Dev projects also feel the heat of Russia-Ukraine war

The Roads and Highways Department had floated tenders for three projects seven months ago, but no contractor had bid for those.

The department has not issued any new tender since then, said an official on condition of anonymity.

Contractors have said they decided not to take part in public tenders as the three-year-old price schedule of the government does not cover the recent hikes in construction material costs.

Prices of construction items had been on the rise since the outbreak of Covid-19 pandemic and the Russia-Ukraine conflict is causing further hikes, creating compelling reasons for contractors to ask for updating the government's rates of construction materials.

Pradeep Kumar, organising secretary of the Contractors Association of Roads and Highways Department, said, "We failed to get a new rate schedule despite several rounds of talk with the authorities. So we have decided not to participate in any new tender since December last year."

AKM Monir Hossain Pathan, chief engineer of the Roads and Highways Department, said, "We have talked to the ministry several times about the rate schedule. The government will make a decision soon."

"No circular for new tender is being issued for any project at present. We are discussing with contractors on how to keep the ongoing projects running. We are trying our best to support them. However, some tenders have been issued for some small projects at district and divisional level," he added.

The situation is almost the same for other departments of the government that implement a majority of development works all over the country. The number of new tenders issued by different departments and agencies of the government has decreased in the last seven months or more, people concerned said.

Slowing of government projects means loss of work for construction workers during this hard time of soaring prices. At least 15 lakh labourers in road and bridge constructions are left without work, contractors' association leaders estimated.    

Economist Dr Khondaker Golam Moazzem said if development projects keep getting interrupted, 35 lakh construction workers and another 20 lakh labourers who depend on the projects would be in trouble.     

Referring to Covid-caused income cut of the workers and rising commodity prices, he said, "If the project sites shut down, they eventually will become jobless."    

He suggested the government figure out ways to continue the infrastructural projects as well as improve the living standard of the workers. 

Mezbaur Rahman Ratan, general secretary of the Bangladesh Contractors Association, told The Business Standard, "The prices of construction materials have shot up but the government has not increased the expenditure of ongoing projects. As a result, the contractors are in a difficult situation."

Mainuddin Monem, managing director of Abdul Monem Limited, one of the largest industrial conglomerates in Bangladesh, said, "Construction work is being hampered due to rising raw material prices. The government should coordinate the prices by taking immediate action."

Officials of the contractors' association said currently the contractors are not interested in participating in any new tender as they are struggling with ongoing projects.

According to the Roads and Highways Department, 232 local and foreign contractors are currently working on different road construction projects worth Tk22,829 crore under the department.

The department is currently implementing a project titled Developing Elenga-Hatikamrul-Rangpur Road to a 4-lane highway approved by the Executive Committee of the National Economic Council (Ecnec) at a cost of Tk16,000 crore. The project is supposed to be completed in 2024. Currently, construction work worth Tk6,000 crore is ongoing in the project. 

Waliur Rahman, project director of the Road project, said, "It is still uncertain whether the raw material price hike would hamper the project work. However, if the war between Russia and Ukraine extends, it may affect the project."

He said, "Every project has an allocation for price contingency considering the increase in the price of raw materials. In some projects, the government also allocates extra money based on the price index of the Bangladesh Bureau of Statistics. However, if the extra amount is higher than the DPP [Development Project Proposal] allocation, the implementation of the project will be in trouble."

Impact of Russia-Ukraine conflict

At the end of last year, the price of mild steel rod was Tk80,000 per tonne, which has increased to Tk87,000 per tonne after the Russia-Ukraine conflict started on 24 February.

According to rod manufacturers, the price of the construction material increased in the local market due to the ongoing conflict as most of the raw materials used to come from Ukraine.

The prices of cement have risen 18% in the past two weeks. Currently, a bag of cement is being sold in the market at Tk 420-485 which was Tk 385-415 at the end of last year.

The prices of imported stone have increased to Tk4,000 per tonne from Tk3,000, bitumen Tk9,800 per drum from Tk6,500, brick Tk10,000 per 1,000-piece from Tk6,000-7,000.

Manwar Hossain, president of the Bangladesh Auto Re-Rolling and Steel Mills Association, said, "The cost of importing scrap, the main raw material for rod, was earlier $435 per tonne that has risen to $500 per tonne after the start of the Russia-Ukraine conflict.

The situation has made it difficult and costly to bring these raw materials by sea."

Number of new tenders dropped

Construction projects worth Tk19,000 crore are currently running under the Public Works Department that have been implemented by 1,000 members of the Bangladesh Public Works Contractors Association.

Babul Akhtar Babla, general secretary of the organisation, said that they are not participating in any new tender like the contractors of other sectors.

"Over the past two weeks, prices of various construction materials have shot up by more than 20%, which has forced some 60 projects to be halted," he said.

Mohammad Shahid Ullah, secretary of the Public Works Department, said, "It is not that issuing new tenders is completely stopped.

The old projects are running as there is no new rate schedule. Notification for new projects will be given very soon."

Some 143 projects worth Tk30,000 crore are underway under the Local Government Engineering Department (LGED) including 70 construction projects.

Sheikh Kauser Ahmed, joint secretary of LGED's Dhaka Metropolitan Contractors Association, said, "The prices of raw materials have gone up. The wage of workers has also increased by 30%-40%. Contractors are in extreme distress."

Md Abdur Rashid Khan, chief engineer, LGED, said, "Issuing new tenders has not been stopped due to increase in market price of construction materials. However, contractors have not participated in some tenders."

According to the Ministry of Planning, development projects worth about Tk2.37 lakh crore are underway in the country, of which 80% is construction related projects worth Tk1.90 lakh crore.

According to people concerned, the departments and agencies implementing the projects are also facing the impact of the global situation as very few new tenders have been issued by them.

However, no progress has been achieved to formulate a new rate schedule so far to address the issue.

Pradip Ranjan Chakraborty, secretary of the Planning Division, told The Business Standard, "The government is working to prepare a unified rate schedule for all ministries and departments. Once ready, it will stop different companies charging different prices for the same type of work."

"The new rate schedule would be formulated considering rising prices of commodities and raw materials. However, no final decision has been made yet," he added.

People concerned said that the rate schedule is supposed to be updated every year but the government has not made any changes since its formulation in 2019.

Economist Ahsan H Mansur said, "The government does not seem to have any proper regulatory authority in monitoring the construction material market. Even if it exists, it is not functional. For this, monitoring needs to be intensified."

"The Indian government has taken strong action in this regard and engaged itself in importing raw materials. It has been subsiding for a certain period of time. But Bangladesh could not do that," he added.