the claim and makes recommendation to the

client (normally MoID/TANROADS) to justify the genuinity of theclaim.

3. Employer after reviewing and assessing the genuinity of thereviewed claim by the consultant after satisfying themselves theapproved claim is forwarded to the nancier (If it is donor fundedproject to seek for approval) but if it is nanced by GoT then, theclaims will be forwarded to the TANROADS Tender Board forapproval.

4. After approval, either from the Tender Board or Donor, MoID/TANROADS will prepare Addendum for variation. The addendumshould be signed by the client, the contractor and the representativeof the Donor if it is donor funded project.

5. Lastly, after signing the addendum, the document is normallyreturned to the nancier to be used as a basis for payment ofadditional cost.

Figure 2.3: Procedure for approving a claim for additional costs

MoID/TANROADSManagement requests

authorization forvariation to Tender

Board

MoID/TANROADSManagement instructsSupervisor to prepare

details of variation

Applicationof newrates

Applicationof existing

rates

New ratesrecommendedby Supervisor

Contractor suggests the

new rates

Supervisor checks

rates

Variation worksrecommendedby Supervisor

No Objection isgranted by the

Financier

Donor funded

Locallyfunded

Variation isapproved

End

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Figure 2.4: Procedure for Extension of Project Timeframe Chapter Three

Time variations in Road construction projects

This chapter provides details on the time variations in road constructionprojects compared to original or revised time. Roads can be nalised beforeset time, but in most cases time variations means delay.

Delays may be measured in different ways. One can for instance measuredelays in relation to original set time, regardless of whether this has beenaltered by later decision. It can also be measured in relation to revised timeset; and if several revisions are made, in relation to the nal revised timeset.

The content in this chapter is presented in the following order: Time variations among the examined road projects Causes to the time variations Consequences of delays

3.1 Original, revised and actual time of road projectsIn a single road project the time for completion of a road construction isstated in the contract between MoID/TANROADS and the contractor. Thistime might be revised by MoID/TANROADS once or a couple of timesdepending on different reasons. 19 The time revisions might occur at differentstages of the project implementation. But most of the time revisions havebeen experienced at the mid of the project implementation and towards theend of the project. Since this audit is aimed at analyzing the system for the management of roadprojects, delays of road constructions are analyzed related to original as wellas revised time. In projects where the time was revised more than once themeasurement of delays is related to the last revision of time.

19 The decision to revise the completion time is done by TANROADS upon receiving the contractorsrequested which normally reviewed by Consultants and later on passed to TANROADS for decision. Seesection 2.4.3.

Contractor requestsextension for the

completion of worksto supervisor

Supervisor analysesthe reasons given

Supervisorsstance

Does notsupport

extension

Supportsextension

Supervisor informs thecontractor

End MoID/TANROADStender board

approves extension

Contractor notified ofterms of extension

End

Supervisor recommends to

MoID/TANROADSonperiodof extension

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Decisions of revised time might imply delays for road construction projects.The impact on delays can be referred to both the frequency of time revisionsand the extent of time revisions.

Time revisions According to project and contract documents between MoID/TANROADSand the contractors, it is common with time revisions for the project workplans. These time revisions have been done as requested by the contractorswhen coming across different problems which prompted them to request forthe extended time. This is illustrated in table 3.1 below.

Table 3.1: Total number of time revisions in programme of works perstage

Road ProjectNumber of revised plans Total Number of

revisionsDesignstage Construction stage

Somanga Matandu 0 1 1KyabakariButiama 0 1 1Mwanza Town 0 2 2Shelui Nzega 1 1 2TindeShinyanga /Mwanza 1 1 2MorogoroDodoma 1 1 2NzegaTindeIsaka 1 1 2MuhutweKagoma 1 2 3SongweTunduma 1 3 4MutukulaMuhutwe 1 4 5

All road projects 7 17 24

Source: Project Files and Contract documents of the ten road projectsaudited 20

The table above shows that all projects had undergone time revisions of theirwork programmes. All of them were revised under the construction phaseand two thirds during the design phase.

Delays in relation to the original plan

The work programme is a mutually approved part of the contract betweenMoID/TANROADS and the contractor. The work program outlines the activityplan and set date for the start and completion of the road project.

20 Reasons for extension of time See Appendices 6 and 10

An assessment of delays in road constructions can be based on fourdimensions of time periods.

One dimension is the original time period for completion as stated inthe contract between MoID/TANROADS and the contractor.

Another dimension is the revised time which is the time period,according to MoID/TANROADS decisions on revised time.

A third dimension is the actual time period for completion of the roadconstruction project.

A fourth dimension if that occurs is the additional time after therevised time for completion.

The difference between original time and actual time is shown in Table 3.2.

Table 3.2 Original and actual time for the ten examined projects

Road projectTime to complete the road

Difference betweenoriginal and actual time

Planned months Actual months Months PercentageKyabakari Butiama 16 17 1 6Somanga Matandu 30 32 2 7Shelui Nzega 31 36 5 16Morogoro Dodoma 24 32 8 33Mutukula Muhutwe 34 46 12 35Nzega Tinde - Isaka 30 42 12 40Tinde Shinyanga/Mwanza 30 47 17 57Songwe Tunduma 24 39 15 63Muhutwe Kagoma 12 23 11 92Mwanza Town 30 58 28 93Total 261 372 111 43

Source: Data from project les and reports from MoID/TANROADS.

As seen in the Table 3.2 above, all projects have exceeded the original settime. The extension is quite signi cant for most projects. This was also thecase for those projects (SomangaMatandu and SheluiNzega) that werecompleted after a decision to reduce the scope and ambition for the projects.If those two projects are disregarded it means that the actual time exceededthe contracted and originally set plan by more than fty percent (51%). 21

21 The original set time for the remaining eight projects were in total 215 months. It took 110 additionalmonths to nalise them.

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Time variation in relation to the last revised planThe picture is thus somewhat different when the actual time (calendar monthsto build the road) is compared to the last revised time approved by MoID/TANROADS. In table 3.3 the actual time is compared to the last revised timefor each one of the studied road construction projects.

Table 3.3: Difference between revised and actual time for roadconstruction

Contract NameApproved and actual totalproduction time in months

Difference betweenrevised and actual time

Last revision Actual Months PercentageNzega Tinde Isaka 54 42 -12 -22Kyabakari Butiama 19 17 -2 -11

Morogoro Dodoma 32 32 0 0Shelui Nzega 36 36 0 0Somanga Matandu 32 32 0 0Tinde Shinyanga/Mwanza 47 47 0 0Mutukula Muhutwe 43 46 3 7Songwe Tunduma 35 39 4 11Muhutwe Kagoma 17 23 6 35Mwanza Town 40 58 18 45Total 355 372 17 6%

Source: Data from project les and reports from MoID/TANROADS.

As seen (Table 3.1) revisions were done in all projects (sometimes twotimes or more during the construction stage) during the overall process. Therevisions were often done in the middle or later stages of the constructionphase; still its common with deviations. In some cases the differences werequite signi cant.

Only in four out of ten projects the revised plan was followed. Two projectswere ready ahead of time, and four were delayed. This may be interpreted asan indication of shortcomings in planning and monitoring.

Review of extension of working days As described (section 2.22.3) MoID/TANROADS has a role to play when itcomes to both reviewing and recommendation of time extensions. Table 3.4shows the extensions of time granted to contractors by MoID/TANROADS asper their request.

Table 3.4: Request for extensions of time granted to contractors byTANROADS (days) 22

Road projectRequest forextension of

time

Reviewed andrecommended time

Granted by MoID/TANROADS

Muhutwe Kagoma 450 450 450Shelui Nzega 175 175 175Kyabakari Butiama 58 58 58Mwanza Town 180 180 180Somanga Matandu 45 45 45MutukulaMuhutwe 175 175 175Nzega Tinde Isaka 720 720 720Morogoro Dodoma 228 228 228Tinde Shinyanga/Mwanza 312 312 312Songwe Tunduma 324 324 324

Total 2667 2267 2267 (100%)Source: Information from the project les and contract documents 23

According to the table above, MoID/TANROADS have approved almost allrequests for the extension of time as requested by contractors and approvedby the consultant. The gures above indicate that MoID/TANROADS and itsconsultants did not carry out any independent analysis to verify the adequacyof the time requested.

3.2 Factors Contributing to delaysKnowledge and understanding about factors contributing to the delays is ofimportance for possibilities of preventing and limiting delays. Of the samereason it is important to know where and when in the road constructionprocedures the problems occur and how they affect the procedures for the

road constructions. Thus problems connected with the delays have beenexamined for the ten studied road construction projects.

22 There are six working days per week. However, all weeks do not consist of six full workings days andadding to that there are vacations. In short, calendar time in days or months is not the same as workingtime. 365 calendar days might for instance meanless than 300 days of working time.

23 Reasons for extension of time See Appendices 6 and 10

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Though delays related to the original time were dominating, delays relatedoccur to both the original and the revised time for completion. The examinationof factors contributing to delays has thus covered deviations from boththe original and the revised completion time. This implies that reasons forapproval of revised completion time also have been examined.

The examination of factors contributing to delays is based on the projectsles as well as interviews with MoID/TANROADS of cials including the

consultants and the contractors. In most of the projects extension of timehas been approved based on a number of reasons.

Factors in uencing the completion time and the responsibilitiesThere are many factors in uencing the completion time of road constructions.

The responsibility, however, is always the Governments and its authoritiesor the contractors, if problems occur. The responsibility of the Governmentand its authorities implies reasons caused by the Government authorities orother circumstances that the contractor cannot be responsible for, like forcemajeure, e.g. earth quake, heavy rains or ooding.

MoID/TANROADS (with consultants) is responsible for planning andpreparation, including the quality of the design or redesign works, conductedbefore signing of the contract. The contractor can thus take a proper conductedplanning and preparation for granted, before signing of the contract. Delayscaused by MoID/TANROADS can be affected by having to redesign partof a project or to somewhat change the scope of the quantities required. Itcould also be caused by shortcomings in MoID/TANROADS management,like delayed information, late decisions, poor supervision and monitoring etc.Delays could occur as a result of other factors, like late payment by the

nanciers, processing time for approval of tax exemptions or force majeure.

Lack of coordination with local authorities may also be a factor that causesdelay. Some utilities are required to be relocated before the start of theconstruction projects (telephone lines, water piping etc.) MoID/TANROADSis not in itself responsible for this. However in relation to the contractor MoID/TANROADS have to take a responsibility for this situation by liaising with theMinistry of Land and Human Settlement which is responsible for relocation.

The contractor also has responsibilities. The contractor is responsiblefor conducting the work according to the applicable standards and therequirement set by the design and the contract. Insuf cient skills or lack ofexpertise competence of staff is an example of a factor that may hamper thecontractors performance and which the contractor is responsible for. Lack

of capacity in mobilising plants and equipment is another. Poor managementby the contractor is a third example, such as a poorly developed system forsupervising and control.

Factors in uencing the revision of plans and causing delaysIn the table below the factors explicitly referred to by MoID/TANROADS asmotives in the documents for revisions of plans are presented.

Table 3.5 Factors in uencing delays and their frequencies (of cialversion)

FACTORS INFLUENCING DELAY NUMBER OF PROJECTS CONCERNEDMain categories Sub categoriesRedesign/new speci cations 9

Change in scope of work 4 Weaknesses in design 3 Additional designs 9

Changes in scope without redesign10 Additional quantities 10

Other changes 3

Management issues2 Inadequate projects supervision 1

Inadequate Contract management 1Contractors factors

1 Lack of skills of the contractors personnel 1 Lack of adequate equipment 1 Contractors work program miscalculations 1

Other factors (not in uential by TANROAD)

4 Force majeure (mainly heavy rains) 1 Late payments/processing time for tax

exemption. 3

Source: Information from the project les and contract documents

As seen above in nine out of ten projects TANROADS/MoID or the Governmentis seen as fully responsible for the delays. Only for one project the contractoris partly blamed as a motive for one of the two revisions done and the delaycaused. But even in that project the causes were mainly considered of beingbeyond the contractors control (the main factors were late payments to thecontractor, redesign and changes in scope within the given scope).

In general, the dominating causes were changes in scope (additionalquantities of various items were required to ful l the design) or to make some

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kind of redesign, from wishes to add new objects or things to the originallyapproved design. As seen its obvious that shortcomings on behalf of thecontractor are not decisive factors for MoID/TANROADS revisions. Its alsorare that MoID/TANROADS refer to shortcomings in its own management asa cause for revision.

One reason for changing design and scope is the time lag between thedesign stage and the construction stage. Among the examined projects, itwas quite common that it took 3-6 years after a design had been approveduntil the construction work actually started. During those years, conditionsor preferences may have changed, resulting in new demands etc. Anotherpotential explanation is of course that the original design was not properlydone or safe guarded.

According to MoID/TANROADS of cials, the many old designs made itnecessary to review the design before its implementation. According to thesame of cials, even though they know that there are going to be changesafter the design, they allow contractors to start the work. This is because ofthe often long time it took to secure funding.

So far it has only been the of cially stated causes to the revisions that havebeen presented. To get a more comprehensive picture, the Audit of cehas also asked the various stakeholders (of cials at MoID/TANROADS,supervisors or consultants and staff among the contractors). They sharemost of the of cial version presented above, but they all claim that it doesnot provide a full picture of the causes.

According to the stakeholders there were frequent delays caused by MoID/TANROADS less ef cient management. Unof cially, they also share theview that contractors lack of ef ciency was a common cause to delays; and

just as for MoID/TANROADS shortcomings more common than of ciallydocumented.

Moreover, all stakeholders stated that lack of coordination between MoID/TANROADS and local authorities was a common cause to delays. 24 Impact of the causes in terms of additional work daysBased on MoID/TANROADS own calculation almost all of the extra workingdays approved by the revisions was caused by redesign and changes inscope without redesign. A minor part (4%) was linked by late payment to thecontractor, and another small part (4%) was stated to be caused by poor

24 Interviews with different stakeholders

management by the contractor. Heavy rains was stated to have even less(2%) impact on the additional working days required as a result of the revisedplans.

3.3 Consequences of the DelaysDelayed completion of the road construction projects implies different kindsof immaterial and material losses and delayed bene ts for the society. Thesociety is losing the opportunity of having new roads which would be able toreduce accidents, traf c delays as well as vehicle wear and tear. In materialterms it is also possible to calculate on the losses.

Calculated capital costsDelays involve capital costs. This means that a proportion of the nal costsare caused by the longer than planned duration time. With a calculatedinterest rate of 18% that means a total capital cost of around 31 billion Tshsor 13 % of the total nal cost, just due to the extended time in relation to theoriginal plans. 25 These costs are not caused by anything else than the timefactor itself.

Additional administrative costs for TANROADSDue to the extended processing time, TANROADS and its consultants needto spend more time than expected to conduct the work required. For theseten projects, it has been calculated that these additional costs are close to 5billion Tshs. 26 Additional costs for the society in a long term perspectiveThe calculated capital and additional administrative costs for only these tenprojects is about 36 Billion Tshs. In a longer perspective, covering a greaternumber of projects, these costs will naturally be much higher. Still, the costfor the society of not having the roads built in time is likely to be signi cantlyhigher than these gures. Better roads will reduce transport costs andstimulate the economy. It will ensure safe life and reduce accidents. It hasnot been within the scope of the audit to calculate on these savings or cost-bene ts. But in most countries which conduct such calculations it is obviousthat delays or poor time management are costly, especially for the society asa whole in a long term perspective.

25 In total the projects exceeded the original plan by 111 months and the revised plan by 17 months (seetable 3.2 and table 3.3). With a calculated interest rate of 18% that means a total capital cost of around 31 BillionTshs or 13 % of the total nal cost, just due to the extended time in relation to the original plans. In relation to therevised plans the capital cost is marginal or 0.4 Billion Tshs or 2 % of the total costs minus the last revised budg-ets.

26 See appendix 10 for more detailed information.

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Chapter Four

Cost Deviation and Cost Overrun

4.1 IntroductionCost overrun is de ned as exceeding of the Contract sum, i.e. the agreedbudget sum between the contractor and the employer, MoID/TANROADS.The contract sum is speci ed and based on a number of concerned itemsincluding the rate for each item and the total amount of required money forthe project. Linked to the contract sum is also a formula for updating the rates,i.e. prices per unit. The updating of rates is decided by MoID/TANROADS

based on advice from its supervisors (supervising consultants).

The revised budget is reached when the original budget is added by other costelements which were not included when preparing the original budget. Therevised budget might occur for many reasons and at different stages of theproject implementation. But frequent revisions have been experienced at themid of the project implementation and towards the end of project completion.In a single road project, budget can be revised more than once depending onthe nature and reasons for the revision of the budget.

According to the contract documents, whenever there is an increase of thequantities/volume of materials at site (when the project is in constructionstage), contractor is supposed to inform the client through the consultant whois supervising the construction of the project on behalf of MoID/TANROADS.Then the consultant is supposed to review the request and re-measurethe quantities on question and inform the client on the matter. Then MoID/TANROADS can review the calculations made by the consultant and then, ifthey are in good order, they can accept the quantity increase.

4.2 Original and revised budgets and actual costsMinor changes can be approved without budget revisions, but if the requestsare huge or the total changes done or planned are many, it is required toadjust the budget. In short, the number of revised budgets is an indicationof how often major changes with cost consequences have occurred in theprojects.

Almost all projects had their budgets revised during the construction stage,as seen in the table below.

Table 4.1: Revised budgets during the construction stageRoad Project Budget revisionsShelui Nzega 0Somanga Matandu road 1Muhutwe Kagoma 1Kyabakari Butiama 1

Mwanza Town 1Morogoro Dodoma 1Mutukula Muhutwe 2Tinde Shinyanga /Mwanza 3Nzega Tinde Isaka 4Songwe Tunduma 4

Source: Project Files and Contract documents

As shown above, four out of ten projects were revised two times or more.Only one project did not have its budget revised (even though that project gotits time plan revised by ve months).

The total amount of added funding through the revised budgets was quitesigni cant, as seen in the table below.

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Table 4.2: Revised budgets during the construction stage (BillionTshs)

Road ProjectOriginalbudget Last revisedbudget

Change(%)

Shelui Nzega 20.7 20.7 0Somanga Matandu 12.3 12.4 1Songwe Tunduma 10.2 11.2 10Kyabakari Butiama 1.7 2.0 11Mwanza Town. 16.4 19.0 18Mutukula Muhutwe 13.8 17.6 28Muhutwe Kagoma 4.4 6.2 41Morogoro Dodoma 25.3 41.0 62

Tinde Shinyanga/Mwanza 28.3 53.2 88Nzega Tinde Isaka 20.6 41.6 102TOTAL 153.7 223.9 46


As seen above, the calculated cost for the ten projects had increased byclose to 50% from the original budgets. For three projects, the changes werehuge in both relative and absolute terms.

Original budgets and actual costsCost variation can be measured in various ways, and below it is measuredby comparing actual costs with the original contract sum.

Table 4.3: Original budget and Final Costs (Billion Tshs)

Road ProjectOriginalbudget Final Cost Deviation(%)

Shelui Nzega 20.7 19.5 -6Somanga Matandu 12.3 12.0 -2Muhutwe Kagoma 4.4 4.7 9Mwanza Town 16.4 18.2 11Kyabakari Butiama 1.7 1.9 12MutukulaMuhutwe 13.8 17.6 28Songwe Tunduma 10.2 14.1 38Morogoro Dodoma 25.3 43.9 74Nzega Tinde Isaka 20.6 44.2 115Tinde Shinyanga/Mwanza 28.3 65.2 130TOTAL 153.7 241.3 57


As shown, most of the projects had cost overrun, and in several projects toa high degree. Two projects used less money than budgeted, since theseprojects had been limited in scope (see under table 4.3). The largest costoverruns in both relative and absolute terms were most common among thebig projects.

4.3 Revised budget and actual costsCost variation can also be measured as difference between the last revisedbudget and the nal cost of each project. This is shown in the table below.

Table 4.4: Revised budget and nal costs (Billion Tshs)

Revised

budgetFinal cost Deviation

(%)Muhutwe Kagoma 5.2 4.7 -11Shelui Nzega 20.7 19.5 -6Kyabakari Butiama 2.0 1.9 -5Mwanza Town 19.0 18.2 -4Somanga Matandu 12.4 12.0 -3Mutukula Muhutwe 17.6 17.6 0Nzega Tinde Isaka 41.6 44.2 6Morogoro Dodoma 41.0 43.9 7Tinde Shinyanga/Mwanza 53.2 65.2 18Songwe Tunduma 11.2 14.1 21TOTAL 223.9 241.3 15


As seen above, four projects were not even able to keep their cost in line withthe last revised budget. Notable is that those three projects that had got theirbudgets revised several times were also among those who had dif culties toeven cope with the last revised budget.

Two projects (SheluiNzega and SomangaMatandu) had spent less moneythan the original budget, since some of the tasks were not executed. Accordingto the contract document, payment is done as per work done, and if there isany change of scope (e.g. omission) then contractor is not paid for that.

Finally, its worth noting that the term nal costs means nal cost both in thatsense that it covers the total and nal cost and also equals the money beingpaid by MoID/TANROADS. In other words, the contractor got paid not only forthe approved last revised budget, but also for the upcoming costs thereafter,

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after having gone through the accounts. 27 To sum up, this means that thecontractors got basically all the money they requested throughout the wholeprocess in all these projects and no contractor had to pay the stipulated feefor being delayed (for more information, see below and also chapter 5.)

4.4 Requested and granted request for additional costsThe management and supervision of road projects is done by MoID/TANROADS for all roads which are under them. To execute this task MoID/TANROADS as a client has employed consultants to supervise the works onits behalf. According to the contract documents, if there is any problem whichcan affect the cost of the road project, the contractor is required to notify theconsultant. After issuance of that notice, the contractor is required to prepare

a request and submit it to the consultant.

The consultant evaluates the claim and gives recommendations. MoID/TANROADS will then decide to accept or reject the claim. The mostimportant things to check are the quantities of work to be executed and theiraccompanying costs. Depending on those two factors, evaluation of thatrequest can result into dropping of some works, changing the quantities ornegotiating to reduce the rates applied etc.

The table 4.5 below shows the amount requested by contractors, whathave been approved by consultant and nal amount approved by MoID/TANROADS. Its worth noting that these requests presented below are not bynecessity linked to revisions of the budgets. Requests may occur at varioustimes, but put together with other cost increasing issues they can createincentive for revising the budget.

27 TANROADS did not disagree with any nal accounts (see chapter 5)

Table 4.5: Request for claim and granted cost increase (Billion Tshs)

Road Project

Requestedfor claim bycontractor

Reviewed andRecommendedby consultant

Approval by MoID/TANROADS

Nzega Tinde Isaka 23 .1 23 .1 23 .1Kyabakari Butiama 0 .34 0 .32 0 .32Muhutwe Kagoma 0.8 0.8 0.8SongweTunduma 1.0 1.0 1.0Shelui Nzega 1.9 1.9 1.9Mwanza Town 2.6 2.6 2.6Mutukula Muhutwe 2.8 2.8 2.8Somanga Matandu 12.4 12.4 12.4MorogoroDodoma 15.7 15.7 15.7Tinde Shinyanga/Mwanza 24.9 24.9 24.9TOTAL 85 .54 85 .52 85 .52 (100%)

Source: Project Files and Contract documents According to the table above, MoID/TANROADS and its consultants have inprinciple approved all the money as requested by contractors.

4.5 Factors contributing to cost overrun As shown above, when the nal costs were related to original budget allprojects that ful lled their undertakings had cost overruns. Information onthe causes to cost overrun is thus of interest in order to nd possibilities ofimprovements.

According to the project les, a number of factors causing cost increasewere identi ed. The various causes can roughly be divided into the twomain categories: (1) increased costs as a result of a new design and newspeci cations, and (2) increased costs due to quantities and variation ofprice factors. In the table below the impact to cost increase of each categoryis presented. The information has been obtained from the project les asdocumented by MoID/TANROADS and consultants.

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Table 4.6: Effect of each category to cost increase of the road projects

Reasons for cost increase Additional amountBill Tsh s %

New speci cation of works (new design) 20.0 23 Additional insurance costs 2.1 2Interest on delayed payment (0.5) and

nancial compensation to land owner (0.5) 1.0 1

Increased volume and prices- Increased quantities- Project cost increase

(VOP)

64.6 74 (33.5) (38) (31.1) (36)

TOTAL 87.7 100


As seen above volume related factors had great in uence on the increasingcost. First, it was common with new speci cations, which have been shownearlier (chapter 3 and 4). Such changes often meant higher volume (not onlyadditional objects). Second, adjustments of volumes occurred quite frequentduring the implementation stage and the costs for that were quite high, asseen above. Less remarkable to some extent is the cost increase, sincethese projects had a long duration time and were executed in an environmentwhere rapid price increases are rather common.

Design and starting time of the project

As earlier seen, a huge part of the increasing costs are related to misscalculation of some kind already in the design stage. This in turn could for

instance be linked to insuf cient preparation (ground work) when the designwas done or by less effective quality control. Other factors like changedconditions, values, priorities etc. have of course also affected the outcome.

One nding is however less expected: among these road projects there werenot any obvious correlation between short and long delay in commencementof the projects. The expectation was that projects that started with a designconducted several years ago ought to have greater difference betweenthe contract sum and the nal costs than other projects. Still its obviousthat those older designs got more expensive than originally planned, dueto the long processing time from having the design ready and starting theconstruction work.

Cost overrun according to MoID/TANROADS, consultants andcontractors

All costs have been approved and found reasonable by MoID/TANROADS. According to les and documents and of cials at MoID/TANROADS, themain causes to the increasing cost and the need to revise the budgets, arechanges in speci cation or unforeseen increased amount of work that haveto be carried out.

According to consultants and Association of Consulting Engineers, thereare several reasons why road projects often have high cost increase. Thereasons are inadequate planning, due to failure to come up with the goodcost estimates of each element. Most of the time, the rates which are usedare the ones taken from what has been used by contractors in other projectsand then modi ed a bit. But there is no thorough study carried out to establishthe actual cost of each work item and used them as a basis for contractingwith contractors. The way the procurement is executed is another aspect. Itmay turn out that the lowest bid may not be the most economical solution ina long term perspective.

Moreover, inadequate design which resulted into change of scope of workduring the construction stage is a common cause to cost overrun, accordingto both consultants and contractors. There are also problems with inadequateproject management. As examples they refer to the frequent failures to paythe contractors on time, resulting in interest payment, failure to processcontractors claims, or inspect and approve the completed work of thecontractor.

Most of these remarks are shared by the contractors and ContractorsRegistration Board of Tanzania. Final quantities are almost always quitedifferent from the original ones, according to their experience. And the site

conditions do often differ from design and planning documents (this couldinclude everything from soil pro le, borrow pit and water sources, to pricematerials).

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Chapter FiveQuality Control of Road Works

Good quality of road works is important for both safety and economic reasonsin any society. Thats why governments set quality standards that need tobe met and require government authorities to establish systems of qualitycontrol. In order to be effective these control systems need to cover the wholeprocess of planning, conducting and maintenance services.

The Audit Of ce has found frequent problems among the ten examined roadprojects linked to planning and supervising. This can be seen as an indicationof a quality control system problem.

The chapter focuses on the road construction stage.

5.1 General standards for planning and conducting roadworks

Quality control of road works in Tanzania is guided by the national standardsand guidelines specially developed for the local environment of the roadsector. The guidelines provide guidance on acceptable quality standards setas well as procedures for testing the compliance with these standards inthe stages of the road project. The guidance for establishing of standards isstated in the following documents:

Pavements and Materials Design Manual (PMDM 1999); Standard Speci cations for Road Works (SSRW 2000); Laboratory Testing Manual (2000); and Field Testing Manual

The general standards and guidelines are supplemented by the standardizedtender and contract documents, provided by various local and internationalinstitutions for works of civil engineering construction. 28 These documentsprovide the rules and procedures for managing the construction process inorder to achieve the desired results and include rights and responsibilities ofvarious parties during the implantation of the different project stages. 29

28 The institutions providing the documents include Fdration Internationale Des Ingnieristes Conseils(FIDIC) and Public Procurement Regulatory Authority (PPRA).

29 For an overview of the road works procedures see chapter 2.

Generally, these documents are similar except for minor differencesconcerning the procurement procedures and some conditions, e.g. for approvalto release varying nances. Thus, for the single cases the actual choice ofguiding standard documents depends on who is the nancier. In additionTANROADS sets a minimum standard for the road to be constructed.

According to the standard contract document between the client (TANROADS)and the contractor a quality control system shall be established by the clientand stated in the contract. 30 MoID/TANROADS is responsible for the roadworks, including the quality control.

5.2 The system of quality control

The system of quality control covers several activities. The main steps in theprocess of building roads are the design phase and the construction phase.

5.2.1 The design phasePlanning, preparation and reviewThe design is a plan or set of drawings and details produced to show the lookand function of the road before it is built. Designing is expected to be done afterthorough investigation of the sites. The investigations should include, but arenot limited to, soil investigations, geotechnical investigations, hydrologicalstudies, topographical surveys and interviews with stakeholders, includinglocal people within the vicinity of the project area. This could be done byuse of in-house engineers or outsourcing to private consulting rms. At thisstage, speci cations need to be set, and bills of quantities, cost estimatesand tender documents have to be prepared. The design has to be reviewedin order to safe guard its quality.

5.2.2 The construction phase

IntroductionFor the construction stage, contractors are expected to be engaged. 31 Basedon the conducted design with the speci cations of quality standards, thecontractors provide bids which have to be scrutinized and evaluated by MoID/TANROADS who proves the contractors technical and nancial capability ofperforming road projects.

30 Contract for consultancy services for the supervision of Roadworks31 The consultants and the contractors are engaged according to the Public Procurement Regulation,

2005 government Notice No. 98 of 15th April, 2005.

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According to the contract documents, some of the most important itemswhich determine the quality of the roads and need to be reviewed by MoID/TANROADS periodically are: Identi cation of defects; tests of materials;correction of defects; presence of quali ed contractors and consultantsstaff; and early warning.

TANROADS/MoID quality control of construction work is conducted bysupervising, monitoring, inspections and evaluations. Supervising is acontinuously ongoing activity, which is supposed to be carried out bothby the responsible project manager at MoID/TANROADS and to a largeextent by hired consultants. Monitoring is also an ongoing activity, butmore periodically, in order to follow how the project is developing in relationto the activity plan etc. Inspections are carried out as monthly inspections

and also in the form of nal inspections with the aim to detect problems tobe addressed and adjusted. Evaluations are to be conducted during criticalsteps in the process when more comprehensive and perhaps independentassessments are needed.

Supervising and Monitoring MoID/TANROADS is responsible for executing supervising and monitoringfunctions. Laboratory tests and tests done at site have to be performed toascertain compliance with speci cations. Defective works should be re-worked or improved prior to approval by the supervisor. Materials to be usedfor the works must also be subjected to tests, where necessary, prior to theiruse. MoI