League of Construction Companies: Reflections of a Consultant

A conversation with Soji Apampa, BIF Country Manager: My initial conversation with Soji Apampa was vague, but I could tell he was interested in confirming my interest in doing some “assignment”; and that my strategy, financial, legal, political economy and consulting background were relevant to whatever the job entailed. Understandably, he couldn’t reveal all facts, as he still needed my resume, and probably some approvals, but I could decipher some vague outlines of the “project”.

Channels of Communication!
Then a text from Rex! Rex was the lead person at GEMS 2 office responsible for the “League of Contractors” project. He was eager to conclude this project (apparently he was exiting the GEMS 2 office and sought to clean up his desk). But his text and subsequent phone call were “anticipatory”, as I wasn’t aware the contract had been finalized and was not expecting his call. Explanations,…….and then we set up a meeting on April 27, 2012 where I and my colleague Kehinde Ayanbadejo got a brief on the “League of Contractors” project. Rex wanted an urgent start from us, and we did attempt so to do. But then contract terms needed to be clarified and the correct communication channel to me, had to be the BIF Country Manager. Eventually, these were sorted out and a kick-off brief from Soji took place on May 16, 2012.

Project Overview
My deliverables on the LoC project was development of an inclusive, innovative, operating model for the League of Contractors which should highlight the following:
• How best to organize the administration;
• Provide a guide on how best to construct the organization’s constitution (highlighting membership, entry criteria, funding criteria, code of conduct, disciplinary procedures, roles and responsibilities, meeting frequency, Board structure & composition etc);
• How financial sustainability could be achieved;
• Types of partnerships required for optimum leverage in advocacy by the League of Contractors.

The deliverables also included collection and analysis of some baseline data to establish the current position of the group including its successes and failures; in order to track progress at a later stage. For instance, the average amount of retention fees unpaid to the group and the average time it has taken to recoup this after the due date, average value of jobs, average number of artisans employed (all in the last 12-24 months); recommendation of an appropriate service provider for debt recovery and blog on learning from the project.

But…Why a League of Contractors?
The Nigerian construction industry is dominated by “foreign” construction companies-European, Chinese, Lebanese and others. The German firm, Julius Berger is by a long stretch the dominant firm in the sector. Other frontline firms are Italian (Gitto Construction), Chinese (CCECC) and Lebanese (Setraco). The consequences are that domestic value-added and social impact is severely limited. Nigerian indigenous contractors are marginalised, especially in the lucrative government sector. Governments over the years have not devoted attention to building the capacity of domestic firms, content to award the largest projects to expatriate firms. Yet a group of professional, qualitative and competent local firms have emerged and they have been relatively successful in the private sector. They are even patronised by foreign companies who find them quite competent.

The GEMS project identified the construction sector, and in particular the professional local operators as firms who could generate employment and achieve positive social impact for the Nigerian economy. One clear objective was to see whether this category of construction companies could be encouraged not just to employ more artisans and technicians, but to help them improve their skills and competences and help develop their earning capacity.

What’s in a name?
The “League of Contractors” was the ‘interim’ name adopted for the group we were seeking to help form. My immediate instinct was that “contractors” in the Nigerian environment did not convey professionalism and respectability. Instead, it may in fact have an association with Nigeria’s corruption, especially in the public sector. I was going to seek to validate this choice. Indeed a few probing questions, later it was clear that League of “Construction Companies” was more like it!

Where’s the Value Point?
The impression we had received at inception was that value to the League’s members would most probably come in the short term from assistance with collection of outstanding “retention fees”. This was not validated by our baseline data gathering. The figures were relatively low in most cases and some firms did not have any practical problem with retention fees; and collection of retention fees was tied to client relationships and projects. While it was a “headache”, in terms of time and effort required to collect, it was not clear that a debt recovery approach was optimal. It seems to me that the collection approach would have to be more careful and diplomatic. As you would see later, we think a local content law in construction sector may be the most critical value point.

Data, Meeting and Interview Fatigue
It did seem that many of the prospective League of Construction Companies members were suffering from meeting fatigue. They had attended several meetings and while they were interested in the idea, action and closure was now the priority! The progress made in securing meeting appointments and obtaining data may have been eased only because several of the respondents knew the consultant either directly or by reputation. Given the nature of the initiative, future engagement time and incidences need to be carefully rationalized.

Conceptual Overview
• Based on my experience and insight, I have (as proposed in the accompanying information) suggested a structure of three (3) types of members:
I. Full Corporate Members (in effect the core of the League)
II. Associate Corporate Members (companies which can be developed to full membership) and
III. Individual Professionals (who need training, mentoring and development and who can form a pool of talent for both employment and later entrepreneurship for the sector).

• Social Impact
We have retained the imperative of social impact and inclusion through the emphasis on value chain development and training of artisans and tradesmen. The League members will appreciate the need for this from an economic standpoint, only if sector volumes and profitability increases, as a local content law would produce.

• Local Content Law
The environment is conducive to the enactment of a local content law in the construction industry after similar exercise in oil and gas, cabotage/maritime and an Agricultural Transformation Agenda focused on increasing local content in food production, processing and agric-business. We strongly believe the League will gain relevance and credibility, as well as increase industry volumes by championing such initiative.

• The draft constitution, conceptual overview document, draft Memorandum and Articles of Association all detail other elements of this initiative, the League of Construction Companies.

• It has being an insightful experience working on this initiative to help create a body that will improve standards, skills & competences and quality in the indigenous construction sector in Nigeria and achieving social impact through value chain development and developing artisans and tradesmen. Hopefully the initiative would improve industry volumes as well.