Construction firms in financial trouble

Shamsul Huda | Published: December 10, 2013 00:00:00 | Updated: November 30, 2024 06:01:00

Most of the construction firms are facing financial trouble despite country's development works increasing every year, sources said.
Absence of price adjustments in the government funded projects, high rates of bank interest, higher performance guarantee, security money and some other problems are leading the firms into trouble, industry sources said.
A Bangladesh Association of Construction Industry (BACI) source said new investments are coming to this sector but many existing firms are in trouble as they are unable to quote prices as per their overhead costs.
He said the new firms are quoting lower prices as their infrastructure and other overhead costs are lesser than their older counterparts.
He said before awarding a job to the lowest bidder the authorities care little about the construction firms' integrity, strength and capability. As a result in many cases the new firms cannot complete their assignments.
BACI Vice President SC Ghosh said Annual Development Programme (ADP) size is increasing every year and new investments are coming in the construction sector but stable growth of good firms is not taking place.
He said the old firms find it is difficult to sustain in the market as their equipment maintenance and overhead costs are higher than the new and smaller ones. So the new firms can quote lower prices.
He said there are some government devised terms and conditions which are not encouraging the development of local firms.
Mr. Ghosh said according to the government's terms and conditions for big projects the locals cannot participate as the conditions are tight saying the locals do not have enough experience and expertise.
He said currently a good number of local firms are capable of working in most of the big projects which are often assigned to foreign firms.
Â "We don't know why the authorities bypass capable local firms and allow foreigners in the projects", he said.
The big firms which have invested a lot of money in purchasing high tech equipment, developing skilled manpower and infrastructure facilities are in trouble as they need to compete in unhealthy environment, a construction industry source said.
Monico Limited managing director Engineer Shafiqul Alam Bhuiyan, said the government is yet to pay money to some firms against projects completed under emergency rehabilitation programme (ERP).
He said many firms are facing financial trouble as they are not getting the bills against the money they had invested in the ERP.
He said along with the existing problems the current shutdowns are also putting pressure on this sector as the firms cannot move construction materials to their sites.
A source in the construction industry said due to problems in moving materials to the sites progress of many projects are slow and the overhead costs are increasing.
Â "We don't get price adjustments in the government funded projects when delays are caused by the government side. As a result duration of the projects increase, within which prices of construction materials also go up," Engineer Bhuiyan, also former BACI president, said.
He said as there are no price adjustments so it is difficult for many firms to complete projects and quality of work is hampered.
A planning commission official said, "There is provision for allowing price adjustments in the projects whose duration is more than eighteen months but it is not being maintained in all the projects."
He said an uneven competition and slow growth is taking place and already many big, stable firms are facing trouble.
The government must devise policies so that the growing construction firms can sustain themselves in the market and the terms and conditions for big projects should be made easier and flexible for the local capable firms to take part, he said.