Clear, Hold and Build

Clear, Hold and Build Conditions and practices characterising construction in conflict and post-conflict settings

André Ullal

ORCID ID 0000-0002-4887-5186

PhD Thesis

November 2018

Faculty of Architecture, Building and Planning

University of Melbourne

This thesis is submitted in total fulfilment of the Doctor of Philosophy degree

For Sana, again.

i

ABSTRACT

The study addresses construction in the context of increased political instability and violence

that characterise conflict and post-conflict settings. Effects of political instability and violence upon

conditions surrounding construction projects and the ways that construction practitioners respond

to these conditions are investigated. Conflict and economic growth are associated such that conflict

and post-conflict situations typically occur in poorer countries at earlier stages of economic

development. Therefore, the study commences with a review of statistical indicators that identifies

how conditions surrounding construction in conflict-affected countries differ from conditions in

other developing countries that are not affected by recent conflict. Four case studies then focus on

relationships between prevailing conditions, construction practices and project outcomes:

Afghanistan from 2002 to 2012, Timor-Leste from 2007 to 2012, South Sudan from 2005 to 2012

and Pakistan from 2007 to 2012. In each case study, semi-structured interviews draw on knowledge

and experience of practitioners, with corroboration from statistics and observations. Statistical

indicators of prevailing conditions are used to position each case in relation to the broader group of

conflict and post-conflict settings, supporting synthesis and generalisation of case-specific findings.

Notwithstanding significant differences between individual conflict and post-conflict

situations, conflict is found to exacerbate many of the problematic conditions surrounding

construction that other studies have associated with construction in developing countries in general.

The regulatory environment surrounding construction is particularly susceptible to effects of political

instability and violence, including the effectiveness of construction regulation, the reliability of the

legal frame for contracting and the prevalence of corruption. While increased political instability

and violence is associated with restricted availability and mobility of construction practitioners,

particularly client representatives and consultants engaged in monitoring works and administering

contracts, access to other construction resources such materials and equipment may be less affected.

In the context of weakened regulatory environments, shortened investment horizons in unstable

settings can promote opportunism among various practitioners. Opportunistic practices identified

in the study include: fraudulent materials testing; various forms of petty and grand corruption;

collusion, fraudulent bidding and excessive under-bidding in competitive tenders; reassignment of

awarded contracts; and intentional compromises to construction quality. Positive practices are also

identified in the study, including strategic award of contracts by clients and investment by

contractors, which can support improved construction supply capacity despite problematic

conditions. Beyond immediate project outcomes, these practices can potentially have more

significant political implications and enduring effects upon construction industry development.

Increased prevalence of dysfunctional practices suggests a limited effectiveness of standard

construction procurement and tendering arrangements in the context of weakened regulatory

environments and shortened investment horizons. Several measures are proposed to support

improved effectiveness of standard procurement and contracting arrangements.

ii

DECLARATION

This thesis contains only my original work toward the Doctor of Philosophy Degree. Due

acknowledgement has been made in the text to all other material used. The thesis is fewer than

100,000 words, exclusive of figures, tables, the bibliography and appendices, as approved by the

Research Higher Degrees Committee.

André Ullal

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TABLE OF CONTENTS

LIST OF FIGURES _____________________________________________________________ VII LIST OF TABLES _______________________________________________________________ IX LIST OF ACRONYMS ___________________________________________________________ X LIST OF ANNEXES ____________________________________________________________ XII PREFACE ___________________________________________________________________ XIII

CHAPTER 1 INTRODUCTION __________________________________________1

CHAPTER 2 LITERATURE REVIEW _______________________________________7

2.1 CONSTRUCTION IN CONFLICT AND POST-CONFLICT SETTINGS _____________________ 7 2.2 CONSTRUCTION IN DEVELOPING COUNTRIES _________________________________ 11

2.2.1 Construction and economic growth __________________________________ 11 2.2.2 Construction resources and supply capacity ___________________________ 14 2.2.3 Construction regulation _____________________________________________ 18 2.2.4 Construction project outcomes in developing countries __________________ 21

2.3 CONFLICT ENVIRONMENTS _______________________________________________ 22 2.3.1 Institutional conditions _____________________________________________ 22 2.3.2 Economic conditions _______________________________________________ 25 2.3.3 Post-conflict reconstruction programs _________________________________ 26

CHAPTER 3 CONCEPTUAL FRAME & THESIS PROPOSITION _____________ 29

3.1 CONCEPTUAL FRAME ___________________________________________________ 29 3.1.1 General environmental conditions ____________________________________ 29 3.1.2 Specific construction conditions______________________________________ 31 3.1.3 Construction actors ________________________________________________ 32 3.1.4 Construction practices ______________________________________________ 34 3.1.5 Project outcomes __________________________________________________ 35 3.1.6 Regulation ________________________________________________________ 35

3.2 THESIS PROPOSITION ___________________________________________________ 37

CHAPTER 4 RESEARCH METHODOLOGY ______________________________ 39

4.1 THE CASE-STUDY APPROACH _____________________________________________ 39 4.1.1 Rationale for a case study approach __________________________________ 39 4.1.2 Case selection and positioning _______________________________________ 42

4.2 DATA COLLECTION ____________________________________________________ 43 4.2.1 Interviews ________________________________________________________ 43 4.2.2 Observations _____________________________________________________ 47

4.3 DATA ANALYSIS _______________________________________________________ 49

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4.3.1 Review of statistical data ____________________________________________ 49 4.3.2 Coding of interview transcripts _______________________________________ 50 4.3.3 Network analysis __________________________________________________ 50 4.3.4 Network synthesis _________________________________________________ 51

4.4 REPORTING __________________________________________________________ 52

CHAPTER 5 STATISTICAL REVIEW OF CONDITIONS ____________________ 53

5.1 DEFINITION OF CATEGORIES ______________________________________________ 53 5.2 REVIEW OF STATISTICS __________________________________________________ 55

5.2.1 General conditions. ________________________________________________ 55 5.2.2 Economic conditions. ______________________________________________ 56 5.2.3 Regulatory conditions. ______________________________________________ 58

5.3 DISCUSSION _________________________________________________________ 59 5.4 TABLES ______________________________________________________________ 62 5.5 FIGURES _____________________________________________________________ 63

CHAPTER 6 AFGHANISTAN __________________________________________ 67

6.1 CONFLICT CONTEXT AND CONSTRUCTION CASE _______________________________ 67 6.1.1 Description of the conflict context ____________________________________ 67 6.1.2 Position of the construction case _____________________________________ 70

6.2 PRIMARY DATA________________________________________________________ 72 6.3 ANALYSIS AND FINDINGS ________________________________________________ 73

6.3.1 Design and certification of actors and works ___________________________ 74 6.3.2 Tendering and award of contracts ____________________________________ 78 6.3.3 Mobilisation and management of resources ____________________________ 83 6.3.4 Contract conditions and administration _______________________________ 87 6.3.5 Summary of findings _______________________________________________ 91

6.4 DISCUSSION _________________________________________________________ 91 6.5 TABLES ______________________________________________________________ 96 6.6 FIGURES _____________________________________________________________ 99

CHAPTER 7 TIMOR-LESTE___________________________________________ 111

7.1 CONFLICT CONTEXT AND CONSTRUCTION CASE ______________________________ 111 7.1.1 Description of the conflict context ___________________________________ 111 7.1.2 Position of the construction case ____________________________________ 114

7.2 PRIMARY DATA_______________________________________________________ 115 7.3 ANALYSIS AND FINDINGS _______________________________________________ 116

7.3.1 Design and certification of actors and works __________________________ 117 7.3.2 Tendering and award of contracts ___________________________________ 118 7.3.3 Mobilisation and management of resources ___________________________ 122

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7.3.4 Contract conditions and administration ______________________________ 127 7.3.5 Summary of findings ______________________________________________ 130

7.4 DISCUSSION ________________________________________________________ 130 7.5 TABLES _____________________________________________________________ 134 7.6 FIGURES ____________________________________________________________ 137

CHAPTER 8 SOUTH SUDAN ________________________________________ 147



8.3.1 Design and certification of actors and works __________________________ 152 8.3.2 Tendering and award of contracts ___________________________________ 155 8.3.3 Mobilisation and management of resources ___________________________ 159 8.3.4 Contract conditions and administration ______________________________ 164 8.3.5 Summary of findings ______________________________________________ 166


CHAPTER 9 PAKISTAN _____________________________________________ 181



9.3.1 Design and certification of actors and works __________________________ 186 9.3.2 Tendering and award of contracts ___________________________________ 187 9.3.3 Mobilisation and management of resources ___________________________ 191 9.3.4 Contract conditions and administration ______________________________ 192 9.3.5 Summary of findings ______________________________________________ 195


CHAPTER 10 SYNTHESIS & FURTHER DISCUSSION ____________________ 209

10.1 SYNTHESIS __________________________________________________________ 209 10.1.1 Design and certification of actors and works _________________________ 210 10.1.2 Tendering and contract award _____________________________________ 212

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10.1.3 Resource mobilisation and management ____________________________ 213 10.1.4 Contract conditions and administration _____________________________ 216


CHAPTER 11 CONCLUSION ________________________________________ 231

11.1 CONCLUSIONS _______________________________________________________ 231 11.2 IMPLICATIONS AND PRACTICAL RECOMMENDATIONS __________________________ 236 11.3 LIMITATIONS OF THE STUDY _____________________________________________ 240 11.4 FURTHER RESEARCH ___________________________________________________ 241

BIBLIOGRAPHY _____________________________________________________ 245

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LIST OF FIGURES

Figure 3.1 Conceptual frame

Figure 5.1 General conditions – Conflict-affected countries and other developing countries

Figure 5.2 Economic conditions – Conflict-affected countries and other developing countries

Figure 5.3 Regulatory conditions – Conflict-affected countries and other developing countries

Figure 6.1 General conditions - Afghanistan

Figure 6.2 Economic conditions - Afghanistan

Figure 6.3 Regulatory conditions – Afghanistan

Figure 6.4 Interviewee distribution – Afghanistan

Figure 6.5 Network diagram legend

Figure 6.6 Network analysis – Afghanistan – Design and certification of actors and works (1)

Figure 6.7 Network analysis – Afghanistan – Design and certification of actors and works (2)

Figure 6.8 Network analysis – Afghanistan – Tendering and contract award (1)

Figure 6.9 Network analysis – Afghanistan – Tendering and contract award (2)

Figure 6.10 Network analysis – Afghanistan – Resource mobilisation and management (1)

Figure 6.11 Network analysis – Afghanistan – Resource mobilisation and management (2)

Figure 6.12 Network analysis – Afghanistan – Contract conditions and administration (1)

Figure 6.13 Network analysis – Afghanistan – Contract conditions and administration (2)

Figure 7.1 General conditions – Timor-Leste

Figure 7.2 Economic conditions – Timor-Leste

Figure 7.3 Regulatory conditions – Timor-Leste

Figure 7.4 Interviewee distribution – Timor-Leste

Figure 7.5 Network analysis – Timor-Leste – Design and certification of actors and works

Figure 7.6 Network analysis – Timor-Leste – Tendering and contract award (1)

Figure 7.7 Network analysis – Timor-Leste – Tendering and contract award (2)

Figure 7.8 Network analysis – Timor-Leste – Resource mobilisation and management

Figure 7.9 Network analysis – Timor-Leste – Contract conditions and administration

Figure 8.1 General conditions – South Sudan

Figure 8.2 Economic conditions – South Sudan

Figure 8.3 Regulatory conditions – South Sudan

Figure 8.4 Interviewee distribution – South Sudan

Figure 8.5 Network analysis – South Sudan – Design and certification of actors and works

Figure 8.6 Network analysis – South Sudan – Tendering and contract award

Figure 8.7 Network analysis – South Sudan – Resource mobilisation and management

Figure 8.8 Network analysis – South Sudan – Contract conditions and administration

Figure 9.1 General conditions – Pakistan

Figure 9.2 Economic conditions – Pakistan

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Figure 9.3 Regulatory conditions – Pakistan

Figure 9.4 Interviewee distribution – Pakistan

Figure 9.5 Network analysis – Pakistan – Design and certification of actors and works

Figure 9.6 Network analysis – Pakistan – Tendering and contract award

Figure 9.7 Network analysis – Pakistan – Resource mobilisation and management

Figure 9.8 Network analysis - Pakistan – Contract conditions and administration

Figure 10.1 Network synthesis – Design and certification of actors and works

Figure 10.2 Network synthesis – Tendering and contract award

Figure 10.3 Network synthesis – Resource mobilisation and management

Figure 10.4 Network synthesis – Contract conditions and administration

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LIST OF TABLES

Table 5.1 Conflict-affected countries and other developing countries - 2012

Table 6.1 Interviewee list – Afghanistan

Table 6.2 Statistically-defined conditions – Afghanistan

Table 6.3 Transcript-coded variables - Design & certification of actors & works – Afghanistan

Table 6.4 Transcript-coded variables - Tendering and contract award – Afghanistan

Table 6.5 Transcript-coded variables - Resource mobilisation & management – Afghanistan

Table 6.6 Transcript-coded variables - Contract conditions & administration – Afghanistan

Table 6.7 Summary of findings - Afghanistan

Table 7.1 Interviewee list – Timor-Leste

Table 7.2 Statistically-defined conditions – Timor-Leste

Table 7.3 Transcript-coded variables - Design & certification of actors & works – Timor-Leste

Table 7.4 Transcript-coded variables - Tendering and contract award – Timor-Leste

Table 7.5 Transcript-coded variables - Resource mobilisation & management – Timor-Leste

Table 7.6 Transcript-coded variables - Contract conditions and administration – Timor-Leste

Table 7.7 Summary of findings – Timor-Leste

Table 8.1 Interviewee list – South Sudan

Table 8.2 Statistically-defined conditions – South Sudan

Table 8.3 Transcript-coded variables - Design & certification of actors and works – South Sudan

Table 8.4 Transcript-coded variables - Tendering and contract award – South Sudan

Table 8.5 Transcript-coded variables - Resource mobilisation & management – South Sudan

Table 8.6 Transcript-coded variables - Contract conditions & administration – South Sudan

Table 8.7 Summary of findings – South Sudan

Table 9.1 Interviewee list – Pakistan

Table 9.2 Statistically-defined conditions – Pakistan

Table 9.3 Transcript-coded variables - Design & certification of actors and works – Pakistan

Table 9.4 Transcript-coded variables - Tendering and contract award – Pakistan

Table 9.5 Transcript-coded variables - Resource mobilisation and management – Pakistan

Table 9.6 Transcript-coded variables - Contract conditions and administration – Pakistan

Table 9.7 Summary of findings – Pakistan

Table 10.1 Synthesis variables – Design & certification of actors and works

Table 10.1 Synthesis variables - Tendering and contract award

Table 10.1 Synthesis variables - Resource mobilisation and management

Table 10.1 Synthesis variables - Contract conditions and administration

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LIST OF ACRONYMS

ADB Asian Development Bank

AECCOP Construction and Public Works Entrepreneurs Association

(Associacao Empressarios Construcao Civil e Obras Publicas)

AfDB African Development Bank

AFS Afghani (currency of Afghanistan)

ASTM American Society for the Testing of Materials

AusAID Australian Agency for International Development

CERP Commander’s Emergency Response Program

CNT Timorese National Consortium (Consocio Nacional Timorese)

CPA Comprehensive Peace Agreement

CPIA Country Policy and Institutions Assessment

CRS Creditor Reporting System

CSR Common Schedule of Rates

DFiD Department for International Development

FATA Federally Administered Tribal Areas

FIDIC International Federation of Consulting Engineers

(Fédération Internationale Des Ingénieurs-Conseils)

GDP Gross Domestic Product

GNI Gross National Income

IDA International Development Association

ILO International Labour Organisation

IMF International Monetary Fund

INGO International Non-Government Organisation

IRAI IDA Resource Allocation Index

ISAF International Security Assistance Force

ISO International Standards Organisation

NATO North Atlantic Treaty Organisation

NGO Non-Government Organisation

NWFP North Western Frontier Province

ODA Official Development Assistance

OECD Organisation for Economic Cooperation and Development

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PDD Decentralised Development Program

(Programa de Dezenvolvimentu Desentralizadu)

PEC Pakistan Engineering Council

PML Pakistan Muslim League

PPP Pakistan People’s Party

PRIO Peace Research Institute Oslo

PRT Provincial Reconstruction Team

SIGAR Special Inspector General for Afghan Reconstruction

SPLA Sudan People’s Liberation Army

SPLM Sudan People’s Liberation Movement

SSP South Sudanese Pound (currency of South Sudan)

UCDP Uppsala Conflict Data Program

UN United Nations

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Program

UNIDO United Nations Industrial Development Organisation

UNMISS United Nations Mission in South Sudan

UNMIT United Nations Mission in Timor-Leste

UNOPS United Nations Office for Project Services

UNStats United Nations Statistics Division

UNTAET United Nations Transitional Authority in East Timor

US United States (of America)

USACE United States Army Corps of Engineers

USAID United States Agency for International Development

USD United States Dollar

USIP United States Institute for Peace

VAC Value Added by Construction

VAM Value Added by Manufacturing

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LIST OF ANNEXES

Annex 1 Plain Language Statement

Annex 2 Consent Form for Persons Participating in a Research Project

Annex 3 Interview Transcript Codebook

Annex 4 Coded transcript example

STUDY DATABASE

An online database containing all data used in the study is accessible temporarily via this link:

https://drive.google.com/open?id=1QYx5ABEoJk9WlvTJvIlkRRsy-gUQ0XHF

The following data and documentation are available within the study database:

1. Coded transcripts - complete coded transcripts and notes for all interviews

2. Statistics – original data for all statistical indicators referred to in the study

3. Documents – documents referred to in the study that are not readily accessible

4. Professional work notes – scanned notes from prior professional work of the Author

xiii

PREFACE

The roots of this study lie in construction practice. It follows nearly a decade spent managing

construction projects in places mired in or emerging from violent conflict, preceded by a further five

years engaged in construction in other poor yet peaceful countries. Beyond the works under my

direct purview, this experience provided the opportunity to observe a wide range of construction

works undertaken within vastly different environments. My work and other observations highlighted

not only the technical and economic challenges entailed in building in close proximity to conflict,

but also the political risks and consequences that these challenges entailed.

During 2008, I travelled twice weekly along a road built during the communist era linking

Kabul to Bagram Air Base - once the main base for Soviet troops though more recently occupied by

the US military. To facilitate trucks carrying supplies to the base from Pakistan, the American

government funded the duplication of the old road now riddled with gaping cracks and pot holes. I

watched occasional site inspections accompanied by convoys of armoured MRAPs and Humvees

to protect military engineers. Work proceeded erratically until two new lanes were opened around

January 2009. Within weeks, cracks began to appear in the new asphalt surface. Within two months

the new road was so badly damaged that traffic reverted to using the old and battered though now

more easily trafficable communist-built road. Afghan colleagues with whom I travelled held the

dismal quality of the new road as further evidence of the corruption and incompetence of the new

government and its international supporters.

In the Takhar province of Afghanistan in 2009, I inspected the construction of a micro-

hydroelectricity plant under construction as part of a demobilization, disarmament and reintegration

program providing aid to communities that surrendered weapons to the government. The

unprecedented cost of this project suggested that many weapons had been surrendered by former

mujahidin fighters in the district. The dismal quality of the initial concreting, including haphazardly

placed formwork, exposed reinforcing steel and the use of large river stones to bulk-out the concrete

mix suggested to me that the micro-hydro plant would fail even before the more complex mechanical

and electrical works commenced. As the former mujahidin fighters railed against the United Nations

and their government over the poor quality of the construction and ongoing delays, I wondered how

they would react when they realized that the electricity they had paid for with their weapons would

not arrive.

In the town of Viqueque in Timor-Leste in 2010, I observed works rebuilding a river-side

embankment comprising a retaining wall and road that had been washed away by annual

monsoonal flooding. The works were part of a national infrastructure program that sought to address

disaffection within rural communities that had recently contributed to widespread violence and

instability, by devolving public investment decisions and procurement functions to local officials and

restricting contracts to local firms. The works were notable for the incompetence evident in both the

design and the construction. The design lacked any visible resistance to lateral loads arising from the

xiv

rebuilt road above. Unwashed and ungraded sand and stones were being taken from the adjacent

riverbank and incorporated directly into the concrete mix with dust and clay. Stone masonry was

comprised of haphazardly placed river stones and scant mortar, with recently-completed sections

of concrete and masonry left uncovered, un-cured and baking in temperatures exceeding 40 degrees

Celsius. The contractor and supervising officials clearly lacked the requisite expertise, and the new

embankment and road would likely be washed away in the next monsoonal floods, perhaps taking

with it any improved local sentiment.

During 2011, I managed the construction activities of a program in Pakistan in which 122

local government buildings that had been damaged or destroyed by floods in 2010 were rebuilt to

support the restoration of local government services. The construction sites covered the length of

the Indus River delta, from the mountains in the north west of Pakistan down to the coast in the

south-east. This geographic scope of the program encompassed peaceful (though very poor) areas

as well as areas experiencing intense violent conflict, including in Baluchistan province and areas

bounding the Federally Administered Tribal Areas. The consolidation of works into 32 separate

contracts and award to 24 separate contractors was based upon bureaucratic and financial

considerations that resulted in, for example, separate works at opposite ends of the country being

awarded to the same contractor and works in insecure “no-go” areas being awarded to firms from

other provinces that were clearly unable to safely access the site. UN officials responsible for defining

and awarding the contracts, and who recognised the inherent problems, were confident that

selection of the lowest priced bids had achieved value for money objectives and met fiduciary

responsibilities to donors, then were surprised as delays and ensuing disputes plagued the program.

Such anecdotes may or may not be indicative of broader dysfunction affecting construction

in these and other settings in the midst or aftermath of conflict. Certainly, the poor construction

outcomes they describe and the potential for these poor construction outcomes to undermine

broader peace-building and reconstruction efforts warrants further investigation. This research

involves a brief step outside construction practice to attempt such an investigation. It draws on

accounts from a wide range of colleagues, many of whom have shown dedication and courage

building under difficult conditions.

1

Chapter 1 INTRODUCTION

"This time we’re doing things differently. This time we’re building shit first then blowing it up”.

Senior Commander of NATO forces in Afghanistan, 2008

Conflict and construction are opposing endeavours. Construction mobilises labour and other

resources towards the creation of a built environment through which social life is sustained and

expanded. In violent conflicts, many of the same resources are organised towards an opposing goal

– the destruction of human life and the built environment. These opposing functions of conflict and

construction are highlighted in the sequence of conflict and post-conflict reconstruction, with

construction following conflict in order to repair some of the damage wrought. However, in addition

to opposition, this sequence suggests a relationship in which conflict and construction are

complementary functions within broader political and economic dynamics. This complementary

relationship is also reflected in the political and military function that construction can play during

conflict, which is additional to the broader function construction fulfils by providing infrastructure

to support economic activity and the provision of basic social services.

This function of construction during conflict is illustrated by the situation in Afghanistan since

2002. In parallel with an expanding civil war marked by the increasing loss of territory to insurgent

groups and by increasing numbers of battle-related deaths, more than USD 9.74 billion was spent

between 2005 and 2018 by the US military on construction programs.1 Alongside this military-

funded construction, reconstruction efforts in Afghanistan included around USD 10.99 billion spent

between 2002 and 2018 on economic infrastructure and services through civilian channels.2

Alongside a traditional military role of infrastructure construction supporting movement and

accommodation of forces, military spending on civilian infrastructure in Afghanistan has been

underpinned by tactics developed during insurgent wars there and in Iraq. These tactics were

formalised by the US military with the first publication in 2006 of Field Manual 3-24 – Insurgencies

and Countering Insurgencies (US Army, 2006). Field Manual 3-24 outlines shape-clear-hold-build-

transition as the “framework for how Army and Marine forces will defeat an insurgency at the tactical

1 SIGAR (2018) reports spending on all US military reconstruction programs in Afghanistan. Disbursements reported include:

USD 0.73 billion on the Afghanistan Infrastructure Fund (pg. 55) and USD 9.01 billion spent on infrastructure from the Afghan

Security Forces Fund (pg. 53). Other funds such as the Commanders Emergency Support Program (total expenditure USD

7.91 billion) and the Taskforce for Business and Stability Operations (total expenditure USD 649 million) are expected to

have also included funding for infrastructure, though infrastructure spending under these programs is not explicitly identified

in SIGAR reports.

2 OECD (2018) reports USD 10.985 billion (constant 2016 USD) disbursed by all donors in Afghanistan from 2002 to 2017

for Sector 200 – Economic Infrastructure and Services.

Introduction

2

level” (US Army, 2006: 115). The build component refers to programs that remove support for

insurgents, align inhabitants with the government, and strengthen the government’s legitimacy and

effectiveness (US Army, 2006: 122). In practice in Afghanistan, shape-clear-hold-build-transition has

been commonly abbreviated to capture-hold-build, and literal interpretation of the build component

has prompted many infrastructure projects implemented by Provincial Reconstruction Teams (PRTs)

and other military units.3 These projects have focussed on areas of heightened insurgent activity with

the aim of winning hearts and minds – building infrastructure for local communities that is ultimately

intended to build support for the government and the international military effort.

In this context, the tactical value of construction stems from the potential for public

infrastructure to generate goodwill and political legitimacy. Infrastructure delivers basic services that

improve living standards, thus it can demonstrate to recipient communities the benevolence of the

government and its international supporters. Further, the provision of public infrastructure is

typically among the expectations that societies have of the states that govern them.4 The fulfilment

of these functions, including the provision of public infrastructure, can contribute to the societal

perceptions of government legitimacy – i.e. perceptions of the state’s right to rule – thus building

public support and political stability.5

Beyond the tactical use of construction in military operations during conflict, the value of

infrastructure construction as a source of political legitimacy and support extends to post-conflict

situations. In civil wars, the transition from conflict to post-conflict rarely denotes a complete

cessation of violence. Rather, it denotes a reduction in violence to levels that enable broad peace-

building measures to begin (see Brinkerhoff 2005: 4; Collier et al. 2003: 150; and UNDP 2008: 15).

Neither peace nor acceptance of a victorious party’s right to rule are ever complete. Therefore, it is

incumbent on new governments in post-conflict situations to build legitimacy – often through

prompt democratic elections and also through visible fulfilment of state functions and societal

expectations that include the provision of public infrastructure. This political value of public

infrastructure is not unique to conflict and post-conflict situations – it is relevant to all countries.

However, this political value of infrastructure construction is enlarged in the context of political

instability and diminished government legitimacy that characterise conflict and post-conflict

situations.

Alongside this political function, in the aftermath of conflict infrastructure construction also

serves expanded social and economic functions that are perhaps more widely recognised. In all

3 During numerous discussions with US military personnel between 2006 and 2009, “capture, hold and build” was regularly

cited in regard to the counter-insurgency function of military construction projects.

4 For example, Brinkerhoff et al. (2012) define three core functions characterising societal expectations of the states that

govern them: 1) provision of public goods and services, 2) management of political participation, and 3) provision of security.

5 Fritz and Menocal (2007: 12) describe five means through which states commonly generate legitimacy: 1) provision of

public goods and services (including infrastructure), 2) economic performance, 3) ideology and nationalism, 4) populism,

and 5) liberal democratic representation.

Introduction

3

countries, the fundamental role of public infrastructure is to support economic activity and to

provide basic social services. Roads and service networks for water, electricity, communications

etc. support the production and distribution of goods and services. Basic social services including

shelter, mobility, water, sanitation and electricity are provided by roads, buildings and service

networks. In post-conflict situations, neglect, damage and destruction of infrastructure during

conflict increases the need for repairs and reconstruction of infrastructure. These immediate needs

may be magnified by the return of populations that previously fled during conflict, which increases

demands placed upon degraded infrastructure networks. Rather than merely restoring infrastructure

access and service provision to pre-conflict levels, the inadequacy of which may have contributed

to public dissatisfaction and political instability, post-conflict reconstruction programs may seek to

expand public infrastructure and improve upon pre-conflict levels of access to public services (see

Barakat & Zyck 2009).

New infrastructure may also be required in post-conflict situations to meet increased

economic production needs. While the occurrence of rapid economic growth following the end of

conflict – often referred to as a peace dividend - is not assured, rapid economic growth follows many

conflicts – particularly long and more destructive conflicts.7 When a peace dividend occurs, rapid

economic growth may be associated with a rapid increase in construction demand. An important

political function of economic growth in post-conflict situations is suggested by studies that have

associated increased rates of Gross Domestic Product (GDP) growth with decreased risk of relapse

into conflict.8 The importance of increased economic growth as a factor in reducing conflict risks

lends increased importance of new infrastructure to support this growth.

While expanding needs for infrastructure, conflict also appears to create conditions that

present significant challenges for construction. Violence, political instability and social instability of

varying degrees characterise conflict and post-conflict situations. Such environments entail

increased risk that affects all forms of economic activity. Construction is perhaps particularly

susceptible to conflict environments given that it involves considerable investments and the

temporary assembly of actors and resources at remote locations. Construction projects also rely

upon legal and regulatory frameworks to control the forms and quality of built work and the expertise

7 Collier (1999) uses econometric analyses combining economic and conflict datasets to find that after long civil wars

economies grow rapidly due to the extensive destruction of capital, whereas after short civil wars the economy continues to

decline as capital stocks remain in excess of post-conflict capital requirements. Numerous studies have referred to and

reinforced these findings. In a broader study that summarises progress of economic studies in addressing causes and

consequences of civil war, Blattman & Miguel (2010), while highlighting consensus around Collier’s earlier findings, note

that “micro-level analysis” of case studies is required to develop further knowledge about economic causes and

consequences of civil war.

8 Bigombe et al. (2000: 323) suggests that 31 per cent of post-conflict situations revert to conflict within 10 years and identify

increased rates of GDP growth as a significant factor in reducing risk of relapse into conflict. Similarly, Collier et al. (2003:

152) identify the level and growth of per capita income as an important conflict risk factor.

Introduction

4

and interactions of the actors involved. Violence and political instability may undermine these

frameworks and the public institutions engaged in formulating and enforcing them.

These potentially problematic conditions surrounding construction in conflict and post-

conflict situations increase the likelihood of poor project outcomes, while the expanded political

value of new infrastructure may amplify the consequences of such outcomes. Just as new

infrastructure can demonstrate capability and benevolence and generate political support,

inadequate infrastructure and failed projects might demonstrate government incompetence or

malfeasance. Increased likelihood of poor results combined with amplified negative consequences

of these results contribute to increased risks associated with construction projects in conflict and

post-conflict situations. This may demand additional efforts and specific measures beyond those that

construction projects in peaceful situations ordinarily require.

Increased risks associated with infrastructure construction in conflict and post-conflict

situations are illustrated by the recent conflict in Afghanistan. Despite the provision of large amounts

of new infrastructure in Afghanistan, well-publicised and highly visible project failures appear to

have contributed to public cynicism regarding the competence and probity of the government and

its international supporters. Investigative reports published by news organisations and oversight

reports from government agencies have focussed attention in Afghanistan and in aid-contributing

nations upon inadequate project results (e.g. Thibault & Shays 2011; Sieff 2014; Murtazaie 2013;

Terkel 2013; SIGAR 2012). The potential erosion of support resulting from poor infrastructure

outcomes is an important aspect of increased risk associated with construction in conflict and post-

conflict situations.

While the situation in Afghanistan has instigated this study, the aim of the research extends

beyond this specific conflict situation. This study aims to increase knowledge about challenges that

conflict and post-conflict situations present for construction. In particular, the study aims to increase

knowledge about the conditions and practices characterising construction in conflict and post-

conflict situations.

This knowledge is sought for both theoretical and practical purposes. Knowledge about

conditions and practices characterising construction in conflict and post-conflict situations is sought

as a contribution to theory about how prevailing economic, political and institutional conditions

affect construction projects. This objective locates the study within the academic field of

construction management and within the branch of that field that addresses the construction industry

in developing countries.9 Alongside this contribution to theory, the study seeks to contribute to

improvements in the practice of construction in conflict and post-conflict situations. In particular,

knowledge about prevailing conditions and practical responses characterising construction in

9 All incidents of civil war since 2002 identified in the Uppsala Conflict Data Program’s Battle-related Deaths Dataset (UCDP

2018) occurred in developing countries, i.e. countries at earlier stages of economic and institutional development (see

Subsection 3.1.1).

Introduction

5

conflict and post-conflict situations is sought as a contribution to any future adjustments to policies,

rules or procedures governing construction in conflict-affected situations. Such a contribution could

make current arrangements for construction projects - such as standard procurement and contracting

arrangements – more responsive to particular challenges and risks that conflict and post-conflict

situations present.

The thesis is comprised of eleven chapters. Chapter 2 reviews literature that contributes to

existing knowledge about construction in conflict and post-conflict situations. In considering the

range of subjects that are relevant to the study, academic and non-academic literature is drawn from

a range of sources. Chapter 3 presents the conceptual frame that circumscribes the study and, from

these concepts, defines the thesis proposition and research questions. The conceptual frame

describes general relationships between prevailing conditions, construction practices, regulatory

measures, and project outcomes, while the thesis proposition distils these concepts and focusses

upon construction in conflict and post-conflict situations. Chapter 4 describes the research

methodology, which includes a case study approach involving four cases of construction in

countries during or soon after episodes of conflict. Chapter 5 uses statistical indicators to describe

conditions surrounding construction in conflict-affected countries and to compare these with other

developing countries, providing a frame for the subsequent study of individual cases. Chapter 6

reports data, analysis and findings of the case of construction in Afghanistan. Chapter 7 reports the

case of Timor-Leste. Chapter 8 reports the case of South Sudan. Chapter 9 reports the case of

Pakistan. Chapter 10 presents a synthesis of the case study findings and further discussion. Chapter

11 presents the conclusions of the study, highlighting some implications of these conclusions,

limitations of the study and directions for further research.

Introduction

6

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7

Chapter 2 LITERATURE REVIEW Towards a coherent discourse

Literature that addresses different aspects of construction in conflict-affected situations from

different perspectives – from various academic and non-academic fields - is addressed in this

chapter. Construction in conflict-affected situations has not been the subject of extensive academic

enquiry. Numerous studies have been published that address different issues related to construction

in the context of conflict and post-conflict situations, though these studies form a diffuse body of

literature – they address different topics, use different methods and lack cross referencing that could

characterise a coherent academic discourse. Literature from the field of construction management

and economics and from the sub-field of construction in developing countries is relevant to the

study. The fields of governance and public administration include streams of literature that address

institutional conditions in fragile and conflict-affected situations that is relevant to construction. In

addition, from the field of applied economics, literature describing economic effects of conflict and

economic conditions in conflict and post-conflict situations also encompasses conditions relevant

to construction in these situations.

From these various fields of inquiry, both academic and non-academic literature is relevant

to the study. Various organisations involved in development aid and post-conflict reconstruction

have published relevant material, with practical engagement of these organisations in conflict-

affected situations lending significance to non-academic publications. Non-academic literature may

not be subjected to external review, is typically not theory-based, and may be influenced by

positions and priorities of publishing organisations. Nevertheless, with critical appraisal, including

consideration of the authoritative character of the publisher, non-academic literature must be

considered alongside academic literature in order to understand the range of literature and concepts

relevant to the study of construction in conflict-affected situations.

The chapter is comprised of four sections. Section 2.1 assembles and reviews literature that

addresses construction in the context of conflict. Section 2.2 reviews relevant literature from the

field of construction in developing countries and from the broader fields of construction

management and economics. Section 2.3 reviews literature that addresses conflict and post-conflict

settings and post-conflict reconstruction programs.

2.1 Construction in conflict and post-conflict settings

Few studies consider a comprehensive range of practices and conditions relevant to

construction and also consider conflict-affected settings in general rather than in specific conflict

situations. Dix (2011), provides a broad discussion about construction in the context of post-conflict

situations that refers to a range of academic and non-academic literature. The focus of the discussion

is the potential for civil-society organisations to engage in post-conflict infrastructure projects.

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8

However, a range construction conditions and practices are identified, including: potential scarcity

of resources (materials, equipment, expertise), limited government capacity for financial

management and regulation, common prioritisation in projects of donor requirements, potential

increases in the prevalence of corruption, and the reassignment of awarded to contracts to other

construction firms. Kadry et al. (2017) use semi-structured interviews with practitioners and analysis

of documentation from 36 projects undertaken in Afghanistan and Iraq to investigate factors affecting

construction project time over-runs in countries with “high geopolitical risks”. Beyond factors that

the study associates with developing countries in general (e.g. owner cash-flow, change orders and

adverse weather), they associate several factors with conflict-affected settings in particular,

including: corruption, customs clearance issues, poor labour productivity, security threats, and theft

of equipment. The study does not address the extent to which come of these issues might also apply

to construction in countries not affected by conflict.

Other studies positioned within the academic field of construction management consider a

comprehensive range of conditions and practices relevant to construction in specific conflict-

affected countries. Niazi and Painting (2017) use a questionnaire survey of practitioners and

statistical analysis of survey results to identify factors causing project cost over-runs in Afghanistan,

finding the most significant factors to be: corruption, payment delays, contractor finance constraints,

changes orders, and resource price inflation. Zafar et al. (2016) employ the same methods to

investigate factors causing project cost over-runs in terrorism-affected areas of Pakistan, finding the

most significant factors to be: a lack of suitable contractors, unsafe project locations, security threat

causing work-stoppages and inaccurate site surveys arising from limited site access of surveyors.

Mohammad et al. (2015) also use a questionnaire-based method to investigate factors affecting

construction projects in areas of Pakistan affected by terrorism. The most significant factors identified

in the study are: security, local residents’ suspicion of outsiders, “contractor constraints”, funding

and cash-flow constraints, limited availability of consultants, and limited availability of plant and

machinery. Earnest (2015) investigated planning and implementation of infrastructure projects

following the conflict in Kosovo using semi-structured interviews, focus-group interviews and

questionnaire surveys. The study draws very broad conclusions, such as that political, economic

and social instability undermine the adoption of project management methodologies (Earnest 2015:

103). Enshassi et al. (2009a) study causes of project time and cost over-runs in the Gaza Strip using

a questionnaire survey, finding the four main causes to be: strikes and border closures, “material-

related factors”, limited availability of materials, and delays in delivery of materials. In a similar

study, Enshassi et al. (2009b) identify border closures, materials shortages, limited availability of

expertise, materials price inflation and poor quality of materials. While they highlight issues that are

relevant for this study, the questionnaire-based methods that are used in these studies limits the

depth of analysis of relationships between prevailing conditions and responding practices

characterising construction in conflict and post-conflict situations.

Literature Review

9

Choudhury (2009) studied effects of political unrest upon construction projects by analysing

records from 104 similar warehouse construction projects undertaken under differing political

conditions throughout Bangladesh. Statistical analysis of project time, change order, cost and

purchasing data associated increased political unrest with increased costs, time delay and materials

shortages. The study does not quantitatively differentiate political conditions affecting the different

projects. Nevertheless, it demonstrates the potential to identify effects of political conditions upon

construction in situations where data is available for comparable projects undertaken under different

levels of political stability.

The specific situation in Afghanistan has been the focus of non-academic studies that consider

a comprehensive range of conditions and practices characterising construction amid the conflict

there. In a study published by the United States Army Corps of Engineers (USACE), Affleck &

Freeman (2010) investigate challenges facing United States (US) military-managed construction

projects in Afghanistan through semi-structured interviews with military construction practitioners.

Significant challenges identified include: mandated use of US construction standards that are

inappropriate to the context, restricted availability of skilled labour and managerial expertise, and

the inadequate availability of materials and equipment. The report suggests that these challenges

are exacerbated in politically-motivated construction projects frequently undertaken insecure

locations. In another report published by the USACE, Affleck et al. (2011) use questionnaires and

semi-structured interviews to document lessons learned from construction projects in Afghanistan.

Significant prevailing conditions identified in the report are: poor security causing delays and

restricting site superintendence, restricted availability of materials, absence of technical standards

contributing to inconsistency in material quality, limited expertise of trade labour to meet "western"

construction techniques and local communal restrictions on labour mobility. Practices identified

include: high incidence of corruption, poor planning by contractors, poor data management by

military clients, and limited site superintendence by military clients. In a paper by several US military

personnel engaged in construction projects in Afghanistan, Suermann et al. (2013) use project data

and case studies to address problems with the US military’s construction program in Afghanistan.

They suggest the program initially experienced significant delays and cost increases, and that these

problems were successfully addressed through increased reliance on local contractors, adaptation

of design standards and streamlined materials purchasing strategies.

The situation in Afghanistan is also addressed in other academic studies that are less

comprehensive in that they address the specific topic of contracting and procurement. These studies

are positioned at an intersection of fields of construction management and military practice. Kremers

et al. (2010) use semi-structured interviews with military personnel to study issues affecting use of

standard contracting and procurement arrangements in military-funded construction projects

undertaken by the Dutch army in Afghanistan. Important environmental characteristics identified

include: absence of a reliable legal framework to enforce contracts, contractors’ prioritisation of

informal agreements over formal contracts in light of the prevailing unenforceability of contracts.

Literature Review

10

The study also highlights the complexity, opacity and the exacerbated "information asymmetry" of

local construction markets from the perspective of foreign clients. The study identifies several

common practices that respond to these conditions: use by clients of withheld payments as a "stick"

to enforce contractor compliance, awarding of contracts through negotiation with "trusted"

contractors rather than through competitive tender, and "opportunistic behaviour" of contractors that

includes cutting corners in regard to construction quality when enabled by limited client

supervision. Relationships identified in this study between prevailing conditions and adopted

practices highlights the potential increased depth of investigation enabled by semi-structured

interviews in comparison with questionnaire surveys.

Other studies by US military personnel into construction contracting arrangements are

notable though less informative. Hoff (2015) and Hoff et al. (2016) assess the relative effectiveness

of fixed-price and cost-reimbursable contracts in US military-managed construction projects in

Afghanistan through analysis of statistical data drawn from project documentation. The study

suggests that the situation facing construction in Afghanistan is comparable to that in developing

countries generally, arguing that "wartime projects are likely to face the same risks as peacetime

projects, with some notable exceptions", and that "many of the risk observed by the USACE are not

unique to wartime - they are common to other nearby Asian and African countries...". Jaszkowiak

(2012), in a masters thesis that addresses the relative effectiveness of fixed-price and cost-

reimbursable contracts in US military-managed construction projects in Afghanistan, fails to

consider in detail the general economic and institutional conditions within which the contracts were

implemented and any specific effects of these conditions, or responding practices, upon project

outcomes. Novotny (2011) studies relationships between construction projects and political

violence through regression analysis of datasets that describe locations in Afghanistan of military

construction projects and insurgent incidents, finding that construction spending by the US military

was higher in less-secure areas. Pooyan (2012) considers appropriate procurement methods for post-

conflict situations, with assessments of appropriateness based upon criteria defined through

questionnaire surveys.

In a report commissioned by the World Bank, Lister & Karaev (2004) draw on semi-structured

interviews, direct observations and documentation to describe markets for construction materials in

Afghanistan. The report highlights the lack of domestic manufacturing. The report also identifies a

range of factors affecting availability and pricing of materials, including: unreliable supply chains

that are interrupted by political and security conditions, corrupt and inefficient customs procedures,

high transportation costs and the prevalence of smuggling to and from the country.

Other non-academic reports that address infrastructure in conflict-affected situations focus on

issues related to the provision of infrastructure – such as financing, the relationship between

infrastructure and political legitimacy, project identification and planning etc. – rather than

conditions and practices involved in the construction of infrastructure. In a study commissioned by

the United Kingdom’s Department for International Development (DfID), Mott MacDonald (2005)

Literature Review

11

discusses the function of infrastructure within broader reconstruction programs, identifying general

challenges such as corruption and security, though does not address in a detailed manner specific

challenges facing construction. In a report published by the African Development Bank (AfDB),

Hoeffler (2003) addresses infrastructure needs and discusses problems limiting public and private

investment through which infrastructure may be financed. In reports published by the World Bank

addressing post-conflict reconstruction, World Bank (1998) and Kreimer et al. (1998) discuss the

roles of finance and infrastructure in the context of post-conflict reconstruction, though do not

consider specific challenges involved in building this infrastructure. In a report published by the US

Institute for Peace (USIP), Mashatt et al. (2008) discuss the function of infrastructure in potentially

either exacerbating or ameliorating conflict. In regard to construction, the report highlights

challenges associated with the application of US government procurement rules in conflict

situations. In a report published by the US Army, Cross (2010) defines criteria affecting the provision

of infrastructure in post-conflict situations including local construction capability, though does

expand upon how conflict affects this capability.

2.2 Construction in developing countries

Literature on the subject of construction in developing countries within the field of

construction management is reviewed in this section. The relevance of this literature to the study

stems from the fact that all recent civil wars have occurred in developing countries. Given the diffuse

character of the literature that addresses construction in the context of conflict, the study is

positioned within the field of construction in developing countries. Thus, the study addresses any

effects of conflict upon construction that may be additional to effects associated with earlier stages

of economic development.

2.2.1 Construction and economic growth

The relationship between construction and economic growth has been a central topic of

literature on the subject of construction in developing countries.

Strassman (1970) analysed cross-sectional data from 27 countries, concluding that the

contribution of construction to GDP increases during the transition from low to middle income.

Turin (1978) analysed cross-sectional data from 87 countries, finding that the contribution of

construction to Gross Domestic Product (GDP) increases with increasing GDP per capita and that

the rate of this increase is greater during the middle range of GDP per capita. From this pattern

across countries, Turin concluded that within any given country, economic development is

associated with increased contribution of construction to GDP. This conclusion was reinforced by

Wells (1984) using a different set of cross-sectional data from over 100 countries. Drewer (1980)

questioned the validity of using cross-sectional data to draw conclusions regarding a particular

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12

country, given effects on construction output data of different labour-capital ratios at different stages

of economic development. Bon (1992), referring to a cross-sectional study of housing construction

in 39 countries (Burns & Gebbler 1977), and to longitudinal studies of infrastructure investment in

France, Germany, and the United Kingdom (Maddison 1987), and the United States (Leisner 1989),

concluded that the contribution of construction to GDP follows an “inverted-U”, increasing during

the transition from low to middle-income, then decreasing during the transition from middle to high-

income. Drewer (1980) and Wells (1984) argued that any association between growth in

construction and broader economic growth does not suggest a direction of causation. Drewer made

a distinction between “growth-initiating” infrastructure and “growth-induced” infrastructure,

concluding that the relationship between construction, economic growth and development is

complex and no causal relationship can be assumed. Drewer identified important effects of the

availability of construction resources - where surplus resources such as labour, materials and

equipment are not available, increased construction demand can cause price inflation and increase

reliance on imports, offsetting any potential positive effects on growth.

Numerous subsequent studies into the relationship between growth in construction and

broader economic growth have reached differing conclusions. Several studies have reinforced Bon’s

finding of a relationship characterised by the “inverted-U” (e.g. Crosthwaite 2000, Yiu et al. 2004,

Ruddock & Lopes 2006). However, Choy (2011) analysed cross-sectional data from 205 countries

and failed to confirm the finding of Bon and others of a decline in the contribution of construction

to GDP during later stages of development. Lopes (1998) and Lopes et al. (2002) address the

relationship between economic growth and construction activity in the economies of Sub-Saharan

Africa using economic data from national accounts, finding that, while decreased GDP growth rates

are associated with decreasing proportion of construction value-added to GDP, the inverse is not

apparent in national accounts data – increasing GDP growth rates are not associated with increasing

contribution of construction to total production. Anaman & Osei-Amponsah (2007) studied the

relationship between national economic growth and growth in construction value-added as a

proportion of GDP. Using a Grainger test applied to national accounts data, they conclude that

growth in the construction industry caused broader economic growth in Ghana. Wong et al. (2008)

addressed the relationship between construction output and economic growth in Hong Kong,

finding that construction output drives economic growth, and not visa-versa. Ramachandra et al.

(2014) studied the causal relationship between construction and the broader economy in Sri Lanka

using economic data from 1990 to 2009 and a Grainger causality test, finding a unidirectional

relationship in which broader economic growth prompted increased construction. Abubakar (2018)

analysed 26 years of time series data describing construction output and GDP in Nigeria, finding a

“bidirectional” causation between construction output and broader economic growth – i.e.

increased GDP growth can prompt increased growth on construction output and visa-versa. In a

survey of literature addressing the relationship between construction and economic development,

Giang and Pheng (2011) highlight a lack of consensus in academic literature regarding the

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13

relationship between increasing contributions of construction to GDP and broader economic

growth. Similarly, Lopes (2012), in highlighting differing findings of various studies, suggests that

despite use of advanced econometric methods the relationship between growth of the construction

industry and that of the broader economy is not fully understood.

While effects of construction on long term economic development has been a central topic

in the subject of construction in developing countries, shorter time-frames characterise conflict and

post-conflict situations. Literature highlights the labour-intensive nature of construction in

comparison with manufacturing, such that increased construction demand can yield a significant

increase in employment (e.g. Turin 1978; Wells 1984; Hillebrandt 1999; Gruneberg & Ive 2000;

ILO 2001). Hillebrandt (2000: 25) and Ive & Gruneberg (2000: 207) suggest that the general increase

in employment resulting from increased construction demand can promote increased consumption

that can in turn stimulate increased production and growth. Ruddock & Lopes (2006) attribute the

importance of the construction industry in developing countries to the contribution of construction

to total output and to the high proportion of the workforce engaged in construction.

Hillebrandt (2000: 5) and Ive & Gruneberg (2000: 167) also highlight that a large proportion

of materials, components and equipment used in construction are products of other industries,

particularly the manufacturing industry, such that increased construction demand can stimulate

production in other industries. Numerous studies have analysed industrial input-output data for

various economies to quantify the extent to which changes in construction demand affect

production in other sectors. Bon & Pietroforte (1990) studied the construction sectors of four

developed economies: the US, Japan, Italy and Finland, finding one monetary unit of increase in

construction demand increased broader production by a range of 1.7 to 2.7.10 In a similar study of

the construction industry in Turkey, Bon et al. (1999) found that increasing construction demand by

one monetary unit resulted in 1.79 to 2.07-times increase in production across other sectors. Gregori

& Pietroforte (2018) used industrial input-output data to study linkages between construction and

other sectors of the economy in six rapidly-developing economies: Brazil, Russia, India, Indonesia,

China and South Africa, finding that in 2005 inputs from other sectors accounted for between 46

per cent and 75 per cent of expenditure on construction. Building on the work of Bon and

Pietroforte, other studies have used input-output data to identify strong backward lineages of

construction to other industries in developing countries including: China (Wu et al. 2005), Sri Lanka

(Rameezdeen et al. 2008), Turkey (Gundes 2011), and Thailand (Kofoworola & Gheewala 2008).

Data and theories describing the breadth of linkages between construction and other

production sectors have supported infrastructure construction programs designed to stimulate

economic growth and macro-economic stability. Construction programs initiated in Australia and

the US in response to the Global Financial Crisis of 2008-09 are recent examples (see Ofori 2012).

However, Drewer (1980) and Ive & Gruneberg (2000: 208) highlight that any growth-stimulating

10 A minimum value of 1.7 is recorded for Finland in 1959 while the maximum value of 2.7 is recorded for Japan in 1962.

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14

function of construction requires that surplus resources - labour, materials, equipment - must be

domestically-available, otherwise increased demand will contribute to price inflation and increased

imports, potentially undermining any growth stimulating effects of construction. Literature is

reviewed in Subsection 2.2.2 from several fields that suggests that a surplus of construction resources

is typically not available in developing countries.

2.2.2 Construction resources and supply capacity

As a corollary to the important role identified for construction in the process of economic

development, early studies on the subject of construction in developing countries also addressed

construction supply constraints in developing countries. These earlier studies typically used data

from particular countries and extrapolated findings to the broader group of developing countries.

However, in arguing that academic research into construction in developing countries had not made

significant contributions to improving industrial conditions, Ofori (1993:179) noted that this generic

approach neglects “the different economic, social, historical and political factors prevailing in each

country and influencing its construction industry”. Reflecting this observation and increased

contributions to literature of academics from many of the developing countries under investigation,

more recent literature focusses upon aspects of conditions and practices characterising construction

in particular countries.

In a textbook outlining central themes regarding construction economics, Hillebrant (2000:

191) describes the supply capacity of the construction industry as a function of the availability of

construction resources. She suggests that, while in the short-term supply capacity may be increased

by stretching use of existing resources – e.g. through additional hours worked by staff – in the long-

term, increased supply capacity requires development of additional resources. The categorisation of

construction resources in literature may be summarised as: labour, materials, equipment and

working finance (which is often referred to as capital or credit).11 For example, Hillebrandt (2000:

101) considers resources used in construction (in relation to variable costs) as: materials, site labour,

management labour, plant and equipment, and working capital. In a report published by the World

Bank based upon experience of Bank-financed infrastructure projects, World Bank (1984: 41)

considers supply capacity in regard to the availability of: management expertise, personnel,

equipment, materials and capital. Other early studies in the field of construction in developing

countries adopt similar resource categories in consideration of construction supply capacity (e.g.

Turin, 1978; Moavenzadeh, 1978; Edmonds, 1979; Ofori, 1984).

11 In some studies, the term “capital” is used to denote this working finance, though as Ive & Gruneberg (2000: 14) point out,

this confuses working finance with capital – the factor of production.

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2.2.2.1 Labour and expertise

Four forms of construction labour are frequently identified in literature: professional

(technical), managerial, trade (skilled), and unskilled, which are distinguished by different training

and education requirements. Turin (1978: 42), highlights that actual resource requirements are

dependent upon construction technologies employed. Nevertheless, he identifies a general lack of

technicians and managerial expertise among other supply-capacity constraints in developing

countries. Moavenzadeh (1978) draws reports and data from organisations such as the UN Industrial

Development Organisation (UNIDO) and International Labour Organisation (ILO) to argue that

management expertise, among other resources, is in very short supply for contractors in developing

countries. The study suggests that the seasonal character of construction work, inadequate health

and nutrition, lack of industrial discipline and low productivity inhibit training and the availability

of appropriate skills. The study also argues that, unlike technical and trade skills that can be

developed through formal training, the development of management expertise requires prolonged

practical experience. The World Bank (1984) identifies inadequate availability of skilled labour and

management expertise, highlighting that the lack of management expertise and fluctuating demand

present greater challenges to industrial development than other supply constraints.

Other studies have been explicit in distinguishing between availability of labour and

availability of expertise. Imbert (1990), in discussing “human issues” affecting construction, notes a

scarcity of skilled personnel, particularly management capacity, in the context of high

unemployment. Hillebrandt (1999), in discussing appropriate construction technologies in

developing countries, notes a typical abundance of unskilled labour. In a report published by the

World Bank based on a review of conditions surrounding Bank lending for infrastructure

construction, Kirmani and Baum (1992) identify the immaturity of consulting professions in

developing countries despite adequate numbers of qualified professionals, highlighting the

important role of professional societies, universities and governments in developing professional

standards and expertise. Jayawardene and Gunawardena (1998) address the availability of skilled

workers and training in the Sri Lankan construction industry through a questionnaire survey of 3,300

workers, finding a shortage of specialist skills despite 60 per cent of the skilled workforce being

under-utilised. Thus, the study makes a distinction between the availability of trade labour and the

availability of trade expertise, with the latter requiring sustained training.

In addition to inadequacies in formal education and training identified in these studies, other

studies have highlighted how opportunities for informal on-the-job training for tradesmen in

developing countries have decreased with increasing prevalence of informal labour-only

subcontracting (ILO 2001; Wells 2006; Wells & Jason 2010). Wells (2007) describes this expansion

of labour-only subcontracting and its implication of reduced job security and training, arguing that

it is associated with the degree of informality in construction - that is, the extent to which

construction activity is undertaken beyond the scope of government regulation. Ofori (2006) also

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16

notes a scarcity of skilled construction workers in developing countries due to inadequacies of

training schemes and the tendency of construction firms to use casual employment practices that do

not contribute to the development of a skilled labour force. Wells (2012) discusses the large extent

of informal construction in developing countries, which includes a large proportion of informal

employment. In a discussion of human resource development construction that draws on a wide

range of academic studies and non-academic reports, Ellis et al. (2012) highlight the lack of training

characterising construction in developing countries.

Studies that address conditions affecting construction projects in particular developing

countries reinforce earlier generic descriptions of inadequate availability of managerial and trade

expertise. Within a stream of literature that investigates conditions causing time and cost over-runs

in construction projects in developing countries through surveys of construction practitioners, a lack

of management expertise (also implied in poor site management) and shortage of skilled labour are

identified in: Jordan (Al-Momani 2000), the United Arab Emirates (Faridi & El-Sayegh 2006),

Thailand (Toor & Ogunlana, 2008), Malaysia (Alaghbari et al. 2007; Sambasivan & Soon 2007),

Vietnam (Le-Hoai et al. 2008), and Iran (Pourostam & Ismail 2011).

2.2.2.2 Materials and equipment

Many of the studies from the field of construction in developing countries that highlight

inadequate availability of managerial and trade expertise also identify limited domestic production

of materials and components as a factor limiting industrial capacity. Turin (1978) identified reliance

on imported plant and equipment for the production of modern materials and equipment as a

significant limitation on domestic supply capacity in developing countries. Similarly, Moavenzadeh

(1978) noted a typical lack of domestic construction materials manufacturing in developing

countries and subsequent reliance on imports. Hillebrandt (1999), arguing for the use of labour-

intensive forms of construction in developing countries, identifies widespread reliance on imported

manufactured components and the negative implications this has for balances of payments and

external debt in developing countries. Similarly, Ofori (2006) identifies the negative impact that

widespread reliance on imported construction materials and equipment has on national debt,

balances of payments and the availability of foreign exchange in developing countries. In general,

these and other studies highlight that developing economies are characterised by lower levels of

manufacturing production and therefore less domestic manufacture of construction materials,

components and equipment. Other studies have quantified the extent to which construction in

developing countries relies upon imported materials. Edmonds (1979) suggested that imported

materials account for 50 to 60 per cent of construction expenditure in developing countries. This

magnitude was reinforced by Ofori (1985), who suggested 60 per cent of the materials used in

construction in Ghana at that time were imported.

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17

More-recent studies that address construction in specific conflict-affected settings suggest that

reliance on imported manufactured materials and equipment leads to restrictions in the availability

of these resources. Enshassi et al. (2009a; 2009b) identify materials shortages due to border and road

closures as the main factor undermining construction projects in the Gaza Strip. In contrast, Zafar

et al. (2015) do not note availability of materials and equipment as a significant factor affecting

construction projects in terrorism-affected areas in Pakistan. Adams (2010) addresses environmental

factors constraining the work and development of Nigerian contractors, highlighting uncertain

pricing and availability of materials as the most significant challenge. Niazi and Painting (2017) note

price inflation, though not availability of manufactured components and equipment, as a significant

factor affecting construction project cost overruns in Afghanistan. Kadry et al. (2017) identify issues

clearing customs and the limited availability of rental equipment as two of the main factors causing

project delays in countries with high geopolitical risks. Affleck and Freeman (2010) identify

inadequate availability of materials and equipment as one of the three main challenges facing

military-funded construction projects in Afghanistan. Affleck et al. (2010) identify restricted

availability of materials and absence of materials standards contributing to inconsistency in the

quality of materials as prevailing conditions and significant challenges. Dix (2011), in a broad

discussion of construction in the context of post-conflict reconstruction, briefly notes that local

materials for construction may be scarce.

Thus, inadequate availability of construction materials and equipment has been identified in

relation to developing countries in general and in particular conflict-affected situations. While

Enshassi et al. (2009) identify particular factors related to conflict that contribute to the problem, in

other studies, particular effects of conflict (as opposed to general effects of development) are unclear.

2.2.2.3 Working finance and credit

Literature addressing construction in developing countries also highlights restricted access of

construction firms to working finance – typically credit from formal sources such as banks. Working

finance is neither a factor of production nor is it directly employed in the construction process,

hence it might not be considered to be a construction resource. However, as noted by Hillebrandt

(2000: 104), typical production arrangements whereby other resources are purchased and used by

suppliers prior to payment by the client is such that credit is a requirement for construction

contracting.

Moavenzadeh (1978) highlighted the need for working capital arising from typical payment

arrangements and typical inadequate availability of credit for construction contractors. The World

Bank (1984) argues that payment delays contribute to uncertain cash-flow for contractors which, in

the context of limited availability of credit, create significant financial risks that inhibit investment

and industrial development. The UN Centre for Human Settlements (UNCHS 1996), in a report that

discusses issues affecting contractor development, describes lack of access to finance as one of the

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18

main factors inhibiting the growth of small construction firms in developing countries. The report

argues that banks lack information to adequately evaluate the risks associated with lending to

construction firms, and firms lack the administrative and management expertise to present their

cases for credit and to manage cash-flow to ensure regular repayment. Ofori (2006) notes the limited

access that medium-sized contractors in developing countries have to credit, noting the lack of

collateral and risks associated with frequently delayed payments as contributing factors.

Other literature specifically addresses the issue of credit access for construction firms in

developing countries. Eyiah (2001) reviews the factors contributing to a lack of access to credit for

construction contractors in developing countries, including the lack of information for creditors to

evaluate risks and a lack of collateral of small construction firms to secure loans, often linked to

inadequate systems of property registration and unreliability of legal and regulatory frameworks.

Eyiah and Cook (2003), in describing the failure of a financing scheme for small and medium

construction firms in Ghana, identify the lack of managerial expertise of contractors, inconsistent

workload, delayed payments from clients and deliberate refusal of debtors to make repayments as

contributing to the failure of the scheme. Palliyaguru et al. (2006) use semi-structured interviews

with Sri Lankan contractors to investigate the utility of advance (mobilisation) payments, highlighting

the importance of advance payments to provide working finance for contractors given restricted

access to formal credit. Aibinu & Odeyinka (2006) used a questionnaire-based method to assess

project delays in Nigeria, finding that contractor financial problems, attributable to inadequate

access to credit, to be the most significant cause of delays. In a broader discussion about financing

of construction projects in developing countries, Akintola & Renukappa (2012) highlight the lack of

contractor access to traditional forms of credit and a need to investigate alternative forms. Thus,

inadequate access of contractors to formal credit appears to be common and may be attributed to

inadequate administrative and managerial expertise among construction firms, inadequacies in

systems that enable potential creditors to assess risks, and inadequacies in systems to enforce loan

repayments.

2.2.3 Construction regulation

Literature that addresses construction in developing countries also identifies particular aspects

of the regulatory environment that affect construction projects and construction industry

development. These regulatory conditions relate to roles that various governments play as regulators

and clients of construction.

Regulatory functions of various branches of government may include: formulating and

implementing codes and standards, registering firms, licensing professionals, enforcing relevant laws

and resolving disputes. Literature from the field of construction in developing countries highlights

inadequate exercise of these functions as an impediment upon industrial development. World Bank

(1984: 49) argues that poorly trained bureaucrats and inordinately complex regulations in

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developing countries undermines the administration of construction contracts, thus undermining

infrastructure outcomes. The report also notes that technical assistance is required for public clients

and regulators of construction in order to improve the operating environment of construction firms.

Ofori (2006) discusses various factors inhibiting the performance of construction firms and capacity

of the construction industry in developing countries, including inappropriate building regulations

and codes of practice. Imbert (1990) notes that the lack of managerial expertise of suppliers extends

to clients and regulators and contributes to the “poor regulatory environment”. Wells (2007; 2012)

addresses informal construction as pertaining to firms that do not fall within the control of

government regulations, highlighting that lower regulatory capacity in developing countries is

associated with the wider extent of informal construction. The study associates the greater extent of

informality with a diminished scope for industrial reform and development.

Issues arising from the role of government as client of public infrastructure construction that

represents a significant proportion of construction demand are also highlighted in literature that

addresses construction in developing countries. The World Bank (1984) contends that dysfunctional

frameworks for procurement and contracting severely undermine industrial development. The study

contends that “because of a lack of a sound framework of institutional and legal arrangements,

especially those affecting public sector procurement, the industry is not shaped to respond quickly

and efficiently to the needs of the clients” (World Bank, 1984: 12). Further, the report notes that

practical conditions for procurement and contracting are commonly neither fair nor equitable,

increasing the risks faced by contractors and undermining industrial development. Kirmani (1988)

argues that unfair competition in procurement and delayed contract payments, both of which arise

from poor government administrative capacity, severely undermine contract performance and

industrial development in developing countries. The report also suggests that inequitable contract

arrangements and procurement procedures that prevail in developing countries are the main barriers

to industrial development, and that functional procurement and contracting arrangements must

account for specific economic and institutional limitations in these countries. Ofori (2002) argues

that procurement models and forms of contract that are frequently adopted in developing countries

from more developed countries are inappropriate in the context of prevailing institutional and

industrial conditions in developing countries. Ofori (2006) notes that the formality of typical

procurement and contract arrangements contrasts with the high degree of informality common in

the construction industry in developing countries, which often relies on goodwill and personal

relationships.

One particularly problematic aspect of the roles that governments play as regulators and

clients of construction that is identified in academic and non-academic literature is the prevalence

of corruption affecting construction in developing countries.

Studies of corruption in general provide a background for literature that addresses corruption

in construction. In a thorough study of forms and effects of corruption, Rose-Ackerman (1999)

presents a widely accepted definition of corruption as the use of public office for private gain. She

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distinguishes between petty corruption, involving small payments associated with day-to-day

services or penalties, and grand corruption, which involves larger, less frequent payments associated

with government contracts. Bardhan (1997) contends that individual and societal perceptions of

corruption are subjective. In many cases, particularly in situations of highly centralised and rigidly

bureaucratic governance, corruption can facilitate improved efficiency in public administration.

Schleifer and Vishny (1993) discuss how corruption undermines economic development, identifying

two primary routes. First, corruption promotes excessive regulation as bureaucrats seek to expand

their “territory” to increase corrupt revenues. Second, corruption distorts investment decisions by

shifting expenditure away from investments that yield the highest public return to those that provide

the greatest income for corrupt officials. Tirole (1996) develops an economic model that

demonstrates the persistence of corruption – that past corruption and reputations of corrupt

behaviour generate future corruption. The study contends that a one-time shock in the behaviour of

a population can lead to entrenched and enduring corruption.

Literature that focusses on corruption in the context of construction projects and developing

countries suggests a greater prevalence compared to other contexts. In a policy report published by

the World Bank, Kenny (2007) suggests that the unique nature of every construction project entails

pricing uncertainty which, combined with the widespread engagement of governments in

infrastructure construction projects, contributes to perceptions of construction being one of the most

corrupt industries worldwide. The report cites a poll by the organisation Transparency International

in which construction was ranked as the most corrupt industry. In another report published by the

World Bank, Kenny (2010) reviews documentation from Bank-funded projects in India, Bangladesh

and the Philippines. The report suggests that corruption is widespread in the construction sector and

argues that the long-term cost implications for individual projects – i.e. increased maintenance costs

arising from quality compromises that can be linked to corruption – are far greater than the short-

term costs of inflated contract prices. In a report published by the International Monetary Fund (IMF),

Tanzi & Dawoodi (1998) analyse financial statistics and indicators of corruption to gauge the extent

of corruption in public works in developing countries. They find inordinately-high levels of

corruption, which they suggest distorts government investment decision-making by prioritising new

construction over maintenance of existing infrastructure. They argue that poor investment decisions

stem from new construction offering greater scope for solicitation of payments by corrupt officials.

Academic studies have also identified a high prevalence of corruption affecting construction

in developing countries. Sohail & Cavill (2008) refer to previous studies and statistics in discussing

the wide extent of corruption in construction and suggest greater accountability to control

corruption, though with limited consideration of implied shortcomings in existing measures to

promote accountability and control corruption. Ofori (2011) suggests that corruption and unethical

behaviour are prevalent in construction and identifies characteristics of construction that make it

particularly prone to corruption: the large scale, long duration and geographic distribution and

technical complexity of construction projects; the complexity of administrative procedures involved;

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and the ultimate concealment of much of the work and materials in built work. Tabish & Jha (2012)

highlight the prevalence of corruption in public construction projects in India and use survey

methods to identify the significance of various factors affecting corruption control measures such as

“management leadership, rules and regulations”. Le et al. (2014) provide a survey of literature

addressing corruption in construction, which highlights varied definitions and distinctions between

corruption and fraud. The study also highlights a lack of detail in literature about the actual

mechanisms through which corruption occurs in construction projects – i.e. the actors and actions

involved. Bowen et al. (2012) study corruption in the construction industry in South Africa using

questionnaire surveys and semi-structured interviews. They find the impact of corruption upon

contract award procedures (grand corruption) is greater than upon contract administration (petty

corruption) and identify factors contributing to the prevalence of corruption including skills

shortages, absence of deterrents and poor ethical standards. Ameyaw et al. (2017) highlight

widespread corruption affecting construction in Ghana, identifying the most prevalent forms to be:

extortion, bribery, collusion and tender rigging, conflict of interest and fraud. Chan and Owusu

(2017) review a selection of the large range of academic literature that addresses forms of corruption

in the construction industry, identifying 28 forms of corruption. Many of these 28 practices differ

from the definition of corruption that is frequently adopted in other literature (i.e. corruption as the

use of public office for private gain) and most describe unethical or fraudulent behaviour by

construction firms, such as: collusion, price-fixing, coercion and deception.

2.2.4 Construction project outcomes in developing countries

Alongside literature that addresses prevailing conditions and, to a lesser extent, construction

practices in developing countries, a related stream of literature addresses project outcomes arising

from these conditions. In particular, a large number of studies use questionnaire surveys and

statistical analysis of survey results to identify significant factors causing time and cost over-runs in

construction projects in developing countries. While these studies generally validate earlier studies

that identified various shortcomings in economic and regulatory conditions surrounding

construction, the use of survey methods limits the depth of investigation and consideration the

behaviour of practitioners in relation to prevailing conditions and project outcomes.

Alinaitwe et al. (2014) addressed the causes of project delays in the Ugandan construction

industry using a questionnaire survey of practitioners, finding the main causes to be: changes to the

scope of work, delayed payments, poor monitoring and control, the high cost of capital and political

insecurity and instability. Ssegawa-Kaggwa et al. (2013) addressed the primary deficiencies affecting

the construction industry in Botswana by analysing documentation from 323 public construction

projects, finding the most significant deficiencies to be a “lack of an effective regulatory regime”,

and lack of “an effective, facilitative environment for the industry”. Windapo & Cattell (2014) studied

the main factors inhibiting the performance, development and growth of the South African

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construction industry using semi-structured interviews with 120 practitioners, finding the main

factors to be: the increasing costs of building materials, access to credit, high interest rates and the

high rate of failure of contracting enterprises. Faridi & El-Sayegh (2006) use a questionnaire survey

to identify the main factors causing construction project delays in the United Arab Emirates, finding

inadequate early planning and slowness of the owners’ decision-making process are the top causes

of delay. Toor & Ogunlana (2008) use a questionnaire survey to identify the main factors causing

construction project delays in Thailand, finding issues such as: lack of resources, poor contractor

management, shortage of labour, design delays, planning and scheduling deficiencies, changed

orders and contractors’ financial difficulties. Other similar studies identify significant factors

contributing to project delays and/or cost over-runs in: Nigeria (Aibinu & Odeyinka 2006), Malaysia

(Alaghbari et al. 2007), Egypt (El-Razek et al. 2008), Libya (Shebob et al. 2012), Cambodia (Santosa

& Soeng 2016), and Tanzania (Sambasivan et al. 2017).

2.3 Conflict environments

Literature is reviewed in this section that describes economic and institutional effects of

conflict – i.e., prevailing institutional and economic conditions that characterise conflict and post-

conflict situations. Descriptions of institutional conditions encompass aspects of governance,

regulation and political legitimacy. Non-academic literature included in this review tends to involve

more generalised discussion based upon the experience of the publishing organisations.

2.3.1 Institutional conditions

Literature published by organisations involved in conflict resolution and post-conflict

reconstruction provides general descriptions of eroded standards of governance and regulation.

Discussing the role of the World Bank in post-conflict reconstruction, the World Bank (1998: 24)

describes the erosion of institutional conditions caused by conflict; “government capacity is

seriously weakened by a loss of skills. Decision-making is confounded by the complexities of post-

conflict politics. In many cases government is struggling to set up, for the first time, the functions

required of a new administration, or even a new state". In a report published by the United Nations

Development Programme (UNDP) that focuses on economic aspects of post-conflict recovery and

takes into account effects of institutional conditions, UNDP (2008) highlights that the extent to

which governing institutions are affected by conflict varies greatly. The report compares limited

effects from localised conflicts such as in Colombia, Indonesia and Sri Lanka with complete state

collapse in places such as Somalia and the Democratic Republic of Congo. Nevertheless, the report

highlights that without adequate administrative capacity and functioning systems of governance,

governments “cannot resume delivering essential services, gain political support, and attract

financing for reconstruction or maintain economic and social stability”. In a policy report intended

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to guide engagement of Australian government agencies in post-conflict situations, AusAID (2011:

47) suggests that institutional weaknesses in conflict-affected situations may include a lack of

capabilities among public sector workers, under-developed bureaucratic systems, non-payment of

staff, a high proportion of unfilled positions and damaged or missing facilities. World Bank (2014b:

26) argues that, beyond problems arising from limited state administrative capacity, social tensions

in fragile and conflict-affected situations often undermine programs to reform the public sector and

build administrative capacity. In a report that addresses requirements and challenges associated with

rebuilding core government functions in fragile and conflict-affected settings, the United Nations &

World Bank (2017) note that, notwithstanding that each conflict situation has “its own genesis,

trajectory and characteristics”, commonalities are evident, including: low government material

capacity, and low government human capacity.

Undermined legal systems and increased prevalence of corruption are also highlighted as

common features of conflict-affected environments. UNDP (2008) notes that typically post-conflict

countries find it extremely challenging to ensure the sustainable revival of the judicial system or to

protect it from political intrusion or corruption. The report notes that typically, poor administration

and weak judiciaries are unable to check illegal economic activity. The report also highlights that

without a functioning judiciary, disputes in conflict-affected situations cannot be resolved promptly

and transparently. UNDP (2008), identifies the spread of corruption that commonly accompanies

the breakdown of state institutions and loss of public administrative capacity during conflict. The

report also contends that conflict destroys social cohesion and trust and “widens the scope for

opportunistic and criminal behaviour, which undermines the values of honesty, hard work and

human dignity” (UNDP 2008: 33). In a report published by DfID, Dix et al. (2012), use interviews

with politicians, officials and academics to investigate corruption in three fragile and post-conflict

situations: Liberia, Nepal and Colombia. They highlight tensions between short and long term

objectives. Associations between corruption and political conditions is such that reforms to address

corruption could contribute to increased political instability in the short term, while the prevalence

of corruption undermines government legitimacy in the medium and long term.

Academic studies of institutional conditions in conflict and post-conflict situations are more

focussed in that they address particular situations and/or more-specific aspects of prevailing

institutional environments.

Inadequate capacities of governments in post-conflict situations, particularly in relation to

significant reforms that are often required to address prevailing dysfunctional governance

arrangements, is a common finding of literature. Brinkerhoff (2010) refers to several cases of post-

conflict situations in developing a model for improved capacity development interventions. He

suggests that inadequacies in government capacity in post-conflict situation are similar to those in

other developing countries, although increase political complexities, including a greater number of

interested foreign stakeholders, complicate capacity development efforts. Porter et al. (2011) analyse

indicators of public financial management to investigate the quality of financial management,

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including public procurement systems, in fragile and conflict-affected states. They find that, while

the adoption of best-practice systems may give an appearance of improved government functions,

de facto implementation and capacities are frequently lower than in more-stable situations. These

studies address institutions from a public administration perspective. In a survey of economic studies

addressing causes and consequences of civil war, Blattman & Miguel (2010: 42) note the lack of

systematic, quantitative data to judge claims about effects of conflict upon public institutions.

The prevalence of corruption in conflict-affected situations is another common theme in

literature, which also raises other issues that are relevant to corruption in post-conflict construction.

In a comprehensive discussion of issues surrounding governance in post-conflict situations,

Brinkerhoff (2005: 6) suggests that institutional conditions in conflict-affected situations are generally

characterised by “policies that favour powerful elites, few budget controls and rampant

corruption…”. Nystrand (2014) addresses corruption in the context of conflict in northern Uganda

through interviews with local business owners. The study concludes that in the contested region,

conflict has led to increased grand corruption affecting spending by the central government, while

petty corruption associated with local officials has been less-affected by the conflict situation.

Belloni & Strazzari (2014) discuss the persistently-high prevalence of corruption in post-conflict

Bosnia Herzegovina despite the adoption of legal frameworks modelled on international best

practice, arguing that international and national actors ignored extra-legal structures, including a

criminal-political nexus, that were perceived as supporting political stability in the post-conflict

period.

Studies addressing corruption in post-Taliban Afghanistan describe how the expansion of

corruption there stems from the influx of excessive amounts of financial aid that exceeded the

absorptive capacity of both the national economy and administrative institutions. The studies suggest

that, while systems of patronage may have undermined government legitimacy, they also partially

and temporarily ameliorated political instability by purchasing political support of potential state

rivals (Maley, 2013; Wilde and Mielke, 2013; Surkhe, 2013). The characterisations of increased

corruption in Afghanistan exemplify the dual relationship between conflict and corruption described

by Le Billion (2003). In this broader discussion, Le Billon (2013) argues that while corruption may

fuel grievances and conflict, pervasive corruption is also often legitimised in post-conflict situations

“as an instrument to build a political and economic order within a context of relative disorder.”

The need to build state legitimacy, potentially through increased service delivery that may be

supported by infrastructure construction is another theme in post-conflict governance literature that

has particular significance for this study. Brinkerhoff et al. (2012) use data describing changes in

water supply in Iraq to investigate relationships between government capacity, service delivery and

state legitimacy. They highlight that limited capacities of governments in post-conflict situations

undermine service delivery, that improved service delivery can increase state legitimacy, though the

relationship between service delivery and legitimacy is complex and depended upon broader

societal and institutional conditions. McGloughlin (2015) reiterates some of these findings,

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suggesting that, while improved legitimacy in post conflict situation is critical, the idea that improved

service delivery will yield increased legitimacy is over-simplistic. She argues that the relationship

between legitimacy and service delivery is “non-linear” and conditioned by expectations of what

the state should provide and other particular characteristics of state-society relations. Kooy et al.

(2015) investigate post-conflict cases of South Sudan and the Democratic Republic of Congo in

studying whether service delivery improves state legitimacy, finding the manner in which new

services are delivered is a determining factor in whether increased state legitimacy is achieved.

2.3.2 Economic conditions

Several of the reports from the UN, World Bank, etc. that that were cited above in relation to

institutional conditions also describe in a general manner effects of conflict upon prevailing

economic conditions. In a report published by the World Bank describing the Bank’s engagement

in post-conflict reconstruction, Kreimer et al. (1998) highlight variation in the effect of conflict upon

domestic production by comparing post-conflict GDP to pre-conflict GDP in Rwanda (46 per cent),

Bosnia Herzegovina (27 per cent) and Lebanon (24 per cent). In another report published by the

World Bank that addresses engagement of international firms in post-conflict reconstruction, Bray

(2005) highlights the effect of instability and unreliable legal systems in preventing investment and,

in particular, limited engagement of international construction firms in short-term project-specific

engagement.

Economic effects of conflict have also been the focus of academic studies. Collier & Gunning

(1995) and Collier (1999) analyse investment and production data from conflict-affected settings,

finding that investment in fixed assets and manufacturing decreases dues to increased risk and

increased transaction costs. Conflict risks include increased risk of damage to fixed assets, insecurity

of property rights, theft, and a breakdown in legal systems and other conventions that support private

ownership. Fitzgerald (1997) addresses the macro-economic effects of war, finding that

manufacturing declines in response to increased costs and “import repression” - severe foreign

exchange shortages that restrict access to imported inputs for manufacturing. Stewart et al. (1997),

in a cross-country analysis of economic conditions in conflict situations between 1970 and 1990

found that domestic production decreased, though that the extent of this reduction varied

significantly between conflicts. Stewart et al. (2000) analyse more-detailed data from a series of

datasets describing economic conditions in 18 conflict-affected countries, finding differences in

economic costs of construction that varied with the level of economic development, the nature of

conflict and government structures. In particular, they found the economic costs of conflict are less

in countries with more-developed economies compared to less-developed economies that relied

upon exports of single commodities. Addison et al. (2001) identify the immediate need to rebuild

financial systems in post-conflict situations, though suggest that weak regulatory authorities and

unsound loans hinder economic recovery.

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In addition to these investigations of macro-economic effects upon risk, costs, and

production, other reports and academic studies have highlighted specific effects of conflict upon

labour markets. In a book published by the ILO, Date-Bah (2003) highlights the lack of statistical

data describing labour markets in conflict-affected situations, though suggests that conflict

aggravates existing high levels of unemployment in unstable developing countries. The study also

argues that, in parallel with increased unemployment, conflict causes a loss of skills and expertise

as well-educated and well-trained workers leave the country and are unlikely to return until durable

peace has been achieved. UNDP (2008) notes the “brain drain” typically associated with conflict,

as entrepreneurs, professionals and intellectuals often leave for better opportunities abroad.

Duponchel & Collier (2013) undertake an econometric analysis of data from a survey by the World

Bank of firms in Sierra Leone. They investigate effects of conflict upon firms, finding that prolonged

unemployment and migration during conflict cause shortages of skills throughout the workforce that

endure long after the end of conflict. In a comprehensive review of literature on the economic

consequences of war, Carbonnier (1998) argues that post-conflict situations are characterised by a

dramatic lack of skilled labour as skills are diverted by war and qualified personnel have migrated.

He also notes that the labour market in post-conflict situations can be negatively affected by the

international community as aid organisations increase demand for scarce domestic skills, thereby

increasing the cost of labour. Cramer (2006) draws on a wide range of literature in discussing labour

markets and employment in conflict-affected economies, arguing that, rather than creating wholly

new conditions, conflict dramatizes conditions already present in labour markets that are not

affected by conflict. He argues that labour supply is affected by death, disease, migration and poor

provision of health and education services, and that problematic labour market conditions persist

after war ends.

2.3.3 Post-conflict reconstruction programs

Reports from the UN and the World Bank reviewed above in relation to prevailing conditions

in conflict and post-conflict situations also describe the scope of post-conflict reconstruction

activities. Kreimer et al. (1998) summarises the World Bank lending operations in post-conflict

countries as financing needs such as: jumpstarting the economy, resettlement and investment, repair

of war-damaged infrastructure, reform of a non-functioning or corrupt civil service and public

administration, and targeted programs for veterans and vulnerable groups such as widows and

children. In discussing issues related to post-conflict economic recovery, UNDP (2008) defines a

series of core areas of engagement for international organisations: 1) rebuilding infrastructure (noting

skills limitations), 2) investing in human capital (i.e. education and health), 3) reintegrating ex-

combatants, 4) creating jobs, and 5) strengthening institutions. In a report published by the United

Stated Agency for International Development (USAID) intended to guide US-funded reconstruction

assistance, USAID (2009) focusses in economic stabilisation and growth as primary goals of post-

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conflict reconstruction, noting that while program planning must be context-specific, starting

objectives include: 1) re-establishing economic governance functions and boosting government

legitimacy, 2) boosting employment, and 3) addressing root economic causes of conflict. These

reports are not empirical studies; however, they indicate the range of activities constituting post-

conflict programs of the publishers and other international organisations.

Academic studies are available that raise other issues associated with post-conflict

reconstruction that are relevant to construction amid post-conflict reconstruction. Barakat & Zyck

(2009) discuss the evolution of post-conflict assistance, suggesting that recent examples in

Afghanistan and Iraq are indicative of a trend of increasing reconstruction assistance during conflict

such that relief and reconstruction spending have become part of the political economy of conflicts.

Also addressing reconstruction in Afghanistan, Surke (2007) highlights that broader programs of

reform and modernisation that may accompany post-conflict reconstruction involve socio-

economic changes that can exacerbate tensions in unstable settings. Harris & Lewis (2002) discuss

and compare the range of needs that typically characterise post-conflict situations, suggesting a need

to prioritise activities that provide short-term gains to address political and human welfare needs

rather than longer-term economic development requirements.

Alongside these issues, several econometric studies have assessed the effectiveness of aid-

financed reconstruction and identified particular issues hindering reconstruction projects. World

Bank (2011) highlights that aid to fragile and conflict-affected countries rose from 29 per cent of

total aid in 1996-1998 to 41 per cent in 2006-2008.15 In a report published by the IMF, Demekas et

al. (2002) note that post-conflict financial aid differs from development financial aid in that “post-

conflict aid comes in a large sudden burst while, compared to that, development aid is a steady

trickle”. Distinguishing between post-conflict humanitarian and reconstruction aid, they develop an

econometric model based on data describing aid project results, finding that humanitarian aid is

more effective than reconstruction aid, and that reconstruction projects that rebuild economic

infrastructure have more significant impacts. Collier & Hoeffler (2004) develop an econometric

model that tests aid effectiveness in post-conflict settings, finding that economic benefits of aid are

greater during the first post-conflict decade compared to impacts on growth of aid in countries not

affected by recent conflict. However, they find the benefits of post-conflict aid may be offset by

limits in absorptive capacity due to problematic economic and administrative conditions. In another

study involving econometric modelling, Duponchel (2008) also finds that reconstruction aid is

particularly effective in post-conflict situations, though also identifies a limit to aid absorption

capacity of 4.8 per cent of GDP. In a report published by the World Bank, Chauvet et al. (2010)

combine project data from 6,400 World Bank projects with conflict data from the Peace Research

Institute Oslo (PRIO) to develop an econometric model that relates aid-funded project outcomes to

15 Notably, this increased identified in the report coincides with wars in Iraq an Afghanistan that included significant financial

contributions from the US government.

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conflict conditions. They find that aid projects are generally less successful in post-conflict situations

compared to settings not affected by recent conflict, though that increased supervision is associated

with improved project outcomes. They note that a lack of skills is one consequence of conflict,

suggesting that addressing shortages of skills is required to increase project success.

…

A wide range of literature has been reviewed in order to position this study and to identify

knowledge and concepts that are relevant to construction in conflict and post-conflict situations.

Literature that addresses construction specifically in the context of conflict has been assembled from

different fields. While some of the literature addressed relationships between construction and

conflict in a general manner (e.g. Dix 2011), most of the studies addressed particular aspects of

construction (time and cost over-runs, contracting arrangements, etc.) in particular conflict or post-

conflict settings. Research methods used in these studies include analysis of project documentation,

questionnaire surveys, and semi-structured interviews. While this group of literature identifies

problematic conditions affecting construction in conflict-affected settings, focus of many of the

studies upon specific situations and the limited scope of data restricts extrapolation of these findings

to general effects of conflict upon conditions surrounding construction projects.

The subject of construction in developing countries provides a more coherent body of

literature within which to position this study. This literature includes older studies that generally

address developing countries in a generic manner, and more-recent studies that tend to focus on

more-specific aspects of construction in particular developing countries. Earlier studies identified a

range conditions related to restricted availability of construction resources and poor regulation that

characterise construction in developing countries in general. Later literature has generally validated

earlier generic findings and extended them to provide more detailed knowledge about construction

in specific developing countries. While highlighting issues related to restricted resource availability

and regulatory quality, lack of a broader frame within which to position these later studies limits

their contribution to understanding about broader relationships between construction conditions

and economic development.

29

Chapter 3 CONCEPTUAL FRAME & THESIS PROPOSITION

Defining variables and relationships

The conceptual frame presented in this chapter provides a foundation for the investigation by

“explaining… the main things to be studied – the key factors, variables or constructs – and the

presumed interrelationships among them” (Miles et al. 2014: 20). This conceptual frame is presented

graphically in Figure 3.1, which incorporates six groups of variables: 1) general environmental

conditions, 2) conditions surrounding construction projects, 3) construction actors, 4) construction

practices, 5) project outcomes, and 6) regulatory measures. The conceptual frame integrates

concepts drawn from literature reviewed in Chapter 2. Essentially, the conceptual frame suggests

that construction practices respond to the environment in which construction actors operate, and

that these practices influence project outcomes, which include broader political, economic and

industrial implications. Regulatory measures are intended to control the behaviour of construction

actors in order to limit undesirable project outcomes. In addition to integrating concepts from

literature related to the subject of construction in conflict and post-conflict situations, this chapter

includes further references to literature that supports and clarifies definitions of terms and categories

adopted in this study.

The chapter is comprised of two sections. In Section 3.1 the concepts and variables

comprising the conceptual frame are explained. In Section 3.2, presents a thesis proposition that is

drawn from the conceptual frame and poses two research questions about relationships between

conflict and construction. Figure 3.1 is placed at the end of the chapter.

3.1 Conceptual frame

Relationships between the variables presented in Figure 3.1 describe a path of causation from

general environmental conditions to projects outcomes and their long term implications. The groups

of variables, specific variables comprising the groups and relationships between the variables are

described in Subsections 3.1.1-3.1.5 below.

3.1.1 General environmental conditions

General environmental conditions in this study are those that characterise the countries in

which construction projects are undertaken. Two types of countries: conflict-affected countries and

developing countries, are the focus of this study.

The group of conflict-affected countries considered in this study is a composite category that

encompasses conflict and post-conflict situations. In this study, conflict situations are countries

experiencing an episode of war, adopting the widely accepted definition of war from the Uppsala

Conflict Data Program (UCDP) that distinguishes war from other forms of violence (Pettersen & Eck

Conceptual Frame & Thesis Proposition

30

2018). According to this definition, episodes of war: involve at least 1,000 battle-related deaths

during in any 12-month period (distinguishing war from less-violent conflicts), and in which each

side has inflicted at least 5 per cent of the deaths (distinguishing war from situations of genocide),

and in which at least one opponent is a state (distinguishing war from inter-communal conflicts). In

this study, post-conflict situations are countries that have recently emerged from an episode of war.

It has been noted in literature addressing institutional and economic aspects of conflict that the

transition from conflict to post-conflict does not mark an end of violence (see Chapter 1). Rather, it

involves a reduction in political violence and instability that enables peacebuilding efforts to begin.

Thus, increased levels of political instability and violence – both fundamental characteristics of

conflict - distinguish the group of conflict-affected countries from other countries not affected by

recent conflict. Different levels of political instability and violence also distinguish different

countries within this conflict-affected group.

Conflict-affected countries are also characterised by the general environmental conditions of

increased economic instability - reflected in increased economic risk, increased transaction costs,

and decreased production that were identified in literature (e.g. Collier 1999; Fitzgerald 1997;

Stewart et al. 1997). Social instability is a further general condition associated with conflict-affected

situations, reflected in the movement and displacement of populations described in literature in

relation to labour markets in conflict and post-conflict settings (e.g. UNDP 2008; Cramer 2006;

Carbonnier 1998).

In this study, the category of developing countries refers specifically to countries in earlier

stages of economic development. A general model described by Bon (1992: 124) holds that

economic development involves a path from primary reliance on agriculture for production and

employment in developing countries, to increasing reliance on industry in transition countries, then

to primary reliance on services in developed economies. The model resembles Rostow’s stages of

economic growth (Rostow 1962), which has been criticised for reflecting the historical path of now-

developed economies rather than the experience of now-developing economies (e.g. Escobar 1999;

Kiely 2000). Notwithstanding criticism of the model, this study adopts a commonly-used definition

of developing countries as those in the process of increasing industrialisation, marked by increasing

productivity and increasing national income. Thus, in comparison with more-developed countries,

developing countries are characterised by: greater significance of agricultural production, a lesser

extent of industrial production and services, and lesser maturity or technical sophistication of

industrial production and services.

Alongside these characteristics of economic development, earlier stages of institutional

development are also commonly associated with developing countries. Institutional development

here refers specifically to formal national institutions that comprise the state, such as: parliaments,

courts of law, regulatory bodies, bureaucracies, and police forces. Thus, in comparison with more-

developed countries, developing countries are characterised by less-mature, less-stable and less-

capable formal institutions.


31

While in this study conflict-affected countries and developing countries are characterised by

different general conditions, these conditions are associated. Political instability and violence result

from a failure of national institutions to peacefully resolve political contests – that is, less-stable,

less-capable institutions contribute to conflict while conflict further-undermines these institutions.

Conflict is also associated with economic development and poverty, with numerous econometric

studies identifying a correlation between low per capita income and higher propensities for civil

war (see Blattman & Miguel 2010). All of the conflict and post-conflict situations during the period

from 2007 to 2012 identified in this study occurred in developing countries at earlier stages of

economic and institutional development (see Section 5.1). Thus, conflict-affected countries are, in

general, considered as a sub-group of the broader group of developing countries.

3.1.2 Specific construction conditions

Specific conditions surrounding construction projects are described in Figure 3.1 as being

influenced by (or symptomatic of) general conditions.

The conditions surrounding construction projects may be classified in different ways. For

example, Hughes (1989) identifies 11 environmental factors affecting construction projects: cultural,

economic, political, social, physical, aesthetic, financial, legal, institutional, technological and

policy. In a review of environmental factors affecting World Bank-funded projects, Youker (1992)

defines an analytic frame comprising six categories: political/legal, physical, infrastructural,

technological, financial/economic, and sociocultural. For this study, environmental factors affecting

construction (i.e. construction conditions) have been drawn from literature addressing construction

in developing countries (see Section 2.2). These conditions are grouped in two categories: economic

conditions and regulatory conditions. Drawing on literature that describes institutional and

economic conditions characterising conflict-affected situations (see Subsection 2.3), this study

contends that, alongside the effects of earlier stages of development, general conditions associated

with conflict also affect specific conditions surrounding construction projects.

The economic conditions surrounding construction that are addressed in the study relate to

the availability of resources for construction, specifically: expertise, materials and equipment, and

credit for contractors (i.e. working finance). The review of literature in Chapter 2 highlighted studies

finding inadequate availability of expertise and credit for contracts in developing countries (see

Subsubsections 2.2.2.1 and 2.2.2.3). Literature in the field of construction in developing countries

also suggests inordinately-high reliance on imported materials and equipment in developing

countries, owing to limited domestic industrial production (see Subsubsection 2.2.2.2). Literature

describing economic effects of conflict, such as increased risk, increased transaction costs,

decreased production and migration of labour, suggests that conflict is also associated with

decreased availability of expertise, materials and equipment and credit (see Subsection 2.3.2). Thus,

conflict conditions could be expected to compound inadequate resource availability associated with


32

earlier stages of development. Conflict might also create additional problems related to resource

availability that have not been identified in relation to developing countries in general (e.g. border

closures identified by Enshassi et al. (2009a; 2009b)).

The regulatory conditions surrounding construction that are addressed in this study relate to

the effectiveness and probity of institutions involved in regulation of construction, specifically: the

quality of regulation, the reliability the legal frame for contracting, and the prevalence of corruption.

Literature reviewed in Chapter 2 identified poor capacity for regulation, inadequacies in contracting

and procurement environments, and an increased propensity for corruption in construction as

common conditions affecting construction in developing countries (see Subsection 2.2.3). Literature

that addresses effects of conflict upon formal national institutions highlighted negative effects

including reduced government capacity, undermined legal systems and increased corruption (see

Subsection 2.3.1). Thus, as with economic conditions surrounding construction, conflict conditions

could be expected to compound inadequacies in construction regulation associated with earlier

stages of development and also possibly create additional problems related to regulation of

construction that have not been identified in relation to developing countries generally.

3.1.3 Construction actors

Construction actors are positioned in Figure 3.1 to indicate that they are influenced by the

prevailing conditions in which they operate.

Construction projects involve various actors, represented by individuals or organisations,

fulfilling different project roles. The range of construction actors may be categorized in a variety of

manners. The definition of construction actors depends on how the scope of construction that is

considered. For example, a minimal scope that considers only construction on site, or a broader

scope that considers as “all production activities contributing to the production of the built

environment” (Ive & Gruneberg, 2000: 5). The definition of construction actors may also vary with

the type of construction. For example, public infrastructure and speculative housing involve a

different range of actors. In defining participants involved in construction, Ive & Gruneberg (2000:

154) distinguish between three roles: developers, designers and builders; and 11 actors: direct

labour organisations, speculative builders, contractors, construction managers, building workers,

project managers, quantity surveyors, architects, engineers, property companies, and owner-

occupiers. Winch & Carr (2001) identify five groupings of construction actors: clients, consultants,

regulators, contractors and trade contractors. Hillebrandt (2000: 4) cites an “internationally agreed”

definition of the construction industry that comprises six types of actors: consultants, contractors,

subcontractors, equipment suppliers, and materials merchants, and notes the close relationship of

clients and financiers. This study considers construction actors in regard to seven types of actor:

financier, client, consultant, contractor, subcontractor, merchant and regulator.


33

Financier in this study refers to organisations involved in financing public infrastructure

construction in conflict and post-conflict situations. This includes domestic governments, foreign

government donors of financial aid (bilateral donors), and international organisations such as the

World Bank and Asian Development Bank (ADB) (multilateral donors). Policies and procedures of

these financiers, particularly those related to financial management and procurement, influence

procurement and contracting arrangements adopted in infrastructure construction projects.

Clients are organisations that are directly engaged as clients in construction contracts.

Regarding public infrastructure construction in conflict-affected situations, clients could include:

various branches of domestic governments, foreign government military units, foreign government

civilian agencies, and international development organisations (such as UN agencies and Non-

Government Organisations (NGOs)).

Consultants are individuals or organisations that provide professional services for construction

projects: project managers, architects, engineers, quantity surveyors, etc. Private firms or individuals

typically act as consultants in construction projects. However, in conflict-affected situations (and in

the broader context of international development aid), development organisations might also act as

consultants, providing project management or other professional services supporting public

infrastructure construction.

Contractors are parties engaged with clients in construction contracts. Typically, contractors

are construction firms. In addition, development organisations might act as contractors. For

example, Dix (2011) highlighted a function of NGOs acting as contractors for small-scale public

infrastructure construction in the context of post-conflict reconstruction.

Subcontractors are considered in this study to be actors engaged by contractors to provide

specific manual input into on-site construction. Trade subcontracting is a common practice in which

subcontracting firms are engaged to provide labour, equipment and materials associated with a

particular construction trade. Wells (2006) and others have identified the prevalence in developing

countries of labour-only subcontracting in which materials are provided by the client or contractor.

While subcontractors are typically small firms, in regard to infrastructure construction in conflict

affected situations, NGOs might also act as subcontractors.

Merchants in this study refers specifically to merchants involved in the supply of construction

materials and equipment. This could include wholesale and retail sellers and distributors located at

various positions within materials and equipment supply chains.

Finally, regulators, while not typically considered to be construction actors (e.g. Ive &

Gruneberg 2000: 154; Hillebrandt 2000: 4) are included as a category of construction actors in this

study. Regulators include various branches of domestic governments that are responsible for:

formulation of construction codes and technical standards, registration of construction firms and

licensing of professionals, certification of designs and certification of built work.


34

3.1.4 Construction practices

Construction practices are defined within this study as the various decisions and actions taken

in relation to projects by construction actors. The range of construction practices is wide and varied.

In addition to being responses to particular priorities and objectives of the individuals and

organisations involved, these practices are addressed in this study as being influenced by the

environment in which practitioners operate. Thus, effects of conflict upon particular conditions

surrounding construction projects may lead to particular practical responses of construction actors.

To support a broad understanding of construction in conflict-affected situations, the study

addresses a wide range of practices. Addressing the wide range of practices in a systematic manner

requires a scheme of classification. One strategy could be to classify practices by practitioner type

– e.g. addressing various practices of contractors as a category. Another strategy could be to address

practices involved in each project phase.16 Rather than group practices according to practitioner or

project phase, in this study construction practices are addressed in relation to particular aspects of

projects – particular fields of project practice. Four fields of practice have been adopted: 1) design

and certification of actors and works, 2) tendering and award of contracts, 3) mobilisation and

management of resources, and 4) contract conditions and administration. These categories have

been defined to provide a comprehensive scheme that encompasses inter-relationships between

different actors.

Design and certification of actors and works includes practices of: financiers, clients,

consultants, contractors and regulators. In particular, this field includes practices associated with:

formulation of construction codes and technical standards by regulators; firm registration and

professional licensing involving regulators, contractors and consultants; design and documentation

of works by consultants; certification of works for compliance with codes and standards by

regulators; etc.

Tendering and award of contracts includes practices of: financiers, clients, and contractors.

In particular, this field includes practices associated with: financial management policies of

financiers, tender documentation and management by clients and consultants, pricing of works and

bid formulation by contractors and subcontractors, bid evaluation and contract award procedures

by clients and consultants, oversight of public procurement by financiers and clients, etc.

Mobilisation and management of resources includes practices of: clients, contractors,

subcontractors and merchants. In particular, this field includes practices associated with: materials

and equipment supply chains involving merchants, contractors and subcontractors; materials

purchase by clients, contractors and subcontractors; investment in staff and equipment by

contractors and subcontractors; subcontracting arrangements involving contractors and

16 E.g. Winch & Carr (2001) define ten construction project phases starting from needs definition and ending with facility

management.


35

subcontractors; coordination of resources on construction sites involving contractors and

subcontractors; etc.

Contract conditions and administration includes practices of: financers, clients, consultants

and contractors. In particular, this field includes practices associated with: definition of contract

conditions by financiers, clients and contractors; guarantee and payment arrangements involving:

clients, consultants and contractors; site superintendence by clients and consultants; certification of

works and completion of payments by clients and consultants; contract dispute resolution involving:

clients, consultants and contractors; etc.

3.1.5 Project outcomes

Construction project outcomes are positioned in Figure 3.1 as effects of the practices and

interactions of the construction practitioners involved. Thus, construction project outcomes in

conflict-affected situations may be attributable to specific practices, and back to specific prevailing

conditions to which these practices respond.

Two levels of project outcomes are considered in this study: immediate project outcomes,

and broader social, economic and political implications. Immediate project outcomes may be

considered in regard to the relationship between time, cost and quality and the impact of various

practices upon the balance of these variables. Broader implications arising from construction

practices in conflict-affected situations could include economic implications such as the stifling or

promotion of industrial development and increased or diminished returns on infrastructure

investments. They could also include social implications arising from improved or unaffected

delivery of basic public services. Political implications of construction project outcomes relate to

the potential for construction of infrastructure to contribute to political legitimacy and stability and,

conversely, for poor construction outcomes to undermine this objective.

3.1.6 Regulation

Two tiers of regulation are considered in this study: 1) industry-wide regulation, such as

construction codes, technical standards, and construction firm registration requirements, and 2)

project- or client-based regulation that includes construction contracts and procurement rules. This

second tier of project/client-based regulation entails a broad definition of regulation that deviates

from some definitions presented in literature. For example, Selznick (1985: 363, cited in Baldwin et

al. (2012: 3)) defines regulation as “sustained or focussed control exercised by a public agency over

activities that are valued by the community” - implying that regulation is an activity of government.

Mitnick (1980) considers two general scopes of regulation: economic regulation that controls market

activities (price, entry, etc.), and social regulation involving controlling activities with direct effects

on people. Despite the potentially-broad scope of social regulation, Mitnick also addresses


36

regulation strictly as a field of government authority. Baldwin (2012) presents a broader definition

of regulation as “an activity that restricts behaviour and prevents the occurrence of certain

undesirable activities” (Baldwin, 2012: 3). This broader definition of regulation can encompass

measures adopted by construction clients that are not necessarily government agencies, such as

adoption of particular construction contracts and enforcement of procurement rules and procedures.

The forms of construction regulation considered in this study are intended to restrict the

behaviour of construction practitioners to prevent the occurrence of undesirable project outcomes.

Industry-wide regulations apply to construction and to construction actors generally.

Construction codes define technical requirements of built work, either through defining acceptable

forms or minimum performance requirements (see Sexton & Barrett 2005; May 2007; Meacham

2010). Construction codes may be formulated and enforced by national, provincial or local

authorities depending on a country’s particular governance arrangements. In defining specific

technical requirements, construction codes may make reference to particular technical standards

that are published by national authorities (e.g. Standards Australia), national organisations (e.g. the

American Society for Testing Materials (ASTM)), and international organisations (e.g. the

International Standards Organisation (ISO)). Specific registration requirements for construction firms

are often additional to general business registration for taxation etc., and may include specific

education, experience and insurance requirements to ensure a degree of capability and liability (see

Love et al. 2010). Kleiner (2000) distinguishes registration from licensing requirements that are often

applied to professions - including construction consulting professions - and may include education

requirements, insurance requirements, and restrictions upon the range of activities that a licenced

professional may carry out. Broader liability laws applied to construction practitioners for the work

they produce, particularly design consultants, contractors and subcontractors, are also considered

here as a form of industry-wide regulation.

Project and client-based regulations considered in this study include the regulation of

procurement through particular rules and procedures, and the adoption by clients of specific forms

of contract defining the responsibilities of clients, consultants and contractors. Procurement here

refers to the range of activities through which clients engage contractors to provide construction

services and built work. For example, for UNDP, procurement includes “all functions from the

identification of needs, selection and solicitation of sources, preparation and award of contract, and

all phases of contract administration through the end of a services contract” (UNDP, 2010: 1). In

the arena of international development aid, particular sets of procurement rules and/or policies are

often stipulated by donors (i.e. financiers) within donor or loan agreements. For example, the World

Bank stipulates procurement rules and procedures to be followed by government recipients of Bank

finance (see World Bank, 2014a). Procurement rules often include stipulation of particular standard

forms of contract. Contracts thus fall within the wider scope of regulation defined for this study.

Standard contracts published by the International Federation of Consulting Engineers (FIDIC) play a

particularly prominent role in aid-funded construction, given stipulated or recommended use of


37

FIDIC contracts in projects funded or managed by a range of donors and international development

organisations.17 18

3.2 Thesis proposition

The thesis proposition distils the concepts comprising the conceptual frame. This thesis

proposition also takes into account the general aim of the study - to develop knowledge about the

conditions and practices characterising construction in conflict and post-conflict situations that can

contribute to theory about construction and to the practice of construction in conflict-affected

settings (see Chapter 1).

The thesis proposition is: that conflict exacerbates problematic conditions that commonly

characterise construction in developing countries and that standard regulatory measures, which

assume less-problematic conditions, are less effective in deterring undesirable construction practices

in conflict-affected situations. Two research questions are proposed to test the thesis:

1. Are conditions surrounding construction projects different in conflict-affected situations

compared to conditions in other developing countries that are not affected by conflict?

2. Are there common construction practices in conflict-affected situations that respond to

particular conditions associated with conflict and that differ from practices in other

developing countries and from practices intended by regulatory measures?

These questions define a broad scope and exploratory character of the study that seeks to

extend the academic field of construction in developing countries to address the specific sub-group

of developing countries affected by ongoing or recent conflict.

17 For example, FIDIC publishes a FIDIC MDB Harmonised Construction Contract that is stipulated by the multi-lateral

development banks (the World Bank, Asian Development Bank, and African Development Bank). USAID recommends use

of FIDIC contracts in its Country Contracting Handbook (USAID 2003). The UN Office of Project Services (UNOPS) publishes

three contracts for: minor works, unit rate-based payment, and lump sum-based payment, which are modified versions of

FIDIC contracts.

18 Baker et al. (2009) provide a thorough overview of the FIDIC suite of contracts. Chen et al. (2018) analyses the FIDIC suite

of contracts in relation to three functions: control, coordination and adaptation. Ndekugri et al. (2007) address the role of the

contract administrator – the Engineer – in the FIDIC Red Book, particularly in relation to the Engineer’s function as an

independent administrator.


38

Decreased availability of

expertise

Decreased availability of materials & equipment


credit for contractors

Decreased effectivenessof regulation

Decreased effectiveness of

legal frame

Increased prevalence of

corruption

RegulatoryEconomicConstruction conditions

Earlier stages of economic development

Earlier stages of institutional development

Political instability &

violence

Increased economic instability

Increased social

instability

Conflict-affected countriesDeveloping countries

Construction codes & technical standards

Registration& licensing

systems

Legal liability& insurance

Construction contracts

Procurement rules &

proceduresProj

ect-

& cl

ient

-bas

edIn

dust

ry-w

ide

Figure 3.1 - Conceptual frame

Financier Client Consultant Regulator

Contractor Subcontractor Merchant

Construction actors

Reg

ulat

ory

mea

sure

s

Sitesuperinten-

dence

Certificationof works & payment

Guarantee & payment

arrangements

Formulation codes &

standards

Des

ign

& th

e ce

rtific

atio

n of

act

ors

& w

orks

Registration &licensing

Design &documentation

Compliance certification

etc.

Price & bid formulation

Procurement oversight

etc.

Bid evaluation & contract

award

Tender documentation & managment

Tend

erin

g an

d co

ntra

ct a

war

d

Investment: staff &

equipment

Sitecoordination

etc.

Subcontracting

Materials supply chains &

purchase

Res

ourc

e m

obilis

atio

n an

d m

anag

emen

t

Con

tract

con

ditio

ns a

nd a

dmin

istra

tion

Dispute resolution

etc.

Project Practices

Time Cost Quality Industrial development

Investment returns

Political implications

Project outcomes Broader implicationsOutcomes

39

Chapter 4 RESEARCH METHODOLOGY

Developing academic knowledge from practical experience

The research methodology described in this chapter includes a case study approach that

adopts individual conflict-affected situations – individual countries during or soon after particular

episodes of conflict – as the primary unit of analysis. The study addresses four cases and, within

each case, four secondary units of analysis are the four fields of practice identified in the conceptual

frame: 1) design and certification of actors and works, 2) tendering and contract award, 3)

mobilisation and management of resources, and 4) contract conditions and administration (see

Subsection 3.1.4). Data has been collected from three sources: interviews, observations, and

statistical indicators. Interviews with actors engaged in construction in each of the cases are the

primary source of data. Analysis of data addresses each case independently, then synthesis addresses

each practice field across the four cases.

The methodology responds to the aims of the study and to practical limitations associated

with the subject. The study aims to increase understanding about practical responses of individuals

and organisations to complex environments. However, conflict and post-conflict situations present

certain risks and restrictions. In discussing challenges and limitations affecting research in conflict

situations, Barakat et al. (2002: 992) suggest that the main problems relate to limited access “to

information, to research settings, and to respondents”, and that the primary methodological

challenge is to mitigate and compensate for access limitations. The Author’s professional history

affords a greater degree of access to particular settings and practitioners than would otherwise be

available. The study has been designed to take advantage of this access. While ameliorating some

access restrictions, reliance on past professional experience introduces a potential dimension of

researcher bias that is addressed in the research design.

The chapter is comprised of four sections. Section 4.1 describes the case study approach, the

selection of four cases, and the manner in which statistical indicators are used to position these

cases in relation to the broader field of conflict-affected situations. Section 4.2 describes the data

collection methods, specifically practitioner interviews and participant observations. Section 4.3

describes how this data is analysed and how the case-specific findings are synthesised. Section 4.4

briefly outlines how the cases are reported.

4.1 The case-study approach

4.1.1 Rationale for a case study approach

The study involves the description of conditions and practices characterising construction in

four conflict-affected situations. This general research design entails a descriptive case study

Research Methodology

40

approach in which each case – that is, the primary unit of analysis (Yin 2009: 30) – is a particular

country and period during or soon after an episode of conflict. For each case, evidence from multiple

sources has been assembled.

The case study approach responds to the complexity of the subject and the importance of

context to the investigation. The study is concerned with how conflict affects environments

surrounding participants in the construction process, taking into account social, economic and

political aspects of this environment. The study is also concerned with how construction actors

behave in conflict-affected environments. While conditions and practices characterising

construction are the primary focus of investigation, the thesis proposition maintains that these

specific conditions and practices are affected by the broader context of conflict-affected situations.

Understanding this broader context is thus a critical component of a study that “seeks to provide

meaning within context” (Remenyi et al. 2002, cited in Knight & Ruddock 2008: 99). Studying cases

of particular conflict-affected situations, including collection and triangulation of evidence from

multiple sources, enables the broader context to be considered while focussing on specific

conditions and practices characterising construction within this context.

Other research approaches are less appropriate considering the aim of the study and the

complexity and variety of variables that the subject entails. An ethnographic approach to the

research design, while potentially addressing complex relationships between environmental

conditions and practical responses, would not address sufficiently the variety of actors and contexts

that the research objective requires.19 The limited range of conditions and practices that a standard

ethnographic approach could address would limit the generalizability of findings and the potential

for the study to develop knowledge that is useful for practitioners. Adoption of an ethnographic

approach is also hampered by the requirement for prolonged fieldwork in high-risk environments

and by prolonged access to a suitable firm or organisation. A survey approach to the research design

could address sufficiently the variety of contexts, conditions and actors that the research aims

require, and ameliorate the impact of access limitations.20 However, questionnaire surveys are a

relatively superficial means of interrogation that would not yield detailed information about how

construction actors perceive and respond to the environment in which they operate. A quasi-

19 An ethnographic approach could, for example, involve observing for a prolonged period a construction firm or an

organisation engaged in managing construction projects in a conflict or post-conflict situation. From this perspective, the

range of conditions and practices that could be observed is more limited than the range potentially open to a case study

approach in which the broader conflict-affected situation is the unit of analysis.

20 A survey approach could involve distribution of surveys to various construction actors working in various conflict and post-

conflict situations. Informed sampling criteria that take into account characteristics of respondents and the contexts in which

they work would support statistical analysis of survey results.


41

experimental approach is not feasible given the complexity of contexts of the research, the variety

of variables, and the lack of control that can be exerted over these variables.21 22

While a research design involving a group of cases that are countries in the midst or aftermath

of an episode of conflict is more appropriate for this study than other approaches, it involves

limitations related to the unique character of each case and adoption of countries as the unit of

analysis.

The effectiveness of the case study approach as a means of developing general knowledge

about construction in conflict-affected situations is limited by the unique nature of every conflict

situation. The study of multiple cases broadens the scope of evidence. In addition, the use of statistics

to position these cases in relation to each other and in relation to the broader group of conflict-

affected situations supports the generalisation of findings from a particular situation to the broader

group (see Subsection 4.1.2). Analysis of evidence and synthesis of findings seeks to look beyond

characteristics of a particular situation and focus on essential relationships between specific

practices and specific prevailing conditions (see Section 4.3). Thus, notwithstanding limitations of

studying specific cases as a means of characterising general phenomena, measures within the

research design support generalisation of findings and conclusions.

Adoption of countries as cases, as opposed to a narrower unit of analysis such as specific

conflict-affected sub-national regions or specific construction projects, also involves particular

limitations. While the national scope of each case encompasses a wide range of projects, conditions,

practitioners and practices, use of semi-structured interviews enables a focus upon factors that are

deemed to be particularly significant by practitioners. The national scope of each case potentially

incorporates both particularly violent/unstable regions and more peaceful regions.23 While political

violence and social instability might be limited to a particular sub-national region, such

geographically-limited wars are expected to yield national political and economic instability.

Further, while some construction actors such as trade subcontractors might only operate locally,

other important construction actors operate nationally, such as donor and development

organisations acting as clients, national government agencies acting as clients and regulators, and

general contractors.

21 One potential quasi-experimental approach could involve identifying projects with similar characteristics undertaken in

situations in which differences in environmental conditions could be clearly identified, then tracing any different practices

back to differing conditions.

22 An alternative that integrates experimental and ethnographic approaches could involve adopting as a subject an

international organisation that is implementing (or has implemented) comparable construction projects in both peaceful and

conflict-affected situations. Assuming comparable projects could be identified and access for research secured, the limitations

described earlier in relation to ethnographic methods would apply to a quasi-experimental/ethnographic mixed approach.

23 For example, in Nigeria the insurgent conflict is primarily limited to the north-east region, while other parts of the country

might only be affected indirectly by the degree of national political instability that the distant conflict causes.


42

4.1.2 Case selection and positioning

The study addresses four cases: Afghanistan during a period of conflict from 2002 to 2012,

Timor-Leste during a post-conflict period from 2007 to 2012, South Sudan during a post-conflict

period from 2005 to 2012, and Pakistan during a period conflict from 2007 to 2012.24

The selection of these particular cases responds to practical considerations, particularly

access limitations to conflict-affected situations for data collection. Each case is a situation in which

the Author has prior professional experience, specifically: in Afghanistan from 2006 to 2009, in

Timor-Leste from 2010 to 2011, in Pakistan from 2011 to 2012, and in South Sudan from 2012 to

2014. This engagement prior to the study has provided a greater degree of access for data collection

than would not otherwise be feasible. Further, this experience affords a degree of “prior, expert

knowledge” that Yin (2009: 116) suggests is a necessary component of case study analysis.

The group of cases includes two conflict situations (Afghanistan and Pakistan) and two post-

conflict situations (Timor-Leste and South Sudan). However, this group does not provide a

representative sample of the larger group of conflict-affected situations. A representative sample is

not feasible given the diversity of situations and access limitations. Rather than representative

sampling, the study adopts a replication logic advocated by Yin (2009: 54). Each case constitutes a

“whole” study in which evidence is compiled and findings identified, which are then considered to

be “information needing replication by other individual cases” (Yin, 2009: 56). The research design

employs this replication logic insofar as each case is studied independently, with results compared

and synthesised in the context of understanding about significant underlying differences between

the cases.

The case studies are preceded by a review of statistics that provides a frame in which each

case is positioned in relation to the broader group of conflict-affected situations. In Chapter 5,

statistical indicators of construction conditions are reviewed in relation to two groups of countries:

conflict-affected countries and other (peaceful) developing countries. Interquartile ranges for each

indicator are consolidated in radar charts for each group of countries, enabling clear visual

comparison of conflict-affected and developing country groups in regard to each condition.25 These

radar charts provide a frame within which the indicators for each case and for each condition are

24 The study was initially planned to address only the single case of Afghanistan. Focus upon this single case responded to

the particularly important role that construction played during the conflict in Afghanistan, reflected in the high levels of

funding for construction and the development of counter-insurgency strategy in Afghanistan that incorporated construction

as a means of developing political support for the military effort. However, recognition that the situation in Afghanistan is

perhaps exceptional rather than indicative of construction in conflict-affected situations in general led to the inclusion of the

other cases.

25 The radar charts are assemblies of standard bar charts that report the interquartile range and the mean for each condition.


43

positioned. By positioning the cases in relation to the broader group of conflict-affected situations,

this review of statistics supports the synthesis of cases and generalisation of findings.

4.2 Data collection

Data was collected from three sources: interviews with practitioners, observations, and

secondary data from statistical databases and documents.26 Interviews are the primary data source

and focus on descriptions of specific construction practices and specific associated conditions.

Observations and statistics corroborate some of the information from interviews. Statistical and

documentary data are used to describe the context of each case and to position each case in relation

to the broader group of conflict-affected situations. Thus, in addition to internal triangulation of data

from interviews with multiple practitioners in each case, external triangulation involves

corroboration of interview data with data from observations and statistics.28

4.2.1 Interviews

Sixty-four semi-structured interviews were conducted with construction practitioners that

have experience working in each of the cases.29 While most interviews involved a single

interviewee, some cases involved multiple interviewees such that a total of 87 practitioners were

interviewed: 32 for the case of Afghanistan, 22 for the case of Pakistan, 17 for the case of Timor-

Leste, and 16 for the case of South Sudan. With regard to construction roles, the group of

interviewees comprises: 3 financiers, 18 clients, 17 consultants, 42 contractors, 3 merchants and 4

regulators. Rather than adopting a structured approach involving a predefined sequence of

questions, each interview was a semi-structured conversation between experts that addressed

predefined topics. The duration of interviews was dictated by the preferences, openness and the

relevance of the knowledge of interviewees. Interviews ranged in duration from around half an hour

to around four hours (with breaks), yielding a total of 63 hours of recorded conversation. All

26 All data collected for the study, including all coded interview transcripts, work notes, statistical data, and documents that

are not readily accessible, is available for review in the Study Database.

28 Denzin (1978) identifies four modes of triangulation: 1) data triangulation employing a variety of data sources, 2)

investigator triangulation in which multiple investigators address the same question, 3) theory triangulation in which multiple

perspectives are used to interpret the data, and 4) methodological triangulation in which multiple analytic methods are

applied to the data. The mode of triangulation addressed in this section is the first mode – data triangulation.

29 Interviews were completed, and other data collected during four research field visits: 1) to Pakistan (Islamabad and Lahore)

for two weeks during June 2013, 2) to Afghanistan (Kabul) for two weeks during January 2014, 3) to South Sudan (Juba) for

two weeks during March and April 2014, and 4) to Timor-Leste (Dili) for two weeks during June 2014. In addition, three

interviews with military personnel with prior experience working in Afghanistan were undertaken in Australia (Canberra)

during November 2011 and one interview was undertaken remotely via Skype with a consultant that had previous experience

working in Afghanistan.


44

recordings were transcribed verbatim and all notes from unrecorded interviews were rewritten for

analysis.

The focus on interviews as a source of evidence reflects practical limitations involved in

researching contemporary conflict-affected situations. Limited documentary or statistical data is

available to describe these situations directly, or to provide a basis for sampling in support of survey

methods that could be employed within the case study approach. The semi-structured format of

interviews with practitioners responds to the subject of the research. The study addresses behaviour

of practitioners as they work together on construction projects. How do practitioners perceive and

respond to conflict-affected environments? What decisions and actions do their responses involve,

and how do they interact with the practices of others? Kvale (1996: 29) highlights that semi-

structured interviews, as opposed to questionnaire surveys or highly structured interviews, are more

appropriate as a means of investigating this “lived experience” of practitioners.

Rather than a predefined sequence of questions, interviews involved a sequence of topics that

were introduced using general, predefined questions in a manner advocated by Kvale (1996: 124).

In order to address a range of construction practices, the four fields of practice outlined in the

conceptual frame of the study were adopted as interview topics (see Subsection 3.1.4). Interviews

commenced with an introduction in which interviewees were asked to explain their professional

background and experience. Then, different questions were posed and different topics addressed

depending upon the characteristics, experience and knowledge of each interviewee.30 Particular

topics were not addressed if they bore no relevance to an interviewee’s experience.31 Within the

structure of the four topics, questions were posed that responded to issues raised by the interviewees

and that were informed by the Interviewer-Author’s own knowledge of the subject. Thus, interviews

took the form of conversations between experts advocated by Kvale (1996: 42), or what Gubrium &

Holstein (2012: 28) describe as “interactional event[s] based on reciprocal stocks of knowledge”.

While accommodating the diversity of interviewees and enabling sufficient depth of

investigation, this semi-structured approach to interviews involves potential research hazards. One

type of hazard relates to the accuracy of information provided in interviews, particularly the

potential for “bias, poor recall, and poor or inaccurate articulation” (Yin, 2009: 108). Interviewees

might only tell the interviewee what he wants to hear (Johnson & Rowlands 2012: 100). In group

interview situations, interviewees may withhold or alter information for fear of negatively affecting

30 Initially, a more structured approach to interviews was employed, with sequences of sub-topics defined under each topic,

and a series of questions defined under each sub-topic. Under each sub-topic, different sets of questions were defined for

different types of practitioners. This more-structured approach was discarded in favour of a more flexible approach that

enabled interviews to adapt to particular characteristics of each interviewee and to address in greater detail each

interviewee’s particular experience and knowledge.

31 For example, neither design and documentation of works nor mobilisation and management of resources was addressed

in an interview with a legal consultant representing construction firms in Afghanistan.


45

relationships in the group (Beitin, 2012: 245). Triangulation of information provided by different

interviewees ameliorates these hazards. Another hazard arises from the potential for interviewer

bias, particularly given the active role played by the interviewer interpreting responses and

formulating questions during interviews, thereby guiding interview conversations. Acknowledging

the scope for researcher bias that semi-structured interviews entail, the potential for bias has been

addressed through maintenance of research standards, particularly standards for conducting

qualitative interviews described in Kvale (1996), and Gubrium et al. (2012).32

A further research hazard and limitation pertains to the reliability of semi-structured

interviews - reliance on the interviewer’s knowledge of the subject has implications for the

reproducibility of findings. Kvale (1996: 65) addresses reliability of qualitative interviews as “inter-

subjectivity” – the inter-subjective testability and reproducibility of findings - distinguishing between

arithmetic inter-subjectivity and dialogical inter-subjectivity. For Kvale, reliability of qualitative

interviews derives from dialogical inter-subjectivity - “agreement through a rational discourse and

reciprocal critique among those identifying and interpreting the phenomenon” (Kvale, 1996: 65).

Interviews undertaken for this study are not strictly replicable. Nevertheless, reliability is provided

by the potential for common interpretation and validation by other researchers of verbatim

transcripts that are the immediate output of interview conversations.

The range of interviewees selected for the study reflects responds to strategic considerations

and to access limitations. The subject of the study encompasses the full breadth of construction

conditions and practices, implying the need for a group of interviewees that represents all of the

types of practitioners involved in construction. In discussing the number of interviewees required to

provide an adequate sample, Beitin (2012: 244) identifies theoretical saturation as the most common

limiting criteria.33 Rather than achieving theoretical saturation, the size of the group of practitioners

interviewed for each case reflects access limitations. For each case, the intention during field visits

was to interview as many practitioners from as wide a range of backgrounds as feasible. Key

informants and an initial group of interviewees were identified through the Author’s prior

professional contacts. From this initial group and a broader group of professional contacts, further

interviewees were identified during field visits.

32 The loss of conversational nuance in the translation from audio recordings to transcribed text contributes to apparently

leading questions in some situations. Interviewees had varying degrees of English language proficiency, such that in some

situations, to provide greater clarity, questions were posed in a manner that could appear leading. In other situations, leading

questions have been posed strategically to verify earlier information provided by the interviewee or information provided in

earlier interviews. Kvale (1996: 159) notes that “leading questions do not always reduce the reliability of interviews, but may

enhance it.” Any other instances of inadvertent use of leading questions are lapses in interviewing technique that, while

regrettable, have not impacted upon research findings.

33 Beitin’s use of the term theoretical saturation, follows use of the term in the grounded theory research approach, referring

to continued collection and analysis of data until all concepts that form the theory are well developed and no new data is

needed.


46

As a result of access limitations and the practical approach to interviewee selection that this

necessitated, the range and number of interviewees varies for each case. While, the range of

interviewees for each case is not a representative sample, each group encompasses a breadth of

experience and knowledge. In each case chapter, the group of interviewees is described and

limitations of this group are considered.

Interviews were audio recorded, except for six interviews where interviewees did not give

consent for audio recording. Recordings were transcribed verbatim, while notes were taken during

unrecorded interviews. Interviews were conducted in English, except for two interviews in

Afghanistan that were conducted in Dari (AFG-11 and AFG-18) and two interviews in Pakistan that

were conducted in Urdu (PAK-04 and PAK-10). Translators were used for these non-English

interviews. Verbatim transcriptions, as opposed to less detailed summaries of discussion, were

produced to provide a better quality of data, to enable more thorough analysis, and to maintain a

chain of evidence. Transcriptions include no condensing nor rephrasing of comments, despite any

use of unclear language by interviewees who varied in their command of English language. For

some transcriptions, text was modified by omitting lengthy introductions. In order to preserve

anonymity of interviewees in accordance with research ethics requirements, mentioned names of

persons or organisations that could have enabled identification of the interviewee were removed

from transcripts.

The omission of names from transcriptions is one aspect of the ethical considerations that

guided the manner in which interviews were planned, undertaken and recorded.34 These ethical

considerations were guided by principles of informed consent and confidentially, taking into

account the potential consequences of participation for interviewees. Interviews sought to address

actual construction practices, including practices that deviated from standards and from regulations,

thus potential professional and commercial consequences for participants were taken into account.

For example, participation in interviews by officials employed with organisations that act as clients,

consultants or regulators of construction could compromise professional relationships. Owners or

employees of construction or consulting firms could divulge information during interviews that

might compromise relationships with current or potential clients.

Relationships between the Interviewer-Author and interviewees required measures to ensure

ethical conduct of the study. The Author’s prior engagement as a representative of construction

clients in each of the four cases entailed a potential relationship with interviewees, either as a

colleague or representative of a past, current or potential employer. For each case, interviews were

34 Human research ethics approval was provided by the University of Melbourne in October 2013 prior to the

commencement of field visits and interviews. Approval included review by the Human Ethics Advisory Group (HEAG), the

Human Ethics Sub-committee (HESC) of the Faculty of Architecture, Building and Planning, and by the Human Research

Ethics Committee (HREC) of the University. This final, additional review by the HREC arose from classification of the study

as high-risk due to the conduct of a field visit in Afghanistan and other conflict-affected locations.


47

conducted after the Author had ceased professional employment and was no longer in a position to

influence any client decisions. In Afghanistan, Timor-Leste and Pakistan, field visits involved a return

to each country after the Author had ceased work there. For South Sudan, interviews were conducted

after the Author had ceased work and the organisation with which he was employed had ceased

operations.35 Prior to each interview it was made clear to interviewees that the interviewer had no

influence over current or future project decisions.

Interviewees’ informed consent for participation in the study was supported by the provision

of a printed Plain Language Statement prior to interviews commencing, in accordance with

University of Melbourne ethics requirements. This Plain Language Statement provided basic

information about the nature of the research, the manner in which interviews would be conducted,

maintenance of interviewee anonymity, and voluntary participation. The Plain Language Statement

was initially written in English, with translations accompanying the statements distributed in

Afghanistan (in Dari) and Pakistan (in Urdu). For each interview, following distribution of Plain

Language Statement, interviewee consent was confirmed by having interviewees sign a consent form

or by indicating consent verbally in the recorded interview.36

Confidentiality regarding the identity of interviewees was maintained throughout the study.

Audio recordings and transcription file names were coded to prevent identification of interviewees.

Names of individuals or organisations that could potentially enable identification of interviewees

were removed from transcript text. Professional translators used for during field visits in Afghanistan

and Pakistan were unfamiliar with the construction industry and the interview subjects and, prior to

interviews, translators were instructed regarding the requirement for confidentiality. The coded

identities of interviewees are associated with actual names only in a single password-protected file

held by the Author.

4.2.2 Observations

Participant observations were made during four periods of professional employment. For each

case, the Author’s professional engagement preceded research-related field visits and did not

include intentional collection of data for research purposes. Nevertheless, work notes documenting

activity and observations during the periods of professional employment are a useful source of

supplementary data.

Participant observations of construction in Afghanistan fall into two periods. From June 2006

until July 2008 (25 months), the Author was employed by an international development organisation

35 The out-break of violence in South Sudan in December 2013 quickly expanded into a civil war. Many UN agencies not

directly involved in humanitarian aid or peace-keeping halted operations in the country by January 2014.

36 Copies of the Plain Language Statement and the Interviewee Consent Form, including Urdu translations, are attached as

annexes.


48

to manage an urban regeneration program in the city of Kabul. The program involved repair or

reconstruction or around 109 houses, construction of three school building and one health clinic,

and basic infrastructure construction such as paved footpaths, drainage, water hand-pumps. A

second period, from August 2008 until November 2009 (15 months) involved employment by a UN

agency to manage a project through which a new settlement was built on the outskirts of Kabul for

returnees that had previously fled the civil war. In addition, the role involved occasional inspections

of construction works undertaken under other projects with this agency’s national program. In

Timor-Leste, participant observations of construction occurred during the period from April 2010 to

March 2012 (23 months) when the Author was employed by a UN agency to manage construction

works undertaken within two separate programs. The first program, which was implemented by the

UN peacekeeping mission, required the construction of office facilities for the Ministry of Defence.

The second program was implemented by a UN agency and involved construction of community

facilities including buildings and sports facilities in two rural locations. This involved feasibility

studies, design and documentation and tender management. Observations of construction in

Pakistan occurred during the period from June 2012 to March 2013 (10 months) when the Author

engaged as a consultant with a UN agency to manage construction works undertaken within a

broader national flood recovery program. The program involved repairs or reconstruction of 122

government buildings. In South Sudan, observations of construction occurred from April 2013 to

March 2014 (12 months) when the Author was responsible for the management of the country office

of a UN agency. Operations included: housing projects involving the construction of 600 houses in

three provincial capitals; construction of water supply infrastructure in four district centres; and

provision of urban planning policy support for the Ministry of Land, Housing and Physical Planning.

The quality of documentation limits the extent to which observational data is included in the

study. Work notes record details of daily work: meeting notes, site inspection notes, design sketches

and calculations, reminders, etc. The notes were intended to record information for work purposes

rather than data for research purposes. Taking into account the poor quality of work notes for

research, participant observations that are recorded in work notes are used in a supplementary

manner to corroborate information from interviews. A potential for researcher bias arising from

prolonged engagement in construction from a particular professional position has also been

considered. In general, observations occurred from the perspective of a consultant and client-

representative employed by international organisations and engaged in aid-funded construction.

The nature of this position, the limited scope of observation it affords, and preconceptions that it

potentially supports have been taken into account. The potential for research bias through

participant observations is partly ameliorated by the supplementary manner in which observational

data is used. The use of participant observations derived from professional experience also has

implications for the reliability – that is, the replicability – of the study. As with semi-structured

interviews, reliability in the context of qualitative research and the use of participant observations

relates to the potential for agreement through rational discourse rather than through replication of


49

data collection. In this context, reliability is supported by the availability of professional work notes

for review.37

4.3 Data analysis

Interviews with practitioners comprised the primary source of data for this study, thus

interview transcripts were the primary focus of data analysis. Analysis of interview data involved

two stages: coding of interview transcripts, and analysis of coded variables in the development of

network diagrams. In addition to these two steps, this section describes two further activities related

to data analysis: the review of statistical data that preceded analysis of interview transcripts, and

synthesis of case-specific findings, which followed the case-based analysis of interview data.

4.3.1 Review of statistical data

The review of statistics in Chapter 5 involves basic statistical methods. These methods are

appropriate for the purposes for which statistical data has been incorporated into the study, namely:

1) to identify general differences between the groups of conflict-affected countries and other

(peaceful) developing countries in relation to conditions surrounding construction, and 2) to provide

a frame within which the four cases may be positioned and compared. Statistical data gathered for

the study has not been subjected to thorough analysis, but rather, a review of the data involves

calculation and comparison of basic descriptive statistics - interquartile ranges and means.

Interquartile ranges and means for each of the statistical indicators of prevailing conditions are

consolidated into a series of radar diagrams that are collections of standard bar charts.41

37 Scanned professional work notes are included in the study database.

41 Use of interquartile ranges rather than standard deviation to describe the central moderate range of values for each indicator

corresponds with the use of the interquartile range in standard bar charts.


50

4.3.2 Coding of interview transcripts

Interview transcripts were coded in two cycles, with the first cycle broadly categorising data

that was then more precisely identified and categorised during the second cycle.43 45 The first coding

cycle used four predefined codes that were the four fields of project practice introduced in the

conceptual frame of the study (see Subsection 3.1.4). Text describing conditions, practices or

outcomes related to these four fields of practice were coded accordingly. Passages of text were

identified with multiple codes where descriptions related to multiple fields of practice. In addition

to broadly categorising data, the first cycle of coding using the four fields of practice linked the

process of analysis with the conceptual frame of the study. The second cycle of coding identified

more precisely particular conditions, practices and outcomes related to each field of practice. This

second cycle of coding was inductive in that codes were not predefined, but rather, were drawn

from the text. Differences in interviews were such that the group of second-cycle codes differed for

each case. Upon completion of the second cycle of coding, the code list was reviewed, and the

number of codes reduced by consolidating excessively-differentiated or excessively-detailed codes.

Coding of transcripts was undertaken using the Nvivo computer application.

4.3.3 Network analysis

Following the coding of interview transcripts, network analysis focussed on the identification

of relationships between practices, conditions influencing the adoption of these practices, and

implications of these practices for project outcomes.

Analysis involved the development of network diagrams that identify and summarise

relationships between conditions, practices and outcomes. Network analysis used as a starting point

construction practices that were identified during the coding of interview transcripts. This analytic

process involving the development of diagrams that describe interrelationships between variables

involved techniques described as causal network analysis by Miles et al. (2012: 237) and logic

modelling by Yin (2009: 149). A consistent graphic language is used in each of the diagrams.

Particular conditions, practices and outcomes are nodes/variables, with categories distinguished by

43 Two-cycle coding, in which a first cycle broadly categorises sections of data that are then addressed in greater detail in a

second cycle is advocated by Saldana (2013: 4) and Miles et al. (2014: 72). Miles et al. (2014: 81) describe the deductive

employment of predefined codes, in contrast with inductive coding in which codes emerge from the text. The process

described here combines a deductive approach in the first cycle with an inductive approach in the second cycle. Other

strategies for coding and annotating interview transcripts were tried prior to the adoption of the approach described here. A

first trial employed 12 codes: four primary codes (design and certification of works, contract award, resource mobilisation,

and contract administration), and, under each primary code, three secondary codes (economic conditions, regulatory

conditions and technical conditions). A second trial employed a simplified system of the four primary codes only.

45 A list of all transcription codes (codebook auto-generated from the NVivo computer application) is attached as an annex.

A sample coded transcript is also attached as an annex. Copies of all coded transcripts are included in the study database.


51

the node shape (circles = conditions, diamonds = practices, squares = outcomes). Most of these

variables are coded conditions, practices or outcomes, or they are conditions identified through the

review of statistical indicators. Other variables are inferred. For each variable, the source of evidence

is signified by line type (interview codes = solid line, statistics = dashed line, inferences = dotted

line). Some variables drawn from transcript codes are corroborated by statistics or participant-

observations – such corroboration is denoted in the diagrams with additional node outlines

(observations = long-short dashed line, statistics = dashed line). Lines linking nodes signify

relationships between variables that were drawn from interview data, from secondary data (such as

literature) or inferred, with arrows representing a direction of effect.

In each network diagram several nodes are highlighted: the nodes for the particular practices

that are the main subject of the diagram, and the node for the condition of political violence and

instability. Identifying any paths of causation between highlighted nodes – between immediate

characteristics of conflict and specific construction practices – was the focus of the analyses. The

network diagrams are not comprehensive in that they do not describe all the conditions, practices

and outcomes characterising construction in each of the cases. The diagrams focus on variables of

particular significance. That these variables were raised by interviewees implies a degree of

significance. Further, during the process of analysis, conditions and practices were assessed as being

particularly significant due to their deviation from normal conditions and practices and/or due to

the significance of their impact upon outcomes.46

A narrative description accompanies each network diagram. These narratives focus on

explaining the significant construction practices. They also describe the paths of causation,

including intermediate conditions and practices, from political instability and violence to significant

practices and on to project outcomes. The narratives enable greater depth of description than that

provided within the graphic language of the network diagrams. They also cite particular evidence,

including quotes and observations, that support the variables and relationships identified in the

network diagrams.

4.3.4 Network synthesis

Following analysis of data that included development of case-specific network diagrams for

each field of practice, synthesis of these models was undertaken to support the generalisation of

findings presented (see Chapter 10). While analysis was structured around individual cases,

synthesis brought together the findings from each case, structured around the four fields of practice.

46 Normal is an imprecise characterisation which in this context refers to conditions, practices or outcomes that are typically

associated with construction and are described in standard textbooks such as Hillebrandt (2000), Walker (2007), and Halpin

& Senior (2011). Normal conditions, practices and project outcomes are those assumed, implied, or intended by standard

regulatory measures, including: construction codes, such as systems of construction firm and professional registration,

standard construction procurement arrangements, and standard forms of contract.


52

From each case, causal network diagrams (and the variables comprising them) for each field were

brought together, compared and consolidated to produce networks describing general, rather than

case-specific, relationships between conditions, practices and project implications. The

development of general causal networks for each field of practice involved a reduction of variables

through integration and generalisation. Similar variables were grouped and consolidated. Overly-

specific variables were discarded or adjusted to render them more generic. In general, the range of

case-specific variables was reduced through consolidation and generalisation. Synthesis of case-

specific findings was also informed by the position of each case in relation to the broader field of

conflict-affected situations (see Subsection 4.1.2).

Thus, from actual practices, conditions and outcomes associated with specific conflict-

affected cases, cross-case synthesis produces network diagrams that describe generalised

relationships between prevailing conditions, construction practices, project outcomes, and broader

implications. As with the case-specific causal networks, synthesised causal networks do not provide

a comprehensive taxonomy of construction practices and conflict conditions. Rather, they describe

in a general manner causes and effects associated with particularly significant practices. In doing

so, they identify ways in which particular conditions associated with conflict can contribute to the

adoption of particular construction practices, which in turn can contribute to particular outcomes.

4.4 Reporting

The cases are presented individually in four chapters: Chapter 6 (Afghanistan), Chapter 7

(Timor-Leste), Chapter 8 (South Sudan) and Chapter 9 (Pakistan). Each of these chapters addresses a

consistent sequence of topics comprising: the context, the data collected, analysis of this data, and

discussion of the findings.

Descriptions of the historical context of each case focus on histories of institutional and

economic development, while descriptions of the contemporary context address general conditions

characterising the conflict and post-conflict periods. Specific conditions surrounding construction

are also described using statistical indicators, with the conditions in each case positioned in relation

to the ranges of conditions characterising the broader groups of conflict-affected countries and other

developing countries not affected by recent conflict. Descriptions of the data collected for each case

identify the group of interviewees in relation to the actor type (client, consultant, contractor, etc.),

the type of organisation they represent (government department, non-government organisation, firm,

etc.), and the position they hold within that organisation. This group of interviewees is positioned in

relation the broader population of construction actors to provide some understanding of the

representative scope of evidence collected for each case. Analysis of data is presented in each case

in a consistent sequence of topics - the four fields of practice identified in the conceptual frame.

53

Chapter 5 STATISTICAL REVIEW OF CONDITIONS

Demarcating the field of conflict-affected situations

Review of statistics in this chapter describes in general terms the environment surrounding

construction in two groups of countries: conflict-affected countries, and other (more peaceful)

developing countries. The construction environment is described in regard to three types of

conditions: general conditions, economic conditions, and regulatory conditions, which were

introduced as part of the conceptual frame of the study (see Subsections 3.1.1 and 3.1.2). This review

of statistics contributes to the study in two ways. First, it enables a comparison of the two groups of

countries in regard to conditions surrounding construction, thus contributing to the testing the first

research question - Are conditions surrounding construction projects different in conflict-affected

situations compared to conditions in other developing countries that are not affected by conflict?

Second, describing conditions surround construction in conflict-affected countries in a general

manner establishes a framework within which each of the cases will be positioned in subsequent

chapters.

The chapter is comprised of three sections. Section 5.1 defines the two categories of

developing and conflict-affected countries. Section 5.2 reviews statistical indicators of each of the

nine conditions for the two country categories and presents the findings of this review. Section 5.3

discusses these findings. Tables and figures are compiled at the end of the chapter.

5.1 Definition of categories

To describe and compare conditions surrounding construction in developing and conflict-

affected countries first requires clear definitions of each group. Doing so involves the explanation

of the terms development and conflict-affected as well as the definition of criteria for inclusion of

particular countries in each category.

Development and conflict are transient characteristics – countries pass through stages of

development and periods of conflict – therefore, identification of groups of developing and conflict-

affected countries is time-specific. For this study, 2012 is the base year for the review of statistical

indicators, based upon consideration of three issues. First, 2012 is relevant to each of the four cases;

in this year Afghanistan and Pakistan fulfilled the criteria defined below for conflict situations, while

Timor-Leste and South Sudan met the criteria for post-conflict situations. Second, 2012 is relevant

in that it immediately precedes field visits for interviews that were conducted during 2013 and 2014.

Statistical Review of Conditions

54

Third, several of the datasets consulted for the study are neither annual nor regular, yet most of the

datasets contain statistics for 2012.47

Conflict-affected countries are those that in 2012 were either experiencing or emerging from

an episode of intense armed conflict. Thus, for this study, the group of conflict-affected countries

comprises two sub-groups: conflict countries experiencing an episode conflict and post-conflict

countries emerging from an episode of conflict. Conflict countries are those in the midst of an

episode of civil war in 2012, as per the UCDP definition of civil war (see Subsection 3.1.1).48 Post-

conflict countries in this study are those in which an episode of conflict ended during the five years

preceding 2012 (i.e. during the period from 2007 to 2011), or that hosted a UN peacekeeping

mission with a military mandate during that period. Definition of a five-year post-conflict period is

somewhat arbitrary given the varied persistence of post-conflict violence and political instability.

However, the five-year post-conflict period adopted here is supported by findings of Collier (1999)

and Collier & Hoeffler (2004) that the residual economic effects of conflict are most significant

during this period. The inclusion of countries hosting UN peacekeeping missions with military

mandates includes within the group countries where significant post-conflict instability endures

despite war having ended prior to 2007. The 32 conflict-affected countries meeting criteria are listed

in Table 5.1. 49

Developing countries are those whose economies are in the transition from primarily agrarian

production to an increasing proportion of industrial production (see Subsection 3.1.1).

Industrialisation is associated with increased productivity reflected in increasing per capita income.

Thus, national income is commonly adopted as a measure of economic development. The World

Bank defines three broad income categories: high income, middle income, and low income, with

the high income category comprising developed countries and the low and middle income

categories comprising developing countries.51 52 Annual per capita income thresholds define World

Bank country classification, with the group of high income, developed countries in 2012 comprising

47 In addition to the statistics described in this chapter, other indicators from a range of datasets were consulted during the

course of the investigation. The statistics included in Section 5.2 have been selected due to their greater relevance to the

particular conditions under consideration and to their greater coverage across countries.

48 Data describing battle-related deaths and identifying opponents has been drawn from the UCDP Battle-related Deaths

Dataset (UCDP 2018).

49 The group of conflict-affected countries listed in Table 5.1 includes several countries in which conflict is limited to

particular areas, notably: India, Nigeria, the Philippines, Thailand and Turkey.

51 More specific categories are also defined by the World Bank. The middle-income category includes upper-middle and

lower-middle-income categories. See http://data.worldbank.org/about/country-classifications.

52 A separate UN system of country classification is published annually in the World Economic Situation and Prospects

(WESP) report (see https://www.un.org/development/desa/dpad/document_gem/global-economic-monitoring-unit/world-

economic-situation-and-prospects-wesp-report/), which defines three categories: 1) developed, 2) transition, and 3)

developing. This UN classification is based on analysis that takes into account criteria other than income.


55

those with Gross National Income (GNI) greater than USD 12,065 per capita.53 Thus, for this study,

developing countries are those with 2012 GNI less than USD 12,065 per capita. 136 countries meet

this criterion, of which 32 also meet the criteria for the conflict-affected group. Thus, in Table 5.1,

alongside the 32 conflict-affected developing countries, are listed 104 other developing countries

that were not in a conflict or post-conflict situation in 2012.

5.2 Review of statistics

Nine conditions surrounding construction are addressed in this section in three categories: 1)

general conditions related to broader country characteristics, 2) economic conditions related to the

availability of resources, and 3) regulatory conditions related to the capability and probity of national

institutions. The absence of directly-relevant statistics requires the use of proxy indicators.55 The

review below of each indicator includes consideration of the relevance of the proxy indicator to the

condition that it describes. Basic descriptive statistics – interquartile ranges and means – are

calculated for each indicator, which are consolidated and presented graphically in radar charts in

Figures 5.1, 5.2 and 5.3.56 For each radar chart each axis represents one condition and adopts the

unit of the relevant statistical indicator. For each country category, shaded areas denote interquartile

ranges and the dashed or dotted lines represents the mean values.

5.2.1 General conditions.

Three general conditions are considered here: 1) economic development, 2) institutional

development, and 3) political stability and violence. Results of the review of statistical indicators

each of these three conditions are consolidated in Figure 5.1.

Institutional development refers to a process of increasing maturity, stability and capability of

national institutions such as legislative systems, systems of public administration, courts of law and

systems of law enforcement. Institutional development is indicated here by the IDA Resource

Allocation Index (World Bank 2018a). The IDA Resource Allocation Index (IRAI) is an aggregated

score based on the World Bank’s annual Country Policy and Institutions Assessment (CPIA), which

rates countries (on a scale of 1-6, with higher scores indicating better rating) against 16 criteria

grouped in four clusters: 1) economic management, 2) structural policies, 3) policies for social

cohesion and equity, and 4) public sector management and institutions (World Bank 2017). The

53 GNI data based on Atlas method, current USD, obtained from the World Development Indicators (see

https://data.worldbank.org/indicator/NY.GNP.PCAP.CD)

55 All statistical data collected for the study is available in the Study Database.

56 Use of interquartile ranges rather than standard deviation to describe the central moderate range of values for each indicator

corresponds with the use of the interquartile range in standard bar charts.


56

CPIA covers the poorest countries that are eligible for concessional loans from the World Bank’s

International Development Association (IDA), which in 2012 comprised 81 countries with GNI per

capita less than USD 1,175. Thus, coverage of this indicator across the larger group of developing

countries is limited.57 However, the dataset covers an adequate range of conflict-affected and other

developing countries. For the group of 20 conflict-affected countries covered by the 2012 CPIA, the

interquartile range is 2.7 – 3.5 and the mean is 3.1. For the group of 61 other developing countries

covered by the 2012 CPIA, the interquartile range of IRAI scores is 3.2 – 3.7 and the mean is 3.4.

Economic development refers to the process of industrialisation that is accompanied by

increasing productivity reflected in increasing national income (see Subsection 5.1). The review here

of differing levels of economic development in conflict-affected countries and other developing

countries uses GNI per capita as an indicator. GNI per capita data is from the World Development

Indicators (World Bank 2018b).58 Mean GNI per capita over the decade from 2007 to 2012 has been

calculated to accommodate annual fluctuations.59 For the group of 32 conflict-affected countries,

the interquartile range in USD 553 – 3,474 and the mean is USD 2,005. For the group of 104 other

developing countries, the interquartile range of GNI per capita is USD 953 - 4,498 and the mean is

USD 3,031.

Political instability and violence in each of the 32 conflict-affected countries and 104 other

developing countries is measured here using the indicator Political Stability and the Absence of

Violence/Terrorism from the World Governance Indicators dataset (World Bank 2018c). This

indicator measures perceptions of political instability and/or the likelihood of politically-motivated

violence. It aggregates data from surveys conducted by a range of research institutes, non-

government organisations, international organisations and firms, capturing the views of enterprises,

citizens and experts (Kaufman et al. 2010). Scores grade countries from -2.5 to 2.5, with lower scores

indicating greater instability and violence. For this review, this score range has been adjusted to 0-

5 and, for each country, the mean for the period from 2007-12 calculated. For the group of 32

conflict-affected countries, the interquartile range is 0.7 – 1.5 and the mean is 1.1. For the group of

104 other developing countries, the interquartile range of Political Stability and the Absence of

Violence/Terrorism is 1.9 – 2.9 and the mean is 2.4.

5.2.2 Economic conditions.

Three economic conditions related to the availability of construction resources are considered

here: 1) availability of expertise, 2) availability of manufactured materials and equipment, and 3)

57 Developing countries in this study are countries with 2012 GNI per capita less that USD 12,065 (see Section 5.1)

58 GNI per capita data used here is calculated using the Atlas method in current USD.

59 Means were also calculated over the shorter period of 2007 to 2012 with no significant difference in the resulting means

and interquartile ranges.


57

availability of credit for construction firms. Results of the review of statistical indicators each of these

three conditions are consolidated in Figure 5.2.

The general availability of construction expertise is measured here by the indicator Labour

Force with an Intermediate Education (percentage of the total labour force), from the ILO’s ILOStat

database (ILO 2018a). Intermediate education here refers to upper secondary education and post-

secondary, non-tertiary education (ILO 2018b). While construction skills, particularly trade and

management skills, are typically developed through on-the-job training rather than formal

education, intermediate education is considered here to be a foundation for on-the-job training. In

the absence of more-relevant statistics, the percentage of the labour force with an intermediate

education provides a useful, albeit limited proxy for the availability of construction expertise. A

further limitation arises from the limited coverage of the dataset. Latest available data for each

country during the period from 2003-12 has been used. For the group of 20 conflict-affected

countries covered by the dataset, the interquartile range is 7.3 – 33.9 and the mean is 25.2. For the

group of 75 other developing countries covered by the dataset, the interquartile range of the

percentage of the labour force with an intermediate education is 16.8 – 42.2 and the mean is 30.7.

Availability of domestically manufactured materials and equipment for construction has been

identified in literature as a significant limitation on construction supply capacity in developing

countries (see Subsubsection 2.2.2.2). In addition to effects of earlier stages of development, conflict-

affected countries could also face further limitations upon imports arising from increased economic

risk and political instability affecting cross-border trade. Availability of manufactured materials and

equipment for construction is measured here using the indicator Value-added by Manufacturing as

a percentage of GDP recorded in World Bank national accounts data (World Bank 2018d). The

indicator describes the relative extent of total domestic manufacturing, rather than the manufacture

of construction materials and equipment in particular. Also, use of this indicator does not account

for differences in availability of imported manufactured materials and equipment. For each country,

the mean has been calculated over the period from 2007-12. For the 27 conflict-affected countries

covered by the dataset, the interquartile range is 5.2 – 16.6 and the mean is 11.6. For the 97 other

developing countries covered by the dataset, the interquartile range of the Value-added by

Manufacturing is 7.3 – 17.3 and the mean is 12.5.

Availability of credit for construction firms is typically required for construction given

standard contracting arrangements that involve the completion of works (or parts thereof) prior to

payment by the client. Inadequate access to credit for contractors has been highlighted in literature

as a significant constraint upon construction industry development in developing countries (see

Subsubsection 2.2.2.3). Availability of credit is measured here using the indicator Domestic Credit

from Banks to the Private Sector (percentage of GDP) obtained from the World Bank Open Data

database (World Bank 2018e). While describing relative availability of formal credit, the indicator

does not reflect the availability of informal credit from suppliers and merchants, which construction

firms may rely upon in lieu of bank finance. For each country, the mean over the period from 2007-


58

12 has been calculated. For the of 31 conflict-affected countries covered by the dataset, the

interquartile range is 10.3 – 22.3 and the mean is 18.6. For the 96 other developing countries

covered by the dataset, the interquartile range of the Domestic Credit from Banks to the Private

Sector is 15.8 – 45.9 and the mean is 33.2.

5.2.3 Regulatory conditions.

Three regulatory conditions related to the capability and probity of institutions that act as

clients and as regulators of construction are considered here: 1) regulatory quality, 2) reliability of

the legal frame, and 3) prevalence of corruption. Each of these conditions is described using statistics

from the World Governance Indicators. For each indicator, the score range has been adjusted such

that the scores considered here are in the range of 0-5. Means have been calculated for the period

from 2007 to 2012. Results of the review of statistical indicators each of these three conditions are

consolidated in Figure 5.3.

Regulatory quality refers to the capability of government agencies, statutory bodies and the

like to formulate and implement rules, codes and procedures that regulate construction actors and

works. The forms of construction regulation considered here include: registration of firms and

licensing of professionals, formulation of construction codes and standards, certification of designs

and works for compliance with codes and standards, monitoring compliance with public

procurement and tender rules, and administration of public construction contracts. The Regulatory

Quality indicator from the World Governance Indicators “reflects perceptions of the ability of

government to formulate and implement sound policies and regulations” (World Bank 2018f). For

the group of 32 conflict-affected countries, the interquartile range is 1.2 – 2.1 and the mean is 1.6.

For the group of 104 other developing countries, the interquartile range of the Regulatory Quality is

1.8 – 2.4 and the mean is 2.1.

Reliability of the legal frame refers in this study to the extent to which systems of legal

adjudication and enforcement effectively support: construction contracting, enduring liability of

contractors and consultants for the work they perform, and rule of law in general. This includes the

effectiveness of and levels of public confidence in courts of law and systems of arbitration to resolve

contractual disputes. The Rule of Law indicator “reflects perceptions of the extent to which agents

have confidence in and abide by the rules of society, and in particular the quality of contract

enforcement, property rights, the police, and the courts…” (World Bank 2018g). The indicator does

not explicitly address systems of arbitration to which construction contracts typically refer disputes,

however it describes the quality of contract enforcement in general. For the group of 32 conflict-

affected countries, the interquartile range is 1.1 – 1.9 and the mean is 1.5. For the group of 104

other developing countries, the interquartile range of the Rule of Law is 1.7 – 2.5 and the mean is

2.1.


59

Prevalence of corruption affects construction through the roles that public officials play as

regulators, contract administrators, and clients. Regulatory functions such as registration of firms,

licensing of professionals, certification of designs and certification of works provide scope for petty

corruption, which is characterised by frequent payment of relatively low-value bribes.

Administration of public construction contracts includes certification of works that provides further

scope for petty corruption. Award of public contracts provides scope for grand corruption which, in

comparison with petty corruption, is characterised by less-frequent though higher-value payments.

The Control of Corruption indicator “reflects perceptions of the extent to which public power is

exercised for private gain, including both petty and grand forms of corruption…” (World Bank

2018h).60 Higher scores reflect a lesser prevalence of corruption. For the group of 32 conflict-

affected countries, the interquartile range is 1.3 – 1.9 and the mean is 1.6. For the group of 104

other developing countries, the interquartile range of the Control of Corruption is 1.8 – 2.3 and the

mean is 2.1.

5.3 Discussion

For many of the conditions and proxy indicators reviewed, significant overlaps of interquartile

ranges for the two groups suggest there is not a clear general distinction between conflict-affected

countries and other developing countries in regard to the environment surrounding construction

projects. The most pronounced distinction between the two groups is in relation to political

instability and violence, which is predictable given that conflict is the principle characteristic

distinguishing the two groups (see Figure 5.1). The overlap of interquartile ranges is greatest for

general conditions of economic and institutional development and for the economic conditions of

availability of materials and equipment, and availability of credit for contractors. The overlap of

interquartile ranges is less pronounced for: availability of expertise, quality of regulation, reliability

of the legal frame, and prevalence of corruption, suggesting greater differences between the two

groups in regard to these dimensions.

The lack of a clear distinction between the groups in regard to some of the conditions –

particularly stages of economic and institutional development – perhaps reflects different starting

conditions. While conflict and development are associated to the extent that all conflict-affected

situations identified in this study occurred in developing countries, conflict is not confined to the

60 Kenny (2009) suggests that perceptions surveys, particularly surveys of perceptions of corruption such as that undertaken

annually by the organisation Transparency International, provide inaccurate indicators of grand corruption. Rather, findings

from a review of various corruption indicators finds that perceptions surveys tend to reflect levels of petty corruption that

have a greater impact upon the daily lives of citizens. The indicator Control of Corruption from the World Governance

Indicators surveys perceptions of academics, officials from aid organisations, government officials etc. rather than members

of the general public and is assumed to indicate both petty and grand corruption.


60

least developed countries.61 Rather, conflict occurs in developing countries at various stages of

economic and institutional development, characterised by differing availability of construction

resources and differing standards of regulation. Despite any negative effects of conflict upon each

of these conditions, pre-conflict differences between countries remain apparent during and after

conflict.

While wide interquartile ranges highlight diversity within the conflict-affected group and

overlapping interquartile ranges highlight similarities with other developing countries that are not

affected by recent conflict, negative effects of conflict are reflected in lower means for the group of

conflict-affected countries. If conflict was not associated with more-problematic conditions, the

means for the two groups would be similar. This is the case only for the availability of construction

materials and equipment indicated by Value-added by Manufacturing. For the other conditions,

lower mean scores suggest that conditions in conflict-affected countries are generally more

problematic than in more-peaceful developing countries.

Significant variation is apparent in the effects of conflict upon the availability different

construction resources. For availability of materials and equipment, indicated by Value-added by

Manufacturing (percentage of GDP), similar means and significant overlap of the interquartile

ranges for the two groups suggest changes in manufacturing in conflict-affected situations are, in

general, proportional with changes in GDP. Assuming that total manufacturing is a reasonable

indicator of manufacturing of construction materials and equipment in particular, this suggests that

availability of materials and equipment is not necessarily more problematic in conflict-affected

situations compared to other more peaceful developing countries. Reduced production of materials

and equipment is perhaps generally matched by reduced demand. Compared to availability of

materials and equipment, effects of conflict upon the availability of credit for contractors appear to

be more pronounced. However, while a negative effect of conflict is reflected in a lower mean for

conflict-affected countries, that this mean still falls within the interquartile range for peaceful

developing countries suggests that levels of restricted access to credit in many conflict-affected

situations is comparable to that in other developing countries.

Reduced availability of expertise in conflict-affected situations appears to be the most

significant distinction between the two groups of countries in relation to the availability of

construction resources. Notwithstanding limitations in the relevance the indicator Percentage of the

Labour Force with an Intermediate Education to the availability of specific construction expertise,

that the mean for conflict-affected countries is below the interquartile range for peaceful developing

countries suggests significant differences between the groups in regard to availability of well-

educated technicians and managers. The interquartile range for conflict-affected situations is

61 While Collier (1999) uses cross-country data to establish a relationship between conflict and the incidence of conflict and

per capita GDP, Blattman & Miguel (2010: 4) suggest the degree of causation should be treated with caution, noting that

effects of conflict upon increased poverty contribute to the association.


61

relatively wide and extends to quite low values, suggesting that in some conflict-affected countries,

educated labour may be particularly scarce. This suggestion of increased scarcity of expertise in

some conflict-affected situations focusses attention upon this condition in the case studies that

follow.

Compared to the varied effects of conflict upon availability of different construction resources,

differences between the groups of conflict-affected countries and other developing countries

regarding the three regulatory conditions are more consistent. For each of the three regulatory

conditions, notwithstanding some overlap in the interquartile ranges, the interquartile ranges and

means for the conflict-affected group are consistently below those of the developing group. This

consistency is partly attributable to the use indicators from the same database (the World

Governance Indicators) for each of the three conditions, as opposed to the use of indicators from

different databases to describe each of the economic conditions. The apparently consistent effects

of conflict illustrated in Figure 5.3 could also suggest that these three regulatory conditions share

the same root causes related to broader institutional conditions. However, despite the wide range

of levels of institutional development characterising the group of conflict-affected situations (see

Figure 5.1), indicators of regulatory conditions suggest a significant and consistent effect of conflict.

Regulatory conditions surrounding construction in conflict-affected situations appear to generally

be more problematic than in peaceful developing countries, focussing attention upon regulatory

conditions in the case studies that follow.

Notwithstanding identification of availability of expertise, regulatory quality, legal reliability

and prevalence of corruption as dimensions of significant difference between conflict-affected and

developing countries, for other conditions, differences are not so clear. Wide variation within the

group of conflict-affected countries are apparent in regard to characteristics such as institutional and

economic development and the extent of domestic production of construction materials and

equipment. The apparently wide range of pre-conflict starting conditions, and that many of the

conditions in conflict-affected situations are comparable with conditions in peaceful developing

countries perhaps limits the utility of addressing conflict-affected situations as a coherent group in

regard to construction. This wide variation among conflict-affected countries with regard to

construction conditions is comparable with significant variation among developing countries (see

Subsection 2.2.2). Similar variation within the group of conflict-affected countries suggest a shift in

focus from the generic group to particular cases of conflict and post-conflict situations.


62

5.4 Tables

Table 5.1 – Conflict-affected countries and other developing countries - 2012

Conflict-affected countries Other developing countries

Afghanistan Albania Ghana Nauru

Algeria Angola Grenada Nepal

Azerbaijan* Antigua & Barbados Guatemala Nicaragua

Burundi* Argentina Guinea Niger

Chad Armenia Guinea-Bissau Palau

Colombia Bangladesh Guyana Panama

Congo, Dem. Rep.** Belarus Honduras Papua New Guinea

Cote d'Ivoire** Belize Indonesia Paraguay

Ethiopia Benin Jamaica Romania

Haiti** Bhutan Jordan Samoa

India Bolivia Kazakhstan Sao Tome & Principe

Iran* Bosnia & Herzegovina Kenya Serbia

Iraq Botswana Kiribati Seychelles

Liberia Bulgaria Kosovo Sierra Leone

Libya* Burkina Faso Kyrgyz Republic Solomon Islands

Myanmar* Cabo Verde Lao South Africa

Nigeria Cambodia Lebanon Sri Lanka

Pakistan Cameroon Lesotho St. Lucia

Peru* Central African Rep. Macedonia St. Vincent & Grenadines

Philippines China Madagascar Suriname

Rwanda* Comoros Malawi Swaziland

Senegal* Congo, Rep. Malaysia Tanzania

Somalia Costa Rica Maldives Togo

South Sudan** Cuba Mali Tonga

Sudan Djibouti Marshall Islands Tunisia

Syrian Arab Republic Dominica Mauritania Turkmenistan

Tajikistan Dominican Rep. Mauritius Tuvalu

Thailand Ecuador Mexico Ukraine

Timor-Leste** Egypt Micronesia Uzbekistan

Turkey El Salvador Moldova Vanuatu

Uganda* Eritrea Mongolia Vietnam

Yemen Fiji Montenegro West Bank and Gaza

Gabon Morocco Zambia

* Conflict ended 2007-11 Gambia, The Mozambique Zimbabwe

**UN peacekeeping mission Georgia Namibia


63

5.5 Figures

Figure 5.1 – General conditions – Conflict-affected & other developing countries


64

Figure 5.2 – Economic conditions – Conflict-affected & other developing countries


65

Figure 5.3 – Regulatory conditions – Conflict-affected & other developing countries


66

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67

Chapter 6 AFGHANISTAN

Intense conflict, extensive construction, unclear horizons

Conditions and practices characterising construction in Afghanistan from 2002 to 2012 are

addressed in this chapter as a case of construction during conflict. The centrality of Afghanistan in

the war on terror that commenced with the destruction of the World Trade Centre on September 11,

2001 attracted international attention and high levels of military engagement and financial aid. As

the insurgency in Afghanistan expanded despite influxes of foreign troops, parallel increases in

financial aid contributions created a situation in which national reconstruction proceeded in the

context of an expanding civil war. Construction played a significant role in both the military effort

and the civilian reconstruction program, as new infrastructure was built throughout the country to

win the hearts and minds of communities, to repair damage, and to build new infrastructure. While

the intensity of conflict, the breadth of international engagement, and the scale of construction in

Afghanistan are perhaps exceptional, the practices adopted by construction practitioners in response

to these conditions can contribute to general understanding of construction in conflict-affected

situations.

The chapter is comprised of four sections. Section 6.1 describes the context of construction

and reconstruction in Afghanistan, highlighting particular aspects of the county’s historical trajectory

that are relevant to understanding the contemporary situation. This contemporary situation in regard

to construction is described through a review of statistical indicators for Afghanistan that are

positioned in relation to construction conditions characterising conflict-affected countries generally.

Section 6.2 addresses the data collected for the study, describing the group of practitioners

interviewed in relation the broader field of actors engaged in construction in Afghanistan. Section

6.3 presents the analysis of this data, particularly the product of this analysis in the form of network

diagrams and accompanying narratives. Section 6.4 discusses the finding of the analysis –

relationships between conditions, practices and outcomes. Tables and figures are compiled at the

end of the chapter.

6.1 Conflict context and construction case

6.1.1 Description of the conflict context

The conflict in Afghanistan that followed the removal of the Taliban in 2001 marked the

beginning of another episode in a broader conflict for control of the Afghan state that commenced

in 1978.

The establishment of a modern Afghan nation-state was influenced by Afghanistan's role as a

buffer between the competing powers of tsarist Russia and British colonial territory in India (Barfield

Afghanistan

68

2010). Afghanistan remained nominally independent under British suzerainty, with Britain and

Russia demarcating its territory to eliminate any shared border between their own empires. In return

for Afghan acquiescence, Britain provided an annual subsidy that reduced incentives for

Afghanistan’s political elite to broaden taxation revenue through the development of national

institutions and national markets (Rubin 2002). Improved communication and transportation that

could have expanded national markets and state authority beyond urban centres were deemed to

undermine national security that relied on the impenetrability of Afghan territory (Barfield 2010).

The economy thus remained primarily agrarian and markets remained local. The British departure

from India in 1947 prompted disputes between Afghanistan and Pakistan over territorial borders,

restricting over-land trade between the neighbouring countries and prompting a reorientation of

Afghan trade north towards the Soviet Union. Financial aid from both the Soviet Union and America,

which maintained Afghanistan’s political non-alignment, increased the state’s aid dependence

(Rubin 2002). In a situation comparable with previous arrangements arising from the British subsidy,

the centralisation of foreign aid income in Kabul reduced the need for taxation and limited the

extension of state authority into rural areas.

A military coup in Kabul in 1978 led to the establishment of a communist regime. Reforms

seeking rapid social and economic transformation, particularly land reform, prompted an uprising

that pitted traditional rural and religious elites against the new regime (Rubin 2002). Soviet

intervention expanded in response to the popular uprising. Economic reforms instituted under Soviet

tutelage included investment in infrastructure and state industry that was confined to urban areas.

Beyond these urban centres, the regime had limited control. The rural economy collapsed because

of mass social displacement, the disruption of supply chains, and the closure of markets for

agricultural products (Rubin 2002). Widespread though highly-localised rural resistance soon

coalesced into an insurgency led by mujahideen groups that were organised around ethnic and tribal

allegiances and supported with cash and weapons provided by America and Saudi Arabia through

Pakistani agents (Roy 1990). After more than a decade of conflict, the communist regime collapsed

following the departure of Soviet troops in 1989 and the end of Soviet aid in 1991 (Rubin 2002).

The collapse of the communist regime heralded a second era of conflict characterised by

internecine fighting between ethnically-aligned mujahideen militias. Militias that had been

nominally united in shared opposition to the communist regime now turned on one another in a

contest for control of the state. Following fighting that razed many areas of Kabul, a tenuous power-

sharing agreement was reached culminating in the formation of the Islamic Government of

Afghanistan. Despite the presence of a national government, regional urban centres and rural areas

remained under the control of competing militias yielding the political fragmentation of the nation-

state (Rubin 2002). This political fragmentation occurred alongside economic fragmentation as

insecurity restricted internal trade and travel. Trade and provincial centres became increasingly

oriented towards neighbouring countries and Kabul became an economic backwater (Rubin 2002).

Afghanistan

69

The Taliban arose around 1996 as a religious solution to the absence of effective central

authority, the environment of widespread insecurity and political-economic fragmentation. The

Taliban rapidly expanded from the south, displacing or absorbing rival mujahideen militias,

eventually capturing Kabul and the northern provinces, leaving limited areas where rival militias

maintained an organised resistance. The Taliban ignored most functions of the state, focussing on

security, law and order, guided by a strict interpretation of Islamic doctrine and Pashtun tradition

(Marsden 2009). Improved security enabled a rapid re-establishment of internal trade routes,

supporting the re-establishment of national markets and increased agricultural production (Rubin

2002).

In response to the attacks in New York on September 11, 2001 that were attributed to Al-

Qa’ida, and to the refusal of Taliban leaders to hand-over Al-Qa’ida leaders, the US organised a

coalition of mujahideen militias and provided support that enabled the rapid ouster of the Taliban

(Rubin 2002). The ensuing Bonn Conference held under the auspices of the UN led to the formation

of an interim authority as a prelude to the formation of the Islamic Republic of Afghanistan.

Following a relatively peaceful period from the departure of the Taliban until the first democratic

elections in 2004, the Taliban and other insurgent forces regrouped from bases in Pakistan and

commenced their insurgency against the new government (Gopal 2014). By 2007, insurgent

violence had reached levels comparable with the worst years of internecine violence following the

collapse of the communist government.

This growth in violence was matched by comparable rates of economic growth. Following

prolonged economic recession during the eras of mujihideen and Taliban rule, which culminated in

per capita GDP of USD 120 in 2001 - around 10 per cent of the developing economy average at

that time - the economy grew rapidly and consistently from 2002. GDP grew from USD 3.30 billion

in 2001 to USD 13.34 billion in 2013, entailing an average growth rate of 12.5 per cent per annum

over the 12-year period.62 Despite this exceptional growth, per capita GDP remained low at around

15 per cent of the developing economy average.63 Economic growth included a significant

component of construction, with Value Added by Construction (VAC) growing from USD 230

million in 2001 to USD 1.70 billion in 2013 – an average annual growth of around 18 per cent.64

Annual growth in VAC exceeded general growth until 2006, when VAC accounted for around 12

per cent of GDP – more than double the average for developing economies. From 2006, growth in

construction output reduced to levels comparable with general economic growth, consistently

contributing around 8 per cent to GDP.

62 GDP data from UNCTAD (2018a)

63 GDP per capita data from UNCTAD (2018a)

64 VAC data from UNCTAD (2018b)

Afghanistan

70

Economic growth in Afghanistan that occurred in parallel with increasing violence appears

to have been fuelled by financial aid. Per annum Official Development Assistance (ODA)

disbursements to Afghanistan rose from rose from USD 1.41 billion in 2002 to a peak of USD 6.73

billion in 2010 - average annual growth of 21 per cent.65 According to data from Poole (2011),

around 70 per cent of ODA was channelled from donors directly to a range of development

organisations, including UN agencies, international and domestic NGOs and commercial

development contractors, such that the majority of spending on public goods was external to the

national budget. The reluctance of foreign government donors to cede control of financial aid to

centralised coordination prioritised individual donor objectives and underpinned a lack of

coordination within the reconstruction program (see Nixon 2007; Maley 2013).

In addition to the lack of coordination, the reconstruction program in Afghanistan was also

complicated by the expansion of militaries into fields traditionally occupied by civilian development

organisations (see Barakat & Zyck 2009). Military counter-insurgency strategies included

engagement of military units in humanitarian and development activities with the aim of winning

the hearts and minds of local communities in order to diminish support for insurgent groups.

Provincial Reconstruction Teams (PRTs) deployed under the North Atlantic Treaty Organisation’s

International Security Assistance Force (NATO-ISAF), and the Commander’s Emergency Response

Program (CERP) under the parallel American military mission were at the forefront of military

engagement in reconstruction. Additionally, the US Department of Defence directed significant

funding for military-managed reconstruction into Afghanistan via its Afghanistan Infrastructure Fund

and the Task Force for Business and Stability Operations (see Goodhand 2013; SIGAR 2015; SIGAR

2018). In a report commissioned by USAID based on USAID and USACE project records and

national accounts data, Altai Consulting (2007) suggests that demand from USACE accounted for 41

per cent of total construction demand in Afghanistan in 2007.66 Military funding in Afghanistan

greatly exceeded civilian reconstruction funding such that military funding for reconstruction, while

incidental to the primary military function, constituted a significant component of total

reconstruction financing. Poole (2011) reports that civilian reconstruction aid reflected in ODA data

constituted less than 10 per cent of the approximately USD 290 billion total aid expenditure up to

2009, with the remaining 90 per cent directed to military and peace-keeping efforts.

6.1.2 Position of the construction case

Statistics for Afghanistan for each of the nine indicators of construction conditions, which

were introduced in Chapter 5, are summarised in Figures 6.1, 6.2 and 6.3. As with the earlier

statistical review, conditions are presented in three groups: general conditions, economic

65 ODA data from OECD (2018)

66 The final report was not made publicly available. Altai Consulting (2007) is a presentation made to USAID and USACE

officials in which the main findings of the report are presented.

Afghanistan

71

conditions, and regulatory conditions – with conditions in each group consolidated and presented

in a radar chart. In comparing statistics for Afghanistan with the interquartile range for the group of

conflict-affected countries, moderate refers to values within the interquartile range, high refers to

values above the interquartile range, and low refers to values below the interquartile range. While

lacking precision, this scale of comparison is adequate for positioning the case in relation to a field

of conflict and post-conflict situations.

General conditions in Afghanistan in 2012 appear to have been particularly challenging for

construction in comparison with the broader group of conflict-affected countries. Indicators

describing institutional development, economic development, and political instability and violence

in Afghanistan are presented in Figure 6.1. Institutional development is measured using the IDA

Resource Allocation Index (World Bank 2018a), with Afghanistan’s score of 2.6 just below

interquartile range for conflict-affected countries of 2.7 – 3.5. Economic development is measured

using per capita GNI (World Bank 2018b), with Afghanistan’s per capita GNI of USD 401 below

the interquartile range of USD 553 – 3,474. Political instability and violence is gauged using the

indicator Political Stability and the Absence of Violence (World Bank 2018c), with Afghanistan’s

score of 0.09 well below the interquartile range of 0.65 – 1.48. In comparison with conflict-affected

countries in general, these indicators describe particularly low levels of institutional and economic

development and particularly high political instability and violence in Afghanistan (i.e. low score

for Political Stability and Absence of Violence) in comparison with conflict-affected countries in

general.

Economic conditions surrounding construction projects also appear to be more problematic

in Afghanistan compared to conflict-affected countries in general. Indicators describing the

availability of expertise, manufactured materials and equipment, and credit for contractors in

Afghanistan are presented in Figure 6.2 alongside the interquartile ranges for the groups of conflict-

affected and developing countries. Labour data from the ILO describing the availability of expertise

is not available for Afghanistan; in the absence of suitable data, the second quartile value is assumed

as a tentative, preliminary value in Figure 6.2, taking into account the very long duration of war in

Afghanistan and the negative effect this is expected to have had on education and training. This

preliminary assumption will be tested against descriptions of the availability of expertise in

interviews. Availability of manufactured materials and equipment is measured using Value Added

by Manufacturing (percentage of GDP) (World Bank 2018d), with Afghanistan’s value of 15.8 within

the conflict-affected group interquartile range of 5.2 – 16.6 per cent. Availability of credit for

contractors is described using the indicator Domestic Credit from Banks to the Private Sector

(percentage of GDP) (World Bank 2018e), with the value for Afghanistan of 7.4 per cent below the

interquartile range of 10.3 - 22.3 for the group for conflict-affected countries. Thus, statistics suggest

a particularly low availability of credit and moderate availability of manufactured materials and

equipment in Afghanistan in 2012 in relation to conflict-affected countries generally.

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72

Finally, institutional conditions affecting construction in Afghanistan also appear to have been

more problematic compared to institutional conditions characterising conflict-affected countries

generally. Indicators describing regulatory quality, reliability of the legal framework, and prevalence

of corruption in Afghanistan in relation to the interquartile ranges for developing and conflict-

affected countries are presented in Figure 6.3. For the Regulatory Quality indicator (World Bank

2018f), the Afghanistan’s score of 0.95 is below the conflict-affected group interquartile range of 1.8

- 2.1. Reliability of the legal framework is measured using the indicator Rule of Law (World Bank

2018g), with a score for Afghanistan of 0.7 below the conflict-affected country interquartile range

of 1.1 – 1.9. The prevalence of corruption is gauged using the indicator Control of Corruption (World

Bank 2018h), with Afghanistan’s score of 1.0 below the interquartile range of 1.3 – 1.9 for the group

of conflict-affected countries. These statistics suggest low quality of regulation, low reliability of the

legal frame, and high prevalence of corruption (i.e. low score for Control of Corruption) in

Afghanistan in comparison with conflict-affected countries generally.

This review of statistical indicators suggests that particularly problematic conditions surround

construction in Afghanistan. Prolonged conflict in Afghanistan appears to have led to very low levels

of institutional and economic development, with ongoing high levels of political violence and

instability during the period from 2002 to 2012 compounding the challenge of poor development.

These particularly problematic general conditions are reflected in similarly challenging economic

and regulatory conditions surrounding construction. Thus, as a case of construction amid ongoing

conflict, the case of Afghanistan presents a particularly problematic scenario compared with conflict

and post-conflict situations in general.

6.2 Primary data

The group of 31 practitioners interviewed in relation to the case of Afghanistan are listed in

Table 6.1. Twenty-three interviews were conducted, with six of these interviews including multiple

interviewees.67 For each interviewee, four characteristics are recorded: 1) the role in construction

(client, contractors, etc.), 2) the entity they represent (government agency, construction firm, etc.),

3) the position within that entity (Program Manager, Director, etc.), and 4) the origin in relation to

Afghanistan (i.e. foreign or domestic). Regarding roles in construction, the group comprises: 1

financier, 12 clients, 8 consultants, and 10 contractors. Regarding entities represented, the group

represents: 6 government agencies, 7 development organisations, 14 firms (consulting and

contracting), and 4 military units. Regarding origin, the group comprises 19 Afghan and 12 foreign

practitioners.

67 Codes are used to identify each interviewee in order to preserve anonymity in accordance with research ethics

requirements. For interviews that included multiple interviewees, individual interviewees are identified with an alphabetic

suffix (e.g. AFG-08a, AFG-08b, AFG-08c, etc.).

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73

The distribution of interviewees in relation to the field of practitioners involved in

construction in Afghanistan is illustrated in Figure 6.4. The field of practitioners is divided along

three dimensions: role, origin, and entity. There are 56 permutations arising from these three

characteristics, of which 22 are excluded from the field and represented with lighter shading in

Figure 6.4 due to their being irrelevant to the particular situation in Afghanistan. For example,

commercial firms appear to not have played a significant role as financiers or regulators of

construction in Afghanistan, nor have military units played a significant role as consultants,

contractors, subcontractors, merchants or regulators. Each interviewee is represented with a closed

circle. Figure 6.4 highlights that the group of interviewees contains several types of client, consultant

and domestic contractor. It also highlights that the group of interviewees contains no foreign

contractors, no subcontractors, merchants or regulators, and only a single financier (a foreign

government agency). That observations were undertaken from the perspective of a foreign consultant

working with a development organisation is also represented in Figure 6.4 with a triangle.

The sources of primary data for the study represent only part of the field of construction and

reconstruction actors in Afghanistan. The complex reconstruction landscape in Afghanistan included

large amounts of financial aid from various independent sources funding a diverse array of

development organisations, including UN agencies, international and domestic NGOs, and

commercial development contractors. It also included military units undertaking development

activities as part of military counter-insurgency strategies. Notwithstanding the limited scope of data

collection in relation to this wide and complex field, experiences and knowledge of a range of

construction clients, consultants and contractors have been captured in interviews and observations.

6.3 Analysis and findings

Analysis of data is presented in this section in the form of network diagrams and

accompanying narratives for each of the four fields of practice. The coding of interview transcripts

relating to Afghanistan identified 46 second-cycle codes: 12 in relation to design and the

certification of actors and works, 15 in relation to tendering and the award of contracts, 12 in relation

to mobilisation and management of resources, and 15 in relation to contract conditions and

administration.68 The review of statistical indicators defined eight prevailing conditions in

Afghanistan in relation to conditions in conflict-affected countries generally (see Subsection 6.1.2),

which are listed in Table 6.2. For these relative conditions, moderate refers to values that are within

the interquartile range for the group of conflict-affected situations, while high and low refers to

values above and below the interquartile range.

These codes and conditions are featured as variables/nodes in network diagrams, with some

coded variables corroborated by direct observations or statistical data. Figure 6.5 provides a legend

68 Several codes were identified in relation to more than one practice field.

Afghanistan

74

applying to all network diagrams. Particular conditions, practices and outcomes are nodes/variables,

with categories distinguished by the node shape (circles = conditions, diamonds = practices, squares

= outcomes). For each node/variable, the source of evidence is signified by line type (interviews =

solid line, statistics = dashed line, observations = long-short dashed line, inferences = dotted line).

In each network diagram several variables are highlighted: the nodes for the particular practices that

are the main subject of the diagram and the node for the condition of political violence and

instability. The paths of causation between highlighted nodes – between immediate characteristics

of conflict and specific construction practices – are the focus of the analyses.

6.3.1 Design and certification of actors and works

The twelve second-cycle transcript codes identified in relation to design and the certification

of actors and works in Afghanistan are presented in Table 6.3. Of the four practices identified in

transcript coding, three were highlighted as being particularly significant: 1) adoption of various

foreign codes and standards, 2) fraudulent testing of materials, and 3) corruption involved in the

certification of works for compliance with regulations. Network diagrams positioning these practices

in relation to prevailing conditions and project outcomes are presented in Figure 6.6 (adoption of

various codes), and Figure 6.7 (fraudulent testing and corrupt certification).

6.3.1.1 Adoption of various foreign construction codes and technical standards

The practice of adopting various foreign regulations is positioned in relation to other variables

in Figure 6.6. Various foreign construction codes and technical standards regulating construction in

Afghanistan were adopted through at least three channels: 1) legacies of former regimes and systems

of education, 2) work of foreigner designers, and 3) conditions accompanying financial aid. Former

regimes and systems of education were reflected in the use of either old Soviet codes or American

codes and standards by some Afghan practitioners. Historically, Kabul Polytechnic was funded by

the Soviet Union, while Kabul University was funded by America, with interviewees reporting that

Dari and Pashto translations of old Soviet and American regulations were still used by engineering

graduates from these institutions.69 70 A significant prevalence of foreign designers referring to foreign

regulations was suggested in interviews, including by an official from USAID - one of the largest

clients of infrastructure construction in post-Taliban Afghanistan.71 The official described the

frequent use of design-construct contracts by USAID, with designs typically produced by American

69 AFG-02, AFG-07

70 Many engineers and other public officials encountered during field visits and during the Author’s prior experience in

Afghanistan had studied and worked in the Ukraine during the era of communist rule, suggesting a further channel through

which old Soviet codes continued to influence construction during the post-Taliban period.

71 AFG-19

Afghanistan

75

consulting firms in accordance with American codes and standards. Stipulations that infrastructure

funded with financial aid be designed and built in accordance with donor-country regulations were

raised in several interviews.72 73 In addition to these descriptions of adoption of codes and standards

from past and current donors, an Afghan engineer supervising construction projects for a UN agency

described increasing use of Indian codes and standards.74 National codes were published in 2012 -

the Afghan Architectural Code and the Afghan Structural Code (Afghan National Standards Authority

2012a; 2012b). Each of these national codes is comprised of sections copied directly from the

International Building Code (International Code Council 2009).

The adoption of various codes and standards can be traced back to the political instability

and violence along two chains of conditions. First, inadequate regulatory quality in Afghanistan

described during interviews and in Regulatory Quality from the World Governance Indicators

included a lack of domestic codes and standards. This lack of domestic regulations is one symptom

of the lack of national institutional development that is highlighted by Afghanistan’s low IDA

Resource Allocation Index score. A second path linking the adoption of various codes and standards

to political instability and violence relates to an inordinately-high reliance on financial aid. This aid

reliance involved many donors stipulating the use of their own national codes and standards. In

Figure 6.6, relatively high levels of financial aid to Afghanistan are attributed to very low economic

development that is in turn attributed to the prolonged history of conflict. In addition, international

attention paid to the war in Afghanistan and large aid contributions accompanying military

engagement from NATO countries involved a direct link between the war and aid receipts, which

in turn increased the range of codes and standards applied to infrastructure reconstruction.

Outcomes arising from the adoption of various foreign regulations were not discussed in

detail by interviewees. A USAID official described the inappropriateness of designs based on

American codes and standards, resulting either in the redesign of works by local engineers, in poor

quality of built work, or in excessive construction and maintenance costs due to a lack of expertise

in the domestic industry.75 Such problems arising from incompatibilities between foreign codes –

particularly from highly developed donor countries - and the less-sophisticated domestic

construction industry are expected to be widespread. However, in Figure 6.6, the potential for

imported regulations to improve the quality of built work is included as a further potential project

outcome given the absence of domestic regulations.

72 AFG-16, AFG-19, AFG-20, AFG-23

73 Stipulated use of donor-country regulations was also observed by the Author during management of a Canadian-funded

school construction project for which the Canadian construction code and associated technical standards were enforced.

74 AFG-07

75 AFG-19

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76

6.3.1.2 Fraudulent testing of materials

Fraudulent testing of materials including materials testing laboratory technicians was

described by several interviewees and is positioned in relation to other variables in Figure 6.7.

Interviewees suggested that testing services were not available in Afghanistan prior to 2002. Testing

was generally confined to large-scale public works until around 2009.76 As domestic testing services

expanded, the USACE established a system certifying laboratories for the provision of testing for US-

funded infrastructure, providing a list of certified laboratories that was also utilised by other clients.77

Laboratory technicians and construction contractors reported that fraudulent test results were easily

purchased. A foreign consultant administering contracts stated, “I’ve gone down to the test lab and

said your figures are wrong. They said “ok, what do you want us to put in then”… I’m talking about

certified labs with the USACE…”.78 An engineer administering construction contracts for a UN

agency reported large discrepancies between results of tests commissioned by contractors, and those

from tests he had directly commissioned.79 Another private consultant described his strategy of

concealing the identity of the testing laboratory from contractors and the identity of the project from

testing laboratories to prevent collusion between them.80

In Figure 6.7, the apparently widespread prevalence of fraudulent materials testing is linked

back to political violence and instability via three paths of conditions. As with the adoption of

various foreign regulations, political instability and violence contributes to the prevalence of

fraudulent testing through its impact on institutional development and, in turn, regulatory quality. A

second path of causation involves an inference of shortened investment horizons. Several

interviewees implied that pervasive instability and uncertainty about future conditions promoted an

opportunistic outlook that prioritised immediate financial gains over other longer term

considerations. Such commercial opportunism and a diminished value of reputation are a

consequence of such foreshortened investment horizons which, for materials testing labs, are

expected to contribute to the prevalence of fraudulent testing.81 Finally, Figure 6.7 describes political

instability and violence in Afghanistan contributing to fraudulent materials testing via weakened rule

of law. A technician from a material testing laboratory and an engineer supervising works for a UN

76 AFG-10a, AFG-10b

77 AFG-10a

78 AFG-12b, pg.7

79 AFG-06

80 AFG-12a

81 Opportunistic practices in this study refer to practices that involve unethical behaviour, such as fraudulent or corrupt

behaviour, that prioritises immediate profits over longer-term gains. This encompasses Oliver’s (1975 cited in Lu et al. 2016)

definition of opportunism as “self-interest seeking with guile”, though is broader than that of Williamson (1985, cited in Lu

et al. 2016), which identifies opportunistic practices as “lying, stealing, and cheating” and “incomplete or distorted disclosure

of information, especially to calculated efforts to mislead, distort, disguise, obfuscate, or otherwise confuse”

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77

agency described threats and intimidation from contractors seeking to force them to approve

substandard samples.82 Such intimidation was also suggested by other engineers in relation to

contract administration, suggesting for example that contractors are often “strong men” that are

above the law.83

The immediate impact of fraudulent materials testing described in interviews and illustrated

in Figure 6.7 is the decreased quality of built work. The actual prevalence of fraudulent testing and

the extent of impact on built infrastructure cannot be determined. However, major failures of built

work described in interviews, observed by the Author, and documented in oversight reports (e.g.

SIGAR 2012) suggest that, alongside other factors, fraudulent testing contributed to poor quality

outcomes.

6.3.1.3 Corruption in the certification of compliance of designs and built work

Widespread corruption affecting the certification of designs and built work for compliance

with regulations was described in interviews and is positioned in relation to other practices and

conditions in Figure 6.7. An Afghan architect described how senior officials from Kabul Municipality

openly discussed soliciting payments for building approvals as necessary to supplement their low

government salary.86 Several other interviewees remarked that building approvals could either be

stalled indefinitely or received immediately subject to payment of a bribe. Such descriptions

focussed on Kabul, though the broad scope of corruption across the country suggests these

descriptions might be indicative of a broader situation.

The prevalence of corruption affecting the certification of works can be considered

symptomatic of the high prevalence of corruption in Afghanistan described in interviews and

corroborated by statistical indicators. This prevalence of corruption can be related back to poor

institutional development directly and via decreased regulatory quality as national institutions and

specific regulatory measures have been ineffective in controlling the expansion of corruption.

Historic and ongoing political instability and violence in Afghanistan have contributed to the poor

state of institutional development in the country. In addition to poor institutional development, the

prevalence of corruption in Afghanistan is also symptomatic of shortened investment horizons. Just

as future uncertainty and shortened investment horizons fosters commercial opportunism, a parallel

effect is increased corruption as public officials seek to maximise short term gains from the

reconstruction economy.

As with fraudulent materials testing, the immediate impact of corrupt certification of works

described in Figure 6.7 as decreased quality of built work.

82 AFG-06, AFG-10

83 AFG-04

86 AFG-15

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78

6.3.2 Tendering and award of contracts

The fifteen second-cycle transcript codes identified in relation to tendering and the award of

construction contracts in Afghanistan are presented in Table 6.4. Of the nine practices identified in

transcript coding, five were highlighted as being particularly significant: 1) partial subversion of

competitive tender rules, 2) complete subversion of competitive tender rules, 3) reassignment of

awarded contracts, 4) excessive under-pricing of bids, and 5) submission of fraudulent bid

information. Network diagrams positioning these five practices in relation to prevailing conditions

and project outcomes are presented in Figure 6.8 (partial and complete subversion of tender rules

and contract reassignment), and Figure 6.9 (excessive under-pricing and fraudulent bidding).

6.3.2.1 Complete subversion of competitive tender rules

Discussions about corruption described two distinct general modes of corruption in contract

award: complete subversion, and partial subversion of the competitive tender rules and procedures

that typically regulate the award public contracts.

Complete subversion of tender rules, which refers to senior officials directly awarding

contracts in neglect of any open competitive process, is positioned in relation to conditions and

outcomes in Figure 6.8. Interviewees, including government officials and owners of construction

firms, maintained that personal connections were required to win any construction contract with

the government. “You must have a connection, you must pay bribes, you must pay more money, to

take the projects”, said the owner of a construction company.88 “Every minister has five companies,

every wakhil [local communal leader] has ten. They come by force – “Give me the projects or I’ll

do this”. Every company should be powerful, otherwise the government will not give them one

metre of concrete”, stated a government official managing a major infrastructure program in which

38 contractors were employed.89 These and other interviewees suggested that contract award

decisions were typically made arbitrarily at the senior-most levels of government. “I was part of

government. They have intentions – ministers or deputy-ministers – they go directly to the

procurement head [and direct him] to give the contract to this person or that”, said an official now

working for a UN agency.90 Such informal contract award decisions in the context of elaborate

procurement systems suggest that procurement officials managing tenders must fabricate evaluations

and documentation in order to satisfy centralised oversight by the Ministry of Finance.

88 AFG-14, pg.6

89 AFG-08a, pg.3

90 AFG-06, pg.3

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79

Complete subversion of competitive tender rules by senior government officials is one

symptom of the high prevalence of corruption that is corroborated by statistical indicators.91 The

widespread prevalence of corruption in Afghanistan is attributed in Figure 6.8 to conditions of poor

institutional development and decreased regulatory quality. Corruption in Afghanistan is also

attributed in Figure 6.8 to shortened investment horizons of officials.

The most significant outcome of complete subversion of tender rules raised during interviews

and illustrated in Figure 6.8 was the inappropriate award of contracts to unqualified firms. Contracts

were awarded to firms with direct political connections rather than to firms with the capacity or

willingness to undertake works. A subsequent practice arising from this is the reassignment of

awarded contracts (see Subsubsection 6.3.2.3 below). Discussions also suggested that in the context

of upper limits placed on contracts by pre-bid estimates and fixed financial-aid budgets, the cost of

bribing public officials reduced the funds available for construction. An owner of a construction firm

cited an example of corruption in the award of a contract for construction of a bridge, “… the

Governor at the time asked us to give 40 per cent [of the contract value] to him, and with 60 per

cent of the value left we could not even make the project by mud”.92 Given constraints on contract

prices, complete subversion of tender rules contributed to undermining the quality of built work.

6.3.2.2 Partial subversion of competitive tender rules

Partial subversion of tender rules differs from complete subversion in that it involves

manipulation of tender rules rather than complete circumvention. Rather than top-down corruption,

interviewees described the solicitation of bribes and manipulation of tenders by officials from

organisations such as UN agencies, bilateral donor agencies and military units. “It’s rampant here…

It’s on both sides – from the westerners and the locals – it’s not just the locals”, suggested a foreign

consulting engineer with extensive experience administering contracts and supervising works for

US-funded projects.93

While it is a distinct mode of corruption, the paths of causation from high political instability

and violence to partial subversion of tender rules illustrated in Figure 6.8 are the same as those for

complete subversion. High prevalence of corruption in Afghanistan is a symptom of low institutional

development and poor regulatory quality as well as a product of shortened investment horizons of

officials. This suggests that, shortened investment horizons also applied to officials from non-

91 For the indicator Control of Corruption from the World Development Indicators, Afghanistan’s adjusted score of 1.00 is

below the interquartile range for conflict-affected countries (1.29-1.90). In Transparency International’s 2012 Corruption

Perceptions Index (Transparency International 2012), Afghanistan was ranked 174th – the lowest ranking alongside Somalia

and North Korea. Afghanistan’s mean CPIA Transparency, Accountability and Corruption score over the period 2002-2012

was 2.00 – below the interquartile range for conflict-affected countries (2.19-3.00) and developing countries not affected by

recent conflict (2.50-3.35).

92 AFG-14

93 AFG-12b, pg.8

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80

government organisations, as financial aid moving through poorly-regulated channels appears to

have motivated partial subversion of competitive tender rules.

Outcomes of the partial subversion of competitive tender rules by lower-level officials in

foreign-government and non-government organisations were not explicitly identified in interviews.

However, as illustrated in Figure 6.8, it is expected that these outcomes are comparable with those

of complete subversion in that, in the context of constraints on contract prices, the cost of bribes

reduce funds spent on construction and, ultimately, reduce the quality of built work.

6.3.2.3 Reassignment of awarded contracts

During several interviews situations were described whereby firms, having won contracts

through competitive tender, reassign the contract to a second firm.94 This second firm might then

purchase materials and engage trade subcontractors to undertake works, though more frequently

would also reassign the contract to a third firm. Further tiers of reassignment were described in

interviews, with up to five tiers of contract reassignment regularly employed before responsibility is

assigned to a local firm that is both willing and able to undertake works.

Two general scenarios of contract reassignment were described in interviews. In one scenario,

corruption enables the award of contracts to firms with no expertise in construction, nor with any

intention of undertaking contracts, having registered as a firm only to facilitate receipt of contracts

that are then reassigned.95 Further intermediary firms at second, third and further tiers of

reassignment may lack official registration and/or access to resources. Given security risks that limit

the mobility of staff and resources, firms on intermediate tiers of contract reassignment may not have

safe access to construction sites required to undertake works. As described by the owner of a firm

that participated in chains of reassignment, “when a person knows the Minister, the Minister gives

him the project. He doesn’t even have a company, doesn’t have the tools, he cannot implement the

project so he gives the project to a company. So, the company that he gives the project to, he also

doesn’t have a company, so they pass it on…”.96 Ultimately, the contract is reassigned to a firm with

a willingness and risk tolerance to actually undertake works. In this scenario, reassignment appears

to typically be informal, involving undocumented agreements with either a lump sum initial

payment for the contract, or a percentage of each interim payment deducted at each tier, “… maybe

10 or 5 per cent, then the second person might take 15 per cent, so the person at the end has to

make the project with whatever is remaining”, explained the contractor.97

94 AFG-04, AFG-07, AFG-13, AFG-14, AFG-19

95 AFGF-06

96 AFG-14, pg.14

97 AFG-14, pg.14

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81

A second scenario of reassignment described in interviews is more formal, involving award

to firms that meet qualification criteria. Such criteria may restrict qualified bidding to firms from the

donor country, firms with minimum levels of experience, staffing, equipment or access to working

finance. Tenders also typically required that participants have English language and administrative

skills to prepare bids in accordance with standardised procurement policies and procedures. In this

reassignment scenario, successful bidders that meet qualification criteria lack the resources,

willingness, risk tolerance or site access necessary to undertake works, thus instigating a chain of

reassignment comparable with that arising from corrupt contract award. As one official

administering contracts for USAID conceded, “Three tiers – USAID accepts that. Beyond that it’s not

accepted, though… due to insecurity we cannot visit some projects. There are many tiers – maybe

up to four or five tiers”.98

Separate paths of causative conditions that may be associated with each of these two contract

reassignment scenarios are included in Figure 6.8. The first scenario of involves the complete

subversion of competitive tenders leading to the award of contracts to unqualified firms and

subsequent reassignment. In the second scenario, the initial tier of reassignment responds to a

disjunction between generic tender qualification criteria and specific traits required to actually

undertake work – particularly risk tolerance, site access and the ability to mobilise resources in

complex, insecure environments. Thus, while conflict does not cause generic qualification criteria,

high levels of political instability and violence in Afghanistan have made generic qualification

criteria inappropriate, thus contributing to award of contracts to inappropriate firms and to contract

reassignment.

Two different outcomes of contract reassignment across multiple tiers described in interviews

depended upon the extent to which initial contract prices were constrained. In the first scenario of

contract reassignment instigated by complete tender subversion, it appears that constraints on initial

contract prices were such that the costs of successive tiers of reassignment reduced the amount spent

on construction. In interviews, contractors described reductions in construction quality necessary to

complete works with reduced budgets.99 In the second scenario of reassignment instigated by

restrictive contract award criteria, it appears that, in some situations, reassignment led to the inflation

of contract prices. A USAID official described the award of contracts to prequalified firms for high

contract prices, such that even with multiple tiers of reassignment the funds eventually available for

construction were adequate to complete the work as specified. In a cited example, contract for

construction of a school was awarded for USD 1.89 million then reassigned and built to specification

for USD 900,000.100

98 AFG-19, pg.7

99 AFG-04, AFG-19

100 AFG-19

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82

6.3.2.4 Excessive under-pricing of bids in competitive tenders

Tenders that were not undermined by corruption or did not involve restrictive qualification

criteria appear to have been commonly affected by excessive under-pricing of bids, which is

positioned in relation to prevailing conditions and project outcomes in Figure 6.9. Procurement

policies demanding unconstrained competition appear to have contributed to widespread under-

bidding – i.e. submission of bid prices that are well below actual costs of construction. The

prevalence of under-bidding and high competition for non-government construction contracts

described during interviews created a race to the bottom amongst bidders, consistently yielding

contracts awarded at prices that were unachievable. “Those companies that give the lowest price

win the project. Unfortunately, this worsens the quality of construction in Afghanistan”, suggested

the manager of a large public construction enterprise.101

Interview discussions suggested two paths of conditions that contributed to the prevalence of

excessive under-bidding and subsequent under-pricing of contracts. Several interviewees managing

construction projects for international organisations attributed excessive under-bidding to a lack of

expertise among bidding firms.102 They suggested that firms lacked both administrative and technical

expertise to accurately estimate construction costs, commonly leading to significant under-

estimation. This inadequate availability of expertise may be attributed in part to the very poor level

of economic development in Afghanistan. It is perhaps also attributable to historical and ongoing

conflict in Afghanistan that impeded education and training and led to emigration of qualified

professionals. Along a second path of contributing conditions, the unreliable legal frame limited the

extent to which contractors could be held liable for the quality of the work they complete. Further,

shortened investment horizons diminish the value of reputation, such that contractors would be less

concerned about the impact of poor work upon future opportunities.

The outcome described during interviews of unconstrained competition and excessive under-

pricing of bids was inadequate quality of built work. A lack of any enduring legal liability of

contractors and restricted inspection of works (see Subsection 6.3.4 below) enabled contractors to

reduce costs by compromising construction quality.

6.3.2.5 Submission of fraudulent bid information

Submission of fraudulent bid information in competitive tenders was described in interviews

and featured in Figure 6.9. The absence of effective legal liability and systems of registration and

insurance in Afghanistan increased the onus upon clients to assess the capability of bidding firms.

In response, qualification criteria were used to define threshold levels experience, expertise,

equipment and working finance. To enable clients to assess compliance with qualification criteria,

101 AFG-11, pg.1

102 AFG-04, AFG-06, AFG-07

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83

tenders appear to have typically required that bidders submit a range of documents with bids, such

as: details of completed projects, staff employed and equipment owned, and bank statements.

Interviewees suggested that the submission of fraudulent documentation was commonplace,

including lists of projects/contracts not actually undertaken, staff not employed and equipment not

owned. “They are writing for us that they have three or five engineers – they include CVs in their

documents – but they don’t have those engineers… We know that some of the companies, they

don’t even have offices”, said an engineer regularly engaged in the evaluation of bids for a UN

agency.103 Engineers managing tenders for UN agencies discussed the necessity of conducting

lengthy verification of bid information, including inspections of equipment and offices and

interviews with staff – a prohibitively time-consuming task for tenders that typically attracted more

than 50 bids.104 Interview discussions are corroborated by the Author’s experience managing tenders

in Afghanistan in which, for example, duplicate bids were submitted under different firm names and

the curricula vitae for the same professionals would appear in bids from different firms.

Conditions contributing to the prevalence of fraudulent bidding appear to be similar to those

contributing to excessive under-pricing of bids. The highly inadequate legal frame and resultant lack

of contractor liability, together with shortened investment horizons, promoted the practice of

bidding for works that firms do not have the expertise or resources to properly complete. Very poor

regulatory quality also contributes to the practice, including a lack of a reliable system of registration

of construction firms and lack of public records that might otherwise support the verification of

submitted information. In Figure 6.9, inadequacies in the legal frame and regulatory quality are

positioned as symptoms of poor institutional development which, in turn, can be partially attributed

to the prolonged history of conflict. In addition, the effect of political instability upon shortened

investment horizons is a more direct path through which conflict contributed to the prevalence of

fraudulent bidding.

The immediate outcome of this submission of fraudulent bidding is the award of contracts to

unqualified firms. Interviewees described the subsequent effect of undermined quality of built work.

An engineer managing projects for a UN agency suggested that inadequate verification of bid

documentation and inadequate evaluation of bidders regularly ensured that, even where tenders

were not undermined by corruption, incompetent firms are regularly awarded contracts.105

6.3.3 Mobilisation and management of resources

The twelve second-cycle transcript codes identified in relation to the mobilisation and

management of construction resources in Afghanistan are listed in Table 6.5. Of the six practices

103 AFG-07, pg.2

104 AFG-06, AFG-07, AFG-17a

105 AFG-07

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identified in transcript coding, two were highlighted as being particularly significant: 1) inadequate

investment in resources by contractors, and 2) investment and vertical integration of resources by

contractors. Network diagrams positioning these practices in relation to prevailing conditions and

project outcomes are presented in Figure 6.10 (inadequate investment by domestic and foreign

firms), and Figure 6.11 (investment and vertical integration of resources).

6.3.3.1 Inadequate contractor investment in resources

Inadequate investment by contractors in resources – specifically, staff and equipment – was

described in interviews in relation to two distinct types of construction firms: large international

firms, and small domestic firms. The practice is represented separately for each type of firm in Figure

6.10.

Large international firms associated with inadequate investment during interview discussions

generally appear to have entered the construction market in Afghanistan with support from donor

countries. The large scale of American financial aid was such that American firms are the most

obvious representatives of this group, though donor-supported firms from China, Germany, the

Netherlands and Australia were also described in interviews or observed by the Author. Interviewees

suggested that large donor-supported firms typically maintained a small presence in Afghanistan in

comparison to the large scale of contracts they were awarded.106 It appears that except administrative

and client liaison services provided directly by the contractor, all other resources required for the

execution of works were typically mobilised via subcontracting to an extent that contracts were

practically reassigned. A military officer managing construction projects for the Australian Army

described a situation in which, following non-competitive award of a contract to an Australian firm,

the contractor positioned one Project Manager in Afghanistan and reassigned the works to a large

domestic firm.107 In such situations, large foreign contractors adopted a project management role,

mediating between clients and domestic firms.

Many small domestic firms also appear to typically have made no significant investment in

staff, equipment or facilities.108 Discussions with the owners of small firms and officials managing

tenders in which they participate suggest that such firms often comprise the owner and a small group

of staff.109 A lack of investment by these firms requires that all resources are engaged on a project

basis - managerial labour through direct short-term contracts and equipment and trade labour

through trade subcontracts. “Because they cannot find projects, when they don’t have projects they

106 AFG-16, AFG-19

107 AFG-23

108 Data from the Afghanistan Investment Support Agency and from the Government’s Central Statistics Organisation records

registration of 14,746 domestic construction firms between 2003 and 2012.

109 AFG-13, AFG-14

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cannot keep engineers. When they get the project, then they hire the engineer…”, said an official

managing tenders and administering construction contracts for a UN agency. 110 111

For these two groups of firms – large international firms and small domestic firms – failure to

invest in adequate resources to undertake projects is attributed in Figure 6.10 to different sets of

prevailing conditions. For international firms, increased risk and costs associated with work in

insecure locations is expected to have reduced investment. Instability, future uncertainty and

subsequent shortened investment horizons are also expected to have impacted investment decisions

by these firms. That large firms from a range of countries were awarded contracts despite a lack on

in-country resources suggests that in-country resources were not necessary – that contracts were

secured based on experience and resources outside Afghanistan. Reassignment of contracts to

medium-sized domestic, Turkish, Indian or Pakistani firms appears to have been a common strategy

adopted by international firms to undertake contracts in the absence of local resources.

Inadequate investment by domestic firms appears to have responded to a different set of

conditions. While political instability and shortened of investment horizons is expected to have

impacted hiring and purchasing decisions by these firms, discussions suggest that uncertainty

regarding future workload and inadequate availability of expert labour was a more significant

concern. The inadequate availability of technical and administrative expertise is one symptom of

poor economic development that is attributable to the prolonged history of conflict. Further,

widespread was such that investment and improved performance were unlikely to result in increased

work, removing incentives for small firms to invest in staff and equipment. The secondary market

for construction contracts and the potential for fraudulent bidding appears to have enabled domestic

firms to survive in the market despite a lack of investment. Compromised tenders and the practices

of fraudulent bidding and contract reassignment are, in part, attributable to the poor regulatory

environment and pervasive corruption which, as highlighted in Subsection 6.3.2 above, are

symptoms of poor institutional development.

Outcomes of inadequate investment by international and domestic firms also appear to have

differed. For international firms, inadequate investment led to (and was enabled by) the practice of

contract reassignment which, in turn, led either to inflated contract prices or to inadequate

construction quality (see Subsubsection 6.3.2.3). For domestic firms, inadequate investment is also

expected to have been associated with contract reassignment with under-resourced domestic firms

expected to have received contracts through reassignment. In interviews, professionals

110 The title Engineer in Afghanistan is broadly applied. Engineer might refer to a qualified construction professional such as

a Civil or Structural Engineer. Alternatively, Engineer might refer to anyone with some form of technical education, or

technical role. For example, a Site Manager or Foreman is referred to locally as an Engineer.

111 AFG-07, pg.2

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86

administering contracts for international organisations discussed the poor quality of work arising

from a lack of adequate expertise and equipment among firms that ultimately undertake works.112

6.3.3.2 Investment and vertical integration of resources by contractors

In contrast with under-investment by many domestic firms, a limited group of domestic firms

made significant investments to meet higher standards of military clients. A manager of a large

domestic firm operating within the military construction market described his firm’s employment of

managerial and technical staff from Bangladesh and India on annual contracts.113 His firm also

permanently employed and trained Afghan trade staff to meet both technical and safety standards

demanded by military clients, thus limiting reliance on trade subcontractors that worked to lower

standards. Investment appears generally to have been limited to professional and trade expertise,

with widespread availability of hire services for equipment and plant.114 This strategy of integrating

all trade and technical expertise also appears to have been limited to a small number of domestic

firms operating as subcontractors (receiving reassigned contracts) within the market for US military-

funded projects. The 25 domestic firms prequalified by the USACE appear to represent the majority

of this group of large integrated domestic firms. Consistent work arising from the small number of

participants in the restricted market (and perhaps the high profitability of military contracts)

promoted investment in internal resources rather than engaging external resources on a project

basis.

In addition to limited competition within a restricted market, investment in staff and training

by domestic firms is positioned in Figure 6.11 as a response to the inadequate availability of

expertise. This lack of expertise is a symptom of poor economic development and a product of

prolonged conflict that undermined systems of education and contributed to the emigration of

educated professionals. Political instability and violence in Afghanistan also had a more direct

impact upon construction expertise by restricting the mobility of professionals. Several interviewees

described the risks faced by Afghan engineers working in insecure locations.115 One Afghan engineer

suggested, “… the Taliban has announced a jihad on engineers. I can find a good job with a good

salary in one of these [insecure] provinces, though unfortunately, I cannot go there, because when

112 AFG-06, AFG-07

113 AFG-16

114 The early expansion and large scale of the domestic industry for equipment hire is incongruous with slower expansion of

markets for materials and components. In response to high demand and the absence of credit preventing construction firms

from investing in equipment, large amounts of expensive equipment for road and other infrastructure construction were

available for hire in Kabul from around 2006. The inordinately large scale of investment in construction equipment was

observed in Kabul in January 2014, when the drawdown of foreign military and reduced financial aid left large amounts of

equipment - representing hundreds of millions of dollars of investment - sitting idle in yards on the outskirts of Kabul.

115 AFG-04, AFG-13

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a Talib captures me, he will kill me”.116 Interviewees mentioned that even with salaries for work in

insecure rural areas generally double or triple those paid in urban centres, typically only poorly

qualified professionals who were unable to obtain work elsewhere accepted the risks.117 Permanent

employment and training of staff by larger domestic firms thus also responded to the conflict and

the reluctance of qualified engineers to work in insecure locations.

The immediate outcome of investment in staff and training upon the projects undertaken by

these firms is increased contract prices driven by increased staffing costs. Beyond this immediate

outcome, investment in staff and training by this small group of firms is expected to have had an

impact upon industrial capacity generally. Increased supply capacity arising from this investment is

reflected in the rapid growth of one firm undertaking projects for the USACE. From establishment

without prior experience in construction in Afghanistan in 2007, the firm grew rapidly such that by

2009 it was undertaking USACE contracts valued at up to USD 32 million.118 Alongside increased

profitability, investment by firms working on military projects in insecure locations also entails

increased commercial risk.

6.3.4 Contract conditions and administration

The fifteen second-cycle transcript codes identified in relation to contract conditions and

contract administration in Afghanistan are listed in Table 6.6. Of the seven practices identified in

transcript coding, four were highlighted as being particularly significant: 1) inadequate (restricted)

superintendence of works, 2) intimidation of superintendents and contract administrators, 3)

outsourcing of site superintendence functions, and 4) corrupt or ineffective arbitration. Network

diagrams positioning these six practices in relation to prevailing conditions and project outcomes

are presented in Figure 6.12 (inadequate superintendence, intimidation of superintendents and

administrators, and outsourcing superintendence), and Figure 6.13 (corrupt/ineffective arbitration).

6.3.4.1 Inadequate or restricted access to sites and superintendence of works

Inadequate superintendence of works arising from restricted site access of clients and

consultants was discussed during interviews by a range of practitioners and is presented in Figure

6.12. A contractor undertaking contracts with government and UN agencies described the typical

extent of superintendence, “they go to see one or two elements – for example, the reinforcement of

the concrete slab. If they see that has been done well, then they know that everything else will be

116 AFG-13, pg.4

117 AFG-04, AFG,13

118 AFG-16

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ok”.119 This contractor went on to describe a specific project, “An engineer came to my project for

an inspection. So, when he saw the area was insecure, he asked only that I bring photos of the

project from there for him”. An official administering construction contracts for a UN agency

highlighted that by 2009 extensive planning and armoured vehicles were required to undertake site

visits, severely restricting the ability to monitor works.120 An officer in the Australian Army who

managed road construction projects succinctly described the situation regarding site

superintendence, “It’s all about inspection – you can’t get out to site, so you can’t know what’s going

on”.121 Some situations of restricted site access led to site inspections being undertaken from the air.

A manager of large Afghan firm undertaking projects for USACE in insecure locations described

such semi-remote inspection, “Sometimes… they have a special plane or helicopter for the project

people. They come and take picture of the site – from the helicopter”.122

Insecurity and the threat of insurgent violence was the primary condition restricting access of

clients and consultants to construction sites, thereby restricting superintendence of works.123 The

deteriorating security situation from 2004 was accompanied by increased financial aid and

increased construction demand (see Subsection 6.1.1). Thus, in parallel with expansion of

construction activity throughout the country, access to sites became increasingly restricted for

government, non-government and military officials.

Compromised quality of built work was the most common outcome of inadequate site

superintendence described during interviews. Restricted site superintendence limited the ability of

contract administrators to inspect works to ensure they complied with specifications and standards.

Inadequate quality of works may have arisen from the limited capability of smaller contractors that

appear to have been responsible for a large proportion of work in insecure locations. In other

situations, compromises to construction quality may have been intentional. Factors such as

inadequate contract prices arising from excessive under-bidding and additional costs of contract

reassignment magnified incentives for contractors to reduce construction costs by compromising

quality. Restricted superintendence provided the opportunity to do so.

6.3.4.2 Outsourcing of site superintendence functions

To achieve a full-time site presence, some organisations employed consulting firms to provide

site superintendence. USAID adopted this strategy following media reports and audits from the

Special Inspector General for Afghan Reconstruction (SIGAR) highlighting failures in US-funded

119 AFG-14, pg.3

120 AFG-07

121 AFG-21

122 AFG-16, pg.6

123 AFG-14, AFG-19

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construction projects (e.g. SIGAR 2012). A USAID official described the employment of an American

consulting firms that engaged Afghan professionals to provide full-time site supervision.125 UN

agencies adopted similar practices from around 2010 in response to increasing insecurity that further

restricted site access, though one official administering contracts for a UN agency cited the varying

effectiveness of domestic consulting firms hired to undertake site superintendence.126 This practice

of outsourcing site superintendence functions in response to increasingly restricted site access

differed from typical engagement of consultants for contract administration in that the organisations

such as USAID retained all contract administration responsibilities under the contract.

Improved site superintendence enabled by engagement of consultant superintendents

appears to have entailed significant increased costs. A USAID official reported that by 2014,

improved quality assurance measures typically constituted around 25 per cent of project costs,

further noting that, “Sometimes, our quality assurance cost goes higher than the project

[construction] cost”.127 The high cost of outsourced superintendence is attributable to the risks taken

by engineers attending sites in insecure situations.

6.3.4.3 Intimidation of superintendents and contract administrators

Intimidation and threats of violence from contractors, particularly in relation to demands to

certify works and approve payments, was described during several interviews and is presented in

Figure 6.12. In one interview, officials from a UN agency referred to the murder of an engineer

working for another UN agency in connection with a dispute with a contractor as evidence of

credible threats of violence faced by officials administering contracts.128 129 In addition to explicit

threats of violence, implicit intimidation arising from the political connections and strength of

contractors was also described. Several interviewees referred to contractors as “strong men” and

“strong people” in an environment where strength is measured by political connections and access

to violence. An engineer with experience as both a contractor and non-government official was

direct in his assessment, “… they cannot manage those people – they don’t have the ability to punish

them, to stop their work or to impose a penalty… Because of weakness – because the contractor is

stronger than the client”.130

The practice of contractors intimidating contract administrators and site superintendents is

associated in Figure 6.12 with conditions of pervasive violence and weak rule of law. High levels

125 AFG-19

126 AFG-17

127 AFG-19

128 AFG-17

129 The Author observed situations in which Afghan engineers requested that inspection reports identifying poor quality works

requiring rectification be submitted under his name, indicating a foreigner was less susceptible to contractor intimidation.

130 AFG-04, pg.2

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of violence were described during interviews and reflected in statistics describing political instability

and violence. The condition of weak rule of law suggests limited protection from the police force

etc. for construction professionals. Under such conditions, any threats to contract administrators and

site superintendents were credible.

The main effect of any situations of intimidation is expected to have been compromised

quality of built work. As described in relation to inadequate site superintendence (see Subsubsection

6.3.4.1), contractors have an incentive to reduce construction costs through reductions in

construction quality, particularly in the context of excessive under-bidding and contract

reassignment.

6.3.4.4 Corrupt or ineffective arbitration

It appears that the arbitration of contractual disputes was not available in Afghanistan despite

the large extent of construction activity. A lawyer whose work included representing Afghan

construction firms in disputes with foreign firms highlighted the lack of arbitration services and of

any legal professionals with suitable expertise.132 In such situations, courts might be expected to

hear cases of commercial dispute that would otherwise be addressed by arbitrators. However, the

courts and judiciary in Afghanistan are highly discredited, with widespread perceptions that court

rulings are arbitrary and easily purchased. As the American lawyer representing Afghan contractors

suggested, “They have never known a fair and honest court system, so the idea that one should exist

is somewhere between a rumour and a fairy-tale”.133

Political violence and instability is described in Figure 6.13 as contributing indirectly to the

absence of effective systems for contract dispute resolution in Afghanistan. The absence of

arbitration services or courts to effectively resolve contractual disputes is one aspect of the broader

conditions of an inadequate legal frame and poor regulatory quality. These conditions are in turn

attributed in Figure 6.13 to the lack of institutional development, which is associated with the

prolonged history of conflict as well as the ongoing conflict that hampers necessary reforms.

The absence of arbitration or a reliable court system to resolve disputes is such that contracts

appears to ultimately have been unenforceable. One outcome of this appears to have been a

devaluation of formal contracts among contractors. As an American lawyer representing Afghan

construction firms suggested, “they don’t see as much enforceability and value in the contract

document as western companies do”.134 Several interviews, including with owners of construction

firms, reinforced observations by the Author that many contractors do not read contracts before

submitting bids, signing contracts and commencing works. Contractors appear to often commence

132 AFG-01

133 AFG-01, pg.6

134 AFG-01

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work with an expectation that details and disagreements are to be resolved through informal

negotiation.135 In relation to clients and consultants, practical outcomes arising from the limited

enforceability of contract conditions include corruption in the administration of contracts and delays

in interim payments. Interviews with owners and managers of construction firms suggest that bribes

are commonly solicited for the certification of works and release of payments. However, these

practitioners conceded that such petty corruption, while common, typically involved low amounts

in the range of AFS 500 (equivalent to around USD 10). Ultimately, the outcomes of the lack of

reliable dispute resolution mechanisms and subsequent unenforceability of contract conditions are

suggested in Figure 6.13 to be project delays and increased risk for both contractors and clients.

6.3.5 Summary of findings

The findings drawn from the analysis of interview data are consolidated and presented in

Table 6.7, which identifies significant general conditions, construction conditions, construction

practices and project outcomes that were identified through the review of statistics, transcript coding

and network analysis.

6.4 Discussion

The problematic confluence of conditions in Afghanistan does not appear to have led to the

adoption of unique construction practices. While the intensity of conflict has affected many

practices, most of the practices described during interviews are also attributable to the broader

economic and institutional effects of conflict that may be observed in other developing countries. It

appears that the particularly problematic conditions in Afghanistan promoted an increased intensity

or prevalence of practices that may also be adopted, albeit to lesser prevalence, in more stable, less

violent situations.

Relationships between prevailing conditions and construction practices highlight a distinction

between more-direct and less-direct effects of conflict upon construction. Conditions surrounding

construction projects in Afghanistan that can be directly attributed to conflict are: insecure (unsafe)

work environments on construction sites, restrictions in the mobility of construction workers,

shortened investment horizons, and limited rule of law. Other conditions were identified during the

analysis as being symptomatic of broader institutional and economic effects of conflict. In general,

these conditions related to decreased availability of resources and decreased effectiveness of

regulation – conditions associated with construction in developing countries generally. Thus, for

these conditions, political instability and violence may be seen as causing economic and

135 AFG-01, AFG-14, AFG-18

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institutional instability that exacerbated effects of earlier stages of economic and institutional

development.

Most of the practices identified during interviews responded to a variety of construction

conditions that have been directly or indirectly attributed to conflict. For example, fraudulent testing

of materials is attributed to shortened investment horizons and weak rule of law, which are directly

attributed to conflict, and to low regulatory quality is indirectly attributed to conflict via increased

institutional and economic instability. These practices are not expected to be restricted to the conflict

situation in Afghanistan, nor to conflict-affected situations in general. Rather, they are expected to

occur in other developing countries, albeit to a lesser prevalence. The inadequacy of site

superintendence and intimidation of site superintendents that was described during interviews in

relation to threats to the safety and security of construction project staff entail practices that are

perhaps most directly attributable to political instability and violence in Afghanistan and least likely

to occur in more peaceful developing countries.

Practices identified in relation to design and certification of actors and works were: 1)

adoption of various foreign construction codes and standards, 2) solicitation of bribes for

certification of works, and 3) fraudulent testing of materials and built work. These practices are not

expected to be unique to Afghanistan nor to conflict-affected situations. However conditions

associated with conflict appear to have expanded the prevalence of these practices. Adoption of

foreign regulations is a function of the absence of appropriate domestic regulation and of the extent

of aid financing of infrastructure construction, both of which occur in other developing countries.

However, high levels of financial aid from a wide range of donors, and the very poor regulatory

environment in Afghanistan suggest an expanded adoption of foreign regulations. Solicitation of

bribes for certification is one aspect of corruption in construction that has been observed in

developing countries generally (see Subsection 2.2.3). However, the prevalence of corruption

affecting construction in Afghanistan appears to have been expanded by the confluence of high

levels of aid finance, poor regulation, and shortened investment horizons of public officials.

Fraudulent testing of materials is an example of comparable short-term opportunism of contractors

and testing laboratories.137 A combination of the poor regulatory environment, high demand in the

137 Opportunistic and fraudulent practices are identified in literature in relation to a range of contexts. Lu et al. (2016a)

identify contractors “hiding” their qualification and submitting “unreasonably low bids” in relation to opportunistic behaviour

in the Chinese construction industry, suggesting that particular characteristics of construction foster increased opportunism

compared to other industries. Lu et al. (2016b) use a questionnaire survey of practitioners to study the effectiveness of contract

conditions in regulating such behaviour. Luo (2006) argues that poor regulatory environments in “emerging markets” foster

opportunism. Bowen et al. (2007) study ethics of construction practices in South Africa, finding that practices are in general

diligent despite several common breaches relating disclosure of confidential tender-related information. This study builds on

a similar study of ethics of construction practices in Australia by Vee & Skitmore (2003), finding a limited prevalence of

fraudulent, negligent and corrupt practices. Boukendour (2007) studies alternative contracting arrangements as a means of

controlling opportunistic behaviour, which he suggests is prevalent in construction due to “contract incompleteness”. Hinton

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context of limited supply capacity, and shortened investment horizons of contractors and testing

consultants appears to have contributed to the expansion of the practice beyond levels that might

be expected in developing counties that are not affected by the heightened instability associated

with conflict.

Practices identified in relation to tendering and award of contracts during the conflict in

Afghanistan were: 1) partial subversion of competitive tender rules, 2) complete subversion of

competitive tender rules, 3) reassignment of awarded contracts, 4) excessive under-bidding in

tenders, and 5) submission of fraudulent information with bids. Each of these practices undermines

fundamental objectives of competitive tenders, which include securing value for money for clients

and promoting increased contractor efficiency and competitiveness. None of the practices are

unique to Afghanistan nor to conflict-affected situations. However, the practices respond to

combinations of conditions including high demand, poor regulation and shortened investment

horizons of officials and contractors that, beyond effects of earlier stages of development, were

exacerbated by the conflict in Afghanistan. Partial and complete subversion of competitive tenders

are examples of opportunism among public officials, including those at very senior levels, seeking

to take advantage of the particular regulatory and financial conditions prevailing during the conflict.

Excessive under-bidding and fraudulent bidding are examples of opportunistic practices of

contractors that are not unique to Afghanistan.138 However, beyond inadequacies in legal

frameworks that enable opportunism, in Afghanistan the practices appear to have been promoted

by shortened investment horizons and significantly expanded in response to very high levels of

funding in the context of the poor regulatory environment.

Reassignment of contracts warrants particular attention given its prevalence and potential

interpretation either as an opportunistic practice or as a functional response to dysfunctional

conditions. The range of situations of contract reassignment described in interviews were distilled

into two general scenarios involving either corruption or restrictive tender qualification criteria.

Contract reassignment across multiple tiers may entail the commodification of contracts by

opportunistic contractors. Viewed less opportunistically, chains of reassignment may be considered

as predictable responses to prevailing conditions that create a disjunction between the traits

& Hamilton (2015) describe “convenient immorality” driven by opportunism and asymmetric power relations in relation to

the construction industry in New Zealand. Kremers et al. (2010) identified opportunistic practices affecting construction

projects managed by the Dutch military in Afghanistan.

138 Excessive under-bidding and fraudulent bidding are described in literature in relation to a range of contexts. In a report

published by the World Bank, Henriod & Lanteran (1998) highlight “abnormally low” bids as a major source of poor quality

of built work in World Bank-funded projects. Grogan (1992) describes “abnormally low” bids in relation to construction in

general, suggesting that in different situations it is attributable to deliberate strategy or to miscalculation. Lo et al. (2007)

develop a model to describe and support the control of excessively low bids, which they suggest frequently promote excessive

claims and intentional compromises to construction quality. In contrast, Yiu & Tam (2006) attribute “under-pricing” to

contractors’ need to maintain cash flow and market entry strategies.

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necessary to win contracts – personal connections, administrative expertise, etc. – and traits

necessary to undertake works – high risk tolerance and access to remote, insecure locations. The

practice is not unique to Afghanistan nor is it limited to conflict-affected situations.139 However,

conditions surrounding construction during the conflict in Afghanistan appear to have promoted an

expansion of contract reassignment such that it appears to have been commonplace.

Practices identified in relation to mobilisation and management of resources for construction

projects in Afghanistan were: 1) inadequate investment by smaller domestic contractors and large

foreign contractors, and 2) vertical integration of resources, particularly labour and equipment, by

large domestic contractors. These two opposing practices were adopted by firms operating in three

isolated segments of the construction market. Inadequate investment by small domestic firms

responded to a combination of widespread corruption and short investment horizons, such that

investment in resources and development of supply capacity would not make firms more

competitive within markets for contracts with government of non-government clients. Inadequate

investment by large foreign firms appears to have responded to prequalification criteria that gave

preference to firms from donor countries irrespective of their local capabilities in Afghanistan, and

to high risk and short investment horizons that discouraged local investment by these firms. In

contrast to these examples of inadequate investment, domestic firms with access to restricted

markets for contracts and subcontracts in large US military and civilian infrastructure projects

invested heavily in staff and equipment in response to limited competition and high profitability

within these markets.140 In Afghanistan, this practice of vertical integration was perhaps limited to a

relatively small number of domestic firms that were engaged in large US-funded infrastructure

projects in particularly insecure parts of the country. Nevertheless, in contrast with a lack of

diligence and low supply capacity that appears to have characterised a significant proportion of the

domestic construction industry, these vertically integrated firms demonstrate that particular market

conditions can support rapid development of construction supply capacity under problematic

conflict conditions.

Practices identified in relation to contract conditions and administration were: 1) inadequate

site superintendence, 2) intimidation of superintendents and contract administrators, 3) outsourcing

of superintendence functions and 4) corrupt or ineffective arbitration. Inadequate site

139 Contract reassignment is described by Dix (2011) in relation to conflict-affected situations in general. Sozen & Kucuk

(1999) describe “secondary subcontracting” in relation to trade subcontracting in Turkey The practice of “secondary

subcontracting” described by Sozen & Kucuk differs from contract reassignment in Afghanistan in that it involves

reassignment of trade packages by trade subcontractors.

140 Vertical integration is described by Hillebrandt (2000: 193) as a strategy that is often adopted by larger firms in construction

industries in general. Dainty et al. (2001) and Briscoe et al. (2004) describe supply chain integration in relation to the

construction industry in the UK. However, their descriptions pertain more to closer relationships between distinct firms than

the integration of materials and equipment supply functions within construction firms. Similarly, Khalfan et al. (2005) and

Khalfan et al. (2006) consider supply integration in construction as closer relationships between firms involved in various

positions within construction supply chains.

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95

superintendence here relates to security threats that restricted access of officials to construction sites

that was perhaps the most direct impact of the conflict upon conditions surrounding construction

projects. In Afghanistan, the inability of clients and consultants to adequately access construction

sites led to undermined quality. Intimidation of superintendents and contract administrators is also

related to insecurity and weak rule of law, with the similar effect of limiting the ability of clients and

consultants to ensure adequate quality of built work. Thus, both practices entailed increased client

risks. The outsourcing of superintendence functions by some clients was one functional response to

limited site access. The very high cost of outsourcing superintendence described in interviews is

perhaps indicative of the increased administrative costs required to successfully undertake

construction projects in less secure locations.

Two themes may be drawn from this discussion about some of the construction practices

adopted during the conflict in Afghanistan. First, various forms of opportunistic behaviour of

contractors and clients emerged from the confluence of high construction demand, the poor

regulatory environment and shortened investment horizons. Most of the opportunistic practices

identified are not limited to conflict-affected situations. However, conditions directly associated with

political instability and violence appear to have expanded opportunistic practices and undermined

various aspects of construction projects. While the situation in Afghanistan is not typical of conflict-

affected situations in general, it could be anticipated that other situations of high reconstruction

demand in the context of instability and poor regulation would lead to similar practices that

undermine projects. The second theme is an extension of the first. The various opportunistic and

dysfunctional practices suggest a failure of standard arrangements for procurement and contracting

to control the behaviour of construction actors in the context of particularly problematic conditions.

The failure of standard competitive procedures to ensure value for money, fairness and transparency

was highlighted by descriptions of widespread corruption involving contracts with government and

non-government clients. Standard contracts appear to have failed to regulate contractor and client

behaviour and distribute risk in a productive manner.

While outcomes identified in relation to these practices focussed on immediate project

outcome, of greater concern are the broader implications of these project outcomes. The political

effects of poor construction outcomes may not be clearly ascertained. While a degree of cynicism

was apparent among many of the interviewees, particularly during discussions about corruption

among domestic and foreign government officials, this must also be considered in relation to the

large amount of infrastructure provided in Afghanistan and the goodwill this may have generated.

The broader industrial implications of the identified conditions and practices are clearer.

Widespread opportunistic practices appear to have crowded-out more diligent, professional

practices from construction markets. Beyond the immediate impact upon construction projects

during the conflict, this situation may have enduring effects if opportunistic practices become

entrenched and continue to undermine construction projects and infrastructure investments in the

long term.

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6.5 Tables

Reference Role Entity Origin Position

1 AFG-01 Consultant Consulting firm Foreign Lawyer / Senior Partner

2 AFG-02 Consultant Consulting firm Domestic Consulting Architect

3 AFG-03 Contractor Development organisation Domestic Program Manager

4 AFG-04 Client Development organisation Foreign Program Manager

5 AFG-05a Contractor Construction firm Domestic Managing Director

6 AFG-05b Contractor Construction firm Domestic Construction Manager

7 AFG-06 Client Development organisation Foreign Construction Manager

8 AFG-07 Client Development organisation Foreign Construction Manager

9 AFG-08a Client Government agency Domestic Managing Director

10 AFG-08b Client Government agency Domestic Project Manager

11 AFG-08c Client Government agency Domestic Construction Manager

12 AFG-09 Contractor Development organisation Domestic Program Manager

13 AFG-10a Consultant Consulting firm Domestic Managing Director

14 AFG-10b Consultant Consulting firm Domestic Director

15 AFG-10c Consultant Consulting firm Domestic Director

16 AFG-11a Contractor Government agency Domestic Managing Director

17 AFG-11b Contractor Government agency Domestic Supervising Engineer

18 AFG-12a Consultant Consulting firm Domestic Quality Control Supervisor

19 AFG-12b Consultant Consulting firm Foreign Senior Quality Control Supervisor

20 AFG-13 Contractor Construction firm Domestic Construction Manager

21 AFG-14 Contractor Construction firm Domestic Managing Director

22 AFG-15 Consultant Consulting firm Domestic Managing Director

23 AFG-16 Contractor Construction firm Domestic Program Manager

24 AFG-17a Client Development organisation Foreign Procurement Manager

25 AFG-17b Client Development organisation Foreign Procurement Officer

26 AFG-18 Contractor Construction firm Domestic Managing Director

27 AFG-19 Financier Government agency Foreign Construction Manager

28 AFG-20 Client Military unit Foreign Major (Project Manager)

29 AFG-21 Client Military unit Foreign Major (Engineer)



32 AFG-24 Financier Government agency Foreign Program Manager

Table 6.1 - Interviewee list - Afghanistan

General conditions Economic conditions Regulatory conditions

high political instability and violence low availability of expertise (assumed) low regulatory quality

low institutional development moderate availability of materials & equip. low reliability of the legal frame

low economic development low availability of credit for contractors high prevalence of corruption

Table 6.2 - Statistically-defined conditions - Afghanistan

Afghanistan

97

Conditions Practices Outcomes

inadequate contractor registration adoption of various foreign regulations poor quality of built work

inadequate professional licensing fraudulent testing of materials inappropriate designs and specifications

inadequate compliance certification corrupt regulatory compliance certification

introduction/expansion of testing facilities local redesign of foreign designs

pervasive corruption

inadequate availability of expertise

Table 6.3 - Transcript-coded variables - Design and certification of actors and works - Afghanistan


inadequate availability of expertise partial subversion of competitive tenders inflation of contract prices

inadequate legal frame to ensure liability complete subversion of competitive tenders poor quality of built work

pervasive corruption reassignment of contracts contract award to unqualified firms

donors-imposed contract award criteria

unrestricted tender competition

excessive under-bidding

fraudulent bidding

contract award to development organisations

reliance on informal contract agreements

Table 6.4 - Transcript-coded variables - Tendering and contract award - Afghanistan


volatility / inflation of resource prices inadequate contractor investment (dom.) industrial supply capacity development

inadequate availability/mobility of expertise inadequate contractor investment (for.) inflated contract prices

insecure contractor work environment intentional quality compromises

rapid expansion of supply chains vertical integration of resources

normal subcontracting of trade packages

supply of counterfeit materials & components

Table 6.5 - Transcript-coded variables - Resource mobilisation and management - Afghanistan


inadequate legal frame corrupt or biased contract administration increased contract costs

weak rule of law corrupt or ineffective arbitration increased project costs

pervasive violence delayed interim payments poor quality of built work

pervasive corruption inadequate/restricted superintendence delayed project completion

intimidation of superintendents/administrators

outsourcing of site superintendence

withheld subcontractor payments

Table 6.6 - Transcript-coded variables - Contract conditions and administration - Afghanistan

Afghanistan

98

General conditions

Design & certification Tendering & contract award Resource mobilisation & management Contract conditions & administration

Construction conditions Moderate-low availability of expertise Low regulatory quality Low regulatory quality High insecuriity / prevalence of violence

Low regulatory quality High prevalence of corruption Moderate-low availability of expertise Low reliability of legal frame / rule of law

Low reliability of the legal frame Short investment horizons Short investment horizons High prevalence of corruption

High prevalence of corruption Moderate-low availability of expertise High prevalence of corruption

Short investment horizons Low reliability of the legal frame High insecuriity / prevalence of violence

High reliance on financial aid

Construction practices Adoption of various foreign codes Partial tender subversion Vertical integration Inadequate site superintendence

Corrupt compliance certification Complete tender subversion Inadequate investment (domestic firms) Outsourcing of site superintendence

Fradulent materials testing Reassignment of contracts Inadequate investment (foreign firms) Intimidation of superintendent/administrator

Excessive bid under-pricing Corrupt or ineffective arbitration

Fraudulent bidding

Project outcomes Decreased quality of built work Decreased quality of built work Increased construction costs Increased quality of built work

Inappropriate designs Inappropriate contract award Increased contract prices Increased project costs

Increased project costs Increased contract prices Increased industrial capacity Decreased quality of built work

Increased quality of built work Decreased quality of built work Project delays

Dispersed contractual responsibility Increased client risk

Increased commercial risk Reliance on informal agreements

Increased contractor risk

Table 6.7 - Summary of findings - Afghanistan

High political instability and violence

Low institutional development

Low economic development

Afghanistan

99

6.6 Figures

Figure 6.1 – General conditions - Afghanistan

Afghanistan

100

Figure 6.2 – Economic conditions - Afghanistan

Afghanistan

101

Figure 6.3 – Regulatory conditions - Afghanistan

Afghanistan

102

Commercial Firm

Foreign | Domestic

Financier

Clie

ntD

omes

tic |

Fore

ign

Consu

ltant

Domes

tic | F

oreign

Foreign

| Dom

estic

Regula

torDevelopment Organisation

GovernmentDepartment

MilitaryUnit

ContractorDomestic | Foreign

Subcontractor

Domestic | Foreign

Merchant

Dom

estic | Foreign

Figure 6.4 - Interviewee distribution - Afghanistan

Afghanistan

103

Loweconomic

development

Lowinstitutional

development

High political instability &

violence

Lowregulatory

quality

Moderate-lowavailability / mobility of expertise

Highfinancial aid

reliance

Adoption of various foreign

codes

Decreasedquality of built

workInappropriate

designsIncreased

project costsIncreased

quality of built work

Figure 6.6 - Network analysis - Afghanistan - Design and certification of actors and works (1)

Inadequate contractor registration

Absent professional

licensing

Ineffective compliance certification

Conditions(circle)

Practices(diamond)

Outcomes(square)

Figure 6.5 - Network analysis diagram legend

Types of node / variable Sources of evidence

Interviews(continuous line)

Statistics(dashed line)

Observation(long-short dashed line)

Inference(dotted line)

Afghanistan

104

Loweconomic

development

Lowinstitutional

development


violence

Lowregulatory

quality

High prevalence of

corruption

Shortinvestment horizons

Fraudulent materials testing

Corrupt compliance certification

Decreased quality of built

work


Absent professional

licensing


systems

Low reliability of legal frame /

weak rule of law

Figure 6.7 - Network analysis diagram - Afghanistan - Design and certification of actors and works (2)

Afghanistan

105

Loweconomic

development

Lowinstitutional

development


violence

Lowregulatory

quality

High prevalence of

corruption


Partialtender

subversion

Complete tender

subversion

Inappropriate contract award


work

Reassignment of contracts

Generic contract award

criteria

Increased contract prices

Figure 6.8 - Network analysis - Afghanistan - Tendering and contract award (1)

Afghanistan

106

Excessive bid under-pricing

Submitting fraudulent bid

information

Moderate-low availability / mobility of expertise

Low reliability of the legal

frame

Lowregulatory

quality


Inappropriate contract award


work

Unrestricted tender

competition


Loweconomic

development

Lowinstitutional

development


violence

Figure 6.9 - Network analysis - Afghanistan - Tendering and contract award (2)

Afghanistan

107

Loweconomic

development

Lowinstitutional

development


violence

Lowregulatory

quality

Highprevalence of

corruption


Completetender

subversionReassignment

of contracts


work

Increased construction

overhead costs

Inadequate investment

(domestic firms)Fraudulent

bidding



(foreign firms)

High insecurity /

prevalence of violence

Increased commercial

risk

Dispersed contractual

responsibility

Figure 6.10 - Network analysis - Afghanistan - Resource mobilisation and management (1)

Afghanistan

108

Loweconomic

development

Lowinstitutional

development


violence


codes

Increased industrial capacity


Verticalintegration

(domestic firms)

Contract reassignment(foreign fiirms)




risk


costs

Lowregulatory

quality

Figure 6.11 - Network analysis - Afghanistan - Resource mobilisation and management (2)

Afghanistan

109

Loweconomic

development

Lowinstitutional

development


violence

Outsourcing sitesuperintendence

Inadequate site access &

superintendence

Intimidation of contract

administrators

Increased project costs

High insecurity /

prevalence of violence

Low reliability of the legal

frame / weak rule of law

Highprevalence of

corruption

Increased quality of built

work


work

Figure 6.12 - Network analysis - Afghanistan - Contract conditions and administration (1)

Afghanistan

110

Loweconomic

development

Lowinstitutional

development


violence

Delayed or witheld payments

Corrupt or ineffective arbitration

Corrupt or biased contract administration

Project delays

Low reliability of legal frame

Highprevalence of

corruption


Reliance on informal

agreementsIncreasedclient risk

Lowregulatory

quality

Figure 6.13 - Network analysis - Afghanistan - Contract conditions and administration (2)

111

Chapter 7 TIMOR-LESTE

Instability, strategic construction and industrial instigation

Conditions and practices characterising construction in Timor-Leste from 2007 to 2012 are

addressed in this chapter as a case of construction in a post-conflict situation. In 2002, independence

from Indonesia and acceptance into the UN established Timor-Leste as the World’s newest nation-

state. However, independence involved the loss of national systems that were established under

Indonesian rule, and left the new nation lacking important institutions such as a bureaucracy, courts

of law, etc. While a lack of economic development included an apparent absence of any domestic

construction firms, the new nation-state controlled significant petroleum resources that were

expected to bring rapid prosperity. Growing political instability following independence culminated

in conflict in 2006. In the aftermath, national income from petroleum resources funded programs in

which construction contracts were employed as strategic tools for building political stability and

instigating a domestic construction industry.

The chapter is comprised of four sections. Section 7.1 describes the context of construction

during the post-conflict period from 2007, describing relevant aspects of Timor’s historical trajectory

and using statistical indicators to highlight aspects of the post-conflict environment surrounding

construction. Section 7.2 addresses the data collected for the study, describing the group of

practitioners interviewed in relation the broader field of construction actors. Section 7.3 presents

the analysis of interview data. Section 7.4 discusses relationships between conditions, practices and

outcomes characterising construction in Timor. Tables and figures are compiled at the end of the

chapter.



The conflict in Timor-Leste in 2006 was preceded by a history of several different forms of

foreign rule – by Portugal, Indonesia, and the UN - that provided an unstable foundation for the

brief period of national independence.

A long history at the periphery of Portuguese colonial attention included institutional and

economic stagnation. Colonial authority was exercised through an administrative centre in the

capital of Dili and local authority was largely delegated to traditional communal leaders (Joseph &

Hamaguchi 2014). The supply of sandalwood was exhausted by the mid-eighteenth century and

later coffee production was only moderately profitable, with subsistence agriculture dominating

production and employment (Pedersen & Arneberg 1999). Despite limited engagement in the

territory, Portugal retained colonial possession, re-establishing authority after a period of Japanese

Timor-Leste

112

and Australian control during World War 2, thus countering the general trend of decolonisation

following the war. Political changes in Portugal eventually led to steps towards decolonisation and

discussions over a handover in 1974. National political parties that formed anticipation of self-

determination were unable to reach agreement over the form and control of government. Disputes

culminated in a declaration of independence by the largest party, Fretilin, and simultaneous

declaration for absorption within Indonesia by its main rival, the Timorese Democratic Union

(Kingsbury 2009).

Indonesian troops entered from West Timor in December 1975, annexing East Timor as the

seventeenth province of Indonesia. Armed resistance to Indonesian annexation, which was

organised around Fretilin, was not a significant threat to Indonesian rule. Indonesian national

institutions expanded into the newly acquired territory, including around 33,000 public servants

and a rapidly expanded education system (Pedersen & Arneberg 1999). Per capita public investment

in Timor-Leste exceeded that in other Indonesian provinces, marked in particular by increased

expenditure on infrastructure. Despite increased public investment, limited economic development

was characterised by negligible non-construction industrial production, and continued low

agricultural production requiring the importation of staple foods (Pedersen & Arneberg 1999;

Valdivieso et al. 2000). Following a financial crisis in Asia in 1998 that led to the collapse of the

Indonesian economy, discussions between Indonesia and Portugal reached an agreement for a

referendum in which the population of Timor-Leste would choose between either special

autonomous status within Indonesia or independence. Voting yielded 78.5 per cent support for

independence, prompting a wave of violence by the Indonesian military and by civilian militias that

supported Indonesian rule. The violence included around 1,400 deaths, destruction of around 70

per cent of government buildings, and the displacement of around two-thirds of the population

(Kingsbury 2009; Valdivieso et al. 2000).

Following the violence, the UN assumed interim authority with support from an Australian-

led military contingent. The mandate of the United Nations Transitional Authority in Timor-Leste

(UNTAET) included providing security, delivering relief and rehabilitation assistance, restoring

public services and making preparations for the transition to self-government. Steps towards self-

rule included the establishment of the National Consultative Council, a national military comprising

former Fretilin fighters and a national police force that included police from the former Indonesian

regime (Kingsbury 2009). Elections led to the formation of the Constituent Assembly that oversaw

the drafting of a constitution, which preceded presidential elections and a proclamation of

independence in May 2002. Increasingly-centralised authority within the new Fretilin government

compounded perceptions of patronage and corruption. Amid concerns over government probity,

high inflation and increasing unemployment contrasted with high expectations of post-

independence prosperity, raising questions about the performance and legitimacy of the

government. Riots in 2002 in which hotels and businesses were looted focussed animosity on

Timor-Leste

113

foreigners and highlighted disparities and unfulfilled popular expectations regarding post-

independence prosperity.

Increasing tension culminated in the collapse of the security institutions and armed conflict

in 2006. Following protests by a group of soldiers, the military and police forces split along regional

and ethnic lines. Ethnically-aligned militias were quickly armed and the ensuing violence led to the

displacement of around 150,000 people throughout the country (Kingsbury 2009). Despite the

restoration of order by an Australian military force, widespread fears of a resumption of violence

kept much of the population in displacement camps. The collapse of the police and military forces

and the inability of the government to restore order reinforced the lack of public confidence in the

government, exacerbating the political instability that had instigated the conflict. A new UN

peacekeeping mission was quickly established to help the government to maintain order and rebuild

the security institutions.

Popular discontent forced the resignation of the Fretilin government in 2007, with national

elections in the same year yielding a new coalition government. Responding to persistent instability

and economic development needs, the new government initiated a range of programs that

encompassed social, political and economic objectives. An assessment of the programs by the

World Bank described increased government spending that included subsidies for essential goods,

pensions for the elderly and disabled, cash transfers for school-going children in vulnerable

households, support for veterans and survivor families, and ad-hoc grants for those affected by

displacement and natural disasters (World Bank 2014c). This expenditure was funded by revenue

from off-shore gas production, which began increasing with rising oil prices in 2005. The new

government relaxed rules governing expenditure from petroleum revenue and devolved some public

investment decisions to local tiers of government to enable a rapid increase in the rate of public

spending.

Government expenditure and petroleum production underpinned rapid GDP growth from

2007. Following a period of economic stagnation up to 2006, annual GDP grew consistently from

USD 463 million in 2006 to USD 900 million in 2012, entailing average annual growth of around

11 per cent.141 Despite this growth, the exceptionally poor level of economic development in Timor-

Leste upon independence was such that GDP per capita remained around a quarter the average for

developing economies.142 Construction contributed a significant component of increased GDP. VAC

grew from USD 17 million in 2006 to a peak of USD 195 million in 2011, entailing average VAC

growth of around 62 per cent per annum.143 As well as growth in construction demand, this growth

rate highlights the initially-low level of VAC, which averaged around USD 28 million per annum

throughout the term of the first government.


142 GDP per capita data from UNCTAD (2018a)


Timor-Leste

114

A large component of construction demand driving VAC growth came from the programs

initiated by the new national government. Increased infrastructure funding and decentralisation of

authority that gave local tiers of government and local communities discretion over infrastructure

investments formed a central component of the government’s strategy that linked peace-building

objectives with the development of a domestic private sector. In 2009, in response to persistent

discontent following the crisis in 2006, the government announced the Referendum Package (Pakote

Referendum), comprising USD 70 million allocated for the construction of small infrastructure in

rural districts throughout the country. In 2012, the Referendum Package was renamed the

Decentralised Development Program (Programa de Dezenvolvimentu Desentralizadu - PDD), with

a budget of USD 31.86 million that increased in subsequent years to USD 44.3 million (2011) and

USD 51.75 million (2012). Around 3,000 infrastructure projects were undertaken under the

programs (World Bank 2014c).


Statistics for Timor-Leste for each of the nine proxy indicators of construction conditions

introduced in Chapter 5 are summarised in Figures 7.1, 7.2 and 7.3. As with the earlier statistical

review, conditions are consolidated in three groups of conditions: general conditions, economic

conditions, and regulatory conditions.

General conditions in Timor in 2012 appear generally to have been moderate in comparison

with the broader group of conflict-affected situations. Indicators describing institutional

development, economic development, and political instability and violence in Timor-Leste are

presented in Figure 7.1. Institutional development in Timor, described by an IDA Resource

Allocation Index score of 2.9 (World Bank 2018a), was within the interquartile range of 2.7 – 3.5

for the group of conflict-affected countries. Economic development is measured using per capita

GNI (World Bank 2018b), with Timor’s per capita GNI of USD 2,096 within the interquartile range

of USD 553 – 3,474. However, a significant proportion of this income came from petroleum

revenue, hence broader industrial development in Timor is expected to be lower than suggested by

GNI data. Political instability and violence in Timor appear to have been less problematic than in

conflict-affected countries generally, with Timor’s Political Stability and the Absence of Violence

score of 1.9 above the interquartile range of 0.7 – 1.5 (World Bank 2018c). Thus, levels of

institutional and economic development in Timor appear to have been moderate in relation to

conflict-affected situations generally, while political stability appears to have been better in Timor

compared to the majority of conflict-affected countries.

Economic conditions in Timor in 2012 were mixed in comparison with conditions in conflict-

affected countries generally. Indicators describing the availability of expertise, manufactured

materials and equipment, and credit for contractors in Timor are presented in Figure 7.2 alongside

the interquartile ranges for the groups of conflict-affected and developing countries. Availability of

Timor-Leste

115

expertise for construction is described by the percentage of the workforce with an intermediate

education (ILO 2018a), with Timor’s value of 31.9 near the upper limit of the interquartile range of

7.3 – 33.9. Availability of manufactured materials and equipment is measured by the Value Added

by Manufacturing (percentage of GDP) (World Bank 2018d), with Timor’s value of 2.1 below the

interquartile range for conflict-affected countries of 5.2 to 16.6. Availability of credit for contractors

is described using the indicator Domestic Credit from Banks to the Private Sector (percentage of

GDP) (World Bank 2018e), with the value for Timor of 16.0 per cent within the interquartile range

of 10.3 to 22.3 for the group for conflict-affected countries. Thus, while indicators suggest

availability of expertise and credit for construction in Timor in 2012 was moderate in relation to

conflict-affected countries generally, relatively low levels of domestic manufacturing suggest

particularly problematic restrictions in the availability of manufactured construction materials and

equipment.

Institutional conditions surrounding construction in Timor appear to have been relatively

moderate or better than conditions in conflict-affected countries generally. Indicators describing

regulatory quality, reliability of the legal framework, and prevalence of corruption in Timor are

presented in Figure 7.3. For the Regulatory Quality indicator (World Bank 2018f), the Timor’s score

of 1.3 is within the conflict-affected group interquartile range of 1.2 - 2.1. Reliability of the legal

framework is measured using the indicator Rule of Law (World Bank 2018g), with a score for Timor

1.5 within the conflict-affected country interquartile range of 1.1 – 1.9. The prevalence of corruption

is gauged using the indicator Control of Corruption (World Bank 2018h), with Timor’s score of 1.9

at the upper boundary of the interquartile range of 1.3 – 1.9 for the group of conflict-affected

countries. With regard to institutional conditions affecting construction, the situation in Timor-Leste

in 2012 thus appears to have been moderate in relation conflict-affected situations generally.

7.2 Primary data

The group of 16 practitioners interviewed in relation to the case of Timor are listed in Table

7.1. Fourteen interviews were conducted, with two of these interviews including multiple

interviewees. For each interviewee, several characteristics are recorded in Table 7.1: role, type of

organisation, position within the organisation, and origin in relation to Timor. Regarding roles in

construction, the group comprises: one financier, one client, three consultants, nine contractors,

one merchant, and one regulator. Regarding organisations represented, the group comprises: two

government agencies, four development organisations, and 10 firms (consulting, contracting, and

materials supply). Regarding origin, the group comprises five Timorese and 11 foreign practitioners.


construction in Timor is illustrated in Figure 7.4. Of the 56 permutations, 30 are excluded from the

field and represented with lighter shading in Figure 7.4 due to their being irrelevant to the particular

situation in Timor. For example, military units did not play a significant role in civilian reconstruction

Timor-Leste

116

in Timor compared to Afghanistan, while government departments did not play significant roles as

consultants, contractors, subcontractors or merchants. Each interviewee is represented with a closed

circle. Figure 7.4 highlights that the majority of interviewees represented foreign commercial firms

or development organisations that acted either as consultants or contractors in regard to

construction. It also highlights that the group of interviewees contains no domestic consultants or

clients, no foreign financiers (that is, no donors of financial aid), nor any subcontractors. That

participant observations were undertaken from the perspective of a consultant employed with a

foreign development organisation is also represented in Figure 7.4 with a triangle.

The sources of primary data for the study thus represent only part of the field of construction

actors in Timor. Rapid development of the construction sector in Timor was described briefly in

Subsection 7.1.1, reflected in VAC growth of 62 per cent per annum over the period from 2006 to

2011. Domestic government and foreign aid financiers played a significant role in instigating this

growth in construction though are not represented among primary data sources. Also, the expansion

of construction activity is expected to have included entry into the Timorese construction industry

of subcontractors that are not represented in primary data sources.


This section presents the analysis of data in the form of network diagrams and accompanying

narratives for each of the four fields of practice. The coding of interview transcripts relating to Timor-

Leste identified 41 second-cycle codes: seven in relation to design and the certification of actors

and works, 12 in relation to tendering and the award of contracts, 15 in relation to mobilisation and

management of resources, and 11 in relation to contract conditions and administration.144 The

review of statistical indicators defined nine prevailing conditions in Timor-Leste in relation to

conditions in developing countries generally, which are listed in Table 7.2. For these relative

conditions, moderate refers to values that are within the interquartile range for the group of conflict-

affected situations, while high and low refers to values above and below the interquartile range.

These codes and conditions are featured as variables/nodes in the network diagrams, with

some variables corroborated by direct observations (Figure 6.5 provides a legend that applies to all

network diagrams). In each network diagram several variables are highlighted: the nodes for the

particular practices that are the main subject of the diagram and the node for the condition of

political violence and instability. The paths of causation between highlighted nodes – between

immediate characteristics of conflict and specific construction practices – are the focus of the

analyses.

144 Several codes are identified in relation to more than one practice field.

Timor-Leste

117


The seven second-cycle transcript codes identified in relation to design and the certification

of actors and works in Timor-Leste are listed in Table 7.3. A network diagram positioning the

practice of adopting various foreign codes and standards in relation to prevailing conditions and

project outcomes is presented in Figure 7.5.


A lack of official codes and standards to regulate construction in Timor-Leste was

symptomatic of a wider lack of regulations and legislation in the new country. In response,

construction professionals adopted a range of foreign codes and standards. A legal consultant

working with on the development of new legislation described the situation; “…we don’t have that

kind of regulation covering quality of materials, usage of materials – nothing like that. Theoretically,

Indonesian legislation in place before May 1999 is applicable, but no-one knows or cares about that

regulation”.145 In the absence of domestic regulations, foreign designers and contractors used codes

and standards from their various countries of origin. As the former manager of a Portuguese

construction firm stated, “It’s based on those in the company that does the design… If he’s an

Indonesian consultant he’ll do based on Indonesian standards. If he’s European, he’ll do [sic] based

on European standards…”.146

The practice of adopting various foreign codes and standards in Timor is connected back to

prevailing moderate political instability in Figure 7.5 via the conditions of poor economic and

institutional development. Limited capacity of nascent national institutions was a cause and an effect

of the crisis in 2006. The wide range of foreign codes adopted reflects the diverse origins of

consultants that were employed due to the inadequate local availability of expertise that was

described during interviews.148 Shortages of expertise are expected to have been exacerbated by

increased demand arising from increased government spending on infrastructure, which was a direct

response to political instability. Otherwise, the prevailing lack of trained professionals in Timor also

reflected the low level of economic development. Adoption of various foreign codes appears also

to have been influenced by financial aid, with interviewees reporting that donor governments,

particularly Australia and Portugal, required compliance with their own national regulations.

However, a degree of financial independence arising from national petroleum income limited the

145 TLS-12, pg.1

146 TLS-06, pg.6

148 This shortage of expertise described in interviews does not correspond with the review of the indicator Labour Force with

an Intermediate Education (percentage of the total labour force) from ILOStat (ILO 2018a), which suggested moderate

availability of expertise in relation to developing countries generally. The availability of expertise suggested by the indicator

may be exaggerated by the small population and small labour force.

Timor-Leste

118

extent to which the government relied on financial aid, thus limiting the impact of donor-stipulated

construction regulations (e.g. compared to the degree of aid dependence in Afghanistan).

While a smaller variety of foreign regulations appear to have been adopted in Timor-Leste

compared to Afghanistan due to the narrower range of donor governments involved, the outcomes

in both cases are similar in that they involve both positive and negative results. In the absence of

domestic regulations, foreign codes and standards were required to regulate the quality of built

work. However, importation of codes from quite different economic and industrial contexts is

expected to have resulted in locally-inappropriate designs. Inappropriate designs resulting from the

adoption of foreign regulations are also expected to have contributed to poor construction quality

that was described during interviews.149


The twelve second-cycle transcript codes identified in relation to tendering and the award of

construction contracts in Timor-Leste are listed in Table 7.4. Of the six practices identified in

transcript coding, two were highlighted as being particularly significant: 1) reassignment of

contracts, and 2) strategic (non-competitive) award of contracts. A network diagram positioning

these practices in relation to prevailing conditions and project outcomes is presented in Figure 7.6.

7.3.2.1 Strategic (non-competitive) award of contracts

The most distinctive aspects of construction in Timor-Leste following the 2006 crisis relate to

the government’s programs through which construction contracts were awarded in a manner that

responded to immediate political and economic objectives rather than longer-term infrastructure

needs. From 2009, under the Referendum Package and the PDD, the government allocated funding

for small-scale infrastructure and awarded contracts with two primary objectives - promoting

political stability by distributing state resources, and promoting economic development in rural

districts through the establishment of construction firms. “Our focus was on stability… We want to

spend – we want to build infrastructure – but that’s our secondary priority. Our first priority is

stability… There was a lot of tension that overseas companies were winning all the construction

work”, explained a foreign official involved in the design of the programs.150

In an initial step, the establishment of a class of domestic construction firms was achieved

through cooperation between the government and a newly formed Construction and Public Works

Entrepreneurs Association (Associacao Empresarios Construcao Civil e Obras Publicas (AECCOP)).

Through 16 district branches, AECCOP assisted citizens in rural communities to establish

149 TLS-05, TLS-10

150 TLS-08, pg.1

Timor-Leste

119

construction firms through registration with AECCOP and the Ministry of Finance. Firm registration

did not require any construction or business expertise.151 Official data reporting numbers of firms

registered is not available, though estimates from several interviews suggest that from no domestic

construction firms operating in 2007, the number of registered firms peaked at around 6,000 in 2010

then decreased to between 3,000 and 4,000 firms by 2014.152 Local officials in conjunction with

communities and newly registered construction firms identified local infrastructure needs. In

principle, works were then designed and priced by government and AECCOP officials, though

interviews suggest that in practice newly registered firms played a central role in designing works

and fixing contract prices.153 Fixed-price contracts were then awarded to firms nominated by

AECCOP – typically the firm involved in the identification, design and pricing of the works.154 From

an initial maximum contract value of USD 10,000, the maximum value of contracts increased to

USD 200,000 then to USD 500,000 with the understanding that contractors that had performed well

on lower-value contracts would be rewarded with subsequent contracts of higher value.155 “Some

people did a bad job, some people did a good job… The idea was those that did a good job, they’d

be given another job and let them build up”, said the official involved in the design of the

programs.156

The award of construction contracts to veterans of the resistance movement appears to have

been another overt use of public works for immediate political ends. Under the national

electrification program, the primary network was built by Chinese firms, while it was suggested in

interviews that contacts for secondary networks linking villages to this primary trunk line were

reserved for firms owned by veterans. “These electrical connection contracts - from the main-line to

the community… a typical one will be USD 1 million. Only veterans are allowed to apply for them”,

stated a foreign consultant employed within the Ministry of Public Works.157 Contracts ranging in

value from USD 1 million to USD 2 million were awarded directly (non-competitively) to veterans

as compensation for services rendered to the nation. Road construction contracts were also awarded

to veterans in a similar fashion.158 “They just go to the government and get the contract. Nobody

prequalified them…”, said a Filipino owner of a construction firm.159 Notably, veterans were also a

151 TLS-15

152 TLS-02, TLS-03, TLS-13

153 TLS-04

154 TLS-04, TLS-08, TLS-15

155 TLS-08

156 TLS-08, pg.2

157 TLS-07, pg.6

158 TLS-01, TLS-04

159 TLS-01, pg.4

Timor-Leste

120

powerful political lobby whose support was important for increased stability during the post-conflict

period.

The government’s strategic, direct award of contracts to newly established rural firms and

firms established by veterans appears to have been a direct response to the prevailing political

instability surrounding the crisis in 2006. Political motives underpinning the strategy were suggested

in several interviews and confirmed in discussions with an official involved in the design of the

Referendum Package and the PDD.160 Alongside political motives, these programs also sought to

initiate a domestic construction industry which, until 2007, appears to have comprised a small

number of foreign firms from Portugal, Australia and the Philippines. As the owner of one of these

firms recalled, “There were only five or six of us bumping into each other, getting shortlisted for

certain projects”.161 Thus, strategic award of contracts by government responded to the very low

level of industrial development that was both a cause and an effect of political instability.

Several intended and unintended outcomes of the strategic award of government contracts

were highlighted during interviews. The extent to which strategic award of construction contracts

contributed to political stability cannot be determined. Nevertheless, the government was confident

that increased stability was one outcome of the Referendum Package and the PDD; “Another way

that the Prime Minister put it was that conflict on average costs USD 3 billion per year. We spent

USD 30 million to avoid conflict – that’s money well spent. People might say you only got half the

roads that you could have, but we got stability – and USD 30 million’s a really good price for that".162 163 Another intended outcome of the programs was the rapid increase in the number of domestic

construction firms, which involved a degree of industrial development and increased construction

supply capacity. However, the level of industrial development prompted by the programs was

limited by the availability of construction resources, which was constrained despite increased

construction demand (see Section 7.3.3 below).

Poor quality of built work was another outcome of the strategic award of contracts that was

not intended though appears to have been expected. An assessment by the World Bank of 19

Referendum Package and PDD projects found five pieces of infrastructure to be unusable and three

to be only partly usable (World Bank 2014c). The Government appears to have readily accepted the

findings, highlighting that the importance of social and political stability in the aftermath of the 2006

conflict and the perceived contributions to stability provided by the strategic award of construction

contracts took precedence over the quality of the built work.164

160 TLS-08

161 TLS-01, pg.3

162 TLS -08, pg.8

163 Budget and expenditure data published by the government and included in the World Bank review of the programs suggest

actual spending was USD 197.91 million.

164 TLS-08

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121

Another unintended outcome of the strategic award of government contracts was the

localisation of construction markets. The large majority of firms established under the Referendum

Package and PDD had no experience of competitive contract award, leading to expectations of

continued non-competitive award and cooperative distribution of contracts. In the context of a

relatively large number of firms and demand that decreased with the end of the PDD, the award of

contracts was restricted to firms from the district or sub-district in which the works were undertaken,

ensuring that no firm can work outside a small geographic area. This restriction upon contract award

and firm mobility was not official policy, but a practical outcome enforced by local firms,

government officials and AECCOP branches. An ILO official involved in training domestic

construction firms explained, “It has become a kind of regulation, that only contractors from the

district – that have a registered office in the district – can do work in that district… It evolved over

a couple of years… to protect your friends. But it’s become a rule and this is backed by the chambers

of commerce and the district administrations, so there’s nothing that you can do about it – that’s the

way it is”.165

7.3.2.2 Reassignment of awarded contracts

A further outcome of the strategic, non-competitive award of construction contracts was an

apparently widespread practice of contract reassignment, which is positioned in Figure 7.6. For

contracts awarded to veterans, reassignment to other firms appears to have been expected by the

client (Government) given the lack of expertise of newly established veteran-owned firms. For larger

contracts under the PDD, reassignment appears to have been acknowledged and tolerated. The

reassignment of contracts, from domestic contractors with no construction capabilities to foreign

firms – typically Filipino or Indonesian – was described in interviews as joint venturing. “It is only

awarded to local contractors… I think the government knows that these local contractors don’t have

the capacity to do the work, so they encourage the local contractors to bring foreign contractors to

join them – a joint venture”, said the owner of a Filipino firm that had undertaken a number of such

contracts with Timorese veterans.166

Contract reassignment in Timor-Leste appears not to have spanned multiple tiers as described

in relation to Afghanistan. Interviews with two Filipino firms undertaking reassigned contracts

suggests that the initial contract awardee received 20 per cent of the contract price – either in a

lump sum from the initial advance (mobilisation) payment, or as a proportion taken from each

interim payment. “It’s the local contractors – we call them veterans, because, I think, the Prime

Minister gave them opportunities to do some jobs – construction… I get paid – every contractor gets

165 TLS-02, pg.11

166 TLS-01, pg.4

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122

paid – 80 per cent”, said the owner of another Filipino firm undertaking contracts reassigned from

veterans.167

The practice of contract reassignment is positioned in Figure 7.6 as a response to both political

and economic imperatives. As a direct outcome of the strategic award of contracts, contract

reassignment may be related back to political instability via the political motives underpinning the

Referendum Package and PDD. Contract reassignment also responded to the inadequate availability

of expertise that limited the capacity of newly-established firms to employ adequately-qualified staff.

This inadequate availability of skilled and professional labour may be seen as one symptom of the

general condition of economic development.168

Two immediate project outcomes arising from the practice of contract reassignment have

been discerned from interviews and are included as variables in Figure 7.6. Suggestions during

interviews from contractors undertaking reassigned contracts that projects were completed

profitably and to specification after payment of 20 per cent of the contract price to the initial contract

recipient suggests that contract prices were inflated to accommodate reassignment. Reassignment

of contracts to more capable firms is also expected to have improved the quality of built work

compared, for example, to unusable infrastructure built by incapable firms under the Referendum

Package and PDD that was identified in the World Bank’s review of the programs (World Bank

2014c)


The fifteen second-cycle transcript codes identified in relation to mobilisation and

management of construction resources in Timor-Leste are listed in Table 7.5. Of the seven practices

identified in transcript coding, four were highlighted during analysis as being particularly significant:

1) importation of skilled and unskilled labour, 2) development of independent international supply

chains by contractors, 3) investment and vertical integration of resources by foreign contractors, and

4) sharing of resources by domestic contractors. Network diagrams positioning these practices in

relation to prevailing conditions and project outcomes are presented in Figure 7.7 (importation of

labour, development of international supply chains, and vertical integration of resources), and Figure

7.8 (cooperative sharing of resources).

167 TLS-04, pg.2

168 The moderate availability of expertise in Timor-Leste identified by the indicator Labour Force with an Intermediate

Education (percentage of the total labour force) is relative to the broader group of conflict-affected countries.

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123

7.3.3.1 Independent international supply chains developed by contractors

In interviews, foreign contractors described the practice of purchasing all materials and

components for specific projects in bulk in foreign markets then importing the consignments. The

practice is presented in Figure 7.7. In the aftermath of the Popular Consultation, foreign construction

firms purchased materials and components in Australia, Indonesia or Singapore and transported

them in bulk via barge to Timor-Leste.169 While cement, steel and manufactured components from

Indonesia and China became available in local markets in the capital, Dili, low quality, high cost,

and unpredictable supply discouraged the reliance of foreign firms upon these domestic markets.

“Lack of materials is a problem – you have to bring everything. You have sand, you have gravel –

everything else you must import. It’s difficult… If you buy in the local market, it’s very high prices”,

said the former manager of a Portuguese firm.170 In other interviews, the low quality of materials and

components available in local markets was raised, including the prevalence of counterfeit materials

from China bearing brand names and markings of higher quality products.171

The practice of foreign contractors importing all materials and components from foreign

markets is presented in Figure 7.7 as a response to the prevailing unreliability of local markets,

including unreliable quality and timing of supply and volatility of prices. The situation described

during interviews of the domestic market for cement perhaps illustrates a general unreliability of

domestic markets for materials and components. Initially imported from a single source in Indonesia,

the supply of cement appears to have expanded around 2008 with the introduction of Chinese

imports.172 Despite this expansion in sourcing, interviews suggest that, except for independent

supply chains established by foreign firms, cement suppliers remained in the hands of two

wholesalers. While unreliable sea-barge transportation contributed to volatility in supply, it was

suggested in several interviews that stockpiling and artificial restrictions upon supply enabled these

wholesalers to manipulate prices. “You need cement… - you want to purchase, but nobody is

selling. They say the shipment is not yet arrived, so you have to wait until the shipment arrives.

Some suppliers, they buy and they keep so that when there is no more in the market, they offer it at

a high price and you have no choice - you have to buy”, said the owner of a construction firm.173

The manager of an NGO that provides construction skills training reiterated, “The cement

companies do cartel – it happened a few times with shipments. Cement import companies are only

one or two – like monopoly. When they see a late shipment, then they play with the price”.174

169 TLS-06, TLS-09

170 TLS-06, pg.3

171 TLS-10

172 TLS-05

173 TLS-04, pg.7

174 TLS-11a, pg.7

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Practitioners suggested that cement prices regularly fluctuate by around 20 per cent in response to

limited supply.

Two outcomes arising from the practice of contractors importing all materials and equipment

are increased project costs and increased commercial risk. While enabling a degree of quality

control and cost efficiency, independent supply chains also required significant investment, thereby

increasing financial risks for each contract. The Portuguese manager explained, “When you buy

materials overseas, you need to buy in advance, which raises financial issues because the banks

here don’t offer credit… Sometimes you have half the construction already paid before you receive

[a contract payment]”.175 These financial risks are compounded by the unreliability of barge services

and customs processing, as the manager of another firm explained, “They can put the barge back

weeks, making it difficult to plan projects and get work done to time schedules”.176

7.3.3.2 Importation of professional and skilled labour

Foreign firms operating prior to the conflict in 2006 imported professional staff from outside

Timor, which is presented in Figure 7.7. Among the initial group of firms from Australia, Portugal

and the Philippines, professional labour was imported from their home countries.177 Similarly,

Chinese and Indonesian firms entering the market later brought all professional staff with them and

recruited further staff from their home countries as their operations expanded. “You need to bring

skilled staff, management staff, also supervisory staff – it’s not easy”, said the former manager of a

Portuguese construction firm.178 Trade expertise was also generally absent from local markets prior

to the conflict in 2006, requiring foreign firms to import tradesmen. Until around 2007, in the

absence of independent trade subcontractors, contractors were forced to directly employ tradesmen

for neighbouring countries – particularly the Philippines. “You have to bring your own human

resources, so I employ Indonesians and Filipinos for skilled positions”, explained a Filipino

contractor.179

The practice of foreign firms importing professional and trade labour is presented in Figure

7.7 as a response to the prevailing lack of expertise that was described in interviews. In addition,

the influx of trade labour into Timor responded to labour regulations that mandated a minimum

wage that was higher than wages in nearby countries. Initiated under the UN interim administration,

the minimum wage was continued by subsequent governments, rising to USD 5 per day, or USD

175 TLS-06, pg.4

176 TLS-09, pg.4

177 TLS-01, TLS-06, TLS-09

178 TLS-06, pg.3

179 TLS-01, pg.11

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125

120 per month by 2014.180 Significantly higher than comparable labour rates in Indonesia, China

and the Philippines, the minimum wage has played a major role in determining relatively high rates

for both basic and skilled labour, which attracted tradesmen and other experienced construction

workers to Timor-Leste. Visa restrictions and labour regulations ensured a level of employment of

Timorese.181 However, the minimum wage attracted more experienced informal foreign workers and

appears to have contributed to a concentration of Timorese in unskilled roles.

One outcome of the importation of professional and skilled labour by foreign firms was

increased supply capacity of the domestic industry, particularly in the establishment of local labour

and trade subcontracting markets. Some of the engineers and construction managers that entered

Timor-Leste under contract with foreign firms appear to have left this employment and became

available for recruitment within local markets.182 Trade subcontracting firms were first established

by Filipino tradesmen that left direct employment with foreign firms. Chinese subcontracting firms

appear to have followed a similar path and were joined by Indonesian firms that either entered

Timor-Leste employed by contractors or entered independently. Relatively-high pay rates attracted

illegal skilled workers from Indonesia, the Philippines and China that, together with a smaller

number of domestic tradesmen, formed a domestic subcontracting industry with standardised pay

rates. As a Filipino engineer explained, “If you hire a local carpenter, it might cost about USD 10 to

USD 12 for the Timorese. But for a Filipino, a good carpenter will cost you USD 30 a day. But the

Chinese… who is doing a good job is paid USD 35 – really good”.183

7.3.3.3 Investment and vertical integration of resources by contractors

Importation of materials and labour described above in Subsubsections 7.3.3.2 and 7.3.3.3

are aspects of broader investment and vertical integration of resources by some contractors. A third

aspect of this vertical integration of resources by foreign contractors was investment in equipment

and plant, which is presented in Figure 7.7. In the absence of any significant equipment leasing or

equipment subcontracting, larger foreign firms from Australia, Portugal, China and Indonesia

invested in plant and equipment as part of vertical integration strategies. The manager of an

Australian firm described the degree to which firms had to be self-sufficient and vertically integrated;

“We do concrete, we do asphalt. We have our own crushing plant to produce our own materials.

180 TLS-05, pg.3

181 In interviews, labour regulations were referred to that defined the minimum wage and that require employment of five

Timorese for each foreign worker. This stipulation is not included in the National Labour Code (Democratic Republic of

Timor-Leste 2012) and is perhaps defined in subsidiary regulations that are not translated into English and not readily

available.

182 TLS-05

183 TLS-05

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126

We also sell to the public. We have our own warehouse that supplies materials, pipe etc. We have

our own mechanical workshop to look after our own machinery”.184

As with the practices of developing independent international supply chains for materials and

components and importing professional and trade labour, the practice of foreign firms making large

investments in equipment and plant responded to the lack of these resources in local markets. For

example, an absence of aggregate or asphalt producers in Timor required that larger foreign firms

invest in equipment to produce these materials themselves.185 In addition, investment in large

amounts of equipment and plant by foreign firms is assumed to also have responded to longer-term

investment horizons than was evident among foreign firms operating in Afghanistan. Conditions

such as greater stability in Timor, limited competition, and the potential for high government

revenue from petroleum resources appear to have contributed to the willingness of foreign firms to

undertake large investments in plant and equipment.

The immediate outcomes of this investment in plant and equipment by foreign firms include

increased supply capacity, increased costs and increased risk. Availability of materials such as

aggregate, batched concrete and asphalt produced by these firms, particularly prior to 2010, appears

to have increased general industrial supply capacity as smaller firms relied on these larger firms for

certain materials. Later, increased demand arising from increased government spending appears to

have attracted materials producers into the market and reduced reliance on large foreign firms.186

Large early investments by foreign firms also appears to have increased operating costs and entailed

increased commercial risks.187

7.3.3.4 Cooperative sharing of resources by contractors

In contrast with the large investments made by some foreign firms, most firms, including the

larger domestic firms, appear to have not made significant investments in professional labour and

equipment. Contract reassignment was one response to such inadequate investment (see

Subsubsection 7.3.2.2). Another response described during interviews was the cooperative sharing

of resources among domestic contractors, which is positioned in relation to prevailing conditions

and project outcomes in Figure 7.8. The owner of a relatively large domestic firm in Dili described

the formation the Consocio Nacional Timorese (CNT) – a consortium of seven Dili-based firms that

cooperatively distributed contracts and shared staff and equipment.188 This cooperative model is

expected to also have been adopted in other rural districts where contracts under the Referendum

184 TLS-09, pg.1

185 TLS-06, TLS-09

186 TLS-05

187 TLS-09

188 TLS-13

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127

Package and PDD were distributed cooperatively and where only limited equipment and no

subcontractors were available.

The practice of cooperatively sharing labour and equipment was thus a response to the limited

availability of these resources. It also responded to the cooperative environment fostered by highly

localised construction markets in which contracts were restricted to firms from the district or

subdistrict in which works were undertaken. This localisation of markets may be traced back to

prevailing political insecurity via the practice of strategic contract award (see Subsubsection 7.3.2.1)

that was part of the government’s response to political instability following the 2006 crisis.

Increased industrial capacity is perhaps one immediate outcome of cooperative sharing of

professional staff and equipment among domestic firms. While not increasing the amount of

resources in the industry, cooperative sharing reduces the amount of time that limited resources are

left idle. It could also limit commercial risks and over-investment in the context of particularly

volatile demand – the owner of the CNT-member firm estimated that 15-20 per cent of firms in

Timor had purchased equipment.189 However, a long-term outcome of cooperation among firms

could be stifled efficiency, as cooperation prevents competition that might otherwise be expected

to provide incentive for increased contractor efficiency/capability and to force less-capable firms

out of the market.


The eleven second-cycle transcript codes identified in relation to contract conditions and

contract administrations in Timor-Leste are listed in Table 7.6. Of the five practices identified in

transcript coding, two were highlighted during analysis as being particularly significant: 1) adoption

of various foreign standard forms of contract, and 2) neglect of insurance and guarantees. A network

diagram positioning these practices in relation to prevailing conditions and project outcomes is

presented in Figure 7.9.

7.3.4.1 Adoption of various forms of contract

Standard forms of contract from FIDIC and other sources appear to have been widely used

during the post-conflict period. During the early years of the post-conflict it appears that various

standard contracts were used by government, with the use of particular contracts based upon the

experience and preferences of foreign advisors employed to manage projects. A government advisor

with previous experience managing a foreign construction firm suggested that, from around 2010,

a single customised variation of the FIDIC Red Book was mandated for all major public works,

though the range of contracts used by government remains unclear.190

189 TLS-13

190 TLS-06

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128

Government and non-government clients also adopted simplified contracts for smaller works.

An AusAID-funded water and sanitation infrastructure programme that initially engaged NGOs to

undertake infrastructure construction shifted to the engagement of small domestic firms from around

2009, using simplified two-page contracts that defined the scope of work and terms of payment.191

Other non-government and foreign government development organisations employed their own

simplified forms of contract intended to suit inexperienced domestic firms.192 The Referendum

Package and PDD programs also used less formal forms of contract and contract administration

arrangements. It appears that, in continuation of the informal way in which contracts were awarded,

the forms of contract used in these programs were brief - identifying the contracting parties, payment

terms and the scope of work through basic bills of quantities and drawings.193 In an example of

highly-informal contracting, the owner of a domestic firm explained that contracts were regularly

undertaken upon the verbal direction of senior government officials, with prices submitted by the

firm after completion of the works.194

The practices of adopting formal standard contracts and less-formal contract forms may only

be traced back to the condition of political instability in certain circumstances. In general, adoption

of formal contracts such as those published by FIDIC responded to policies of donor organisations

that mandated use of these contracts. It also responded to prevailing moderate-low regulatory quality

described during interviews and in the indicator Regulatory Quality from the World Governance

Indicators, such that no alternative domestic contracts were available. This moderate-low regulatory

quality is a symptom of moderate-low institutional development.

While the use of formal standard contracts may not be a response to political instability, the

use of less-formal contracts in the Referendum Package and PDD may be traced back to prevailing

political instability and the conflict in 2006 in Figure 7.9. The use of simplified contracts reflects the

limited capabilities of firms involved. It also reflects the degree of informality involved in these

programs through which contracts were awarded for strategic considerations of political stability

and domestic industry development. Thus, the use of simplified contracts in the Referendum

Package and the PDD is associated with prevailing political instability that these programs sought

to address.

One outcome suggested during interviews of the use of simplified contracts in Timor was a

lack of development of administrative capabilities among domestic contractors. These simplified

contracts formed the basis of contract experience of all domestic firms and appear to have provided

inadequate preparation for firms that graduated to larger projects in which more-formal contracts

191 TLS-07, TLS-14

192 TLS-06, TLS-08

193 TLS-04

194 TLS-13

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129

were used. The owner of a domestic firm whose experience included contracts valued at up to USD

5 million conceded that he had limited understanding of formal contracts and suggested that such

contracts were inappropriate for the contracting environment in Timor-Leste.195 It appears that

continued use of simplified contracts enabled at least some firms to grow without developing

administrative capabilities that standard forms of contract require.

7.3.4.2 Neglect of insurance and guarantees

The practice of neglecting insurance and guarantee provisions normally included within

standard construction contracts was one particularly significant aspect of the use of simplified forms

of contract described during interviews and represented in Figure 7.9. The manager of a foreign firm

suggested that insurance to support construction contracting was available in Timor from two

insurance companies that were based in Indonesia and Singapore.196 It appears that for larger

projects employing FIDIC or other standard contracts, insurance was required from these companies

and bank guarantees were required from an Australian bank operating in Timor. In addition, it

appears that foreign contractors were able to provide bank guarantees from foreign banks. For

smaller projects engaging domestic contractors, which comprised a large proportion of construction

activity during the post-conflict period from 2007, simplified forms of contract appear not to have

included provisions for insurance or guarantees. This lack of insurance and guarantees is particularly

significant given that contracts appear have typically included generous advance (mobilisation)

payments. In the absence of any domestic sources of credit for construction firms, government

contracts typically included mobilisation payments of around 20 per cent of the total contract price

paid upon signing of the contract.

Frequent neglect of insurance or guarantees for advance payments or for contractor

performance is thus one aspect of the use of simplified contracts. The manner in which this use of

simplified contracts responded to political instability for a significant proportion of government-

funded construction under the Referendum Package and PDD was addressed in Subsubsection

7.3.4.1 above.

A general outcome of the practice of neglecting insurance and guarantees in simplified

contracts is increased client risk. One aspect of this increased client risk is widespread contractor

defaults that were described during interviews. Several interviewees described a common situation

of firms receiving advance payments then only partially undertaking work. “Government projects,

because so many were left abandoned – the local guys just took the projects – USD 800,000 – 20

per cent… then nothing happens”, said a foreign engineer employed in a domestic firm, explaining

a common situation raised in interviews.197 Increased incidence of contractor default is perhaps

195 TLS-13

196 TLS-06

197 TLS-05, pg.17

Timor-Leste

130

predictable given the neglect of guarantees, relatively high mobilisation payments, and the limited

capabilities of newly-established domestic firms.



Table 7.7, which identifies general conditions, construction conditions, construction practices and

project outcomes that were identified through the review of statistics, transcript coding and network

analysis.

7.4 Discussion

That many of the construction conditions identified in relation to Timor-Leste are statistically

comparable with the majority of conflict-affected countries might suggest that practical responses in

Timor to these conditions also have wider relevance. Some of the construction practices identified

in relation to Timor-Leste were also identified in the case of Afghanistan, namely: adoption of various

foreign regulations, adoption of various forms of contract, reassignment of contracts, and inadequate

investment by contractors. In general, these practices responded to restricted access to expertise and

inadequacies in regulatory effectiveness – conditions that have also been observed in relation to

construction in developing countries in general. However, while some of the construction practices

identified in the case of Timor might be anticipated in other situations, other practices appear to be

more specific to Timor, namely: strategic award of contracts for political stability objectives, reliance

of contractors upon independent international resource supply chains, and cooperative resource

sharing by domestic contractors. These practices responded to specific combinations of conditions,

including the prevailing political, economic and regulatory environment, that are more relevant to

the group of conflict-affected situations than to the broader group of developing countries.

As with the case of Afghanistan, analysis of the interview data identified some conditions and

practices that were directly affected by political instability during the post-conflict period and others

that were affected indirectly via the impact of political instability upon broader institutional and

economic conditions. Conditions or practices that were identified as being directly affected by

political instability were: increased reconstruction demand (arising from the Referendum Package

and PDD), strategic award of contracts in response to peacebuilding and stability objectives, and

moderate investment horizons of construction firms. Other conditions and practices were related to

limitations in the local availability of resources and the effectiveness of regulation, which are

relevant to developing countries generally. Thus, while problematic economic and institutional

conditions in Timor-Leste from 2007 to 2012 were exacerbated by political instability, these

conditions were symptoms of the earlier stage of economic and institutional development. The

prevalence of many of the practices that responded to these conditions was thus expanded in as a

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131

result of the post-conflict situations. However, they are also be expected to be involved with

construction in other developing countries not affected by recent conflict.

In relation to design and the certification of actors and works, the only practice raised during

interviews that was associated with the post-conflict situation in Timor was the adoption of various

foreign construction codes and technical standards. The practice was also identified in the case of

Afghanistan, where, as in the case of Timor, it was associated with the absence of applicable

domestic regulations and the influence of donors of financial aid. Adoption of foreign regulations is

expected to also occur in other developing countries that feature inadequate regulatory frameworks

and that receive financial aid for infrastructure construction. However, the prevalence and

significance of the practice appears to have increased in Timor given the need to establish wholly-

new national institutions and regulatory systems following separation from Indonesia. The primary

problematic aspect of adoption of foreign codes is perhaps the diversity of regulations that were

stipulated by different donors and adopted by different consultants.

Practices identified in relation to tendering and contract award were: 1) strategic award of

contracts for strategic peace-building and industrial development objectives, and 2) reassignment of

awarded contracts. Politically-strategic contract award was associated with reassignment of

contracts in that reassignment appears to have been an anticipated outcome of the award of

contracts to newly-established firms that lacked the capability to undertake works. Political

considerations may be a typical factor involved to varying degrees in award of government contracts

in all countries. However, the situation in Timor-Leste is notable for the explicit manner in which

construction contracts were included in a national peace-building strategy. The strategy entailed

deviation from standard competitive tendering arrangements that typically accompany financial aid.

Thus, the strategic award of contracts was enabled by the national income independence that

petroleum revenue provided – a situation that is perhaps not common among post-conflict

situations. While highlighting the potential political value of infrastructure construction in conflict-

affected countries, the situation in Timor-Leste also highlights limitations in the potential for

increased construction demand to stimulate industrial development in the short term. Despite the

sudden proliferation of domestic construction firms in Timor in response to government strategies,

development of industrial supply capacity was restricted by constraints in the availability of

construction resources.

Resource supply constraints were highlighted by the five practices identified in relation to

resource mobilisation and management: 1) vertical integration of resources by large foreign firms,

2) inadequate investment in resources by domestic firms, 3) reliance of foreign firms upon

independent international supply chains for material and equipment, 4) importation of skilled and

unskilled labour, and 5) cooperative sharing of resources by domestic firms. Each of these practices

responded to the restricted availability of resources that was symptomatic of the broader lack of

economic development in Timor. Except for inadequate investment by domestic firms, each of the

practices was functional in that they improved supply capacity of firms in the context of problematic

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132

economic conditions. However, the practices also involved compromises. Vertical integration,

reliance on independent supply chains, and importation of labour involved increased investment

and increased risk for contractors. Such investments reflected investment horizons that took into

account significant national infrastructure needs and the potential for petroleum revenues to

translate this need into future construction demand. Cooperative sharing of construction resources

by domestic firms appears to have been associated with the cooperative distribution of contracts

involved in peace-building oriented infrastructure programs. While enabling more-efficient use of

scarce resources in the short-term, such cooperation could undermine competition and

development of efficiency and increased construction capability in the long-term.

Practices identified in relation to contract conditions and administration were: 1) adoption of

various forms of contract, 2) neglect of provisions for insurance and contractor performance

guarantees in standard contracts, and 3) overlapping systems of administration for government

contracts. Each of these practices stems from the implementation of standard contractual

arrangements in the absence of an established legal and regulatory frame. This situation may be

common in developing countries.198 However, the prior conflict in Timor and separation from

Indonesia required the establishment of new national institutions and regulatory systems, entailing

more problematic regulatory conditions that characterise conflict-affected situations generally (see

Subsubsection 5.2.3). Adoption of contracts of varying origin and complexity and neglect of

insurance and guarantee provisions was necessary in Timor given prevailing regulatory conditions.

Immediate project outcomes of various practices included: increased or decreased quality of

built work, increased costs, and increased risk. The political implications of the conditions and

practices characterising construction in Timor are particularly important given the political

objectives that underpinned a significant proportion of government infrastructure expenditure from

2007 to 2012. It is unclear to what extent the direct and cooperative award of construction contracts

under the Referendum Package and subsequent programs improved political stability. It appears that

the national government considered the programs to have contributed to increased political stability.

A government official described plans to present the Referendum Package/PDD experience to the

G7+ group of fragile and conflict-affected states as an example of successful post-conflict peace-

building.199 Any contributions to political stability came at the expense of economic returns on

infrastructure investments, as the distribution of construction contracts to newly-established firms

appears to have led to the poor quality of much of the built work.

198 For example, World Bank (1984: 81) and Ofori (2006) identify problematic situations regarding insurances and guarantees

for construction contracts in relation to developing countries in general. Kirmani (1988: 69) identifies inadequate expertise

within government departments for the administration of contracts as a significant barrier for construction industry

development.

199 TLS-08

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133

Industrial development outcomes appear to have been mixed. Increased construction

demand in Timor from 2007 appears to have promoted a rapid increase in construction supply

capacity among domestic and foreign firms. However, actual industrial capacity was limited by the

availability of construction resources, with increased resource availability through, for example,

training and domestic manufacturing, requiring longer time frames for development. The large

number of domestic firms established in response to government spending from 2007 appears to be

unsustainable, with the failure of large number of firms entailing further wasted investments. A

further industrial implication of sudden expansion of the domestic construction industry is the

potential entrenchment of practices such as cooperative distribution of contracts, and potential for

collusion in competitive tendering, and the localisation of construction markets that could

undermine long term industrial development.

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134

7.5 Tables

Reference Role Entity Origin Position

1 TLS-01 Contractor Construction firm Foreign Managing Director

2 TLS-02 Client Development organisation Foreign Program Manager

3 TLS-03 Consultant Development organisation Foreign Project Engineer

4 TLS-04a Contractor Construction firm Foreign Managing Director

5 TLS-04b Contractor Construction firm Foreign Construction Manager

6 TLS-05 Contractor Construction firm Domestic Project Engineer

7 TLS-06 Contractor Construction firm Foreign Managing Director

8 TLS-07 Consultant Consulting firm Foreign Operations Manager

9 TLS-08 Financier Government agency Domestic Economic Advisor

10 TLS-09 Contractor Construction firm Foreign Deputy Director

11 TLS-10 Merchant Supply firm Domestic Manager

12 TLS-11a Contractor Development organisation Foreign Procurement Manager

13 TLS-11b Contractor Development organisation Foreign Construction Manager

14 TLS-12 Regulator Government agency Domestic Legal Advisor

15 TLS-13 Contractor Construction firm Domestic Managing Director

16 TLS-14 Consultant Consulting firm Foreign Program Manager

17 TLS-15 Regulator Industry organisation Domestic Office Manager

Table 7.1 - Interviewee list - Timor-Leste


low political instability and violence moderate availability of expertise moderate regulatory quality

moderate institutional development low availability of materials & equip. moderate reliability of the legal frame

moderate economic development moderate availability of credit for contractors moderate-low prevalence of corruption

Table 7.2 - Statistically-defined conditions - Timor-Leste


inadequate contractor registration adoption of various foreign regulations poor quality of built work

inadequate compliance certification

very poor regulatory quality

inadequate availability of expertise

income independence (moderate aid )

Table 7.3 - Transcript-coded variables - Design and certification of actors and works - Timor-Leste

Timor-Leste

135


inadequate availability of expertise corrupt or ineffective arbitration excessive contractor risk

inadequate legal frame delayed interim payments increased prevalence of contract default

inadequate insurance & liability problematic retention & guarantee payments

inadequate superintendence of works

overlapping contract administration

adoption of various forms of contract

Table 7.6 - Transcript-coded variables - Contract conditions and administration - Timor-Leste


national income independence foreign/domestic joint venturing rapid industry expansion

inadequate availability of expertise complete subversion of competitive tenders common contractor default

reassignment of awarded contracts localisation of construction markets

construction by NGOs poor quality of built work

direct (non-competitive) contract award

donor-imposed contract award criteria

Table 7.4 - Transcript-coded variables - Tendering and contract award - Timor-Leste


exorbitant transport costs independent international supply chains rapid supply-capacity development

inadequate availability of expertise cooperative sharing of resources increased overhead costs

rapid expansion of supply chains importation of professional & skilled labour

restricted or unreliable supply chains inadequate contractor investment

highly localised construction markets vertical integration of resources

national income independence labour-only subcontracting

supply of counterfeit materials

Table 7.5 - Transcript-coded variables - Resource mobilisation and management - Timor-Leste

Timor-Leste

136

General conditions


Construction conditions Moderate-low availability of expertise Moderate-low availability of expertise Moderate-low availability of expertise Moderate-low regulatory quality

Moderate-low regulatory quality Restricted or unreliable supply chains Moderate-low availability of expertise

Increased reconstruction demand Moderate investment horizons

Moderate reliance on financial aid Moderate aid reliance

Highly-localised construction markets

Construction practices Adoption of various foreign codes Strategic award of contracts Importation of skilled and unskilled labour Adoption of various forms of contract

Reassignment of contracts Vertical integration Neglect of insurance and guarantees

Independent international supply chains

Project outcomes Decreased quality of built work Decreased quality of built work Industrial capacity development Increased client risk

Inappropriate designs Increased project costs Increased construction costs Increased prevalence of contract default

Increased project costs Increased quality of built work Increased contract prices

Increased quality of built work Localisation of construction markets Decreased quality of built work

Rapid industrial development Increased commerical risk

Moderate institutional development

Moderate-low economic development

Table 7.7 - Summary of findings - Timor-Leste

Low political instability and violence

Timor-Leste

137

7.6 Figures

Figure 7.1 – General conditions – Timor-Leste

Timor-Leste

138

Figure 7.2 – Economic conditions – Timor-Leste

Timor-Leste

139

Figure 7.3 – Regulatory conditions – Timor-Leste

Timor-Leste

140

Commercial Firm

Foreign | Domestic

Financier

Clie

ntD

omes

tic |

Fore

ign

Consu

ltant

Domes

tic | F

oreign

Foreign

| Dom

estic

Regula



MilitaryUnit


Subcontractor

Domestic | Foreign

Merchant

Dom

estic | Foreign

Figure 7.4 - Interviewee distribution - Timor-Leste

Timor-Leste

141

Moderateeconomic

development

Moderateinstitutional

development

Low political instability &

violence

Moderate-low regulatory

quality

Moderate-lowavailability of

expertise

Additional reconstruction

demand


codes

Inappropriate designs

Moderate aid reliance


work



work

Figure 7.5 - Network analysis diagram - Timor-Leste - Design and certification of actors and works



Timor-Leste

142

Moderate economic

development

Moderate institutional

development


violence


expertise

Foreign/domestic joint venturing


Strategic award of contracts

Rapid industrial development

Localisation of construction

markets


work


work


Figure 7.6 - Network analysis diagram - Timor-Leste - Tendering and contract award

Timor-Leste

143

Moderate economic

development


development


violence

Restricted or unreliable

supply chains


risk

Moderate investment horizons


expertise

Moderate aid reliance

Contractors’ independent international

supply chains

Contractor vertical

integration of resources

Importation of skilled and unskilled labour


costs


Industrial capacity

development

Figure 7.7 - Network analysis diagram - Timor-Leste - Resource mobilisation and management(1)

Timor-Leste

144

Moderate economic

development


development


violence


supply chains

Highlylocalised

construction markets

Unreliable or problemmatic supply routes


(domestic firms)

Contract reassignment

and joint venturing

Localcontractor resourcesharing


expertise

Exhorbitant transport

costs

Strategicaward of contracts


work


Industrial capacity

development

Figure 7.8 - Network analysis diagram - Timor-Leste - Resource mobilisation and management (2)

Timor-Leste

145

Moderate economic

development


development


violence

Moderate-low-regulatory

quality


expertise

Increasedclient risk

Inadequate legal frame for

dispute resolution

Inadequate legal frame for insurance and

liability

Strategicaward of public

contracts

Neglect of insurance and

guarantees

Adoption of various forms

of contract


contract default

Limited contractor

administration capacity

development

Figure 7.9 - Network analysis diagram - Timor-Leste - Contract conditions and administration

Timor-Leste

146

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147

Chapter 8 SOUTH SUDAN

Nascent markets, dysfunctional institutions, tenacious responses

Conditions and practices characterising construction in South Sudan from 2005 to 2012 are

addressed in this chapter as a case of construction in a post-conflict situation. This post-conflict

period includes two distinct phases: 2005-2011 from the signing of the peace agreement with the

northern government in Khartoum to the vote for independence, and 2011-12, which covers the

brief period of post-conflict independence before civil war broke out in the new nation. During each

of these phases, the effort to build a new nation-state was complicated by very low levels of

economic and institutional development that distinguish South Sudan among conflict-affected

countries. Beyond very poor economic and institutional development, a difficult physical

environment of the land-locked country included a lack of sealed roads between urban centres,

such that much of the country remained inaccessible by during annual monsoons. The historic lack

of development in South Sudan was such that the post-war effort was described as national

construction – that is, national construction from scratch - rather than post-conflict re-construction.

The chapter is comprised of four sections. Section 8.1 describes the historical and

contemporary context and employ statistical indicators to describe prevailing conditions and

position the case of South Sudan in relation to the broader group of conflict-affected situations.

Section 8.2 describes the group of practitioners interviewed in relation to the broader population of

construction actors in South Sudan. Section 8.3 presents the analysis data, in the form of network

diagrams and accompanying narratives. Section 8.4 discusses the findings. Tables and figures are

compiled at the end of the chapter.



Throughout its history prior to the granting of partial autonomy in 2005, the territory of South

Sudan was systematically neglected by governments in the Sudanese capital of Khartoum. The

territory of Sudan, including the primarily-Arab north and African south was incorporated with

Britain’s Egyptian colonial territories from the mid-nineteenth century. British colonial

administration based in Khartoum regarded the northern and southern areas of Sudan as politically,

economically and ethnically distinct. Southern areas were divided into three districts, each under

the authority of an Arab District Commissioner until popular unrest prompted a policy of Native

Administration in which colonial administrators in Khartoum delegated local authority in the south

to traditional tribal leaders (Badiey 2014). The lack of administrative engagement of colonial

authorities in southern Sudan matched the lack of economic engagement, with negligible trade

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148

limited primarily to the extraction of ivory and slaves and negligible development of economic

infrastructure (Holt & Daly 1961).

For southern Sudan, independence from British rule in 1956 essentially involved the switch

from British control to that of the Arab elite in Khartoum. Colonial administrative systems were

transferred to the independent Sudan intact, with governance in the south reverting to Arab

administration. Following independence, political instability in Khartoum was marked by 13

successive civilian and military governments in 13 years from 1956 to 1969. Under Arab authority,

economic neglect of the south continued (de Waal 2014). Southern insurgence from 1962

culminated in an agreement in 1972 for a semi-autonomous authority - the Southern Regional

Government - based in Juba, the southern regional capital. The discovery of oil in southern territories

preceded the dissolution of the southern government and return to Arab authority in 1981. This loss

of autonomy prompted renewed fighting between, on one side, the Khartoum government, and on

the other side many southern ethnically-aligned militias arranged in shifting patterns of allegiance

and internal conflict. Rivalries between the southern militias were exploited by the Khartoum

government through patronage and payments that precluded unified southern resistance and

promoted a mercenary militia culture (de Waal 2014; Sudd Institute 2014).

Conflict between northern government and southern militias ended in 2005 with the signing

of the Comprehensive Peace Agreement (CPA). The CPA provided a framework for a federal system

that granted political and financial autonomy to the south, including its own constitution, military,

and half of all petroleum revenue. As the largest resistance militia and the only southern resistance

movement recognised by foreign governments, the Southern Sudanese People’s Liberation

Movement/Army (SPLM/A) became the de facto authority in the newly autonomous south. Transition

from a resistance movement to a regional government required the trifurcation of the SPLM/A into

three distinct organs: the Government of Southern Sudan, a separate political party – the SPLM, and

a national military - the SPLA. The mandate of the CPA extended to 2011, when it allowed for a

referendum on full southern independence.

Autonomy within Sudan described within the CPA involved the establishment of a wholly

new set of national institutions rather than the extension and reinforcement of existing Sudanese

institutions. An interim constitution, promulgated in 2005, established a federal system comprised

of 10 states, with a national parliamentary legislature and an executive branch under the office of

the President. The national army and other security forces, including the police, were formed from

the consolidation of the SPLA with other militias (Sudd Institute 2014). The establishment of a new

bureaucracy arranged within 20 ministries had limited administrative experience to draw on. The

Secretariat of Finance of the SPLM/A, which previously oversaw an annual budget of around USD

100,000, was transformed overnight into the Ministry of Finance, responsible for the management

of billions of dollars in aid and petroleum revenue (World Bank 2012). The new political elite was

comprised of militia leaders whose loyalty to the new government was purchased with funds from

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149

aid and petroleum revenue in an informal though systematic process of state-building that neglected

the establishment of functioning formal institutions (Pinaud 2014).

Historic of economic neglect of southern Sudan was such that, upon the signing of the CPA,

the autonomous region’s economy was largely subsistence-based. Economic data is unavailable for

the initial post-CPA period though an economic assessment conducted by the World Bank and

UNDP describes a subsistence economy with no significant production nor functioning markets

(World Bank & UNDP 2005a, 2005b). From this exceptionally low starting point, GDP in Southern

Sudan grew to around USD 10 billion in 2010.200 Petroleum production constituted a large

proportion of this GDP, as demonstrated in GDP data for 2012, when a shutdown in oil production

in response to a dispute with the government in Khartoum coincided with a halving of GDP. Given

the isolation of petroleum production from the broader economy, a more accurate picture of general

production and poverty is perhaps reflected 2012 GDP per capita of around USD 500 - around one-

sixth the average for developing economies.

In the referendum held in January 2011, over 98 per cent voted in favour of independence,

leading to the creation of South Sudan as the 123rd member of the United Nations. The regional

Government of Southern Sudan became the national Government of South Sudan. However, within

four years, the nation-building effort unravelled in a civil war that commenced in December 2013.

The system of political patronage that was dramatically expanded by the resources of petroleum

revenue and financial aid exacerbated rather than ameliorated divisions within the political elite. In

the context of an increasingly kleptocratic political culture, an internal contest within the SPLM for

control of the party turned into armed conflict that quickly took on ethnic dimensions and expanded.


Statistics for South Sudan for each of the nine proxy indicators of construction conditions


review, three groups of conditions are addressed: general conditions, economic conditions, and

regulatory conditions – with conditions in each group consolidated and presented in radar charts.

General conditions in South Sudan in 2012 appear to have been mixed in relation to the

broader group of conflict-affected countries. Indicators describing institutional development,

economic development, and political instability and violence are presented in Figure 8.1.

Institutional development is described using the IDA Resource Allocation Index (World Bank 2018a),

with South Sudan’s score of 2.1 below interquartile range for conflict-affected countries of 2.7 – 3.5.

Economic development is measured using per capita GNI (World Bank 2018b), with South Sudan’s

per capita GNI of USD 937 within the interquartile range of USD 553 – 3,474. However, the

200 GDP data from UN Statistics Division (2018)

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150

inordinately large contribution of petroleum income to national income in South Sudan is such that

per capita GNI perhaps does not provide a good indication of the level of economic development

of the country.201 Political instability and violence is gauged using the indicator Political Stability

and the Absence of Violence (World Bank 2018c), with South Sudan’s score of 1.2 within the

interquartile range of 0.7 – 1.5. These indicators suggest that the levels of institutional and economic

development in South Sudan from 2005 to 2012 were below that of the majority of conflict-affected

countries, though that political instability and violence in South Sudan was moderate in comparison

to the broader group of conflict and post-conflict situations.

Economic conditions surrounding construction also appear to be more problematic in South

Sudan compared to the majority of conflict-affected countries. Indicators describing the availability

of expertise, manufactured materials and equipment, and credit for contractors in South Sudan are

presented in Figure 8.2. In the absence of labour data to describe availability of expertise in South

Sudan, the second quartile value is assumed as a tentative, preliminary value in Figure 8.2. This

assumption will be tested against information gathered in interviews. Data for Value Added by

Manufacturing (percentage of GDP), is also not available for South Sudan, though the 2005

assessment by the World Bank and UNDP that no industrial production was undertaken in the

country suggests a level of manufacturing below the interquartile range of conflict-affected countries

(World Bank & UNDP 2005a). In Figure 8.2, the second quartile value has been assumed for Value

Added by Manufacturing in South Sudan, suggesting a low level of domestic production that will

be tested against information from interviews. Availability of credit for contractors is described using

the indicator Domestic Credit from Banks to the Private Sector (percentage of GDP), with the value

for South Sudan of 0.9 per cent well-below the interquartile range of 10.3 - 22.3 for the group for

conflict-affected countries (World Bank 2018e). Thus, notwithstanding the lack of statistical data to

describe availability of expertise and domestic manufacturing, the low availability of credit and the

reported lack of any industrial production at the outset of the post-conflict period suggest particularly

problematic economic conditions surrounding construction.

Statistical indicators suggest that institutional conditions affecting construction in South Sudan

from 2005 to 2012 were moderate or low in relation to institutional conditions characterising

conflict-affected countries generally. Indicators describing regulatory quality, reliability of the legal

framework, and prevalence of corruption in South Sudan are presented in Figure 8.3. For the

Regulatory Quality indicator (World Bank 2018f), the South Sudan’s score of 0.9 is below the

conflict-affected group interquartile range of 1.2 - 2.1. Reliability of the legal framework is described

using the indicator Rule of Law (World Bank 2018g), with a score for South Sudan of 1.1 at the lower

limit of the conflict-affected country interquartile range of 1.1 – 1.9. The prevalence of corruption

is measured using the indicator Control of Corruption (World Bank 2018h), with South Sudan’s score

201 The halving of GDP that coincided with the shut-down in oil production in 2012 suggests that non-petroleum GNI per

capita would be below the interquartile range for conflict-affected countries.

South Sudan

151

of 1.3 at the lower limit of the interquartile range of 1.3 – 1.90 for the group of conflict-affected

countries. This suggestion of a moderate prevalence of corruption in relation to the group of conflict-

affected countries does not reflect the very high levels of corruption described in South Sudan

described in literature (e.g. Pinaud 2014; de Waal 2014). Notwithstanding differing accounts of the

prevalence of corruption, reliability of the legal frame in South Sudan from 2005 to 2012 appears

to have been moderate in comparison with the group of conflict-affected countries, while regulatory

quality in South Sudan was more problematic that the majority of countries in the group.

8.2 Primary data

The group of 15 practitioners interviewed in relation to the case of South Sudan are listed in

Table 8.1. Twelve interviews were conducted, with one of these interviews including four

interviewees. Regarding roles in construction, the group comprises: three clients, two consultants,

six contractors, two merchants, and two regulators. Regarding entities represented, the group

comprises: two government agencies, five development organisations, and eight firms (consulting,

contracting, and materials supply). Regarding origin, the group comprises 3 South Sudanese and 12

foreign practitioners.


construction in South Sudan is illustrated in Figure 8.4. Of the 56 permutations of practitioner

characteristics, 36 are excluded from the field and represented with lighter shading in Figure 8.4

due to their being irrelevant to the situation in South Sudan. For example, military units associated

with the UN peacekeeping mission appear to have played a significant role as financiers and clients

of construction though not in any other construction role, while government agencies do not appear

to have played a significant role as consultants, contractors, subcontractors or merchants. Each

interviewee is represented in with a closed circle. That observations were made from the perspective

of a foreign consultant employed by a development organisation is represented with a triangle.

Figure 8.4 highlights that the majority of interviewees represented foreign contracting firms, foreign

clients or foreign consultants, with domestic merchants and regulators also represented in the

interviewee group. It also highlights that the group of interviewees contains no financiers nor

domestic clients of construction.


This section presents the analysis of data collected for the case of South Sudan in the form of

network diagrams and accompanying narratives for each of the four fields of practice. The coding

of interview transcripts relating to South Sudan identified 44 second-cycle codes: 9 in relation to

design and the certification of actors and works, 13 in relation to tendering and the award of

contracts, 15 in relation to mobilisation and management of resources, and 12 in relation to contract

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152

conditions and administration.202 The review of statistical indicators defined eight prevailing

conditions characterising the environment surrounding construction in South Sudan in relation the

broader group of conflict-affected countries. These conditions are listed in Table 8.2, with moderate

referring to indicator values for South Sudan within the interquartile range of the group of conflict-

affected countries, while high and low refer to values for South Sudan above and below the group’s

interquartile range.







analyses.


The nine second-cycle transcript codes identified in relation to design and the certification of

actors and works in South Sudan are listed in Table 8.3. Of the four practices identified in transcript

coding, three were highlighted as being particularly significant: 1) adoption of various foreign

regulations, 2) adoption of informal design standards, and 3) strategic over-design. A network

diagram positioning these practices in relation to prevailing conditions and project outcomes is



Adoption of various foreign codes and standards in South Sudan appears to have occurred

through two different channels - one formal and another ad-hoc or informal. Both channels are


Two examples of formal adoption of regulations from neighbouring countries was raised

during interviews. South Sudan’s Ministry of Housing and Physical Planning engaged a Kenyan

consulting firm to draft the South Sudan Building Code (Republic of South Sudan 2011), with the

resulting 399-page document replicating the Kenyan national construction code with some minor

modifications.203 The new South Sudan Building Code was considered inappropriate for the

prevailing technical and economic environment, with the government official responsible for


203 An Ethiopian design consultant working with a UN agency suggested that the Kenyan code was in turn a replication of

the South African code.

South Sudan

153

commissioning the consultants commenting, “If we send this book to the states, nobody will read it,

and it will end the process”.204 A second set of construction standards governing road design and

construction was imported from Ethiopia. Despite being held by UN officials as a good example of

regulations from the region, these Ethiopian standards were considered unsuitable due to differences

in geological conditions – particularly the prevalence of clay-rich black cotton soil in South

Sudan.205 206

The less-formal channel through which foreign regulations influenced construction in South

Sudan was via the influx of foreign construction professionals. Ethiopian, Kenyan and Ugandan

engineers and architects, as well as construction professionals from further afield such as Sri Lanka,

the Philippines and China, entered South Sudan as employees of construction firms and

development organisations.207 Independent consultants, primarily from Ethiopia and Kenya, were

also engaged by clients in South Sudan to provide design services for private and public works.208

In the absence of applicable domestic regulations, these professionals appear to have employed

codes and standards from their countries of origin.

In Figure 8.5, the adoption of foreign regulations may be traced back to prevailing political

instability and violence via the low level of institutional development, in relationships comparable

to those identified in the cases of Afghanistan and Timor-Leste. The adoption of foreign regulations

was a direct response to the absence of applicable domestic regulations, which is symptomatic of

very poor regulatory quality. In theory, throughout the civil war and the initial post-conflict period,

laws and regulations of greater Sudan, including a national construction code – referred to by local

engineers as the Khartoum Code – was enforceable (Republic of Sudan 1997). However, in practice,

the publication of the Khartoum Code in Arabic and availability of only a 24-page summary in

English effectively prevented its use.209 210 The condition of very poor regulatory quality during the

conflict and post-conflict periods is in-turn a symptom of the broader condition of very-low

204 SSD-08, pg.4

205 SSD-10c

206 Black cotton soil covers around half the territory of South Sudan and is also prevalent in other parts of East Africa. The

composition of the soil, including the very high clay content, is such that it expands dramatically when wet. Expansion of

the soil during the annual monsoon season is particularly problematic. Infrastructure must be designed to accommodate the

high foundation movement and geological forces arising from soil expansion.

207 SSD-04, SSD-12

208 SSD-01, SSD-05

209 While a wide variety of languages are spoken by different ethnic groups in South Sudan, English is the national language,

which is widely spoken as a result of British colonial heritage and the involvement of Christian groups in education there

during the civil war.

210 SSD-08, SSD-09

South Sudan

154

institutional development that appears to be both a cause and an outcome of the conflict and the

enduring political instability in the post-conflict period.

The immediate impact described during interviews of the use of foreign codes and standards

was inappropriate designs and poor construction quality. In particular, the failure of foreign

structural and road design standards to accommodate particularly problematic geological conditions

was raised in interviews.211 Large waves in roads and cracks in buildings that were observed

throughout the country corroborated suggestions that designs based on foreign standards failed to

accommodate the large forces and movement arising from the specific geological conditions in the

territory.

8.3.1.2 Adoption of informal design standards (rules of thumb)

In the absence of formal construction regulations, design and construction of buildings

appears to have been commonly guided by informal standards, or rules of thumb – a practice

positioned in relation to conditions and project outcomes in Figure 8.5. A government official

responsible for the certification of built work described informal structural design standards, “For

normal ones – G [single storey] buildings only – you make strip foundations 50cm by 80cm. In some

areas such as Equitoria where the ground is harder, you make it 50cm by 60cm, or even 50 by 50…

In some areas - like near the airport - it’s loose soil and we have to make that deeper”.212 This

engineer went on to describe in detail the types of soil in different areas of the city of Juba, citing

dimensions of footings required to suit specific soil conditions. This adoption of informal norms in

the absence of more-precise standards is perhaps common in many places. It is significant in South

Sudan due to its impact upon public buildings and infrastructure rather than its confinement to

vernacular and informal construction.

As with the adoption of foreign regulations described above (see Subsubsection 8.3.1.1),

adoption of informal design standards responded to the very poor regulatory environment and

broader undeveloped institutional environment. These prevailing conditions were in turn products

of political instability and violence throughout the conflict and post-conflict period.

Outcomes arising from the use of informal design standards were not discussed during

interviews. In the absence of effective formal codes and standards, informal norms perhaps played

a role in maintaining a degree of consistency and quality of built work.

211 SSD-04, SSD-10

212 SSD-09, pg.3

South Sudan

155

8.3.1.3 Strategic over-design to compensate for industrial limitations

Strategic over design of structural work, which is included as a practice in Figure 8.5, was

described in one interview as a response to prevailing industrial conditions. “The major issue we

face is quality”, explained an official with a UN agency. 213 He went on, “We have no standard for

materials, no facilities to do any checking. Even the use of expired [cement] – we are unable to put

a system in place [to control this]”. He described the common practice of over-designing structural

elements to compensate for shortcomings in materials and construction quality. “For example…

concrete – theoretically, 15 newtons strength is sufficient at USD 200 per cubic metre. But here, my

engineers don’t have the facilities for checking, so I go for 25 newtons strength, which is USD 450

per cubic metre”.214

Strategic over-design of structural elements appears to be a response to prevailing economic

and institutional conditions. Testing facilities appear generally to have been unavailable up to 2013.

The only laboratory facilities identified by the group of interviewees were operated for limited use

by one domestic construction firm and by one UN agency.215 Structural over-design also appears to

have responded to a lack of expertise such that the designs accommodated anticipated shortcomings

in construction quality. The absence of testing facilities and limited availability of expertise may be

viewed as aspects of very-low level of economic development described in interviews and literature

and corroborated by observations, which may in-turn be attributed to the prolonged history of

conflict and persistent political instability and violence during the post-conflict period. Strategic

over-design also responded to poor regulatory quality which was related back to poor institutional

development and prevailing political instability and violence in relation to the adoption of foreign

and informal design standards.

The principle outcome presented in Figure 8.5 in relation to the practice of strategic over-

design is increased project costs. In particular, the UN official that described the practice described

a cost increase of 225 per cent for concreting, entailing significant increases in total project costs.


The thirteen second-cycle transcript codes identified in relation to tendering and the award

of construction contracts in South Sudan are listed in Table 8.4. Of the five practices identified in

transcript coding, three were highlighted during analysis as being particularly significant: 1)

complete subversion of procurement rules, 2) donor-imposed contract award restrictions, and 3)

reassignment of contracts. A network diagram positioning these practices in relation to prevailing

conditions and project outcomes are presented in Figure 8.6.

213 SSD-04, pg.2

214 SSD-04, pg.2

215 SSD-02, SSD-10

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156

8.3.2.1 Direct (non-competitive) award of contracts

Different modes of contract award that varied from standard competitive tenders were

described during interviews in relation to two stages of the post-conflict period. During the initial

post-conflict period from 2005 to 2010, it appears that a large proportion of contracts awarded by

international development organisation did not involve competitive tenders, but rather were directly

awarded to nominated contractors. Direct award was described by a Kenyan contractor operating

in South Sudan at that time.216 In parallel with the common direct award of contracts, a small number

of higher-value road construction contracts such as the Juba-Nimule Road funded by USAID appear

to have been awarded through competitive tender to larger firms that were based in neighbouring

Kenya or Uganda. This situation appears to have changed from around 2009 as open competitive

tenders appear to have become the typical mode of contract award by international organisations.

These two stages, the first distinguished by non-competitive award and the second

distinguished by increased use of competitive tenders, reflect changes in construction markets in

South Sudan. Upon independence, it appears that no construction industry was present in the

country. “In 2005… within South Sudan, there was not any industry”, suggested a senior government

official.217 In the absence of domestic firms, the end of the conflict appears to have attracted a small

number of frontier entrepreneurs - construction firms from Kenya, Ethiopia, and Uganda that appear

to have primarily been owner-operators with construction experience in their home countries.218

The few firms that entered South Sudan during the initial post-conflict period, compared to high

demand from a large number of international development organisations that commenced work in

the country, appears to have underpinned the direct award of contracts. The Kenyan owner of a

construction firm described the market for construction firms up to 2009, “I could get clients – in

one week I could get five or six clients. Not only prefab, but even these hard structures, civil works,

roads and all of that. I had a lot of clients”.219 The practice of foreign development organisations

directly awarding contracts, appears to have ended around 2009 as more construction firms entered

South Sudan. In addition to larger firms from neighbouring Uganda, Kenya and Ethiopia, firms from

diverse origins including China, India and Lebanon, as well as smaller numbers of firms from Egypt

and Syria entered the market. “It changed a lot. In 2006, 2007, 2008, contractors were not many so

you could bump into as much work as you wanted. But as time went by, contractors became many,

especially from around 2011… “, said the Kenyan contractor.220

The practice of international development organisations directly awarding contracts is

positioned in Figure 8.6 as responding to the lack of economic development and to prevailing

216 SSD-01

217 SSD-08, pg.1

218 SSD-01, SSD-05

219 SSD-01, pg.13

220 SSD-01, pg.17

South Sudan

157

political instability and violence. The lack of economic development included a lack of domestic

construction firms and markets to support competitive tenders. Moreover, persistent instability and

violence during the post-conflict period initially appears to have deterred all but small firms with a

high risk tolerance from entering the market.

Project outcomes arising from direct award of contracts are difficult to assess given that the

alternative of competitive tenders appears to not have been viable. Given that the condition of

demand far exceeding supply underpinned the practice, it may be expected contract prices were

higher than under usual competitive circumstances.

8.3.2.2 Preferential award of contracts

Another deviation from open competitive tenders described during interviews was the

preferential award of contracts, which is also featured as a practice in Figure 8.6. Three examples

of preferential award were described in interviews. In one example, a road construction program

implemented by a UN agency restricted contract award to newly established domestic firms. Works

under the program were divided into contracts of a scale reflecting both the limited capacity of

newly-established domestic firms and the value of contract required to make work in remote

locations profitable. “On our judgement, we couldn’t give them more than USD 1 million… [but]

you have to balance the circumstances around the bid – for example, if I say a USD 1 million

contract in Bentiu [remote location], he won’t do it”, said a UN official engaged in the project.221

Other examples of preferential award related to donor countries’ promotion of their own national

firms, specifically those from the US and from China. For US-funded programs, preferential award

of higher-value contracts to US firms appears to stem from similar policies and procedures that

restricted contract award in Afghanistan. A similar policy was described by the manager of a Chinese

firm in relation to China-funded road construction contracts that were restricted to Chinese state

enterprises.222

These examples of preferential contract award respond to different conditions, as illustrated

in Figure 8.6. The example of preferential award to newly-established domestic firms was part of a

donor-driven strategy to develop a domestic construction industry. This strategy was a response to

the very poor state of economic development in South Sudan. The need to develop domestic

contracting capabilities is not limited to South Sudan or to conflict-affected situations, however, the

very-low level of economic development in South Sudan is attributable to the prolonged history

conflict and persistent instability in the post-conflict period. The other example of preferential award

to national firms from donor countries – specifically the US and China – did not respond to domestic

conditions but rather to the policies and objectives of donor countries.

221 SSD-10a, pg.5

222 SSD-12

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158

Outcomes arising from these two types of preferential award of contract also differed.

Officials involved in the program in which contracts were preferentially awarded to domestic firms

suggested a degree of success in building industrial supply capacity. “They are learning with our

contracts… from the mistakes they make, they are learning”, explained an official responsible for

site superintendence of the various contracts.223 He went on, “We have a large supervision team,

which enables us to work with lower calibre contractors”. However, the officials conceded that

some of the higher-value contracts had been reassigned to more capable Ugandan or Kenyan firms.

The practice of contract reassignment was also reported in connection with a contract preferentially

awarded to a US firm. The Kenyan firm that ultimately undertook the works described inflated costs

associated with reassignment - of an initial contract price of USD 4 million, the contract was

reassigned to a Kenyan logistics firm for USD 2 million then in turn reassigned to the small Kenyan

construction firm for USD 1 million that completed the works to specification at a cost of USD

800,000.224 Preferential award of contracts to Chinese state enterprises appears to have encouraged

entry into South Sudan of Chinese firms, including a large number of private firms that made

significant investments in order to establish operations in South Sudan (see Subsection 8.3.3

below).225

8.3.2.3 Complete subversion of procurement rules

Complete subversion of competitive procurement rules was described during interviews in

relation to contracts awarded by government and is featured as a practice in Figure 8.6. Government

contracts that were funded through financial aid, e.g. from the World Bank-managed Multi-donor

Trust Fund, appear to have followed standard competitive tender procedures. In contrast, contracts

funded through government revenue appear to have been awarded at the discretion of senior

government officials and heavily influenced by corruption. “Unless you have some relation with

some officers, you cannot get that opportunity. Even for the South Sudanese, two people take the

projects for the whole country”, said the owner of an Ethiopian firm.226 Other firms described similar

situations.227

The situation described in interviews of all government-funded contracts being awarded

without any competitive or systematic procedure is a symptom of corruption described in reports

and other literature in relation to South Sudan. The indicator Control of Corruption from the World

Governance Indicators suggests only moderate levels of corruption (see Subsection 8.1.2). This

contrasts with other reports and observations that suggest very high levels of corruption related to

223 SSD-10c, pg.16

224 SSD-01

225 SSD-12

226 SSD-05, pg.4

227 SSD-01, SSD-06

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159

the poor state of institutional development in the new country (e.g. Pinaud 2014; de Waal 2014).

This situation of very poor institutional development and high levels of corruption are attributable

to the prolonged history of conflict and to persistent political instability and violence during the

post-conflict period form 2005.

A particularly significant outcome of the corrupt award of government-funded contract

described during interviews and included in Figure 8.6 was the development of a duopoly market.

Interviewees suggested that two large domestic firms received all medium and large government-

funded contracts.228


The fifteen second-cycle transcript codes identified in relation to mobilisation and

management of construction resources in South Sudan are listed in Table 8.5. Of the six practices

identified in transcript coding, three were highlighted during analysis as being particularly

significant: 1) importation of professional, skilled and unskilled labour, 2) development of

independent international supply chains by contractors, and 3) investment and vertical integration

of resources by foreign contractors. Network diagrams positioning these practices in relation to

prevailing conditions and project outcomes are presented in Figure 8.7.

8.3.3.1 Importation of professional, skilled and unskilled labour

While the importation of professional labour was reported in Afghanistan and the importation

of professional and trade labour was reported in Timor-Leste, in South Sudan it appears that most

professional, skilled and unskilled construction labour was imported. As reported in relation to

design and the certification of actors and works (see Subsubsection 8.3.1.1), Ethiopian, Kenyan and

Ugandan engineers and architects, as well as construction professionals from further afield such as

Sri Lanka, the Philippines and China, entered South Sudan as employees of construction firms and

development organisations. Tradesmen appear to have entered South Sudan most commonly from

Ethiopia and Kenya, while basic labourers typically came from Uganda.229 In the early years of the

post-conflict period, trade and basic labourers entered South Sudan in association with small

construction firms that comprised the initial wave of frontier entrepreneurs. Workers that remained

in South Sudan beyond the duration of their initial projects comprised the beginning of the domestic

market for construction labour. “Labour in South Sudan, most are coming from Uganda and Kenya

– unskilled labourers from Uganda and skilled labourers from Kenya and Uganda. Skilled persons

228 SSD-01, SSD-06

229 SSD-01, SSD-05

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160

like foremen and engineers you get from Ethiopia”, explained an Ethiopian contractor.230 A Chinese

contractor described his firm’s practice of bringing all technical and trade labour from China and

hiring unskilled Ugandan labourer in local markets.231

The inadequate availability of professional and skilled labour that was described during

interviews appears to have stemmed from a prolonged lack of education and training facilities. The

single university campus in the south was closed during the civil war, restricting engineering and

architectural education to a limited number of individuals that studied at the university in

Khartoum.232 Around 2008, a group of around 20 engineers that formed a national Council of

Engineers appears to have comprised the majority of domestic construction professionals.233 The

only training available in modern construction methods appears to have been offered by two

vocational training schools – one in the rural centre of Torit and another in the capital, Juba.234

While no statistics are available to describe training and the availability of expertise in South Sudan

during the period from 2005 to 2012, descriptions form interviews suggest that very low availability

of expertise was one aspect of the low state of economic development in general.

Foreign skilled and unskilled workers appear also to have been attracted to South Sudan by

relatively high wages.235 Relatively high salaries in South Sudan are linked to the high cost of living

that resulted from the need to import all goods, including basic foods, into the land-locked country.

Relatively high salaries are also linked to high volatility of the new national currency, with political

instability that included disputes with Sudan and internal insurgent violence leading to large

fluctuations in the value of the South Sudanese Pound. Thus, in addition to economic conditions,

the influx of foreign labour also responded to institutional and political conditions.

One outcome of this influx of foreign workers appears to have been an increase in

construction supply capacity. Beyond the projects for which they entered South Sudan, foreign

tradesmen constituted a nascent subcontracting industry and domestic labour markets, in a situation

similar to that reported in regard to the case of Timor-Leste (see Subsection 7.3.3).

230 SSD-05, pg.8

231 SSD-12

232 SSD-09

233 SSD-09

234 SSD-09

235 In January 2013, the average daily rate for skilled tradesmen was around SSP 50 per day (around USD 12), and for

unskilled workers around SSP 30 per day (around USD 7), compared to the rate at that time in Uganda for unskilled labour

of around USD 3.50.

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161

8.3.3.2 Development of independent international supply chains by contractors

The practice of contractors purchasing all materials and components in neighbouring

countries and importing consignments into South Sudan is featured in Figure 8.7. After securing

contracts, owners or managers of firms typically travelled to Sudan, Kenya or Uganda, purchased

all materials required to complete the works, and arranged either for consolidation and

transportation by barge from Sudan in the north or by road from Uganda or Kenya to the south.236

Some larger firms invested in trucks to transport their own consignments from Kenya and Uganda.237

The emergence of domestic markets for imported materials and components and basic equipment

reduced the need for contractors to rely upon independent international supply chains.

Nevertheless, it appears that many firms continued to purchase and import materials and

components in bulk to meet individual project requirements. Chinese firms appear to have taken

the practice of developing independent international supply chains further than other contractors.

The manager of a Chinese firm described a practice of purchasing all materials components in China

then importing them to South Sudan via the Kenyan port of Mombasa.238 239

In Figure 8.7, the practice of contractors relying on independent international supply chains

for materials and components may be traced back to prevailing political instability and violence via

two paths of conditions. Along the first path of conditions, development of independent supply

chains responds to the unreliability character of domestic markets, which is considered to be

symptomatic of low economic development. Only basic construction materials such as aggregate

and cement blocks made by hand appear to have been produced in South Sudan during the civil

war and initial post-conflict period.240 Throughout the civil war, it appears that only a single Indian

entrepreneur brought modern construction materials and equipment into southern Sudan via barge

along the Blue Nile from Khartoum.241 From this initial reliance upon barge transportation from the

236 SSD-01, SSD-07

237 SSD-02, SSD-03

238 SSD-12

239 The practice of Chinese firms importing materials, components and equipment in bulk from China appears to have made

them particularly competitive in open tenders. During interviews, other contractors complained of malfeasance by Chinese

competitors, suggesting for example that employed prisoners from China as slave labour or that they worked at night not to

avoid daytime heat but rather to enable quality compromises that might otherwise be detected during the day (SSD-01, SSD-

07). Rather, it appears that reduced costs arising from independent supply chains back to China enabled significant savings

that in turn enabled Chinese firms to consistently out-bid competitors.

240 The rudimentary state of production in South Sudan was highlighted in observations of women at the base of Jebel Kujur

(Jebel Mountain) on the outskirts of Juba wielding small hammers to break large stones rolled down from the mountain into

smaller pieces. Around the women, piles of graded aggregate broken down by hand were available in 2013 for around USD

45 per cubic metre.

241 SSD-11

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162

north, increased demand and the opening in 2008 of a sealed road connection south to Uganda and

Kenya enabled an expansion of supply chains.

In addition to problematic road conditions along this southern route, institutional conditions

in South Sudan appear to have restricted development of domestic markets. The high volatility of

the new national currency, which, as reported above in relation to the importation of labour (see

Subsubsection 8.3.3.1) was directly linked to political instability and violence, led to highly volatile

prices and regular shortages in local markets as producers and wholesalers in Uganda and Kenya

refuse to accept the South Sudanese Pound. “The biggest issue for the fluctuation in prices is the

dollar – pounds and dollars. The biggest problem in this country is that that pound has not been

rated in East Africa, meaning that even if you have one million pounds in your account, you cannot

use it anywhere”, suggested an owner of a construction firm.242 Corruption and disorganisation at

the single customs station also restricted supply chains and the reliability of domestic markets.243

The situation regarding cement supply chains highlights problems that contributed to the high

cost and limited reliability of local markets. The Somali owner of a cement supply business described

business conditions and practices involved in typical cement supply chains.244 The cement market

in South Sudan appears to have been controlled by Somali traders that imported from Kenya.245

While regulations restrict truck loads on Kenyan roads to 30 tonnes, to remain competitive cement

suppliers ran loads of 45 tonnes, requiring that for almost half the route they travelled at night only

to avoid Kenyan police and fines of up to USD 2,000. The poor condition of roads resulted in the

typical 10-days required for a return trip from Nairobi to Juba – a return distance of around 2,200

km. The absence of any significant production in South Sudan ensured that no goods were available

for export and the return leg of such trips was made empty.246 To a wholesale cost of USD 5,265

per 45-tonne load, traders added USD 6,000 for transportation costs and USD 2,000 for taxes and

bribes. Currency fluctuations were such that traders stopped supplies in response to sudden

fluctuations in the South Sudanese Pound; “If I’m selling cement now, I have to keep one eye on the

242 SSD-01, pg.11

243 Internal distribution of materials appears to also have been problematic and expensive. The manager of a Chinese firm

undertaking road construction contracts in the north of the country described the high cost of basic quarried materials outside

Juba - including around USD 10,000 per truck load (around 12 cubic metres) of aggregate and around USD 5,000 per truck

load of murram (a low clay content soil used in road construction) – almost ten-times the price of comparable materials in

the Australian market (SSD-12). The risks faced by contractors in transporting valuable materials across long stretches of

insecure territory was highlighted by the experience of an Ethiopian contractor whose truck carrying a load of aggregate from

350 km from Juba to Jonglei town was hijacked. Hijackers stole the truck, the load, and the clothes off the backs of the

contractor and his staff, forcing them to walk naked across around 100 km of harsh terrain to the nearest town (SSD-05).

244 SSD-06

245 SSD-01, SSD-05, SSD-06

246 SSD-06

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163

exchange rate, otherwise I’ll be selling it for less than I can get it in Nairobi”, explained the Somali

trader.247

While the practice of contractors developing independent supply chains responded to several

different conditions, the main effect upon projects appears to have been a consistent increase in

construction costs and contract prices. Purchase of materials and components appears to have

ensured more reliable supplies, though importing contractors were forced to pay the same bribes

and transportation costs as traders.248 In addition, bulk purchase of all materials at the beginning of

construction entailed significant investment and risks for contractors, adding to overhead costs.

8.3.3.3 Investment and vertical integration of resources by domestic and foreign

contractors

Importation by contractors of labour, materials and components from foreign markets are

aspects of a broader strategy of investment and vertical integration of resources that was also

described in relation to the cases of Afghanistan and Timor-Leste. However, investment and vertical

integration of resources by larger firms in South Sudan appears to have been more extensive than in

the other cases. For the larger firms from Uganda, Kenya and Ethiopia, and further afield from India,

China and Lebanon that entered South Sudan after independence in 2011, local markets and project-

based importation appear to have been inadequate for anticipated project requirements. Small fleets

of trucks enabled large construction firms to transport consignments from Kenya and Uganda. Firms

maintained yards and quarries containing large amounts of plant to produce aggregate, asphalt and

concrete, including batching plants and mixing trucks for the production and delivery of batched

concrete. Fleets of heavy construction equipment included various large excavators, graders and

cranes and specialised road construction equipment.249 250 Further, staff and facilities were required

for maintenance and repairs to these fleets of vehicles, equipment and plant.

The UN Peacekeeping Mission in South Sudan (UNMISS) also adopted a strategy of vertical

integration of construction resources. To meet infrastructure requirements including offices and

accommodation for staff, UNMISS imported equipment, plant and raw materials for local production

247 SSD-06, pg.4

248 SSD-07

249 SSD-02, SSD-03

250 High levels of investment were observed during a visit to the yard and quarry in Juba of a firm established as a joint

venture between an Eritrean and Italian construction firm specifically to enter the South Sudanese market. The yard contained

a substantial array of heavy equipment and plant manufactured in Italy and imported to South Sudan via the Kenyan port of

Mombasa. This assembly of equipment, perhaps valued at tens of millions of dollars, was comparable with the yards and

quarries of other firms observed on the outskirts of Juba. Despite these major investments, the plant and equipment of these

firms was idle as the expected increase in construction demand failed to occur.

South Sudan

164

of materials including different types of masonry units and metal roof sheeting by work teams

employed by the UN.

Like the importation of labour and materials by construction firms, the practice of investing

in large amounts of equipment and plant responded to a lack of resources in local markets and to

medium-to-long term investment horizons. Despite risks associated with political instability and

violence, the lack of existing infrastructure in South Sudan and the potential for petroleum revenue

to convert infrastructure needs in high construction demand appears to have encouraged some firms

to make large investments. The absence of a domestic construction industry may also have led large

foreign firms to assess that demand would exceed supply capacity and make investments profitable.

While increasing construction supply capacity in the country, the failure of anticipated

demand to eventuate as a result of persistent political instability and violence (culminating in the

outbreak of civil war in 2013) was such that the main outcome of high investments was increased

overhead costs. Despite these costs, the need to turnover in the context of low demand appears to

have underpinned highly competitive bidding and relatively low contract prices.251


The twelve second-cycle transcript codes identified in relation to contract conditions and

contract administration in South Sudan are listed in Table 8.6. Of the six practices identified in

transcript coding, two were highlighted during analysis as being particularly significant: 1)

inadequate superintendence of works, and 2) adjusted payment terms. A network diagram

positioning these practices in relation to prevailing conditions and project outcomes is presented in

Figure 8.8.

8.3.4.1 Inadequate superintendence of works

Site superintendence appears typically to have been curtailed by the restricted availability

and movement of construction professionals, leading to inadequate superintendence that is featured

as a variable in Figure 8.8. While foreign professionals were hired to administer construction

contracts, access of these administrators to construction sites was restricted by insecurity, the poor

road network and limited accommodation facilities. Hiring local staff to support contract

administrators was limited by the absence of South Sudanese with the required expertise. An official

managing construction programs for a UN agency described his inability to find any South Sudanese

staff to supervise the large number of construction sites under his administration, “For the last three

months I am searching for qualified engineers – national staff – because foreign staff are unable to

251 SSD-12

South Sudan

165

reach those [project] locations. Two times we advertised and failed… For a third time, we were

supposed to advertise, but we don’t find suitable people here”.252

Inadequate site superintendence reported during interviews is positioned in Figure 8.8 as a

response to inadequate availability of expertise and to prevailing political instability and violence.

The limited number of trained domestic professionals required that foreign professionals be

employed for contract administration and site superintendence functions. The lack of local

professionals is attributable to both very low economic development and very low institutional

development (given the lack of training and education institutions), both of which are results of the

prolonged conflict. In addition, prevailing insecurity appears to have limited the deployment of

foreign staff to locations outside the national and provincial capitals.

Inadequate site superintendence is expected to have contributed to poor quality of built work

and motivated the practice of strategic over-design by clients and consults (see Subsubsection

8.3.1.3). Beyond normal commercial motivations to reduce construction costs, the very high cost of

materials is expected to have provided additional motivation for contractors to reduce costs by

compromising construction quality. A description in one interview of the use of expired cement is

an example of intentionally compromised quality associated with problematic materials supply.253

8.3.4.2 Adjusted payment terms

During interviews, clients and contractors described contract payment terms that were

notable for the amount of advance payments and the currency in which payments were to be made.

Payment terms varied with different clients and contracts, however, interviewees described a

common practice of providing advance payments of 40 per cent of the total contract price.254 In

another notable adjustment of typical payment terms, contractors and clients described a preference

for payment in USD rather than the national currency, the South Sudanese Pound (SSP). Firms

offered substantial discounts for contracts paid in dollars. Interview descriptions of the preference

and common payment of contracts in USD is corroborated by observations of discounts of up to 10

per cent offered by contractors seeking to avoid payment in Pounds.

Adjustment of payment terms including increased advance payments and payment in USD

rather than SSP is positioned in Figure 8.8 as a response to prevailing conditions of unreliable supply

chains and high currency volatility. Given the absence of formal credit from banks that was

described during interviews, contractors relied upon generous mobilisation payments to purchase

and import all materials, components and equipment required to undertake contracted works.255

252 SSD-04, pg.5

253 SSD-04

254 SSD-01, SSD-05, SSD-07

255 SSD-01, SSD-05, SSD-07

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166

That the SSP was not accepted for exchange in neighbouring countries underpinned the preference

of contractors for payment in USD.

The main outcome of the common adjustment of payment terms to meet prevailing conditions

in South Sudan is expected to have been increased client risk. In particular, generous advance

payments in the context of an absent regulatory framework to provide for contractor liability is

expected to significantly increase risks of contractor default. Interviews and observations suggest

that, given the typical use of USD as the currency of aid contributions from donors to development

organisations, payment in USD by these clients was not problematic.



Table 8.7, which summarises general conditions, construction conditions, construction practices

and project outcomes that were identified in transcript coding and network analysis.

8.4 Discussion

Analysis of interview data highlighted a distinction between direct and indirect effects of

conflict upon conditions surrounding construction projects. Two related conditions that were

determined to be directly affected by conflict were high price volatility and restricted supply chains.

Volatility on resource prices was identified as a direct result of currency fluctuations that tracked

political conditions, particularly relations between Sudan and South Sudan. These price and

currency fluctuations compounded the resource supply chain problems arising from the lack of

domestic production and poor international trade connections. Conditions deemed to be indirectly

affected by conflict were impacted via the effects of contemporary political instability and conflict

upon broader economic and institutional conditions. Limitations in the availability of construction

resources and effectiveness of regulation that were described by statistics and interviews were

comparable to conditions associated with construction in developing countries in general, albeit

magnified in South Sudan given the exceptional state of economic and institutional under-

development. Other conditions that were indirectly affected by political instability via its effect upon

broader economic conditions were: 1) the absence of testing facilities, 2) investment horizons

which, despite the problematic economic environment, were extended by potential infrastructure

demand funded by national petroleum revenue, and 3) aid reliance that was moderated by national

income from petroleum resources.

Practices identified in relation to design and certification of actors and works were: adoption

of various foreign codes, adoption of informal design standards, and strategic structural over-design.

These practices were, in general, positive responses to the lack of regulation and the limited

availability or limited mobility of construction expertise. The practices involved compromises. For

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167

example, adoption of foreign regulations, which was also identified in the cases of Afghanistan and

Timor-Leste, was associated with inappropriate designs that were highlighted as being particularly

problematic in the context of specific geological conditions in South Sudan. Structural over-design

was associated with significantly increased costs of projects in which the practice was adopted.

However, these practices are also expected to have increased the quality of built work considering

the absence of a more appropriate domestic technical-regulatory framework for construction.

Practices identified in relation to tendering and award of contracts were: complete subversion

of tender rules, reassignment of contracts, preferential contract award, and direct non-competitive

award of contracts. Complete subversion of competitive tender rules described in relation to

government contracts is symptomatic of broader dysfunctional institutional conditions. Comparable

conditions and practical responses were also identified in relation to the case of Afghanistan.

Reassignment of contracts was also identified in the cases of Afghanistan and Timor-Leste. In South

Sudan, this practice was similar to the practice of preferential award in that both are attributable to

contract award preferences of donor-financiers. Contract reassignment in Afghanistan and Timor-

Leste resulted from specific political conditions in each country (increased risk and restricted

contractor mobility arising from political violence in Afghanistan, strategic peace-building

considerations in Timor-Leste). Donor-financier preferences leading to reassignment in South Sudan

might also be expected to underpin similar practical responses in other developing countries that

are not affected by political violence. The direct award of contracts in South Sudan, specifically

direct award by international organisations in the initial post-conflict period, appears to have been

a necessary response to the very low number of construction firms operating at that time.

Practices identified in relation to resource mobilisation and management were: vertical

integration of resources by contractors, reliance of contractors upon independent international

supply chains for materials and components, and importation of skilled and unskilled labour from

neighbouring countries. Each of these types of practice were productive responses to prevailing

economic conditions. While the practices enabled the availability of resources under very

problematic economic conditions, they also entailed a high degree of risk for contractors. For

project-based investment associated with independent supply chains, increased advance payments

entailed the transfer of some of the risk to clients. Nevertheless, increased risk and increased costs

associated with resource mobilisation practices contributed to increased construction costs and

increased contract prices.

Finally, practices identified in relation to contract conditions and administration in South

Sudan were: inadequate superintendence of works, and adjustment of payment terms to include

increased advance payments and payment in US dollars (rather than the domestic currency). As with

resource mobilisation-related practices, these contract-related practices were traced back to

problematic economic conditions. Inadequate superintendence related to the inadequate

availability of domestic expertise, prevailing insecurity and unavailability of facilities such as

accommodation outside Juba, which restricted the mobility of foreign professionals. The adjustment

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168

of payment terms responded to the need for contractors to purchase materials and equipment in

foreign markets and to do so using US dollars. That discussions with practitioners about contract

terms and administration highlighted practices that related to economic conditions rather than

institutional conditions (such as the reliability of the legal framework) suggests that problematic

economic conditions were of greater concern for the practitioners interviewed.

Two themes emerge from this consideration of the specific practices adopted in South Sudan.

Firstly, the practices highlight the need to adapt standard arrangements for procurement and

contracting to particularly problematic conditions in South Sudan, with adaptations apparently

undertaken in an ad-hoc rather than systematic manner. Secondly, the practices highlight that, with

tenacity, the supply of construction resources was achieved under problematic conditions.

However, this supply was accompanied by significant increases in risks and costs.

The outcomes that were identified included a range of negative immediate project outcomes

as well as more positive outcomes related to broader industrial capacity. Negative project outcomes

such as increased contractor and client risk, increased construction and contract costs, and

decreased quality of built work are perhaps predictable given the problematic project environments.

Considering the extent of these challenges, the establishment of a domestic construction industry

including: foreign and domestic contractors, domestic markets for skilled and unskilled labour, and

domestic markets for construction materials and equipment, represents a significant advance that

was driven by post-conflict construction demand. This increase in industrial capacity was partially

undermined by dysfunctional practices – particularly corruption that was reflected in the duopoly

market for government contracts – which could diminish investment incentives for contractors and

undermine further industrial development in the medium and long term.

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169

8.5 Tables

Reference Function Entity Origin Position

1 SSD-01 Contractor Construction firm Foreign Owner / Manager

2 SSD-02 Contractor Construction firm Domestic Construction Manager

3 SSD-03a Contractor Construction firm Foreign Project Manager

4 SSD-03b Contractor Construction firm Foreign Project Engineer

5 SSD-04 Client Development organisation Foreign Construction Manager

6 SSD-05 Contractor Construction firm Foreign Owner / Manager

7 SSD-06 Merchant Supply firm Foreign Manager

8 SSD-07 Contractor Construction firm Foreign Managing Director

9 SSD-08 Regulator Government agency Domestic Director

10 SSD-09 Regulator Government agency Domestic Director

11 SSD-10a Client Development organisation Foreign Program Manager

12 SSD-10b Client Development organisation Foreign Procurement Manager

13 SSD-10c Consultant Development organisation Foreign Construction Manager

14 SSD-10d Consultant Development organisation Foreign Project Engineer

15 SSD-11 Merchant Supply firm Domestic Managing Director

16 SSD-12 Contractor Construction firm Foreign Managing Director

Table 8.1 - Interviewee list - South Sudan


moderate political instability and violence low availability of expertise low regulatory quality

low institutional development low availability of materials & equip. low reliability of the legal frame

moderate economic development low availability of credit for contractors moderate prevalence of corruption

Table 8.2 - Statistically-defined conditions - South Sudan


absence of testing facilities adoption of various foreign regulations inappropriate designs and specifications

inadequate contractor registration adoption of informal design standards inflated construction costs

inadequate compliance certification strategic over-design

neglect of testing of materials and works

Table 8.3 - Transcript-coded variables - Design and certification of actors and works - South Sudan

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170


inadequate availability of expertise delayed interim payments poor quality of built work

absence of testing facilities neglect of insurance and guarantees excessive contractor risk

restricted or unreliable supply chains inadequate superintendence of works

inadequate legal frame for insurance/liability informal (undocumented) contracting

adoption various standard forms of contract

adjusted payment terms

Table 8.6 - Transcript-coded variables - Contract conditions and administration - South Sudan


corrupt customs & problematic supply independent international supply chains expansion of domestic industry

currency volatility and restricted availability import of prof., skilled & unskilled labour increased project overhead costs

exorbitant transport costs informal credit from merchants

high volatility & inflation of resource prices vertical integration of resources

very-low availability of expertise merchants price & share goods cooperatively

insecure (unsafe) contractor work sites

rapid expansion of supply chains

restricted or unreliable supply chains

Table 8.5 - Transcript-coded variables - Resource mobilisation and management - South Sudan


volatile construction demand complete subversion of competitive tenders inflated construction costs

very-low availability of expertise partial subversion of competitive tenders duopoly market for government contracts

very-high prevalence of corruption preferential contract award market entry of firms

excessive under-pricing of bids expansion of domestic industry

reassignment of contracts

direct (non-competitive) award of contracts

Table 8.4 - Transcript-coded variables - Tendering and contract award - South Sudan

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171

General conditions


Construction conditions Low availability of expertise Low regulatory quality Low availability or mobility of expertise Low availability or mobility of expertise

Low regulatory quality Moderate-high prevalence of corruption Currency volatility and restricted availability Restricted or unreliable supply chains

Absence of testing facitlies Low availability of expertise Economic volatility and price inflation Currency volatility and restricted availability

Donor strategic objectives Restricted or unreliable supply chains


Construction practices Adoption of various foreign codes Complete tender subversion Importation of skilled and unskilled labour Inadequate site superintendence

Adoption of informal design standards Preferential contract award Vertical integration Adjusted payment terms

Strategic over-design Direct contract award Independent international supply chains

Project outcomes Decreased quality of built work Duopoly market for government contracts Increased commerical risk Increased client risk

Inappropriate designs Increased contract prices Industrial capacity development Decreased quality of built work

Increased project costs Market entry of foreign firms Increased construction costs

Increased quality of built work Domestic firms established Increased contract prices

Table 8.7 - Summary of findings - South Sudan

Moderate political instability and violence

Low institutional development

Low economic development

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172

8.6 Figures

Figure 8.1 – General conditions – South Sudan

South Sudan

173

Figure 8.2 – Economic conditions – South Sudan

South Sudan

174

Figure 8.3 – Regulatory conditions – South Sudan

South Sudan

175

Commercial Firm

Foreign | Domestic

Financier

Clie

ntD

omes

tic |

Fore

ign

Consu

ltant

Domes

tic | F

oreign

Foreign

| Dom

estic

Regula



MilitaryUnit


Subcontractor

Domestic | Foreign

Merchant

Dom

estic | Foreign

Figure 8.4 - Interviewee distribution - South Sudan

South Sudan

176

Loweconomic

development

Lowinstuitutional development

Moderate political

instability & violence

Lowregulatory

quality

Lowavailability & mobility of expertise


codes

Inappropriate designs


costs

Absence of testing

facilities

Strategic over-design

Adoption of informal design

standards


work


work

Figure 8.5 - Network analysis diagram - South Sudan - Design and certification of actors and works



South Sudan

177

Loweconomic

development

Lowinstitutional

development

Moderate political


Lowregulatory

quality

Moderate-highprevalence of

corruption

Increased contract costs

Complete subversion of tender rules


Donorstrategic

objectives


Preferential contract award

Duopoly market for government

contractsMarket entry by

foreign firmsDomestic firms

established

Direct contract award

Increased contract costs

Figure 8.6 - Network analysis diagram - South Sudan - Tendering and contract award

South Sudan

178

Loweconomic

development

Lowinstitutional

development

Moderate political

instability &

Highly volatile resource

prices


risk



Verticalintegration - equipmentand plant

Independent international

supply chains

Importation of skilled and unskilled

labour


costs


Increased industrial capacity

Currency volatility and

restricted availability


supply chains

Figure 8.7 - Network analysis diagram - South Sudan - Resource mobilisation and management

South Sudan

179

Loweconomic

development

Lowinstitutional

development

Moderate political

instability &


Adjusted payment terms

Restricted/ unreliable

supply chains

Inadequate superintendence

of works

Contractors’ independent international

supply chains

Increasedclient risk


work

Strategic over-design

Currency volatility

Increasedconstruction

costs

Figure 8.8 - Network analysis diagram - South Sudan - Contract conditions and administration

South Sudan

180

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181

Chapter 9 PAKISTAN

Localised violence, normalised instability, entrenched opportunism

Conditions and practices characterising construction in Pakistan from 2007 to 2012 are

addressed in this chapter as a case of construction during conflict. The situation in Pakistan is notable

for more advanced levels of economic and institutional development than the cases of Afghanistan,

Timor-Leste and South Sudan. However, despite national institutional development stretching back

to the British colonial era and economic development including industrial production comparable

with that of middle-income countries, Pakistan’s history is marked by prolonged political instability

and violence. This has included various separatist, insurgent and Islamist conflicts which, during the

period from 2007 to 2012, all contributed to levels of political violence that ranked Pakistan behind

only Afghanistan and Syria in regard to the number of battle-related deaths.256 While much of the

political violence Pakistan during the period occurred in a limited part of the country’s territory, the

high levels of violence and instability associated with the various conflicts throughout the country

had wider national effects.

The chapter is comprised of four sections. Section 9.1 describes particular aspects of

Pakistan’s historical trajectory that are relevant to understanding the contemporary context of

construction, which is described through a review of statistical indicators that positions Pakistan in

relation to conflict-affected and developing countries generally. Section 9.2 addresses the data

collected for the study, describing the group of practitioners interviewed in relation the broader field

of actors. Section 9.3 presents the analysis of this data in the form of network diagrams and

accompanying narratives. Section 9.4 discusses the findings. Tables and figures are compiled at the

end of the chapter.



The creation of Pakistan in 1947 from areas previously under British colonial control brought

together culturally and economically distinct territories within the new nation-state. The religious

rationale underpinning the partition of territory between Pakistan and India, with majority Hindu

256 UCDP Battle-related Deaths Dataset (UCDP 2018) records 23,081 battle-related deaths in Pakistan during the period from

2007 to 2012, compared to 40,787 deaths in Afghanistan and 39,465 deaths in Syria during the same period. In addition,

the BFRS Political Violence in Pakistan dataset (Empirical Studies of Violence Program 2014), which records incidences of

political violence in Pakistan that do not necessarily meet the UCDP definition of war, records 11,390 incidents of political

violence during the period from 2007 to 2012, including: acts of terrorism, assassinations, violent political demonstrations

and attacks on the government.

Pakistan

182

provinces forming India and majority Muslim provinces forming Pakistan, created a non-contiguous

state comprising West Pakistan and East Pakistan separated by around 2,000 km of Indian territory.

West Pakistan comprised the provinces of Punjab, Sindh, Balochistan and the North-western

Frontier Province (NWFP), each of which experienced vastly differing histories of colonial

possession. East Pakistan - formed from part of the colonial province of Bengal - was a more coherent

territory with a Bengali-speaking population comprising more than half of the population of Pakistan

(Noman 2012).

The reluctance of the new Pakistani political elite - primarily Punjabis based in West Pakistan

- to cede control to numerically dominant Bengalis contributed to delays in the drafting of a

constitution that would enable democratic elections (Cohen 2004). These delays undermined the

legitimacy of the interim civilian government, which was eventually ousted in a military coup d’état

in 1958. The national institutions of Pakistan were inherited largely intact from the colonial

administration. In the absence of a democratically elected government, two of these institutions -

the military and bureaucracy - expanded their roles within the state, with the bureaucracy taking

charge of domestic policy within the military government (Cohen 2004). Following national

elections that were eventually held in 1971, the military government refused to cede power to the

victorious Bengali party, prompting a civil war that eventually led to the secession of East Pakistan

and the creation of Bangladesh.

The secession of East Pakistan heralded competition for control of the state between elites in

the remaining western provinces. The military ceded power to the Sindh-based Pakistan People’s

Party (PPP) which had won the majority of parliamentary seats in the west prior to the war. Populist

economic and institutional reforms initiated by the PPP government, including the nationalisation

of industries and expansion of the bureaucracy to include PPP supporters. Unrest following

discredited national elections in 1977 provided justification for another coup d’état and a military

government that reversed many of the PPP-government reforms.

In response to increasing regional and ethnic divisions, the new military government departed

from prior principles of a secular state and sought to reinforce national cohesion through the

elevation of Islam as the central factor in national identity. Elections eventually held in 1988

heralded an era marked by a succession of short-lived civilian governments. The Sindh-based PPP

and Punjab-based Pakistan Muslim League (PML) won alternating elections, with each government

plagued by incompetence and corruption that provided justification for the removal of each

government by the military, followed by new elections. Increasing political isolation of Baloch and

Pashtun ethnic groups contributed to rising secessionist violence in Balochistan and political

violence in Sindh.

The military eventually assumed power again following another coup d’état in 1999. The

new military government coincided with resumed American engagement in Afghanistan following

September 11, 2001. Support for the war in Afghanistan provided increased political and financial

support from America that sustained the military government in Pakistan (Rashid 2004). The war in

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183

Afghanistan also led to increasing political instability in Pakistan, as Islamists associated with Al-

Qa’ida fled across the border, along with members of the Afghan Taliban, which received both

material and organisational support from the Pakistan military (Gopal 2014). Pakistan’s Federally

Administered Tribal Areas (FATA) adjacent to the border with Afghanistan, over which the

government exerted limited control, became the home and training ground for Afghan insurgents

and foreign Islamists. In FATA and Khybher Pakhtunkwa province (formerly the NWFP), the

presence of foreign Islamists, together with popular discontent with the government, contributed to

the expansion of a range of Pakistani Islamist insurgent groups that eventually coalesced to form the

Pakistani Taliban (Tehrik-i-Taliban Pakistan - TTP) (Rashid 2004).257

Elections in 2008 led to the first democratically-elected government to complete a full term

of office in Pakistan’s history - a landmark suggesting a degree of stability in state-society relations

that is not reflected in levels of political violence during the period. While political violence has

been a consistent feature of Pakistan’s history, increased violence from 2005 to 2012 distinguish the

period from Pakistan’s normally turbulent state. In FATA and Khyber-Pakhtunkhwa province,

increasing insurgent violence from 2006 peaked in 2009, with 6,864 battle-related deaths recorded

by the UCDP for 2009 (UCDP 2018). The expansion of Islamist groups in other parts of the country

was marked by increasing attacks on religious minorities in the urban areas of Punjab, Sindh and

Balochistan. In response to instability arising from Islamist violence, political violence associated

with the Baloch secessionist movement and Karachi political activists also expanded. Each of these

movements was limited in geographic scope - none of them presents a substantial threat to the state.

Nevertheless, the combined violence arising from Islamist, secessionist and political movements

throughout Pakistan from 2005 to 2012 exceeds levels experienced in any civil war during the

period except Afghanistan’s.

Despite significant social and political upheaval, Pakistan’s economy grew consistently from

2007 to 2012, albeit at a diminished rate. Average annual growth of around 4 per cent from 2000

reduced to 0.5 per cent from 2007 in parallel with national elections and the surge in insurgent and

sectarian violence, then rebounded back to around 4 per cent as violence subsided in 2012.258

Notwithstanding continued production in segments of the economy, violence and political

instability, appears to have stifled investment and construction demand. Consistent per annum VAC

growth from 2004 of around 4 per cent ended abruptly in 2008, following which VAC stagnated

until 2011.259 Construction demand appears to have responded to the environment of increased

257 The Tehrik-i-Taliban Pakistan share some ideological origins with the Afghan Taliban, primarily in the Deobandi school

of Islam, though are organisationally distinct. This distinction is clearly reflected in their relationships with the Pakistani

military, which is a covert ally of the Afghan Taliban and the principal enemy of the Pakistani Taliban.



Pakistan

184

social and political instability surrounding the national elections and the escalation in insurgent and

sectarian conflicts.


Statistics for Pakistan for each of the nine proxy indicators of construction conditions


review, conditions are consolidated in three groups: general conditions, economic conditions, and

regulatory conditions.

General conditions in Pakistan in 2012 appear to have been mixed in comparison with the

broader group of conflict-affected countries. Indicators describing institutional development,

economic development, and political instability and violence in Pakistan are presented in Figure

9.1. Institutional development is measured using the IDA Resource Allocation Index (World Bank

2018a), with Pakistan’s score of 3.3 within the interquartile range for conflict-affected countries of

2.7 – 3.5. Economic development is measured using per capita GNI (World Bank 2018b), with

Pakistan’s per capita GNI of USD 922 within the interquartile range of USD 553 – 3,474. In contrast,

political instability and violence appears to have been very high in Pakistan compared the conflict-

affected countries generally, with Pakistan’s Political Stability and the Absence of Violence score of

0.2 below the interquartile range for the conflict-affected group of 0.7 – 1.5 (World Bank 2018c).

These indicators highlight the moderate levels of institutional and economic development in

Pakistan in relation to the group of conflict-affected countries in parallel with relatively high levels

of political instability and violence.

Economic conditions surrounding construction in Pakistan in 2012 appear to be moderate in

relation to the group of conflict-affected countries. Indicators describing the availability of expertise,

manufactured materials and equipment, and credit for contractors in Pakistan are presented in Figure

9.2. Availability of expertise is described by the proportion of the labour force with an intermediate

education (ILO 2018a), with the value for Pakistan of 22.6 per cent within the interquartile range of

7.3 – 33.9 per cent. Availability of manufactured materials and equipment is measured using Value

Added by Manufacturing (percentage of GDP) (World Bank 2018d), with Pakistan’s value of 15.8

within the conflict-affected group interquartile range of 5.2 – 16.6 per cent. Availability of credit for

contractors is described using the indicator Domestic Credit from Banks to the Private Sector

(percentage of GDP) (World Bank 2018e), with the value for Pakistan of 24.4 per cent above the

interquartile range of 10.3 - 22.3 for the group for conflict-affected countries. Thus, indicators

suggest that economic conditions in Pakistan were either moderate or, in the case of availability of

credit, high in relation to conditions in the majority of conflict-affected countries.

Finally, institutional conditions affecting construction in Pakistan also appear to have been

moderate compared to institutional conditions characterising conflict-affected countries generally.

Indicators describing regulatory quality, reliability of the legal framework, and prevalence of

Pakistan

185

corruption in Afghanistan in relation to the interquartile ranges for developing and conflict-affected

countries are presented in Figure 9.3. For the Regulatory Quality indicator (World Bank 2018f), the

Pakistan’s score of 1.9 is within the conflict-affected group interquartile range of 1.2 - 2.1. Reliability

of the legal framework is measured using the indicator Rule of Law (World Bank 2018g), with a

score for Pakistan of 1.6 within the conflict-affected country interquartile range of 1.1 – 1.9. The

prevalence of corruption is gauged using the indicator Control of Corruption (World Bank 2018h),

with Pakistan’s score of 1.5 within the interquartile range of 1.3 – 1.9 for the group of conflict-

affected countries. For each dimension of institutional conditions, the situation of construction in

Pakistan thus appears to moderate compared to the majority of conflict-affected countries.

In contrast with high levels of political instability and violence, other indicators for Pakistan

describe a moderate situation in relation to the group of conflict-affected countries.

9.2 Primary data

The group of 23 practitioners interviewed in relation to the case of Pakistan are listed in Table

9.1. Sixteen interviews were conducted, with four of these interviews including multiple

interviewees. Regarding roles in construction, the group comprises: 2 clients, 4 consultants, 16

contractors and 1 regulator. The contractors in this group were all medium-sized construction firms.

Regarding entities represented, the group comprises: one statutory authority, five development

organisations, and 17 firms (consulting and contracting). Regarding origin, the group comprises 18

Pakistani and five foreign practitioners.


construction in Pakistan is illustrated in Figure 9.4. Of the 56 permutations of practitioner

characteristics, 34 are excluded from the field and represented with lighter shading due to their

being irrelevant to the particular situation in Pakistan. For example, military units did not play a

significant role in civilian construction in Pakistan, the well-established domestic government

bureaucracy retained responsibility for all regulatory functions, and only commercial firms appear

to have acted as merchants or subcontractors. Each interviewee is represented in with a closed

circle. Figure 9.4 highlights that the majority of interviewees represented domestic contracting firms.

It also highlights that the group of interviewees contains no domestic clients, no financiers, no

subcontractors and no merchants. That participant observations were undertaken from the

perspective of a consultant employed with a foreign development organisation is also represented

in Figure 9.4 with a triangle. The sources of primary data for the study thus represent only part of

the field of construction actors in Pakistan. In particular, primary data focusses on experiences and

knowledge of medium-sized domestic contractors and foreign consultants.

Pakistan

186


The analysis of data is presented in this section in the form of network diagrams and

accompanying narratives for each of the four fields of practice. The coding of interview transcripts

relating to Pakistan identified 29 second-cycle codes: five in relation to design and the certification

of actors and works, eight in relation to tendering and the award of contracts, six in relation to

mobilisation and management of resources, and twelve in relation to contract conditions and

administration.260 The review of statistical indicators defined nine prevailing conditions in Pakistan

in relation to conditions in conflict-affected countries generally (see Subsection 6.1.2), which are

listed in Table 9.2.







analyses.


The five second-cycle transcript codes identified in relation to design and the certification of

actors and works in Pakistan are listed in Table 9.3. A network diagram positioning the practice of

fraudulent materials testing in relation to prevailing conditions and project outcomes is presented in

Figure 9.5.

9.3.1.1 Fraudulent testing of materials

The practice of materials testing laboratories providing fraudulent test results was also

reported in relation to the case of Afghanistan. In Pakistan, testing services are widely available, with

testing available from private laboratories and from engineering faculties of universities. It was

suggested during interviews that, while tests from private labs were unreliable and potentially

subject to fraud, tests from university labs were generally credible.261

In Figure 9.5, fraudulent materials testing in Pakistan may be traced back to prevailing

political instability and violence via two paths. Along an indirect path of conditions, fraudulent

testing is an aspect of opportunistic contractor behaviour that is both a cause and a consequence of

client practices of: corrupt/biased contract administration, and the enforcement of dysfunctional


261 PAK-06, PAK-11

Pakistan

187

construction price controls (see Subsections 9.3.2 and 9.3.4 below). While seeking to control

contractor opportunism, biased contract administration appears to contribute to antagonistic

contract environments that promote opportunistic practices such as the submission of fraudulent test

results. Dysfunctional price controls and biased/corrupt administration may, in turn, be viewed as

symptoms of inadequate regulatory quality and moderate corruption, which are symptoms of

shortcomings in broader institutional development.

A more direct path of causal conditions from fraudulent testing back to conflict may be traced

via the effect of political instability and violence upon investment horizons. High levels of political

instability and violence and associated economic instability may have contributed to opportunistic

behaviour of contractors by shortening investment horizons, prioritising immediate gains over long-

term reputation and business development.

Outcomes arising from fraudulent testing were not explicitly described during interviews,

however, observations suggest significant negative impacts upon construction quality, as presented

in Figure 9.5.


The eight second-cycle transcript codes identified in relation to tendering and the award of

construction contracts in Pakistan are listed in Table 9.4. Of the five practices identified in transcript

coding, three were highlighted as being particularly significant: 1) dysfunctional price controls by

clients, 2) partial subversion of competitive tender rules, and 3) bid collusion among prequalified

firms. A network diagram positioning these practices in relation to prevailing conditions and project

outcomes is presented in Figure 9.6.

9.3.2.1 Dysfunctional price controls by clients

A dysfunctional system of construction price controls was briefly noted in Subsubsection

9.3.1.1 as one aspect of regulatory and institutional conditions in Pakistan that inadvertently

contribute to opportunistic behaviour of contractors. Price controls for government contracts are

based upon Common Schedules of Rates (CSRs) that are published by various federal and provincial

government departments. CSRs list construction materials and components, together with basic

specifications and market prices. In addition to providing the basis for client cost estimates, CSRs

form the basis of price constraints for government contracts such that typically only bids that are 5

per cent above or below the CSR-based cost estimate are deemed qualified in government tenders.262

CSRs thus constrain both unit rates and overall contract prices. Interviewees suggested that

inadequate maintenance of CSRs is such that that they do not accurately reflect prevailing market

prices. Interviewees suggested that inaccuracies in CSRs were particularly acute in the context of

262 PAK-01, PAK-03, PAK-04

Pakistan

188

increased price inflation that accompanied increased conflict and political instability from 2007.

Rather than quarterly revisions based upon market surveys, in practice CSRs are typically updated

less frequently using standard inflation indexes. “What is actually happening for the last three years,

they are just reprinting [the CSRs] - adding a percentage then just reprinting. Standard inflation rate,

though the standard inflation rate does not apply equally to each of the items”, explained one

manager of a construction firm.263 “This is the main dilemma doing work with government agencies

– the rates, the prices, the CSR – they are not the actual market rates”, suggested a manager of

another firm.264

A complex relationship appears to exist between CSR-based price controls, prevailing

regulatory conditions and contractor practices. The primary motive behind the CSRs is to ensure

reasonable contract prices, particularly in the context of corruption that might otherwise lead to

price inflation. Introduction and widespread use of CSRs might also be viewed as a response to the

prevailing technical environment, as standardized specifications for all scheduled items entail a

degree of standardisation of designs and built work.

Inadequate maintenance of CSRs, which is related to regulatory quality and institutional

development, appears to undermine the objectives motivating their introduction. Inadequate

contract prices promotes opportunistic behaviour among contractors seeking to ensure a profit

despite inadequate contract prices. The submission of fraudulent test results (see Subsubsection

9.3.1.1) is an example of opportunistic behaviour that perhaps responds to dysfunctional price

control, as contractors seek to reduce costs by intentionally reducing the quality of built work.

Another responding practice is widespread collusion among prequalified bidders in government

tenders (see Subsubsection 9.3.2.2). CSR price controls might also promote partial subversion by

officials of competitive procurement rules, which interviews suggests is widespread in government

tenders (see Subsubsection 9.3.2.3). Regulation of prices through CSRs ensures that increased costs

arising from corruption are not reflected contract prices nor in departmental budgets, diminishing

the likelihood that corruption is detected and also perhaps diminishing motivation for government

departments to undertake reforms to tackle corruption.

Rather than a direct product of high political instability and violence, dysfunctional price

controls in Pakistan appear to stem from inadequacies in regulatory quality and institutional

development. Unlike authorities in Afghanistan, Timor-Leste and South Sudan, Pakistani authorities

had the capacity to formulate and implement elaborate regulatory measures such as the CSRs,

though not to effectively maintain these systems.

A tangible outcome of dysfunctional price controls described during interviews and

positioned in Figure 9.6 was the inadequate quality of built work, as contractors compromised

263 PAK-01, pg.6

264 PAK-03

Pakistan

189

construction quality in order to make inadequately priced contracts profitable.265 Two other practical

outcomes – bid collusion and petty corruption – are described below.

9.3.2.2 Bid collusion among prequalified firms

Interviewees that were involved primarily in small and medium-sized government-funded

projects suggested that annual prequalification of firms was typically undertaken by individual

government departments and that collusion among prequalified firms was widespread. Several

processes of collusion were described in interviews. In one form of the practice, colluding firms give

incomplete bids to one bidder, who completes the other bids to ensure the desired result. “We call

it ring. All the contractors sit together and say we want X to win – you pay all the contractors an

amount and they give you their bid documents”, explained an engineer with direct experience in

such collusion.266 “[It] is called the ring – after preselection you might have five contractors… They

all decide who will take which contract and this is prevalent in the government sector – they give

the payments for the other contractors then they quote the price”, explained an owner of a

construction firm.267 It was suggested in interviews that the amount distributed by the nominated

winner among the other bidders is equivalent to the bid security deposit – typically 2 per cent of the

bid price. The predefined amount of payments described in interviews suggests the systematic

character of collusion between prequalified firms.

A manner in which collusive bidding relates back to prevailing regulatory and institutional

conditions and to prolonged political instability in Pakistan was described above in Subsubsection

9.3.2.2. A contractor involved in collusion justified the practice as a reasonable response to price

controls and high inflation; “The pooling system is justified because it’s reasonable for the

contractor, so that the contractor doesn’t feel that he will lose much if he follows inflation”.268 Thus,

in addition to widespread collusion being traced back to prolonged political instability via

inadequate institutional and regulatory conditions, the practice may also be more directly associated

with political instability and violence via economic instability and high inflation.

As with dysfunctional price controls, reduced quality of built work is expected to be an

outcome arising from widespread collusion, through the additional costs of collusion-related

payments and through diminished incentives for contractors to perform diligently in order to

increase prospects for future work.

265 PAK-01, PAK-03

266 PAK-11, pg.6

267 PAK-09, pg.2

268 PAK-04, pg.2

Pakistan

190

9.3.2.3 Partial subversion of competitive tender rules

Well-established public procurement procedures described during interviews, including

several national and provincial oversight agencies, appear to have limited the prevalence of

complete subversion of competitive procurement rules compared to the cases of Afghanistan and

South Sudan. However, interviewees described widespread partial subversion of tenders.

Interviewees suggested that corruption was widespread within the annual prequalification of firms

by individual provincial or national government departments and was restricted to firms with

connections to senior government officials. “The contractors are very powerful, or you could say

well-connected people”, explained an engineer that managed contracts for a government

department.269 The owner of a construction firm that has undertaken road construction contracts

with the government of Punjab province explained, “The prequalification is not fair. The government

people, they prefer their own contractors – their relatives. It’s common in this country”.270 In another

example of partial subversion of competitive procurement procedures, an interviewee described a

central role played by officials facilitating collusion among prequalified firms. It was suggested that

collusion is typically coordinated during pre-bid meetings with the consent or participation of the

official responsible for tender management, and that a predefined payment of 0.5 per cent of the

bid price is paid to the official.271 Several interviews with contractors and engineers with past

experience in public construction projects suggested that, while the general form of competitive

tender procedures is maintained to satisfy oversight bodies, corruption within particular aspects of

these procedures is widespread.272

Corrupt practices such as the partial subversion of tender rules may be traced back to

conditions of moderate regulatory quality and moderate institutional development similar to the

path of conditions described above in relation to dysfunctional price controls and collusive bidding.

The widespread prevalence of corruption described in interviews in the form of partial subversion

by officials of competitive tender rules appears to be incongruous with parallel descriptions of well-

established public procurement oversight. The high prevalence of corruption suggested in interviews

also contrasts with statistical indicators that suggest moderate levels of corruption in Pakistan in

relation to the wider group of conflict-affected situations. One explanation could be that corruption

is particularly prevalent in construction compared to other government spending, and that

established public procurement procedures provide cover for, rather than control of, this corruption.

As described in relation to dysfunctional CSR price controls (see Subsubsection 9.3.2.1), the

main immediate outcome of partial subversion of competitive tenders appears to be poor

construction quality. In the context of price controls, it is assumed that costs of bribes are recouped

269 PAK-06, pg.16

270 PAK-04, pg.3

271 PAK-11

272 PAK-01, PAK-04, PAK-09, PAK-11

Pakistan

191

through compromises to construction quality. Another outcome of widespread corruption in

government tenders appears to be that more diligent construction firms avoid government contracts.

Of the contractors interviewed, the two firms that appeared to be the most competent and

professional refused to participate in government tenders in response to widespread corruption and

inadequate payment.273 If widespread, avoidance of government clients by more-professional

contractors is perhaps another route through which corruption undermines the quality of public

infrastructure.


The six second-cycle transcript codes identified in relation to the mobilisation and

management of construction resources in Pakistan are listed in Table 9.5. Analysis of these second-

cycle interview codes in relation to other variables identified through the review of statistics does

not suggest any significant effect of political violence instability upon resource mobilisation and

management practices in Pakistan. This component of analysis thus did not yield any network

diagrams describing paths of causation from political instability and violence to construction

practices and project outcomes.

Established systems of professional education in Pakistan include a network of around 90

accredited engineering schools, which an official from the Pakistan Engineering Council (PEC)

suggested annually produce around 10,000 graduates in various construction-related engineering

disciplines.274 The PEC official suggested that this consistent supply of new expertise contributed to

a population in 2013 of around 150,000 registered engineers. Parallel systems operate for the

education and registration of architects and other construction professionals.275

A graded system of construction firm registration maintained by the PEC ensures that domestic

firms employ sufficient expertise. Graduation to successive PEC grades, from C-6 to C-1, then C-B

and finally C-A, requires full-time employment by firms of increasing amounts of registered

professional labour. For example, C-5 firms are required to employ registered professional(s) with

total of five years of professional experience while, to obtain a C-1 grade, in addition to contract

experience and financial requirements firms must employ registered professionals with a total of 75

years of experience (Pakistan Engineering Council 2010). Higher PEC grades enable firms to

compete for contracts of greater value, providing incentive for firms to hire professional staff. This

presence of firms with sufficient expertise to undertake large contracts appears to restrict the

entrance of foreign firms to the construction market in Pakistan compared to Afghanistan, Timor-

Leste and South Sudan.

273 PAK-01, PAK-03

274 PAK-14

275 PAK-14

Pakistan

192

Interviewees described the mobilisation of trade and unskilled labour through a system of

subcontracting known locally as petty contracting. A clear distinction was drawn by interviewees

between subcontracting, which locally refers to the wholesale reassignment of contracts, and petty

contracting, in which the contractor retains responsibility for managing the works and employs other

smaller, specialist firms or individuals to provide specific trade services.276 Petty contracting takes a

range of forms, varying from the engagement of individual firms to undertake specific trades – a

practice akin to traditional trade subcontracting – through to the engagement of a single petty

contractor that in-turn engages the various trade subcontractors.277 Depending on their specialist

trade, petty contractors provide all required tools and equipment and both skilled (trade) and

unskilled (basic) labour. The supply of materials by contractors, rather than petty subcontractors,

resembles the system of labour-only subcontracting prevalent in construction industries of many

developing economies (see Wells 2008).


The twelve second-cycle transcript codes identified in relation to contract conditions and

contract administration in Pakistan are listed in Table 9.6. Of the seven practices identified in

transcript coding, two were highlighted as being particularly significant: 1) corrupt or biased contract

administration, and 2) corrupt or ineffective arbitration. Network diagrams positioning these four

practices in relation to prevailing conditions and project outcomes are presented in Figure 9.7.

9.3.4.1 Corrupt or biased contract administration

Corrupt or biased behaviour of contract administrators was described during several

interviews with contractors and highlighted previously in relation to submission of fraudulent test

results and collusive bidding (see Subsubsections 9.3.1.1 and 9.3.2.2). Biased behaviour of contract

administrators described during interviews contrasts with the independent, impartial contract

administration required by FIDIC contracts that are commonly used in Pakistan.279 Several managers

and owners of construction firms described typical exploitative behaviour by contract administrators

that discouraged more professional firms from competing for government contracts. “Here, the

276 PAK-01, PAK-02

277 This second form of petty contracting differs from reassignment in that the contractor retains overall responsibility for the

management and coordination of works through a site supervisor.

279 The PEC publishes a series of standard contracts - including a general construction contract, a contract for smaller works,

and a contract for civil works - that interviewees suggested are mandatory. The PEC contracts are copies of FIDIC contracts

(with minor modifications). The legal validity of a statutory body such as the PEC mandating use of a particular form of

contract, particularly for contracts involving two non-government parties, is unclear. Nevertheless, the PEC/FIDIC contracts

appear to be commonly used for public and private construction projects.

Pakistan

193

mindset is strange – they [government contract administrators] think they are the owner – the

employer. If they have given the contract to us, we are now… their slave. They are not treating the

contractor as they should – as partners”, said the manager of a particularly highly-qualified firm that

undertook contracts with foreign private clients and international organisations though had ceased

competing for government contractors in response to perceived exploitative behaviour of officials.280

Contractors also described corruption associated with contract administration, including the

unofficial, albeit standardised 2 per cent of each interim payment paid to contract administrators. In

interviews, owners and managers of firms explained that this fee is then distributed amongst officials

within the clearly defined bureaucratic hierarchy.281 The standardised nature of the payment and

general acceptance by contractors suggests a degree of normalisation of corruption in the

administration of government contracts. Contractors that refused to pay this illicit fee, or failed to

comply with other demands of officials, risked having interim payments delayed indefinitely.

“Everyone understands that you have to pay some percentage… otherwise you won’t get your

money back. I have seen contractors who don’t pay such things, then they keep wandering around

the department for years [seeking payment]”, explained the owner of a firm.282

Practices associated with corrupt or biased contract administration may be viewed as

symptoms of the broader regulatory environment and as both causes and effects of commonly

antagonistic contract environments described during interviews. Relationships between corrupt or

biased contract administration and prevailing conditions thus appear to be similar to relationships

described previously in regard to dysfunctional CSR price controls and subversion of tender rules.

Corrupt or biased behaviour appears to be a symptom of broader corruption as well as an attempt

to exert greater control over contractors in order to restrict opportunistic practices. The prevalence

of corruption in Pakistan may be seen as a symptom of the state of institutional development, with

prolonged political instability having influenced corruption indirectly via the effect of stifling

institutional development. Prolonged political instability may also have had a more direct impact

upon corruption, with short term political horizons and appeals to narrow electorates fostering a

corrupt political culture that influenced the normalisation of corruption within established

bureaucratic procedures.

From interviews, two inter-related outcomes of biased and corrupt contract administration

practices may be discerned. In the context of contract price controls, increased costs arising from

corruption are expected to ultimately contribute to reduced construction quality as contractors seek

to reduce construction costs to compensate for costs of bribes. Interviews also highlighted that biased

behaviour of administrators entails increased risks for contractors. These risks seem to discourage

more-professional firms from working with government. These risks also appear to contribute to

280 PAK-01, pg.18

281 PAK-09, PAK-11

282 PAK-03, pg.5

Pakistan

194

commonly antagonistic contracting environments described during interviews. In doing so, biased

contract administration and the increased risks for contractors that it entails appear to encourage

opportunistic behaviour of contractors, who may view practices such as collusive bidding and

fraudulent testing as reasonable responses to an unfair contracting environment.

9.3.4.2 Corrupt or ineffective arbitration

Corrupt and biased practices associated with contract administration appear also to be

abetted by corrupt or ineffective arbitration of contract disputes. Legal services appear to be readily

available to enable arbitration of disputes between clients and contractors. However, contractors

and consultants suggested that construction contract dispute resolution is usually neither fair nor

transparent. A system of arbitration described in interviews involves the government client and the

contractor each nominating a respected construction professional, with the resulting two-member

panel ruling on the dispute.283 Several professional engineers and representatives suggested this

dispute resolution mechanism, while efficient, was easily compromised. “Arbitration [that is, this

two-member panel], is better, because they solve the problems; most fairly, but sometimes you have

to give under the table”, explained the owner of a firm.284

Despite the regularity of contract disputes and availability of arbitration, all construction firms

interviewed expressed an unwillingness to escalate disputes to this level. Given the corrupt influence

of officials in the award of contracts, contractors suggested that they would prefer to incur a loss on

any specific contract rather than escalate disputes and thereby gain a reputation that might preclude

them from future government contracts. “We have a basic understanding that we will not go against

the client, even in some places if we have to forgo some money… Because every department, when

you go for prequalification, and you tell them you already have arbitration with this [other]

department, then it leaves a bad image... that you might do the same sort of thing with us”.285

Conditions underpinning corrupt and ineffective arbitration appear to be the same as those

underpinning corrupt or biased contract administration – broader corruption and the compromised

regulatory environment that are symptoms of the level of institutional development. The particular

period of increased political instability and violence from 2007 to 2012 is not expected to have a

major impact upon these conditions. However, the prolonged history of political instability is

expected to have an impact upon the prevalence of corruption, with implications for the corruption

in contract administration and dispute arbitration.

283 This system of dispute resolution for government contracts resembles provisions for the Dispute Resolution Board included

in the FIDIC Red Book.

284 PAK-04, pg.8

285 PAK-03, pg.15

Pakistan

195

Outcomes of corrupt or ineffective dispute resolution are also closely associated with corrupt

or biased contract administration. The common absence of impartial contract administration and

fair dispute resolution both contribute to increased risk borne by contractors.



Table 9.7, which summarises general conditions, construction conditions, construction practices

and project outcomes identified through the review of statistics, coding of transcripts, and network

analysis.

9.4 Discussion

Rather than being directly-affected by conflict, most of the identified conditions surrounding

construction projects in Pakistan were symptoms of general economic and institutional conditions,

such that many of the responding practices that were identified are expected to also occur in

developing countries that are not affected by recent conflict. Conditions that were found to be

directly affected by political instability and violence were: economic volatility and associated high

price inflation of construction resources, and shortened investment horizons of construction

contractors. Rather than instigating practices that are peculiar to Pakistan or to conflict-affected

situations, these practices and the political instability and violence underpinning them appear to

have increased the prevalence of practices that are expected to also occur in other countries at

similar stages of economic and institutional development.

In relation to design and the certification of actors and works, the only practice identified as

being significantly-affected by political instability and violence was the fraudulent testing of

materials. This was one example of opportunistic behaviour of contractors that responded to

inadequacies in regulatory conditions and to shortened investment horizons of contractors and

testing laboratories. Fraudulent testing was also identified in the case of Afghanistan, where it was

also symptomatic of widespread opportunistic behaviour responding to political instability,

shortened investment horizons and the lack of effective regulation.

Practices identified in relation to tendering and award of contracts in Pakistan were:

dysfunctional price controls enforced in tenders, partial subversion of competitive tender rules by

government officials, and collusive bidding by prequalified firms in participating in tenders for

government contracts. Dysfunctional price controls and partial subversion of competitive tenders

highlight disjunctions between de jure and de facto regulation. Established regulatory frameworks

include the systems of CSRs and systems of public procurement oversight. While these systems

appear to prevent complete subversion of tenders that was identified in the cases of Afghanistan and

South Sudan, poor practical implementation of regulatory systems in Pakistan appears to enable

Pakistan

196

other dysfunctional practices. The presence of elaborate though ineffective regulatory systems

appears to conceal dysfunctional practices such as the inadequate pricing of construction contracts

and widespread undermining of competitive tenders by public officials. Price collusion among

prequalified bidders for government contracts appears to be one practice that is abetted by

ineffective public procurement systems. While not unique to Pakistan or to conflict-affected settings,

particular conditions in Pakistan appear to have promoted bidder collusion in competitive

tenders.286 Enforcement of inadequate prices appears to have discouraged competition among

bidders while limiting the extent to which collusion increases contract prices and affects government

spending. Thus, public officials have limited incentive to control the practice which appears to be

easily concealed from procurement oversight.

No practices were identified in relation to mobilisation and management of resources in

Pakistan as being significantly affected by political instability and violence. Resource mobilisation

and management practices that were raised during interviews included: trade subcontracting,

labour-only subcontracting, permanent employment of management and site supervision staff within

contracting firms, and the provision of informal credit by materials merchants. These practices have

been associated with construction in developing countries in general and do not appear to respond

to the high levels of political instability and violence in Pakistan. Compared to the other cases,

economic development and the relatively high availability of various forms of labour, materials and

equipment in Pakistan is such that practices such as vertical integration of resources and reliance

upon independent contractor supply chains are unnecessary.

Practices identified in relation to contract conditions and administration were: corrupt or

biased contract administration, and corrupt or ineffective arbitration. These practices that were

primarily described by contractors appear to be similar to the practices identified in relation to

tendering and contract award in that they involve informal, dysfunctional practices occurring within

established formal regulatory systems. Despite widespread knowledge and use contracts requiring

independent administration, contractors described frequently antagonistic environments in which

contract administrators act as agents of the client, soliciting bribes and using delayed interim

payments as a punitive measure. Corrupt or biased administrative practices and opportunistic

practices of contractors highlight the ineffectiveness of standard contracts intended to control such

behaviour. This ineffectiveness of contracts is partially attributable to the lack of reliable arbitration

that would otherwise provide incentive for all parties to comply with contract conditions. While not

286 Collusive bidding practices are described in literature in relation to a range of contexts. Zarkada-Fraser & Skitmore (2000)

address collusion in relation to the Australian construction industry, finding that while legal and professional principle limit

the prevalence of collusion, a minority of practitioners would engage in collusion depending upon prevailing conditions.

Prius (2004) describes a case of widespread collusion in the Netherlands. Chotibongs et al. (2012) suggest that collusion is

difficult to detect and thus may be more widespread than recognised in construction industries. Bowen et a. (2007) identify

collusive behaviour among contractors in the South African construction industry.

Pakistan

197

restricted to Pakistan nor to conflict-affected countries in general, this situation is exacerbated by

institutional dysfunction that is associated with the prolonged history of political instability.

Two themes may be drawn from this consideration of practices identified in relation to

construction in Pakistan during the period of expanded conflict from 2007 to 2012: the moderating

effect of economic and institutional development, and the persistence of dysfunctional or

opportunistic practices despite well-established regulatory systems.

Conditions and practices characterising construction in Pakistan suggest that improved

economic and institutional development reduces the impact of political instability and violence

upon construction. Despite very high levels of instability and violence in Pakistan, conditions and

practices characterising construction were comparable with conditions and practices associated

with developing countries in general. This situation in Pakistan stands in contrast with the situation

of construction in Afghanistan, where, notwithstanding important differences in political situations,

comparable levels of violence were associated with different construction conditions and practices.

The situation in Pakistan also highlights the potential entrenchment of dysfunctional

construction practices. Despite moderate institutional conditions in Pakistan and well-established

regulatory systems, dysfunctional practices of clients and contractors including various forms of

corruption, collusion and fraudulent behaviour appear to be prevalent. It appears that, to an extent,

these regulatory systems provide a façade of de jure regulation though fail to control opportunistic

and dysfunctional practices. Practices that were identified from interviews such as various forms of

corruption, bidder collusion, and fraudulent materials testing are not expected to have arisen in

response to the expanded conflict from 2007 to 2012. Rather, these practices appear to be symptoms

of widespread entrenched opportunism. Tirole (1996) identified the persistent nature of corruption,

which might also apply to other opportunistic practices, such that reputations of contractor

opportunism promote the persistence of various opportunistic practices despite the presence of

established regulatory systems.

Pakistan

198

9.5 Tables

Reference Function Entity Origin Position

1 PAK-01a Contractor Construction firm Domestic Construction Manager

2 PAK-01b Contractor Construction firm Domestic Program Manager

3 PAK-02a Contractor Construction firm Domestic Program Manager

4 PAK-02b Contractor Construction firm Domestic Construction Manager

5 PAK-02c Contractor Construction firm Domestic Construction Manager

6 PAK-03a Contractor Construction firm Domestic Managing Director

7 PAK-03b Contractor Construction firm Domestic Program Manager


9 PAK-04 Contractor Construction firm Domestic Managing Director

10 PAK-05 Consultant Development organisation Foreign Construction Manager

11 PAK-06 Consultant Development organisation Foreign Consulting Engineer





16 PAK-11 Consultant Development organisation Foreign Construction Manager

17 PAK-12 Client Development organisation Foreign Program Manager

18 PAK-13 Client Development organisation Foreign Construction Manager

19 PAK-14 Regulator Government agency Domestic Senior Manager

23 PAK-15 Consultant Consulting firm Domestic Consulting Architect

20 PAK-16a Contractor Construction firm Domestic Managing Director

21 PAK-16b Contractor Construction firm Domestic Deputy Director


Table 9.1 - Interviewee list - Pakistan


high political instability and violence moderate availability of expertise moderate regulatory quality

moderate institutional development moderate availability of materials & equip. moderate reliability of the legal frame

moderate economic development high availability of credit for contractors moderate prevalence of corruption

Table 9.2 - Statistically-defined conditions - Pakistan

Pakistan

199


established system of contractor registration fraudulent testing of materials

established system of professional licensing

inadequate compliance certification

high prevalence of corruption

Table 9.3 - Transcript-coded variables - Design and certification of actors and works - Pakistan


high prevalence of corruption bid collusion among prequalified firms project delays

complete subversion of competitive tenders poor quality of built work

partial subversion of competitive tenders

enforcement of dysfunctional price controls

reassignment of contracts

Table 9.4 - Transcript-coded variables - Tendering and contract award - Pakistan


high volatility & inflation of resource prices labour-only subcontracting

insecure (unsafe) contractor work sites trade package subcontracting

adequate availability of expertise investment in professional staff

Table 9.5 - Transcript-coded variables - Resource mobilisation and management - Pakistan


inadequate legal dispute resolution escalation of contract rates increased contractor risk

inadequate liability and insurance corrupt or biased contract administration inadequate quality of built work

established systems of gov contract admin corrupt or ineffective arbitration

enforcement of retention or guarantees

inadequate superintendence of works

informal (undocumented) contracting

adoption of standard forms of contract

Table 9.6 - Transcript-coded variables - Contract conditions and administration - Pakistan

Pakistan

200

General conditions


Construction conditions Moderate regulatory quality Moderate regulatory quality Moderate regulatory quality

Moderate prevalence of corrutpion Moderate prevalence of corruption Moderate prevalence of corruption

Short investment horizons Opportunisitc contract environment

Economic volatility and price inflation

Construction practices Fradulent materials testing Partial tender subversion Corrupt or ineffective arbitration

Enforcement of dysfunctional price controls Corrupt or biased administration

Collusion among prequalified firms

Project outcomes Decreased quality of built work Decreased quality of built work Increased contractor risk

Decreased contractor risk Decreased quality of built work

Table 9.7 - Summary of findings - Pakistan

High political instability and violence

Moderate institutional development

Moderate economic development

Pakistan

201

9.6 Figures

Figure 9.1 – General conditions - Pakistan

Pakistan

202

Figure 9.2 – Economic conditions - Pakistan

Pakistan

203

Figure 9.3 – Regulatory conditions - Pakistan

Pakistan

204

Commercial Firm

Foreign | Domestic

Financier

Clie

ntD

omes

tic |

Fore

ign

Consu

ltant

Domes

tic | F

oreign

Foreign

| Dom

estic

Regula



MilitaryUnit


Subcontractor

Domestic | Foreign

Merchant

Dom

estic | Foreign

Figure 9.4 - Interviewee distribution - Pakistan

Pakistan

205


development

Moderate economic

development


violence

Moderate regulatory

quality

Moderate prevalence of

corruption

Fraudulent materials testing


work

Established contractor registration

Established professional

licensing



Enforcement of dysfunctional price controls

Contractor opportunism


Figure 9.5 - Network analysis diagram - Pakistan - Design and certification of actors and works

Pakistan

206

Partial subversion of tender rules


development

Moderate economic

development


violence

Moderate regulatory

quality


corruption

Collusion among

prequalified firms


work

Enforcement of dysfunctional price controls

Opportunisitc contracting

environment

Economic volatility and price inflation

Decreased contractor risk

Figure 9.6 - Network analysis diagram - Pakistan - Tendering and contract award

Pakistan

207



development

Moderate economic

development


violence

Moderate regulatory

quality


corruption



Contractor opportunism


work

Figure 9.7 - Network analysis diagram - Pakistan - Contract conditions and administration

Pakistan

208

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209

Chapter 10 SYNTHESIS & FURTHER DISCUSSION

Integrating cases and generalising relationships

Analysis addressed data collected for each case sequentially through each of the four fields

of practices. Synthesis in this chapter addresses case-specific findings together by considering the

findings from all four cases under each field of practice. This synthesis involves the integration and

generalisation of the conditions, practices and outcomes that were identified in the case studies. The

aim is not to characterise a typical case of construction in conflict-affected situations – diversity

between individual situations limits the utility of a typical scenario. Rather, synthesis aims to identify

relationships between prevailing conditions, construction practices, and project outcomes that are

relevant beyond the individual cases. That these conditions, practices and outcomes are associated

with conflict does not imply that they will occur in all conflict-affected situations, nor that they are

restricted to conflict-affected situations. They are more likely to arise with increased political

instability and violence and should be considered when addressing construction in other conflict

and post-conflict settings.

The chapter is comprised of two sections. In Section 10.1, synthesis of case-specific findings

is presented using network diagrams and accompanying narratives. In section 10.2, themes that

emerge from the integration and generalisation of case-specific findings are discussed. Tables and

figures are compiled at the end of the chapter.

10.1 Synthesis

Synthesis of case-specific findings is presented in this section under each of the four fields of

practice. For each practice field, the variables identified during the review of statistics and analysis

of interview transcripts in each of the cases are presented in a table. Then, synthesis of these

variables is presented in a network diagram that integrates and generalises important variables,

eliminates overly-specific variables, and describes general relationships between groups of

variables. Accompanying narratives describe the integration and generalisation of the case-specific

variables in relation to: general conditions, conditions immediately surrounding construction

projects, construction practices, project outcomes, and their broader implications.

The synthesis of general conditions is consistent across each of the fields of practice. Political

conditions varied from high political instability and violence in Afghanistan and Pakistan, to low

political instability and violence in Timor-Leste. The stages of institutional development in the cases

ranged from moderate in Pakistan to low in South Sudan. The relative states of economic

development also ranged from moderate in Pakistan to low in South Sudan. Similar variation

between conflict-affected situations in relation to economic and institutional development was also

identified in the review of statistical indicators. Synthesis of general conditions presented in Figure

Synthesis & Further Discussion

210

10.1 takes into account this variation by distinguishing between, on one hand economic and

institutional development, and on the other hand economic and institutional instability. This

differentiates between the longer-term character of development and the shorter-term effects of

conflict, suggesting that instability compounds problems associated with earlier stages of economic

and institutional development.


Variables related to design and certification of actors and works that were directly or indirectly

associated with political instability and violence in the case studies are presented in Table 10.1.

Figure 10.1 presents the synthesis of these variables and describes relationships between them.

Synthesis of conditions immediately surrounding construction projects distinguishes between

conditions that are directly-affected by political violence and instability and conditions that are

indirectly affected via the impact of political violence and instability upon national economic and

institutional conditions.

Conditions that identified as being directly affected by conflict in Figure 10.1 are: shortened

investment horizons and increased aid-financed reconstruction demand. Shortened investment

horizons of contractors and officials were identified in relation to design and certification of actors

and works in Afghanistan and Pakistan. These cases contrasted with Timor-Leste and South Sudan

where the specific combination of high infrastructure needs and anticipated petroleum-related

revenue appear to have supported moderate investment horizons of contractors. Notwithstanding

mitigating factors in specific situations (such as presence of natural resources that could promote

investment), increased political instability is expected to contribute to shortened investment

horizons of contractors and officials. Differing levels of reconstruction aid in each of the cases

highlights that aid receipts and the level of construction demand they support depend on a range of

factors. The high level of reconstruction aid received in Afghanistan during conflict is perhaps

exceptional. Nevertheless, other post-conflict situations such as Timor-Leste and South Sudan may

involve increased financial aid, including finance for infrastructure construction that has particular

effects upon practices involved in the design and certification of works.

Conditions that are identified as being indirectly affected by conflict in Figure 10.1 are:

decreased availability of expertise, decreased regulatory quality, decreased reliability of the legal

frame, and increased prevalence of corruption. Decreased availability of expertise was identified in

the cases of Afghanistan, Timor-Leste and South Sudan. Decreased regulatory quality was identified

in relation to design and the certification of actors and works in all of the cases. Decreased reliability

of the legal frame was identified in Afghanistan. Increased prevalence of corruption was identified

in relation to design and the certification of actors and works in Afghanistan and Pakistan. For these

conditions, notwithstanding varied prevalence across the group of cases, it appears that instability


211

associated with conflict exacerbates problems that previous studies have associated with developing

countries in general.287

Synthesis of case-specific practices yielded three practices that are included in Figure 10.1:

adoption of various foreign codes, corrupt certification of works, and fraudulent testing of materials.

Adoption of various foreign construction codes and technical standards was identified in

Afghanistan, Timor-Leste and South Sudan, where the practice was associated with increased

engagement of foreign clients and consultants in the context of low domestic capacity to formulate

and enforce appropriate regulations. Corrupt certification of works was identified only in the case

of Afghanistan. However, the practice is symptomatic of the increased prevalence of corruption,

which is in turn associated with shortened investment horizons in the context of poor regulatory

capacity. Fraudulent testing of materials was identified in the cases of Afghanistan and Pakistan. The

practice may be limited to particularly problematic situations that combine shortened investment

horizons, poor regulatory quality and very low reliability of the legal frame, which promote

opportunism and limit enforcement contractor liability for the quality of built work. Inclusion of the

practice within synthesised findings highlights the significant implications that undermined testing

could have upon the effectiveness of standard contracting arrangements and the quality of built

work.288

Three general project outcomes were drawn from the synthesis of case-specific variables:

increased prevalence of inappropriate designs, increased contract prices, and decreased quality of

built work. Decreased quality of built work was identified in relation to all four cases, while the

other three variables were identified in relation to Afghanistan, Timor-Leste and South Sudan.289

The broader implications of these project outcomes that are identified in Figure 10.1 relate to

investment returns and the potential of enduring dysfunctional practices upon industrial

development. Decreased political returns is the most immediate wider implication of poor project

outcomes, which is particularly relevant to situations where construction has been used overtly for

political objectives such as in the cases of Afghanistan and Timor-Leste. The potential for

dysfunctional practices such as corrupt certification of works and fraudulent testing to become

widespread and entrenched is also identified in Figure 10.1 as a potential factor inhibiting

construction industry development.

287 Absence of testing facilities, which was identified as a conflict-related condition in relation to design and the certification

of actors and works in South Sudan, was omitted from the synthesised findings due to the specific nature of the variable.

288 Two case-specific practices were omitted from synthesised practices – adoption of informal design standards and strategic

over-design – due to these practices being responses to specific conditions in South Sudan.

289 While increased quality of built work was a project outcome associated with adoption foreign regulations in Afghanistan,

Timor and South Sudan, the variable has been omitted from Figure 10.1 as it is only relevant in relation to the opposing

situation of undertaking works without reference to codes or standards.


212

10.1.2 Tendering and contract award

Variables related to tendering and contract award that were directly or indirectly associated

with political instability and violence in the case studies are presented in Table 10.2. Figure 10.2

presents a synthesis of these variables and relationships between them.

Directly-affected conditions surrounding construction projects that are identified in Figure

10.2 as being relevant to tendering and contract award in conflict-affected situations in general are:

insecurity on work sites, and shortened investment horizons. Shortened investment horizons were

described in relation to design and certification of actors and works (see Subsection 10.1.1).

Insecurity on work sites was identified in the cases of Afghanistan and South Sudan and was

primarily associated with restricted site superintendence. However, contract reassignment in

Afghanistan was also identified as a means of assigning contracts to firms that failed to meet tender

qualification criteria though had a high-enough risk tolerance required to undertake contracts in

insecure locations. The potential relevance of these relationships for other conflict-affected

situations supports the inclusion of insecure work sites within the synthesis of construction

conditions.

Construction conditions that are indirectly-affected by conflict via increased economic and

institutional instability and are included as variables in Figure 10.2 are: decreased regulatory quality

increased prevalence of corruption, decreased reliability of the legal frame for contracting and

volatility in market prices for construction resources. All four conditions were described in above

relation to design and certification of actors and works (see Subsection 10.1.1). These conditions

relate to economic instability, decreased institutional capacity and decreased probity in the context

of heightened political instability.290 Resource price volatility and inflation was only raised in

relation to tendering and contract award in Pakistan, however, inclusion of the practice in Figure

10.2 reflects the potential for economic instability to affect resource prices and the tendering

practices of contractors.

Synthesis of case-specific practices yielded four practices in Figure 10.2 that are identified as

being of general relevance to conflict-affected situations: contract reassignment; subversion of

competitive tenders; fraudulent, opportunistic or collusive bidding; and strategic contract award.

Contract reassignment was identified in relation to the cases of Afghanistan, Timor-Leste and South

Sudan. The practice responded to increased prevalence of corruption, increased insecurity and the

award of contract for political reasons, which have broader relevance for conflict-affected situations.

The variable Subversion of competitive tenders in Figure 10.2 encompasses both partial and

complete tender subversion, which respond to the same prevailing conditions - increased

290 Decreased availability of expertise was associated with tendering and contract award during case-specific analysis for

Afghanistan, Timor-Leste and South Sudan, though has been omitted from synthesised variables as the effect of this condition

in relation to tendering and contract award is represented in decreased regulatory quality.


213

prevalence of corruption and decreased regulatory quality. Fraudulent, opportunistic or collusive

bidding encompasses several contractor tendering practices identified in the cases of Afghanistan

and Pakistan, which appear to have responded to shortened investment horizons and decreased

regulatory quality. Strategic contract award encompasses political stabilisation strategies in

Afghanistan and Timor-Leste and economic strategies such as: the distribution of contracts to newly–

established firms in Timor to promote industrial development, donor-enforced restrictions of

contract award to donor-country firms in Afghanistan and South Sudan, and client-enforced

restrictions of contract award to domestic firms to promote industrial development in South Sudan.

These practices are associated in Figure 10.2 with two undesirable project outcomes:

increased contract prices and decreased quality of built work. In particular, contract reassignment,

subversion of competitive tenders and fraudulent, opportunistic or collusive bidding practices

contribute to increased costs and diminished quality of built work. Other immediate project

outcomes were identified during case-based analysis. However, the effects of these outcomes in

general lead to increased costs or diminished quality. For example, inappropriate contract award

(i.e. award of contracts to firms that lack the capacity or willingness to undertake works), which was

identified in the case of Afghanistan, eventually led to increased costs and/or diminished quality. In

Timor-Leste, diminished quality arising from strategic contract award to incapable firms were

mitigated by the reassignment of contracts to more-capable firms.

The broader implications of increased contract prices and decreased quality of built work are

primarily decreased political and economic investment returns. The potential entrenchment of

dysfunctional construction practices and the negative consequences of this for medium and long

term development of the construction industry is also highlighted in Figure 10.2 as implications of

tendering and contract award practices. In addition to these negative implications, strategic award

of construction contracts may also be associated with positive outcomes. Notwithstanding

diminished construction quality, increased costs, and localisation of markets that were associated

with direct award of contracts to newly-established domestic firms in Timor-Leste, the strategies

employed there appear to have had some effect on improved stability and stimulation of industrial

development. In Afghanistan, restricted markets for military contracts appear to have fostered supply

capacity development within some segments of the construction industry. Similarly, in South Sudan

restriction of contracts to domestic firms under an infrastructure program managed by a UN agency

appears to have contributed to capacity development within the nascent construction industry.

10.1.3 Resource mobilisation and management

Variables related to tendering and contract award that were directly or indirectly associated

with political instability and violence in the case studies are presented in Table 10.3. Figure 10.3

presents a synthesis of these variables and relationships between them.


214

Conditions that may be directly affected by conflict and impact on the management and

mobilisation of resources on construction sites are: decreased investment horizons of construction

firms, and decreased mobility of labour and expertise. Decreased investment horizons in response

to prevailing instability and future uncertainty was described in relation to the cases of Afghanistan

and Pakistan where it had implications for investment decisions of contractors as well as

opportunistic behaviour that prioritised immediate financial gains over long term business

development. Decreased mobility of labour, particularly restricted mobility of professionals acting

as site superintendents and contract administrators, was identified in the case of Afghanistan where

insecurity in rural areas appears to have undermined the superintendence of a significant proportion

of construction projects. In South Sudan, limited mobility of expertise was also attributed to a lack

of facilities and infrastructure to support the movement and accommodation of professionals outside

provincial centres.

Increased investment horizons are another construction condition identified in Figure 10.3 as

being directly-affected by political instability and violence, though is distinguished from the other

directly-affected conditions. Increased investment horizons were identified in the cases of

Afghanistan, Timor-Leste and South Sudan, where specific conditions prompted increased

investment by specific groups of firms. In Afghanistan, restricted markets for US military-funded

projects that required particularly high standards of work underpinned large investments by a small

group of domestic firms. In Timor-Leste and South Sudan, similar investments by foreign firms were

prompted by anticipated high demand to be funded by national petroleum revenue. While arising

from specific circumstances, the potential for similar circumstances to lead to increased investment

horizons within specific segments of the construction industry supports inclusion of this variable

within Figure 10.3 as an important consideration for conflict-affected situations generally.

Construction conditions identified in Figure 10.3 as being indirectly affected by political

instability and violence via increased economic and institutional instability are: decreased

availability of expertise, decreased availability of materials and equipment, decreased quality of

regulation, and increased resource price volatility and inflation. In this synthesis, decreased

availability of expertise arising from a lack of trained managers, technicians and professionals, which

was identified in Afghanistan, Timor-Leste and South Sudan, is distinguished from mobility of these

actors that was a direct effect of the increased threat of violence in Afghanistan. Decreased

availability of materials and equipment, which has been associated in literature with developing

countries in general (see Subsubsection 2.2.2.2), was identified in relation to the cases of Timor-

Leste and South Sudan as a consequence of restricted or unreliable supply chains. In these cases,

decreased availability of materials and equipment was primarily a result of low levels of

industrialisation and economic development, with political instability exacerbating the condition by

discouraging manufacturing investment and restricting cross-border trade. That the availability of

materials and equipment in Afghanistan and Pakistan appears to have not been a significant

problem, despite high levels of political instability and violence, perhaps suggests that general levels


215

of economic development and market demand are more important factors than political instability

in determining availability of these resources. Decreased regulatory quality was identified in the

case of Afghanistan as a factor contributing to inadequate investment in labour and equipment by

domestic firms, with the relationship between poor regulation and inadequate investment having

broader relevance in conflict-affected situations and in developing countries generally. Increased

resource price volatility and inflation, identified as a prevailing condition in South Sudan and as a

factor contributing to restricted/unreliable supply chains in Timor-Leste, was symptomatic of broader

economic instability.

Four practices that were identified in case-specific analysis in relation to resource

mobilisation and management have been highlighted as having broader significance for conflict-

affected situations are: vertical integration of resources, specifically plant and labour; independent

international supply chains; importation of skilled and unskilled labour; and inadequate contractor

investment. The first three of these practices were identified in Afghanistan, Timor and South Sudan

and are related in that they involve particular forms of contractor investment. As responses to

unreliable supply conditions, these practices are highlighted as having broader relevance in other

situations where resource supply constraints coincide with conditions promoting contractor

investment, such as restricted markets in Afghanistan and petroleum-related revenue in Timor and

South Sudan. At the other end of the investment spectrum, inadequate investment by contractors

was identified in relation to Afghanistan where, as described above, poor regulation (among other

conditions) enabled firms to remain in the market despite not making any investments to build

supply capacity.292

Two groups of immediate project outcomes have been associated with the practices featured

in Figure 10.3. Higher-than-normal contractor investment entailed in vertical integration,

particularly in the context of increased political and economic instability, are associated in the case

analyses with increased contractor risk and increased contract prices. While the case studies did not

suggest any consistent broader implications, increased investment in resources by contractors in

particular segments of construction markets was associated with increased industrial supply

capacity. In Afghanistan, Timor and South Sudan, increased investment by some firms demonstrated

how, in response to particular market conditions, supply capacity can be developed despite

significant challenges – a finding that has broader relevance for construction in conflict-affected

situations. At the other end of the contractor investment scale, inadequate investment by contractors

is associated in Figure 10.3 with decreased quality of built work, as contractors lacking appropriate

292 Cooperative resource sharing was identified only in relation to the case of Timor, where it arose in response to specific

conditions, including the direct/cooperative award of government contracts and localisation of construction markets. Specific

nature of these conditions suggest that cooperative resource sharing is not widely prevalent among other conflict-affected

situations. However, the practice is notable as a potential intermediate solution between, at one end of the spectrum high

investment of vertical integration (and associated risk), and at the other end of the spectrum, inadequate investment.


216

expertise and equipment continue to undertake works. Decreased quality of built work is associated

with the broader implications of decreased political and economic investment returns.


Variables related to contract conditions and administration that were directly or indirectly

associated with political instability and violence in the case studies are presented in Table 10.4.

Figure 10.4 presents a synthesis of these variables and relationships between them.

Conditions surrounding construction projects that are identified in Figure 10.4 as being

directly affected by political instability and violence are: insecure work sites, decreased mobility of

labour, and decreased investment horizons. Each of these conditions has been described above in

relation to the other three fields of practice.

Construction conditions identified in Figure 10.4 as being indirectly affected by political

violence and instability via increased economic and institutional instability are: decreased

availability of expertise, decreased quality of regulation, decreased reliability of the legal frame, and

increased prevalence of corruption. This group of conditions includes all of the problematic

regulatory conditions associated with earlier stages of economic development in the literature

review (see Section 2.2), highlighting the general compounding effect of political instability and

violence upon these problematic conditions.293

Four practices that are identified in Figure 10.4 as having broader relevance to construction

in conflict-affected situations are: restricted site superintendence, ineffective dispute arbitration,

biased contract administration and neglect of contract terms relating to insurance and guarantees.

Restricted site superintendence encompasses the intimidation of superintendents that was identified

in Afghanistan, and inadequate site superintendence that was identified in the cases of Afghanistan

and South Sudan. While these practices responded to specific situations, restricted site

superintendence is associated with increasing political instability and violence in general. Ineffective

arbitration was identified in relation to the cases of Afghanistan and Pakistan, though has broader

relevance for conflict-affected situations given the compounding effect of conflict upon problematic

regulatory conditions. Similarly, while biased contract administration was identified in Pakistan

only, the practice is associated with a lack of effective arbitration and with unreliable legal

frameworks. Problematic legal and regulatory conditions, which are associated with construction in

developing countries in general and expected to be exacerbated by increased political instability

and violence, are associated in Figure 10.4 with increased neglect of insurance and guarantee

provisions in construction contracts. None of these practices are unique to conflict-affected

293 This group of synthesised indirect conditions omits two conditions – restricted supply chains and high currency volatility

– that were identified in relation to the specific situation of South Sudan that required the adjustment of standard terms of

payment to accommodate contractors’ bulk purchase of materials and components through independent international supply

chains.


217

situations. However, they are expected to become more prevalent in the context of a more

problematic regulatory environment that is associated with increased political, and institutional

instability.

The general project outcomes arising from these practices relate to increased risks for clients

and contractors. For clients, restricted site superintendence and neglect of insurance and guarantee

provisions contribute to increased risks that are expected to be realised in decreased quality of built

work. For contractors, a lack of reliable dispute resolution and increased prevalence of biased

contract administration is expected to contribute to increased risk. Increased risk for contractors is

expected to prompt increased contract prices.

Decreased political and economic returns on investments are expected to be significant

broader implications of increased risk, increased costs, and decreased construction quality

associated with contract administration practices. As described above in relation to the other fields

of practice, decreased political returns potentially have significant immediate implications in

politically-unstable conflict-affected situations. In contrast, economic investment returns are

perhaps of lesser immediate significance. In addition to these implications for investment returns,

increased contractor risks are expected to reduce investment in construction resources, stifling

industrial supply capacity development in the medium and long term.

10.2 Discussion

For each of the fields of practice, the same distinction was drawn between conditions that are

a direct result of increased political instability and violence, and conditions that are indirectly

affected by conflict via increased institutional and economic instability. Many of the problematic

conditions identified in the case studies, such as inadequate availability of expertise, poor regulatory

quality and the prevalence of corruption have also been associated in other studies with developing

countries generally. For these conditions, conflict appears to exacerbate effects of earlier stages of

economic and institutional development. Several other conditions were identified as being directly

affected by increased political instability and violence, namely: decreased investment horizons,

increased insecurity (i.e. increased threats of violence) on construction sites, and decreased mobility

of labour/expertise. In addition to political violence and instability, these conditions are also related

to poor regulatory quality and weak rule of law that have been associated with developing countries

in general. However, the important role of political instability in affecting investment horizons, and

the security and mobility of construction workers suggests a far greater significance of these

conditions in conflict-affected countries compared to more-peaceful settings.

These direct and indirect effects of conflict upon conditions surrounding construction may be

mitigated by other national characteristics. In particular, prevailing levels of economic and

institutional development and the level of national income are factors that were identified in the

cases as ameliorating effects of political violence and instability upon construction. These mitigating


218

factors are such that comparable levels of instability and violence do not necessarily yield

comparable conditions surrounding construction. Despite Afghanistan and Pakistan both exhibiting

high levels of political instability and violence, differences in construction conditions in these

countries highlight the important function of higher levels of development in determining conditions

surrounding construction. The situations in Timor-Leste and South Sudan highlighted the potential

for national income to promote longer investment horizons despite prevailing instability. While

some general effects of political instability and violence upon construction conditions have been

identified, the actual conditions that emerge in any particular setting are also influenced by unique

combinations of economic, institutional and social conditions.

Several of the practices identified as being relevant to conflict-affected situations in general

have been characterised as opportunistic in that they prioritise short term profits over longer term

investment and returns. Various forms of corrupt behaviour of officials and fraudulent or collusive

behaviour by contractors are all characterised as opportunistic practices that respond to shortened

investment horizons, inadequate regulatory quality and inadequate reliability of legal frameworks.

Opportunism is not restricted to conflict and post-conflict situations. However, decreased

investment horizons and the diminished regulatory environment that appear to accompany political

instability and violence also appear to increase the prevalence of opportunistic practices.

The expansion of undesirable opportunistic practices suggests a degree of ineffectiveness of

standard arrangements for construction procurement and contracting in the context of shortened

investment horizons and the poor regulatory environment characterising conflict-affected situations

in general.

In each of the cases, corrupt, fraudulent and collusive behaviour affected the award of

contracts to varying extents despite adoption of standard policies and procedures designed to ensure

fairness, transparency and value-for-money in public procurement. The subversion of competitive

tender procedures appears to have been most prevalent in Afghanistan. However, the situation in

Pakistan is perhaps equally notable given the apparently widespread prevalence of corruption and

collusion despite well-established administrative systems and tiers of independent procurement

oversight. The varied prevalence of corruption in each of the cases highlights that a wide range of

factors influence the behaviour of public officials and the effectiveness of public procurement

systems (see Rose-Ackerman 1999). Nevertheless, competitive tenders for construction contracts

rely on probity of public officials as well as probity and legal liability of contractors, which are

undermined by shortened investment horizons and weakened regulatory environments.

Practices identified as being relevant to conflict-affected situations in general also suggest a

reduced effectiveness of standard construction contracts in these settings. In the context of shortened

investment horizons, restricted site superintendence, limited legal liability and restricted availability

of services for insurance and financial guarantees, the incentives for contractors to comply with

contractual obligations are diminished. On the other hand, in the context of limited access to reliable

dispute arbitration and the increased prevalence of corruption, incentives for clients and consultants


219

administering contracts to comply with obligations related to, for example, timing of payments, are

also reduced. Failure of clients and contractors to comply with contractual obligations are not

unique to conflict-affected situations. Nevertheless, conditions that have been associated with

conflict-affected situations in general such as shortened investment horizons, restricted

superintendence of works and decreased reliability of the legal frame appear to undermine

incentives and liabilities that support construction contracts.

One aspect of this diminished effectiveness of standard arrangements for construction

tendering and contracting is increased risk and the potentially dysfunctional distribution of this risk

between clients and contractors. In the context of inadequate legal frameworks to ensure

contractors’ legal liability, clients bear increased risk for the quality of built work. The award of

contracts to unqualified firms for inadequate contract prices, which was associated in interviews

with increased prevalence of corruption and decreased availability of expertise for contractors,

compounds this situation of increased client risk associated with the quality of built work. Fixed-

price and unit-rate contracts provide incentives for contractors to reduce construction costs in order

to increase profits. However, inadequate site superintendence, shortened investment horizons and

limited legal liability provide contractors with incentives and opportunities to reduce costs by

intentionally compromising construction quality, thereby further increasing risks borne by clients in

relation to the quality of built work. On the other hand, in the context of volatile resource prices,

biased contract administration and unreliable dispute resolution that were identified as being of

general relevance to conflict-affected situations, increased financial risks are borne by contractors,

particularly in relation to delayed payments. While not unique to conflict-affected situations, this

inappropriate allocation of risks appears to increase in prevalence in the context of shortened

investment horizons and the diminished legal and regulatory environment that have been associated

with conflict and post-conflict settings in general.

Several positive construction responses to conflict and post-conflict conditions were also

identified in the cases. In regard to the tendering and contract award, strategic award of contracts

and contract reassignment contributed to some positive outcomes that are relevant to conflict-

affected situations in general. Strategic award took several forms: support for commercial objectives

of donor countries, support for local industrial development, and support for local peace-building

objectives. Support for local industrial development and peace-building objectives highlight the

potential for strategic award of construction contracts to contribute to positive outcomes that are

additional to the provision of physical infrastructure. In regard to mobilisation and management of

resources, increased contractor investment (in the forms of vertical integration, independent supply

chains and importation of labour), and the expansion of markets for materials and equipment despite

difficult conditions in Afghanistan and South Sudan were positive response to problematic

conditions.

Increased risks arising from limitations of standard procurement and contracting arrangements

in conflict-affected situations is one aspect of negative project outcomes that were identified in the


220

synthesis of case-specific findings. Decreased quality of built work and increased construction costs

were the other project outcomes that were associated with the range of practices under each of the

fields of practice. In some of the cases, more-positive project outcomes were identified in relation

to specific practices. For example, increased quality of built work was associated with the adoption

of foreign codes, considering the alternative of designing and building infrastructure without

reference to standards. However, in general, problematic conditions prompted practices that

ultimately contributed to increased project costs and/or decreased quality of built work.

The broader implications of the construction practices and project outcomes that were

identified as being of general relevance to conflict-affected situations are considered here in relation

to the short, medium, and long term.

Decreased construction quality and increased costs are associated with decreased economic

contributions of new infrastructure and decreased political returns arising from the potential for new

public infrastructure to generate good-will and political legitimacy. Decreased economic returns

arising from built work are more relevant in the medium and long term and are perhaps most

significantly impacted by decreases in the quality of built work. In considering the effects of

corruption upon infrastructure investment returns, Tanzi and Dawoodi (1998) suggest that effects of

decreased provision of services, decreased utility of built work and increased maintenance costs

arising from poor construction quality have a greater effect upon investment returns than any

increase in initial construction contract costs.

Potential political contributions of new infrastructure are more relevant in the short and

medium term and are therefore more important considerations given the immediate problem of

prevailing political instability that characterises conflict and post-conflict situations. In the short

term, in addition to construction quality and other considerations, appearances of probity and

capability of clients and organisations that provide infrastructure are important factors affecting

political returns. In the medium term, timely completion of projects and the quality of built work

are expected to also affect any political contributions of new infrastructure construction.

Implications of construction practices and project outcomes for construction industry

development were also apparent in the case studies and in the synthesis of cases-specific findings.

Beyond their immediate impact upon project outcomes, many of the dysfunctional practices such

as the various examples of fraudulent and opportunistic practices could have longer term

implications. In each of the cases, opportunistic behaviour appeared to crowd-out more diligent

practices from construction markets, such as in Afghanistan where corruption and fraudulent

bidding removed incentives for contractor investment. In a study of the persistence of corrupt

practices, Tirole (1996: 18) demonstrated that reputations for past corrupt behaviour promote future

corruption, and that a single “one-time non-recurrent shock” on the behaviour of a group can

prevent the group from ever returning to a satisfactory state. This same finding could apply to

undesirable construction practices that respond to problematic conditions in conflict and post-

conflict situations, such that opportunistic practices may become entrenched and continue to


221

undermine construction projects and industrial development long after the conflict and post-conflict

period.

Alongside these negative implications for industrial development, some of the practices

identified as having relevance for conflict-affected situations in general could make positive

contributions to the development of construction supply capacity. Despite problematic economic

conditions, strategic award of contracts by clients and vertical integration of resources by contractors

can potentially support increased construction supply capacity in times of acute need in conflict

and post-conflict situations.

Synthesis & Further D

iscussion

222

10.3 Tables

Afghanistan Timor-Leste South Sudan Pakistan

General conditions High political instability and violence Low political instability and violence Moderate political instability and violence High political instability and violence

Low institutional development Moderate institutional development Low institutional development Moderate institutional development

Low economic development Moderate-low economic development Low economic development Moderate economic development

Construction conditions Moderate-low availability of expertise Moderate-low availability of expertise Low availability of expertise Moderate regulatory quality

Low regulatory quality Moderate-low regulatory quality Low regulatory quality Moderate prevalence of corrutpion

Low reliability of the legal frame Increased reconstruction demand Absence of testing facitlies Short investment horizons

High prevalence of corruption Moderate reliance on financial aid

Short investment horizons

High reliance on financial aid

Construction practices Adoption of various foreign codes Adoption of various foreign codes Adoption of various foreign codes Fradulent materials testing

Corrupt compliance certification Adoption of informal design standards

Fradulent materials testing Strategic over-design

Project outcomes Decreased quality of built work Decreased quality of built work Decreased quality of built work Decreased quality of built work

Inappropriate designs Inappropriate designs Inappropriate designs

Increased project costs Increased project costs Increased project costs

Increased quality of built work Increased quality of built work Increased quality of built work

Table 10.1 - Synthesis variables - Design and certification of actors and works


iscussion

223





Construction conditions Low regulatory quality Moderate-low availability of expertise Low regulatory quality Moderate regulatory quality

High prevalence of corruption Moderate-high prevalence of corruption Moderate prevalence of corruption

Short investment horizons Low availability of expertise Opportunisitc contract environment

Moderate-low availability of expertise Donor strategic objectives Economic volatility and price inflation

Low reliability of the legal frame

Construction practices Partial tender subversion Strategic award of contracts Complete tender subversion Partial tender subversion

Complete tender subversion Reassignment of contracts Preferential contract award Enforcement of dysfunctional price controls

Reassignment of contracts Direct contract award Collusion among prequalified firms

Excessive bid under-pricing

Fraudulent bidding

Project outcomes Decreased quality of built work Decreased quality of built work Duopoly market for government contracts Decreased quality of built work

Inappropriate contract award Increased project costs Increased contract prices Decreased contractor risk

Increased contract prices Increased quality of built work Market entry of foreign firms

Localisation of construction markets Domestic firms established

Rapid industrial development

Table 10.2 - Synthesis variables - Tendering and contract award


iscussion

224





Construction conditions Low regulatory quality Moderate-low availability of expertise Low availability or mobility of expertise

Moderate-low availability of expertise Restricted or unreliable supply chains Currency volatility and restricted availability

Short investment horizons Moderate investment horizons Economic volatility and price inflation

High prevalence of corruption Moderate aid reliance Restricted or unreliable supply chains

High insecuriity / prevalence of violence Highly-localised construction markets Moderate investment horizons

Construction practices Vertical integration Importation of skilled and unskilled labour Importation of skilled and unskilled labour

Inadequate investment (domestic firms) Vertical integration Vertical integration

Inadequate investment (foreign firms) Independent international supply chains Independent international supply chains

Project outcomes Increased construction costs Industrial capacity development Increased commerical risk

Increased contract prices Increased construction costs Industrial capacity development

Increased industrial capacity Increased contract prices Increased construction costs

Decreased quality of built work Decreased quality of built work Increased contract prices

Dispersed contractual responsibility Increased commerical risk

Increased commercial risk

Table 10.3 - Synthesis variables - Resource mobilisation and management


iscussion

225


High political instability and violence Low political instability and violence Moderate political instability and violence High political instability and violence

General conditions Low institutional development Moderate institutional development Low institutional development Moderate institutional development


High insecuriity / prevalence of violence Moderate-low regulatory quality Low availability or mobility of expertise Moderate regulatory quality

Construction conditions Low reliability of legal frame / rule of law Moderate-low availability of expertise Restricted or unreliable supply chains Moderate prevalence of corruption

High prevalence of corruption Currency volatility and restricted availability

Inadequate site superintendence Adoption of various forms of contract Inadequate site superintendence Corrupt or ineffective arbitration

Construction practices Outsourcing of site superintendence Neglect of insurance and guarantees Adjusted payment terms Corrupt or biased administration

Intimidation of superintendents/administrators


Increased quality of built work Increased client risk Increased client risk Increased contractor risk

Increased project costs Increased prevalence of contract default Decreased quality of built work Decreased quality of built work

Project outcomes Decreased quality of built work

Project delays

Increased client risk

Reliance on informal agreements


Table 10.4 - Synthesis variables - Contract conditions and administration


226

10.4 Figures

Increased political


Increased institutional instability

Decreased investment horizons


Aid-financed reconstruction

demand

Decreased regulatory

quality


corruption

Decreased availability / mobility of expertise

Earlierstages of

development

Corrupt certification of

works


codes

Fraudulent testing of materials


workIncreased

contract prices

Increased prevalence of inappripriate

designs

Decreased political

investment returns

Decreased economic

investment returns

Dysfunctional practices

undermine industrial

development

Decreased reliability of the

legal frame

Figure 10.1 - Network synthesis diagram - Design and the certification of actors and works


227

Increased political





Decreased regulatory

quality


corruption

Resourceprice volatility/

inflation

Earlierstages of

development

Subversion of competitive

tenders

Strategic contract award

Fraudulent, opportunistic or

collusive bidding

Contract reassignment


workIncreased

contract prices

Decreased political

investment returns

Decreased economic

investment returns

Dysfunctional practices

undermine industrial

development

Circumvention of market barriers

Increased political stability

and/or industrial

development

Increased insecurity at work sites

Decreased reliability of legal frame / rule of law

Figure 10.2 - Network synthesis diagram - Tendering and contract award


228

Increased political



Decreased mobility of

labour




expertise

Decreased availability of materials & equipment

Increased investment horizons

Earlierstages of

development

Vertical integration of

resources

Inadequate contractor investment

Importationof skilled & unskilled

labour

Independent international

supply chains


workIncreased

contract prices

Decreased political

investment returns

Decreased economic

investment returns


Increased industrial

supplycapacity

Increased resource

price volatility/ inflation

Decreased quality of regulation

Income independence or restricted

markets

Figure 10.3 - Network synthesis diagram - Resource mobilisation and management


229

Increased political




expertise



Decreased quality of regulation

Decreased reliability of the

legal frame

Decreased mobility of

labour

Earlierstages of

development

Restricted site superintendence

Biased contract administration

Unreliable dispute

arbitration

Neglect of insurance and

guarantees


workIncreasedclient risk

Decreased political

investment returns

Decreased economic

investment returns


Increased insecurity atwork sites


corruption


Decreased investment undermines

industrial development

Figure 10.4 - Network synthesis diagram - Contract conditions and administration


230

Blank page

231

Chapter 11 CONCLUSION

This study commenced with the objective to increase knowledge about the conditions and

practices characterising construction in conflict and post-conflict situations. This knowledge is

sought as a contribution to theory about how prevailing economic, political and institutional

conditions affect construction projects, with particular reference to the subject of construction in

developing countries. This knowledge is also intended to contribute to the practice of construction

in conflict and post-conflict situations by highlighting in a systematic manner some of the conditions

that can affect construction projects in conflict-affected settings and some of the ways that

construction actors respond to these conditions. The thesis has been guided by a proposition, that

conflict exacerbates problematic conditions that commonly characterise construction in developing

countries and that standard regulatory measures, which assume less-problematic conditions, are less

effective in deterring undesirable construction practices in conflict-affected situations. The

proposition is broad and suggests the exploratory character of the study. Based on the thesis

proposition, two questions were posed:

1. Are conditions surrounding construction projects different in conflict-affected situations

compared to conditions in other developing countries that are not affected by conflict?

2. Are there common construction practices in conflict-affected situations that respond to

particular conditions associated with conflict and that differ from practices in other

developing countries and from practices intended by regulatory measures?

This concluding chapter is comprised of four sections. In section 11.1, the conclusions of the

study are presented. In Section 11.2, some of the implications of these conclusions are considered

and recommendations are made regarding improvements to standard tendering and contracting

arrangements. Section 11.3 identifies some of the limitations of the study. In Section 11.4, some

directions for further research are suggested.

11.1 Conclusions

11.1.1 Conditions surrounding construction projects differ widely among conflict and post-conflict

situations due to differences in pre-conflict starting conditions and other characteristics.

All of the countries identified as conflict or post-conflict situations in this study were

developing countries in earlier stages of industrialisation, highlighting the relationship between

conflict and economic development that has been identified in other studies (e.g. Stewart et al.

1997; Blattman & Miguel 2010). However, the group of developing countries includes countries at

various stages of economic development.

Conclusion

232

Along with different stages of development, conflict and post-conflict situations appear to

differ in relation to conditions surrounding construction projects. In particular, conflict and post-

conflict situations differ regarding economic conditions related to availability of construction

resources and regulatory conditions related to effectiveness of public institutions involved with the

regulatory and legal framework of construction. These differences in construction conditions among

conflict and post-conflict situations are reflected in statistical indicators and highlighted by, for

example, very different economic and regulatory conditions surrounding construction in the cases

of South Sudan and Pakistan. In addition to variation between countries, conditions surrounding

construction vary within conflict-affected countries, as conflict focussed in particular regions may

lead to varied levels of instability within a national territory. Varied conditions in different conflict

and post-conflict settings limits the utility of addressing conflict-affected situations in a generic

manner, just as addressing developing countries in a generic manner limited the impact of research

in the field of construction in developing countries (see Ofori 1993).

11.1.2 Notwithstanding differences in pre-conflict conditions, conflict has negative impacts upon

conditions surrounding construction that exacerbate problems associated with construction

in developing countries in general.

While conditions surrounding construction differ among conflict and post-conflict situations,

negative effects of conflict upon these conditions are apparent. While earlier stages of development

are associated with problematic conditions surrounding construction, economic and institutional

instability associated with conflict exacerbate some of these problematic conditions. Negative

effects of conflict upon construction conditions are evident in statistical indicators. However, the

extent to which particular conditions are impacted by political instability and violence in any

particular conflict or post-conflict situation depends upon specific circumstances. For example,

higher levels (i.e. more advanced stages) of economic and institutional development can ameliorate

the effects of conflict upon conditions surrounding construction, as highlighted by differing effects

of conflict in the cases of Afghanistan and Pakistan despite high levels of instability and violence in

both situations.

11.1.3 Effects of conflict upon regulatory conditions such as quality of regulation, reliability of the

legal framework and prevalence of corruption are particularly pronounced across conflict-

affected situations in general.

Conflict and post-conflict situations are generally characterised by poorer regulatory

environments in comparison with developing countries that are not affected by recent conflict. Poor

regulatory environments include decreased quality of regulation, decreased reliability of legal

frameworks, and increased prevalence of corruption. This association between conflict and eroded

regulatory conditions is particularly pronounced in that it appears to be consistent across conflict-

Conclusion

233

affected situations and has significant effects in undermining common tendering and contracting

arrangements, which in turn undermines project outcomes. Effects of conflict eroding regulatory

conditions surrounding construction are apparent in statistical indicators and in the particular cases

of Afghanistan, Timor-Leste, South Sudan and Pakistan.

The broader relationship between conflict and national institutions underpins the association

between conflict and poorer regulatory environments of construction. Conflict is identified as both

a cause and effect of weakened national institutions such as legislatures, public administrative

systems and courts of law (see Brinkerhoff 2010; World Bank 1998). Weakened national institutions

are, in turn, a cause of the weakened regulatory environment surrounding construction projects.

11.1.4 While availability of materials, equipment and credit varies widely among conflict and post-

conflict situations, the effect of conflict reducing availability of construction expertise is

pronounced across conflict-affected situations in general.

The problem of inadequate availability of expertise - particularly managerial and professional

expertise for construction – has been identified in relation to construction in developing countries

in general. The problem is exacerbated in conflict and post-conflict situations. Decreased

availability of construction expertise in conflict-affected situations may be viewed as a symptom of

broader social and economic instability that are associated with political instability and violence.

Additionally, decreased availability of expertise may be directly associated with political instability

and violence in that insecurity can restrict the mobility of professionals, managers and other

construction workers, i.e. restrict their access to construction sites in insecure locations.

In contrast with consistently lower availability of expertise in conflict and post-conflict

situations in comparison with other developing countries, there appears to be no clear general

association between conflict and availability of other construction resources, namely: materials,

equipment and credit. Wide variation in statistical indicators and between the cases of Afghanistan,

Timor-Leste, South Sudan and Pakistan suggests that markets and supply chains for materials and

equipment can expand despite significant political instability and violence. This suggests a

potentially high degree of adaptability of materials and equipment supply chains and markets to

problematic conditions such as those accompanying conflict. This adaptability of supply chains and

markets and the commercial actors that comprise them contrasts with the lower adaptability of

public institutions and organisations suggested by poorer regulatory conditions in conflict and post-

conflict situations in general.

Conclusion

234

11.1.5 Instability and poor regulatory environments in conflict and post-conflict settings shorten

investment horizons and contribute to increased prevalence of opportunistic construction

practices that prioritise immediate profit over longer-term investment.

Political, social and economic instability characterising conflict and post-conflict situations

entail increased degrees of future uncertainty that shorten investment horizons. Such shortened

investment horizons affect commercial and institutional actors and include the prioritisation of short-

term profits and a diminished value of reputation. Shortened investment horizons and poorer

regulatory environments in conflict-affected situations promote opportunistic construction practices.

Opportunistic practices of contractors can include: collusion in competitive tenders, submission of

fraudulent bid information, excessive under-pricing of bids, intentional compromises to construction

quality, reassignment of awarded contracts, and submission of fraudulent test results. Opportunistic

practices of officials representing client organisations and consultants administering contracts

include solicitation of bribes in various forms of petty and grand corruption. None of these examples

of opportunistic behaviour are unique to construction in conflict and post-conflict situations. Nor

are these practices consistently adopted in all conflict and post-conflict situations. However,

instability, shortened investment horizons and poorer regulatory environments, which characterise

conflict and post-conflict situations in general, are associated increased prevalence of these

opportunistic practices.

11.1.6 Incentives and controls entailed in standard tendering and contracting arrangements are less

effective in the context of shortened investment horizons and poor regulatory environments

characterising conflict-affected situations in general.

Increased prevalence of opportunistic practices of institutional and commercial actors

involved in construction is indicative of a reduced effectiveness of standard tendering and

contracting arrangements that are intended to curb such undesirable behaviour. Standard tendering

arrangements for public contracts include competition to promote value for money for clients and

increased contractor efficiency, and tiers of oversight to ensure fairness and transparency.

Competitive tenders rely upon conditions including the reliability of legal frameworks to ensure

legal liability of bidders, and the probity and capability of officials to manage tenders in accordance

with standard procedures. Opportunistic practices such as grand corruption, fraudulent bidding,

excessive under-bidding and contact reassignment are indicative of inadequacies in these

conditions. Standard contracting arrangements include standard forms of contract that define

responsibilities of clients, contractors and contract administrators, and provide mechanisms for

resolution of disputes. Contracts typically rely upon conditions including: reliability of legal

frameworks to ensure liability of contractors for their work, access to sites for clients and

superintendents to certify the quality of work, and availability of arbitration services for dispute

resolution. Opportunistic practices such as petty corruption, biased contract administration, contract

Conclusion

235

reassignment, intentional compromises to construction quality and submission of fraudulent test

results are indicative of inadequacies in these conditions that support construction contracts.

These conditions and practices are not exclusive to conflict and post-conflict situations – the

effectiveness of competitive tenders and standard forms of contract is flawed in other environments

including more-peaceful developing countries. Nor are shortcomings in these conditions and the

prevalence of these practices consistent among conflict-affected situations. However, poorer

regulatory environments and shortened investment horizons, which characterise conflict-affected

situations in general, appear to be associated with decreased effectiveness of standard tendering and

contracting arrangements.

11.1.7 Reduced effectiveness of standard tendering and contracting arrangements and increased

prevalence of opportunistic practices increases the likelihood of poor construction project

outcomes.

Poor project outcomes include increased costs and decreased quality of built work, with

decreased quality being more significant for public infrastructure projects given the greater medium

and long term costs associated with increased maintenance and decreased utility of poor quality

infrastructure. In the context of poorer regulatory environments, shortened investment horizons and

restricted access to construction resources, compromised construction quality may be due to

intentional or unintentional negligence. Intentional negligence may be associated with inadequate

superintendence of works, limited effective legal liability of contractors for their work, and

diminished value of reputation for contractors. Unintentional negligence regarding construction

quality may be associated with award of contracts to unqualified contractors, for example as a result

of corruption, and with restricted availability of managerial and technical construction expertise.

Poor project outcomes are not unique to conflict and post-conflict settings. However, the likelihood

of such outcomes increases in the context of poorer regulatory environments, increased restrictions

on the availability of expertise, reduced effectiveness of standard arrangements for tendering and

contracting, and increased prevalence of opportunistic construction practices.

11.1.8 Increased prevalence of opportunistic practices during conflict and post-conflict periods

could undermine development of construction supply capacity in the medium and long term.

In addition to effects upon individual project outcomes, opportunistic practices of contractors,

officials representing clients, and consultants administering contracts can have broader implications.

Opportunistic practices can crowd-out more diligent practices from construction industries and

markets, as demonstrated in the cases of Afghanistan and Pakistan, where practices such as

corruption, collusion and fraudulent bidding restricted more-diligent contractors to small segments

of construction markets. In addition, opportunistic practices may become entrenched, undermining

construction supply capacity in the long term. In a study of the persistence of corrupt practices,

Conclusion

236

Tirole (1996) demonstrated that reputations for past corrupt behaviour promote future corruption,

and that a single “one-time, non-recurrent shock” on the behaviour of a group can prevent the group

from ever returning to a satisfactory state. This may also be applied to other forms of opportunistic

behaviour of construction actors, such that after a period of instability accompanying conflict,

entrenched practices may persist and undermine project outcomes and industrial development long

after political instability and violence have diminished.

11.1.9 Despite a general tendency towards short-term opportunistic practices promoted by

instability and poor regulatory environments, particular incentives can promote investment

and rapid development of construction capacity in conflict and post-conflict situations.

In the cases of Afghanistan, Timor-Leste and South Sudan, despite particularly problematic

conditions including widespread insecurity in Afghanistan and very limited availability of resources

in Timor and South Sudan, investments by some contractors underpinned rapid development of

construction supply capacity in segments of the construction industries. In Afghanistan, restricted

markets for US military-funded contracts supported rapid development of a group of domestic firms.

In Timor-Leste and South Sudan, expected high demand in the context of limited competition and

limited availability of construction resources promoted major investments by construction firms.

While responding to specific conditions these examples illustrate that, despite problematic

conditions that generally discourage investment, restricted competition can provide incentives that

support rapid development of construction supply capacity.

11.2 Implications and practical recommendations

Notwithstanding differences among conflict-affected situations, the conclusions outlined

above contribute to a general scenario in which political instability and violence contribute to

poorer regulatory environments and shortened investment horizons. These conditions undermine

standard regulatory measures and promote an increased prevalence of opportunistic construction

practices, which increase the likelihood of poor construction project outcomes. Reduced political,

social and economic contributions derived from infrastructure construction projects are implications

of poor project outcomes. Of these, potential political contributions of new infrastructure are more

important in the short term in conflict and post-conflict situations. Poor quality infrastructure as well

as perceptions of opportunistic practices such as corruption can undermine contributions of new

infrastructure to building political legitimacy, winning hearts and minds, and supporting increased

stability.

This general scenario also implies a disjunction between standard procurement or contracting

arrangements and the particular situations in which these standards are applied. Consistent

application of standard tender procedures and forms of contract was described in each of the cases

Conclusion

237

considered in this study despite significant differences in regulatory and legal frameworks and

despite apparent failures of these standard measures to adequately control construction practices.

Inadequacies in legal and regulatory conditions and in the effectiveness of standard tender

procedures and forms of contract are not unique to conflict and post-conflict situations – they are

evident to varying degrees in all environments. However, effects of conflict upon regulatory

environments and investment horizons potentially broadens this gap between standard tendering

and contracting arrangements and the particular conditions under which they are employed.

Despite this gap, major reforms to standard constructing tendering and contracting

arrangements to accommodate poor regulatory environments in conflict-affected situations may not

be appropriate. Competitive tender procedures and forms of contract such has those published by

FIDIC reflect established principles and international standards of practice. Donor and development

organisations such as the World Bank, the United Nations Office of Project Services (UNOPS) etc.,

which mandate the use of these standard arrangements, operate across wide ranges of countries

characterised by very different regulatory environments and construction industries. Beyond any

institutional inertia preventing major reforms of standard rules and procedures to suit particular

situations, there are issues of efficiency, equality and transparency that promote international

standardisation. Considering the continued adoption of standard tendering and contracting

arrangements, some additional measures were identified during the course of the study that could

make these standards more effective in conflict and post-conflict situations.

11.2.1 Particular project priorities and environmental limitations should be taken into account in

moderating levels of competition within competitive tenders and contract award.

While open competitive tender (i.e. tenders open to all firms) is the default mode of contract

award mandated by many international organisations, situations described in this study highlighted

that alternative modes of contract award can respond to particular project priorities. In Timor-Leste,

direct award of government contracts prioritised peace-building and industrial development

objectives over the quality of built infrastructure. In one road construction program in South Sudan,

restriction of tenders to newly-established domestic firms, which required additional supervision of

works by the client, prioritised industrial development objectives over project cost efficiencies. In

Afghanistan, limited competition among a pool of prequalified domestic contractors promoted

investment in construction resources that enabled projects to be undertaken under very insecure

and problematic conditions. These and other deviations from standard open competitive tenders

involved various compromises such as decreased quality of built work and increased project costs.

However, they also demonstrated that other project priorities may be better served through

moderation of competition in construction tenders.

Conclusion

238

11.2.2 The range of standard forms of contract mandated by donor and development organisations

should be expanded to include contracts that provide appropriate incentives for compliance

and appropriate distribution of risk in particularly problematic environments.

Standard forms of contract involving lump-sum or unit-rate pricing provide incentives for

contractors to reduce construction costs in order to increase profits. In the context of inadequate

legal frameworks to ensure limited legal liability for the quality of built work, or in the context of

inadequate superintendence of works due to limited availability or mobility of client representatives,

other forms of contract should be considered that limit contractor incentives to reduce construction

costs. Standard cost-reimbursable contracts may be more appropriate than lump-sum or unit-rate

contracts under particular circumstances. Cost-reimbursable contracts can allocate more financial

risk to clients and potentially reduce risks related to intentional compromises to construction quality.

Use of such contracts raises other considerations such as documentation of contractor costs and

reduced incentives for construction efficiency. Nevertheless, the option of using cost-reimbursable

contracts in specific situations of restricted site superintendence, limited effective legal liability and

shortened investment horizons could support improved project outcomes.

11.2.3 International organisations should support local systems of arbitration to provide reliable

dispute resolution and promote compliance of all parties with contract conditions.

The absence of reliable arbitration identified in each of the cases is not unique to conflict-

affected situations. Nevertheless, the problem is perhaps particularly acute in the context of poorer

regulatory and legal environments that characterise conflict and post-conflict situations in general.

The absence of reliable, efficient dispute resolution removes incentives for clients, contractors and

consultants engaged as contract administrators to comply with contractual obligations and

undermines the effectiveness of contracts to provide predictability for contracting parties. In the

absence of reliable domestic systems of arbitration, international organisations could support

temporary local provision of arbitration services. For example, the World Bank regularly supports

public procurement technical support programs that could also engage independent international

arbitrators to provide arbitration services.

11.2.4 International organisations could support systems of market information that consolidate and

disseminate information to enable more-accurate pricing of works and assessment of past

performance and qualification of contractors.

A lack of reliable information about prevailing market prices and the capability of firms

appears to have undermined competitive tenders run by international organisations in Afghanistan

in particular. Inability of clients to reliably estimate construction costs enabled excessive under-

bidding that contributed to poor construction quality. Inability of clients to verify bid documentation

Conclusion

239

and assess bidders’ past contracting performance contributed to a diminished value of reputation

for contractors and promoted fraudulent bidding. Conflict-affected situations such as Afghanistan,

Timor-Leste and South Sudan are perhaps peculiar in that aid-funded projects constituted a large

proportion of construction demand and could thus provide sufficient data to enable broader

descriptions of construction markets. Consolidation, analysis and dissemination of data from aid

funded projects such as unit rates from bid and contract bills of quantities, project documentation

and reports of contractor performance could inform more appropriate future contract award

decisions. More-appropriate contract award decisions based on appropriate prices and

demonstrated past performance could in turn increase the value of contractor reputation and

incentives for more diligent contractor behaviour. Support from major donors would be necessary

to gather sufficient initial data and to provide ongoing data access. Issues of access to and

confidentiality of commercially-sensitive information would need to be addressed. The complicated

task of data collation and analysis could be assisted by online platforms and standardised bills of

quantities, with support from donors required to coordinate among various government and non-

government construction clients.

11.2.5 International organisations could support generic design standards for consistent interim use

in the absence of appropriate official domestic standards.

Use of different building codes and technical standards in the absence of applicable domestic

regulations was described in the cases of Afghanistan, Timor-Leste and South Sudan. Typically,

codes from donor countries or codes chosen by foreign design consultants were adopted, resulting

in wide ranges of regulations of varying appropriateness. To support greater consistency and

appropriateness of codes and standards in the absence of official domestic regulations, international

organisations could coordinate and support use of a set of basic generic standards. While generic

standards would not accommodate specific environmental conditions and requirements, they could

address important fundamental design issues such as: structural performance (including seismic

performance where appropriate); fire safety access and egress for buildings; and characteristics of

important materials such as concrete, steel, road foundations, and refer to appropriate international

technical standards. Abbreviated generic standards could provide a foundation for development of

official domestic regulations and reduce reference to more-sophisticated, less-appropriate codes and

standards from donor countries.

Conclusion

240

11.3 Limitations of the study

11.3.1 Proxy statistical indicators and basic statistical methods provide a limited description of

conditions surrounding construction in developing and conflict-affected countries.

Review of statistical indicators in this study fulfilled a specific function of providing a frame

for comparing conflict-affected countries with other developing countries and for positioning

conflict-affected cases in relation to the broader group. In particular, the review of indicators was

undertaken to describe a series of specific conditions surrounding construction projects. The proxy

statistical indicators were used in response to a lack of directly-relevant indicators. These proxies

varied in their relation to the actual conditions they were used to measure.

11.3.2 Particular cases have been used to describe general phenomena despite significant differences

between conflict and post-conflict situations.

Large differences between various conflict and post-conflict situations that was identified in

the review of statistical indicators highlights limitations of the use of specific cases to describe

conflict-affected situations in general. Further, wide variation among conflict-affected situations

suggests that any generalised situation is of limited value as an indication of particular scenarios.

However, the focus of analysis was upon relationships between prevailing conditions, construction

practices and project outcomes. This focus upon relationships intended to provide a degree of

abstraction that would enable generalisation of findings beyond the particular circumstances of each

case. Given the characteristics of a subject that involves responses of individuals to complex

environments, this case-based approach to the study is appropriate. Nevertheless, use of cases and

characterisation of generalised relationships is limited given the unique circumstances that

characterise each conflict and post-conflict situation.

11.3.3 The adoption of entire countries as cases does not adequately reflect differences within

countries, including varied levels of instability and violence.

The using countries as cases, as opposed to a narrower unit of analysis such as specific

conflict-affected sub-national regions or specific construction projects, leads to two separate

limitations of the study. While the national scope of each case encompasses a wide range of

construction projects, conditions, practitioners and practices, interviews focussed upon factors that

were deemed particularly significant by the practitioners. Further, the national scope of each case

incorporated both particularly violent/unstable regions and more peaceful regions. While political

violence and social instability might be limited to a particular sub-national region, such

geographically-limited wars are expected to yield national political and economic instability.

Conclusion

241

11.3.4 The experience and knowledge of a limited group of interviewed practitioners provides a

limited description of the range of conditions, practices and outcomes characterising

construction in country.

As a result of access limitations, the range and number of interviewees varies for each case.

The groups of interviewees for the cases are neither comprehensive nor consistent. While the range

of interviewees for each case is not a representative sample, each group is sufficiently large and

diverse enough to encompass a breadth of experience and knowledge.

11.4 Further research

The broad scope of the study addressing conflict-affected situations in general is appropriate

given the exploratory character of the research. However, the finding of large differences in

conditions among conflict-affected countries and identification of particularly significant issues,

conditions and practices in each case suggests further research that adopts a narrower focus. This

narrower focus could apply to specific situations, specific programs or specific aspects of

construction. The suggested topics for further research prioritise ways that academic research can

contribute directly to construction practice in conflict and post-conflict settings as well as other

developing countries.

11.4.1 Contributing factors and outcomes associated with the reassignment of construction contracts

in Afghanistan and other similar situations

Despite being prohibited (subject to client consent) in standard contracts, contract

reassignment was a widespread feature of construction during the conflict in Afghanistan. The

practice was also identified in the cases of South Sudan and Timor-Leste. In this study, the practice

has been associated with a range of conditions and practices including corruption, strategic and

preferential contract award, and insecurity on construction sites, and with project outcomes of

increased costs and decreased construction quality. Given the prevalence of the practice, significant

implications, and potential prevalence in other situations, factors and outcomes associated with

contract reassignment warrant further study in relation to conflict-affected situations and other

contexts. More detailed study of contract reassignment in Afghanistan and other places could focus

on particular projects or programs and involve interviews with practitioners and analysis of project

documentation. Research may be limited by willingness of practitioners to discuss the prohibited

practice openly. Greater understanding of the practice could support clients in developing measures

to address the practice proactively.

Conclusion

242

11.4.2 Political and economic outcomes of the Pakote-Referendum program and the Decentralised

Development Program in Timor-Leste

Infrastructure construction programs initiated by the Government in Timor-Leste in the wake

of the national crisis in 2006 initiated a domestic construction industry and supported its rapid

expansion. Commencing in 2009, the programs involved around 3,000 individual projects and

apparently led to the registration of more than 4,000 construction firms. A limited study of the

programs by the World Bank (World Bank 2014c) highlighted problems with the quality of built

work, while in this thesis other issues were identified in relation to the programs including the

localisation of construction markets and continued restrictions on construction supply capacity.

Nevertheless, the government in Timor appears to have considered the programs to be successful in

instigating industrial development and supporting political stability. In interviews it was suggested

that the Timorese Government intended to promote the programs to the G7+ group of fragile and

conflict-affected countries as examples of successful peace-building and economic development

strategy. Further research is required to understand the political and economic implications of the

programs and to increase understanding about whether similar programs may be useful in other

conflict-affected situations. Research could take the form of an historical study and involve

interviews with contractors and officials, analysis of statistics and other secondary data, and

assessments of built work.

11.4.3 Industrial development outcomes of road construction programs in South Sudan and similar

programs elsewhere

A road construction program managed by a UN agency in South Sudan restricted contracts

to newly-established domestic firms in order to support the establishment of a domestic construction

industry. Similar programs have been implemented in other countries. In addition to supporting

industrial development, the program in South Sudan was associated with other issues and practices

including increased superintendence requirements, contractor defaults, and contract reassignment.

Further investigation could increase understanding about the positive and negative outcomes and

implications of such programs and support improvements in program planning and implementation.

Research could address particular programs as cases, involving interviews with officials, contractors,

subcontractors etc. and analysis of program documentation.

11.4.4 Mechanisms of petty and grand corruption in medium-scale construction projects in Pakistan

Despite adoption of standard public procurement systems involving various checks, balances

and tiers of oversight, corruption appears to be widespread in the award and administration of public

construction contracts in Pakistan. Numerous studies of corruption in public construction contracts

have suggested a significant scale of the problem, though few studies have addressed the issue in

Conclusion

243

detail by identifying particular mechanisms, levels of bribes, and specific impacts of particular forms

of corruption upon other contracting practices. The depth of research into corruption is restricted

by a limited willingness of practitioners to discuss the subject. However, interviews in this study

have suggested that research can address corruption in greater depth. Increased understanding of

the mechanisms and costs of corruption could support more-effective identification and control

measures.

Conclusion

244

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245

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Youker, R., 1992. Managing the international project environment. International Journal of Project

Management, 10(4), pp.219–226.

Zafar, I., Yousaf, T. & Ahmed, D.S., 2015. Evaluation of risk factors causing cost overrun in road

projects in terrorism affected areas Pakistan – a case study. KSCE Journal of Civil

Engineering, 20(5), pp.1613–1620.

Zarkada-Fraser, A., & Skitmore, M., 2000. Decisions with Moral Content - Collusion. Construction


ANNEX 1

Pla

in L

angu

age

Sta

tem

ent

Con

stru

ctio

n P

ract

ices

and

Out

com

es in

Fra

gile

Set

tings

ئجتا

ر نل او

عمرز

ا طک

یر تعم

یں ت م

باتی

ترک

نازIn

terv

iew

s w

ith c

onst

ruct

ion

cont

ract

ors

and

cons

truct

ion

man

ager

sیو

رونٹ

تھ اسا

ے ک

رز یج

ینی م

اتیر

تعمور

وں ادار

کیھی

ٹتی

یراتعم

1Y

ou a

re in

vite

d to

par

ticip

ate

in th

e ab

ove

rese

arch

pro

ject

, whi

ch is

bei

ng c

ondu

cted

by

Mr

And

re U

llal o

f the

Fac

ulty

of A

rchi

tect

ure,

Bui

ldin

g an

d P

lann

ing

at T

he U

nive

rsity

of

Mel

bour

ne, A

ustra

lia.

کی U

llalے

ندرٹر آ

سے م

کٹی

کلفی

کی ت

یراتعم

فن دی

بنبہ

صو من

پریا

یلٹر

سی، آ

سٹور

نییو

رن بو

یلر م

ر اومی

تعکی

پ آ

ے.تا ہ

جایا

کعو

مدے

لئے

کے

ینہ ل

ص ح

یںے م

وبص

منے

کق

قیتح

لا با

جہ ندر

ں ممی

س ج

ےہا ہ

ا ر ج

یاک

قد نع

ے مس

ف 1طر

2Th

e U

nive

rsity

’s H

uman

Res

earc

h E

thic

s C

omm

ittee

has

app

rove

d th

is s

tudy

.ے.

ی ہی د

ظور من

کییق

حق ت

سے ا

ی نیٹ

کمت

قیاخلا

ی اسان

چ انسر

ریے

کٹی

سیور

ونی

2

3Th

e ai

m o

f thi

s st

udy

is to

inve

stig

ate

the

chal

leng

es fa

ced

and

prac

tices

ado

pted

by

cons

truct

ion

cont

ract

ors

and

man

ager

s an

d cl

ient

s of

con

stru

ctio

n pr

ojec

ts in

frag

ile s

ettin

gs,

parti

cula

rly: P

akis

tan,

Tim

or-L

este

, Sou

th S

udan

and

Afg

hani

stan

.

پرور

طص

خاور

ڑا ا پ

رناک

نا سام

کا وں

نجیل

د چص

مقکا

ق قی

تحس

ن: اتا

سغان

فر ا

ن اووڈا

سی

وبجن

ٹ، س

لیور

یم ت

ان،ست

کپا

کیمل

ا عنای

اپے

سف

طری

کوں

کگاہ

ور رز ا

یجین

ر مں او

رویدا

کھی

ٹے

کیر

عم ت

کیں،

بوصو

منتی

یراعم

تیں

ل محو

ک ماناز

ے.ے ہ

لئے

کے

رنک

ین ب

ھان3چ

4S

houl

d yo

u ag

ree,

you

wou

ld b

e as

ked

to p

artic

ipat

e in

an

inte

rvie

w o

f abo

ut n

inet

y m

inut

es(w

ith tr

ansl

atio

n).

This

inte

rvie

w w

ill h

elp

us to

und

erst

and

the

chal

leng

es y

ou fa

ce a

nd th

eco

nstru

ctio

n pr

actic

es y

ou a

dopt

in re

spon

se to

thes

e ch

alle

nges

.

ےائ

ا جکہ

ے لئ

ے ک

ے ین

ہ لص

ں حمی

ھ( ات

سے

کمہ

رج)ت

یو رو

نٹک ا

ایکا

ٹ من

ے نو

یں ے م

بارے

کپ

تو آوں

ی ہض

راآپ

گر ا

کووں

یقطر

ے ک

یر عم

تکی

ے نان

اپیں

ب مجوا

ے ک

وں نج

یلن چ

کو اپ

ور آں ا

ہیش

پی در

ےس

پ ں آ

میو ہ

ویٹر

انس

گا. ای.

گے

ملدد

ے ملئ

ے ک

ے ھن

مج4س

5W

ith y

our p

erm

issi

on, t

he in

terv

iew

wou

ld b

e re

cord

ed s

o th

at w

e ca

n en

sure

that

we

mak

ean

acc

urat

e re

cord

of w

hat y

ou s

ay.

یںے ہ

کتس

کر ین

یقکا

ت با

س ے ا

لئے

کے

نان ب

ارڈک

ریح

حیص

ی ک

ہو ے

ہتک

تم جو

ے م ن

و ہوی

ٹر ان

تھ،سا

ے ک

ت جاز

ی اک

پ آ

ے.گ

یں جائ

ے کی

ند مب

قلکہ

5تا

6W

hen

the

tape

has

bee

n tra

nscr

ibed

, you

wou

ld b

e pr

ovid

ed w

ith a

cop

y of

the

trans

crip

tup

on re

ques

t, so

that

you

can

ver

ify th

at th

e in

form

atio

n is

cor

rect

and

/or r

eque

st d

elet

ions

.ے

یا ہگ

trans

cribe

d پٹی

کہ تا

یں ے ہ

کتس

کر ق

دیص

تکی

ت با

س ے ا

ف ہحذ

ت س

خوا در

یار /

ت اوس

درات

لوممع

ی ک

پ آ

ی.گ

ے ائ

جکی

ہم فرا

تھ سا

ے ک

قل ک ن

ایی

کقل

ر ن پ

ستخوا

درکی

پ و، آ

6ت

7W

e in

tend

to p

rote

ct y

our a

nony

mity

and

the

conf

iden

tialit

y of

you

r res

pons

es to

the

fulle

stpo

ssib

le e

xten

t, w

ithin

the

limits

of t

he la

w.

کیت

باجوا

ے پن

ر ا او

یںکر

نہ ہر

ظانام

ے پن

ے الئ

ے ک

ے رن

کمل

کک م

تحد

ن ک

ممر،

ندر ا

ندے ا

کود

حدی

کن

نو قا

ے ن

ہمیں.

ے ہھت

کہ ر

رادکا ا

ے رن

کت

فاظی ح

کی

دارراز

7

8Th

e na

me

of y

ou c

ompa

ny a

nd y

our n

ame

and

cont

act d

etai

ls w

ill b

e ke

pt in

a p

assw

ord-

prot

ecte

d co

mpu

ter f

ile s

epar

ate

from

any

inte

rvie

w re

cord

ing.

In a

ll do

cum

enta

tion,

you

will

be re

ferr

ed to

by

a ps

eudo

nym

– fo

r exa

mpl

e, C

ontra

ctor

A, E

ngin

eer X

etc

.

ورڈس

پاک

ایگ

الے

سگ

رڈنکا

رییو

رونٹ

ی ابھ

ی س

کپر

نام ے

کت

یلاص

ف ت

کیے

بط را

ورنام ا

ے ک

پ ر آ

ی اوپن

کمپ

آک،

ایگا -

ے جائ

یا ہ د

والے ح

سف

طری

کص

خل ت

ک ای

آپں،

میت

یزاتاو

سام د

تمگا.

ے جائ

کھا ں ر

میئل

فاٹر

یومپ

کوظ

فمح

دارکی

ھی ٹ

پر،ور

ے طک

ثال رہ م

غیس و

ک ای

ئرین

نج8ا

9In

form

atio

n pr

ovid

ed d

urin

g in

terv

iew

s ca

n be

use

d as

evi

denc

e in

cou

rts o

f law

. D

irect

refe

renc

e to

spe

cific

eve

nts

or a

ctiv

ities

of a

n ill

egal

nat

ure

shou

ld b

e av

oide

d.یر

ک غای

تا. ک

سجا

یا ک

ال عم

ستر ا

پور

طے

کت

بو ث

یںت م

دالی ع

کون

قانے

کت

وماعل

ہ مکرد

ہم فرا

ان ور

ے دک

یو رو

نٹا

ے.ہئ

چاونا

ں ہہی

س نرن

فری

ت س

ہ رابرا

کو وں

میگر

سریا

ت قعا

ص واصو

مخے

کت

عینو

ی ون

قان9

10Y

our p

artic

ipat

ion

in th

is s

tudy

is c

ompl

etel

y vo

lunt

ary.

Sho

uld

you

wis

h to

with

draw

at a

nyst

age

you

are

free

to d

o so

with

out p

reju

dice

. A

ll re

cord

ings

and

tran

scrip

tions

of t

his

inte

rvie

w w

ill b

e de

stro

yed

afte

r fiv

e ye

ars.

یںد ہ

آزاے

لئے

کے

رنک

سا ای

یر بغ

ے ک

ب ص

تعپ

یا آک

ے. ہ ہ

رانکا

ضار ر

پور

طمل

کو م

کت

کشر

ی ک

پ ں آ

میعہ

طالس م

اباہ

تعد

بسال

چ پان

tran

scrip

tions

ور گ ا

ڈنکار

ریمام

تکی

یو رو

نٹس ا

ں. اہی

ے ہت

چارنا

کے

س لاپ

ر و پ

ےحل

مری

بھی

سک

گا.ے

ائ ج

یار د

10ک

11If

you

wou

ld li

ke to

par

ticip

ate,

ple

ase

indi

cate

that

you

hav

e re

ad a

nd u

nder

stoo

d th

isin

form

atio

n by

sig

ning

a c

onse

nt fo

rm o

r by

agre

eing

ver

bally

at t

he b

egin

ning

of t

hein

terv

iew

.نی

باں ز

میاز

آغے

کیو

رونٹ

یا اے

سف

طری

کے

رنک

خط ست

ر د پ

ارمف

ٹ سن

کانک

ایکو

پ و، آ

تیں

ے ہہت

چارنا

کت

کشر

پ آ

یں.کر

ی ندہ

شای ن

کت

باس

کہ اے

یا ہھ ل

مجس

ور ھ ا

پڑکو

ت وما

علی م

کس

ے اس

ف طر

ی ک

ق فا

اتپر

ور 11ط

12S

houl

d yo

u re

quire

any

furth

er in

form

atio

n, o

r hav

e an

y co

ncer

ns, p

leas

e do

not

hes

itate

toco

ntac

t the

rese

arch

er, s

uper

viso

r or t

he E

xecu

tive

Offi

cer o

f Hum

an R

esea

rch

Eth

ics,

Uni

vers

ity o

f Mel

bour

ne v

ia th

e co

ntac

t det

ails

bel

ow:

ےک

ت یلا

صف

تکی

ے بط

ل راذی

ے، ہئ

چایں

ت ہشا

خدی

بھی

سک

یا ے،

ی ہوت

ت ہور

ضری

کت

لوما مع

ید مز

ئیکو

کو پ

گر آا

یںے م

رنک

طہ راب

ٹی س

یورون

ن یبور

یلر، م

سفی

ٹو آک

زیگ

ایے

کت

قیاخلا

ے اک

یق حق

تنی

ساا ان

ر یئز

رواسپ

ق، حق

ے میع

ذری:

بانمہر

راہ ب

تویں

ے ہرت

کیں

نہوچ

کسن

12

Andr

e U

llal –

u

llala

@st

uden

t.uni

mel

b.ed

u.au

Andr

e U

llal –

u

llala

@st

uden

t.uni

mel

b.ed

u.au

Dr P

aolo

Tom

besi

- p.

tom

besi

@un

imel

b.ed

u.au

Dr P

aolo

Tom

besi

- p.

tom

besi

@un

imel

b.ed

u.au

Exec

utiv

e O

ffice

r of H

uman

Res

earc

h Et

hics

- te

l +61

3 83

44 2

073

/ fax

+61

3 93

47 6

739.

Exec

utiv

e O

ffice

r of H

uman

Res

earc

h Et

hics

- te

l +61

3 83

44 2

073

/ fax

+61

3 93

47 6

739.

HR

EC n

umbe

r: 13

4016

7.1

/ Doc

umen

t ver

sion

: 2 (w

ith tr

ansl

atio

n) /

Dat

e cr

eate

d: 3

/6/1

3

ANNEX 2

Con

sent

form

for p

erso

ns p

artic

ipat

ing

in a

rese

arch

pro

ject

ےین

ہ لص

ں حمی

ٹ ک

جیرو

پقی

قیتح

ک ای

پررم

فای

ورنظ

ے ملئ

ے ک

راد ف

ا

Con

stru

ctio

n P

ract

ices

and

Out

com

es in

Fra

gile

Set

tings

ئجتا

ر نل او

عمرز

ا طک

یر تعم

یں ت م

باتی

ترک

نازIn

terv

iew

s w

ith c

onst

ruct

ion

cont

ract

ors

and

man

ager

sیو

رونٹ

تھ اسا

ے ک

رز یج

ینر م

ں اورو

یداک

ھی ٹ

تییرا

تعم

Nam

e of

inve

stig

ator

: And

re U

llal

Nam

e of

par

ticip

ant:

1I c

onse

nt to

par

ticip

ate

in th

is p

roje

ct, t

he d

etai

ls o

f whi

ch h

ave

been

exp

lain

ed to

me,

and

Iha

ve b

een

prov

ided

with

a w

ritte

n pl

ain

lang

uage

sta

tem

ent t

o ke

ep.

یںر م

، اوے

یا ہگ

یا جھا

سمے

جھت م

یلاص

ف ت

کیس

، جے

ی ہمند

ضاے ر

لئے

کے

ینہ ل

صں ح

میے

وبص

منس

ں امی

یں.ی ہ

گئی

کہم

فراتھ

ساے

کان

زبدہ

سایں

ن مبیا

ی یر

حر ت

ک ای

ےلئ

ے ک

ے ھن

کر

1

2I u

nder

stan

d th

at a

fter I

sig

n an

d re

turn

this

con

sent

form

it w

ill b

e re

tain

ed b

y th

e re

sear

cher

.یں

ائ ج

جھسم

ھا ک

ر رقرا

برے

سف

طری

کق

حقس م

عد ا ب

ےک

ے آن

ساپ

ر و پ

رمفا

ی ور

نظس م

ر ا او

یںکر

ان ئن

سایں

مکہ.

ے گ

2

3I u

nder

stan

d th

at m

y pa

rtici

patio

n w

ill in

volv

e an

inte

rvie

w a

nd I

agre

e th

at th

e re

sear

cher

may

use

the

resu

lts a

s de

scrib

ed in

the

plai

n la

ngua

ge s

tate

men

t.قق

محپر

ور ے ط

کان

بیدہ

کران

بییں

ن مبا

ہ زساد

یں ر م

ہ اوک

ے گ

یں جائ

جھ سم

مل شا

یو رو

نٹک ا

ایکو

ت ک

شری

پنں ا

میوں.

تا ہکر

اق ف

اتکہ

یں ے ہ

کتس

کر مال

تعس

کا ائج

تاے ن

3ک

4I a

ckno

wle

dge

that

:یں:

ے ہرت

کیم

سل ت

یہیں

4م

4aTh

e po

ssib

le e

ffect

s of

par

ticip

atin

g in

the

inte

rvie

w h

ave

been

exp

lain

ed to

my

satis

fact

ion;

ے؛ی ہ

گئی

کت

ضاحی و

کے

لئے

کان

ینطم

ے اپن

کو ات

ثرانہ ا

کے مم

کے

ینہ ل

صں ح

مییو

رونٹ

4aا

4bI h

ave

been

info

rmed

that

I am

free

to w

ithdr

aw fr

om th

e pr

ojec

t at a

ny ti

me

with

out e

xpla

natio

nor

pre

judi

ce a

nd to

with

draw

info

rmat

ion

that

I ha

ve p

rovi

ded;

کیہم

فرایں

ر مے او

لئے

کے

رنک

ار برد

ستے د

سے

وبص

منس

ت اوق

ی بھ

ی س

کیر

بغے

کب

صتع

یا ت

ضاحے و

ں نمی

ے؛یا ہ

گیا

ر دک

ع طل

ں ممی

کہ وں

د ہآزا

ے لئ

ے ک

ے ین

س لاپ

و وک

ت وما

علہ م

کے

ہ4b

4cTh

e pr

ojec

t is

for t

he p

urpo

se o

f res

earc

h;ے؛

ے ہلئ

ے ک

صد مق

ے ک

یق حق

تکی

ے وب

ص من

س4cا

4dI h

ave

been

info

rmed

that

the

conf

iden

tialit

y of

the

info

rmat

ion

I pro

vide

will

be

safe

guar

ded

subj

ect t

o an

y le

gal r

equi

rem

ents

;یا

گیا

کلع

مطکہ

گا ے

ائ ج

یاک

ظ ف

تحت

تحے

کت

یاور

ضری

ونقان

ی وئ

کی

کی

دارراز

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ہ4d

4eI h

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rmed

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with

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terv

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that

audi

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the

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s;وظ

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ے اں ن

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ا ہگی

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refe

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;گا؛

ے جائ

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4f

4gI h

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rmed

that

a c

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gs w

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ded

to m

e, s

houl

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this

.ے.

ہئ چا

رناک

اق ف

اتپر

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میے،

یا ہگ

یا ک

کہ گا

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I wis

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rece

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a su

mm

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proj

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Yes

/ N

oہاں

خواے

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رنک

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پوٹ ر

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Par

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4016

7.1

/ Doc

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Dat

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/6/1

3

ANNEX 3

UME_CHB_Codebook Nodes Name Files References PF1 Design & certification 38 131

CO Absence of testing facilities 2 3

CO Absent or inadequate contractor registration 4 4

CO Absent or inadequate professional licensing 1 1

CO Established system of registration-licensing 3 3

CO High prevalence of corruption 7 9

CO Inadequate availability of expertise 8 12

CO Inadequate systems of compliance certification 5 6

CO Introduction and expansion of testing facilities 2 4

CO National income independence 2 3

CO Poor regulatory quality 12 18

OU Inappropriate designs & specs 6 7

OU Inflated construction costs 5 8

OU Poor quality of built work 9 12

PR Adoption of various foreign regs 21 30

PR Corrupt compliance certification 3 3

PR Fraudulent testing of materials and works 4 8

PR Local redesign of foreign designs 1 2

PR Locally-inappropriate designs & specifications 4 6

PR Neglect of materials testing 1 2

PR Strategic over-design 1 2

Name Files References

PR Use of informal design standards 2 2

PF2 Tendering & Contract award 53 369

CO High prevalence of corruption 9 13


CO Inadequate legal frame for liability 6 7

CO National income independence 2 3

CO OU Localisation of markets 2 2

CO Rapid industry expansion (contractors) 4 6

CO Volatile construction demand 2 5

OU Contract award to unqualified firms 6 8

OU Duopoly market for gov contracts 2 2

OU Increased contract costs 2 2

OU Increased prevalence contractor default 2 2

OU Industrial supply capacity development 3 5

OU Inflation of contract prices 1 2

OU Market entry foreign firms 1 1


PR Bid collusion by prequalified firms 4 5

PR Complete subversion of tenders 12 15

PR Contract award to NGOs 3 6

PR Direct (non-competitive) contract award 3 7

PR Donor-imposed award criteria 7 8

PR Dysfunctional price control by clients 3 7

PR Excessive under-pricing of bids 13 19


PR Foreign-domestic joint venturing 1 3

PR Fraudulent bidding 3 6

PR Partial subversion of tenders 13 18

PR Preferential contract award 3 3

PR Reassignment of contracts 19 38

PR Reliance on informal contract agreements 3 5

PR Restriction of contract award to local firms 2 2

PR Stability & development strategies determine contract award 1 12

PR Unrestricted tender competition 2 2

Untitled 0 0

PF3 Resource mobilisation & management 50 253

CO Availability of expertise 2 2

CO Corrupt customs 2 3

CO Currency volatility & restricted availability 7 14

CO Exorbitant transport costs 4 5

CO High volatility & inflation of resource prices 6 10


CO Insecure (unsafe) contractor work environment 11 15

CO OU Highly localised construction markets 1 1

CO Rapid expansion of supply chains 11 16

CO Restricted mobility of expertise 6 8

CO Restricted or unreliable supply chains 17 26

OU Increased construction costs 2 3

OU Increased project costs 1 1


OU Industrial supply capacity development 3 7

OU Inflated contract prices 8 11

PR Cooperative sharing of resources 2 2

PR Corrupt customs and problematic supply routes 2 3

PR Importation of skilled and unskilled labour 7 12

PR Importation prof. and skilled labour 3 4

PR Inadequate contractor investment in resources 6 11

PR Independent international supply chains 7 12

PR Informal credit from merchants 3 5

PR Intentional compromise of construction quality 1 1

PR Investment in prof staff 1 2

PR Labour-only subcontracting 11 18

PR Merchants price and share goods cooperatively 4 6

PR Supply of counterfeit materials 4 5

PR Trade package subcontracting 5 5

PR Vertical integration of resources by contractors 5 8

PF4 Contract conditions & administration 43 184

CO Absence of testing facilities 2 2

CO Established public contract administration systems 1 1

CO Inadequate availability of contract administration expertise 4 4

CO Inadequate compliance certification 2 4

CO Inadequate legal frame 5 9

CO Inadequate systems for liability & insurance 2 4

CO Pervasive corruption 9 13


CO Pervasive violence 2 3

CO Restricted or unreliable supply chains 3 3

CO Weak rule of law 3 3

OU Excessive contractor risk 8 11

OU Increased contract costs 3 5

OU Increased contract default 2 3

OU Increased project costs 6 8


OU Project delays 2 2

PR Adjusted payment terms 3 3

PR Adoption of various standard form contracts 3 4

PR Common contractual escalation of contract rates 6 7

PR Corrupt or biased contract administration 13 27

PR Corrupt or ineffective arbitration 6 8

PR Delayed interim payments 9 11

PR Enf of problematic guarantees etc 5 7

PR Exorbitant or problematic retention & guarantee payments 4 7

PR Inadequate superintendence of works 16 27

PR Informal (undocumented) contracting 1 2

PR Intimidation of contract administrators-superintendents 6 11

PR Neglect of insurance-guarantees 4 4

PR Outsourcing of site superintendence functions 2 4

PR Overlapping contract administration mandates 4 4

PR Withheld subcontractor payments 3 4

ANNEX 4

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Page'5'of'17'

So'now,'as'we'move'to'a'stricter'procurement'regime,'some'of'them'are'complaining.''Some'of'the'

companies'didn’t'survive'very'long.''Some'of'them'did….'And'then'there'were'lots'of'other'things.''

Like'for'example,'you'could'…'they'would'take'a'loan'from'bank'A,'they'would'win'the'project,'and'

say'to'the'bank'here’s'my'project'from'the'government,'give'me'a…'$20,000'loan…'They'then'get'the'

$20,000'but'they'then'open'an'account'in'bank'B,'and'the'government'money'goes'into'bank'B'and'

they'refuse'to'pay'back'bank'A.''And'bank'A'has'a'massive'amount'of'bad'debt.'''

There'were'lots'of'things'like'that,'and'we'resolved'that'by'communicating'by'the'banks,'saying…'

you'must'inform'the'government'so'we'know'we'have'to'pay'to'that'bank.''But'again,'some'of'the'

banks'copped'it.''But'that’s'what'happens'–'these'are'things'you'have'to'deal'with.''The'issue'isn’t'

whether'they'happen,'you'know'they'happen'–'the'issue'is'that'yes,'we'must'be'constantly'learning,'

constantly'improving,'otherwise,'you'never'learn.'''

The'alternative'is'what'was'happening'up'to'2007'when'we'came'in,'was'that'you'know,'outsource'

everything,'and'that’s'not'the'solution'in'a'fragile'state,'in'a'post$conflict'state.''That’s'a'very'

dangerous'solution.''It’s'not'going'to'help'at'all.''It’s'not'going'to'help'with'stability,'and'it’s'not'going'

to'help'development…'and'as'such'it’s'not'going'to'work.'''

What'you’ve'got'to'do'is'have'these'things'but'have'them'iterative:'yes,'we'know'this'happened'in'

the'first'round;'in'the'second'round'it'happened'less,'and'in'the'third'round'it'happened'less…''by'

the'end'we’ve'got'what'is'a'more'recognisable'process'–'internationally.''But'to'get'there'you'went'

step'by'step.'

Was'this'resited'at'all'by'some'of'the…'the'World'Bank'for'example?''Because'the'have'guidelines'

and'principles'they'like'to'see'adhered'to.'

Everybody.''Because,'for'example'the'World'Bank'wanted'to'do'their'$20M'cash'for'works,'but'it'

would'take'them'two'years'to'design,'maybe'another'year'for'a'lot'of'consultants'to'come…''We'

don’t'have'that'amount'of'time'$'we'don’t'have'that'luxury.''We'had'these'IDPs.''We'didn’t'have'

time'–'we'had'to'have'this'up'and'running'in'three'months.''So,'thanks'World'Bank'$'great,'when'

you’re'ready'call'us,'but'we'need'something'now.''So'yes,'they'were'heavily'critical.''Subsequently'

they'wrote'a'nice'report'about'it.''Their'analysis'of'the'programme'was…'it’s'very'positive.'

What'year'was'that?'

The'report?'It’s'in'draft'–'just'this'year.''I'can'speak'to'my'Minister'and'see'if'we'can'give'it'to'you,'as'

a'researcher'to'have'a'look'at.''Because…'what'we'want'to'do'with'this'report'is'pull'out'the'lessons'

learned'and'share'it'with'the'G7+.''…To'use'it,'and'show'to'them:'you’re'all'going'to'face'this.''We'

know'that'South'Sudan'is'one'country'we’re'working'with'quite'a'lot:'South'Sudan,'Somalia,'CAR,'

Guinea'Bissau.''We'know'they’re'going'to'have'the'same'problem…:'take'a'look'at'this,'this'is'what'

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Page'6'of'17'

we'did,'we'think'it'was'quite'successful,'we'did'get'heavily'criticised'in'the'start:'people'said'

handouts…,'corruption,'where’s'your'accountability…'''

But'we'all'believe'it'was'successful'in'the'end.''But'there'are'things'we'could'have'done'better.''And'

that’s'what'we'want'to'use'as'an'example'for'some'of'these'G7+'countries'and'say'look,'you'can'

actually'stimulate'the'local'construction'industry,'which'is'good'for'your'own'people,'it’s'good'for'

stability,'it'has'broader'developmental'and'stability'and'peace'building'aspects.''You'can'do'that'

within'the'context'of'a'construction'boom'that'you’ll'need'inevitably'following'a'conflict.''Because'in'

a'lot'of'these'(countries)…'a'lot'of'infrastructure'needs'to'be'built.''It'can'be'done.''And'you'can'also'

do'that'simultaneously'with'large'contracts'to'fix'big'this:'airports,'ports,'whatever.'

…'as'you'were'saying,'by'strategic'weighting'of'tender'assessment'criteria'encouraging'joint'ventures'

etc.'

Yes.''You’ve'got'to'be'aware'that'sometimes'you'can'go'too'far.''There'was'a'case'recently'where'the'

Japanese…'everybody'criticised'them'for'building'a'bad'road,'but'is'was'because'they'were'overly'

reliant'on'pretty'poor'local'contractors.''And'they'said,'we'felt'that'we'were'forced'to'use'this'–'

there’s'a'balancing'act.'''

That’s'why'I’m'saying'that'for'larger'strategic'investments,'it'has'to'be'purely'international'$'like'the'

port,'the'airport.'Because'that’s'a'strategic'area'and'the'economy'cannot'afford'for'that'to'be'

anything'but'an'international'quality.''But'for'everything'else,'or'certainly'below'a'certain'threshold,'

you'can'be'a'lot'more'flexible.'''

It’s'a'case'of'trying'to'set'thresholds,'for'flexibility.''The'smaller'amount,'the'more'flexible'you'can'

be.''It'also'means'you’re'carrying'more'risk.''But'that’s'fine,'because'the'payoff'isn’t'the'worlds'best'

infrastructure'–'the'payoff'is'the'broader'development'objectives,'which'in'a'post$conflict'setting'is'

much'more'valuable.'

And'in'particular,'you'were'discussing'there,'the'development'of'a'sector'of'the'economy.'

That’s'right.''Ultimately,'this'country'will'need'a'construction'sector.''From'a'financial'point'of'view,'

this'is'what'we'can'do.''We'can’t'implement'a'construction'code'there'are'other'people'that'will'do'

that'–'the'Ministry'of'Public'Works'can'do'the'building'codes...'From'the'financial'perspective,'this'is'

what'we'can'do.'

Was'there'any'consideration'of'the'ongoing'maintenance'costs'–'in'particular'that'lower'quality'

infrastructure'will'mean'higher'maintenance'costs'in'the'future?''

Yes'and'no.''At'that'stage'it'was'more,'it'was'a'bit'like'a'pilot'project.''Maintenance'wasn’t'a'big'

issue,'because'in'a'lot'of'cases'we'may'end'up'knocking'it'down'–'we'did'in'about'a'third'of'the'

TLS$08'

Page'7'of'17'

cases.''We'ended'up'knocking'the'structure'down'and'rebuilding.''We'took'a'lot'of'criticism'about'

that,'but'again,'people'forget'what'the'aim'of'the'programme'was'–'it'was'to'create'and'a'private'

sector,'which'it'did.'

Or,'would'it'be'fair'to'say,'to'be'seen'to'be'creating'jobs?'

Yes'exactly.''So'three'or'four'iterations'down'the'priority'has'shifted'towards'higher'quality'work.''

And'then'you'are'definitely'thinking,'like'now'we'are'definitely'thinking'about'maintenance.''But'this'

is'now'five'years'later.''So'it’s'a'different'country.''We’ve'had'seven'years'of'stability'–'I’ve'never'

seen'this,'it’s'a'different'country.''We'do'have'many'construction'firms'now;'many'who'are'very'

good.''So'the'industry'is'now'starting.'''

So'now'they’re'facing'new'challenges'–'now'the'quality'challenge.''Therefore'the'emphasis'is'on'

maintenance'etc.,'and'this'is'where'building'come'in.''But'at'that'time'no,'maintenance'wasn’t'the'

highest'priority'–'it'was'one'of'the'lower'priorities.'

I’ve'been'speaking'with'the'Ministry'of'Public'Works'–'a'couple'of'different'people'have'spoken'

about'nascent'attempts'to'register'and'grade'construction'companies…'

That'was'our'biggest'challenge'at'the'start.''That’s'what'they’re'trying'to'do…'and'we'did'it…''That'

was'the'challenge'that'we'had,'with'each'of'the'chambers'of'commerce.''After'the'first'round,'let'us'

know'who'is'completely'useless,'because'they'shouldn’t'get'any'more'work,'and'who'did'an'ok'job.''

Then'in'the'next'round,'those'companies'should'be'eligible'–'the'ones'that'did'a'really'bad'job'

shouldn’t'be'eligible.'

To'start'the'tapering'process'and'bring'numbers'back'down'to'a'sustainable'level.'

But'over'time…'we'don’t…'work'through'the'district'chambers'anymore'$'now'it’s'just'the'PDID'and'

we’ve'got'a'different'structure.''And'so,'now'they’ve'got'to'a'level'that'the'Public'Works'are'

involved.''So'from'the'Public'Works'side'they'need'to'register'who’s'bad…''Our'computer'system'

allows'for'that'–'it'allows'us'to'document'all'sorts'of'things'but'we'never'used'that'functionality…'

The'functionality'was'built'in,'because'all'our'systems'are'online…''

You'mean'the'contract'award,'the'budgeting'process…'

Everything’s'online'–'even'the'payments.''What'it'means'is'that'when'the'people'are'doing'the'

contract,'they'can'actually'have'a'look'at'who’s…'you'have'various'degrees'of'listing…'nobody'uses'

that'functionality,'but'they'could'actually'look'and'say:'ok,'who’s'this'company…''It’s'probably'

something'that'needs'to'be'developed,'because'there'are'so'many'companies'out'there'now,'we'

need'to'start'ranking'them'in'terms'of'quality'and'stuff.'

TLS$08'

Page'8'of'17'

We’ve'discussed'this'notion'that'strategy'was'aimed'at'building'up'the'construction'sector.''I’m'also'

interested'in'what'seems'to'be'a'conscious'strategy'to'use'public'works…'as'a'peace$building'tool'–'

or'as'a'strategy'to'increase'stability.'

That’s'exactly'right.''That'was'the'priority.''The'number'one'priority'wasn’t…''It'was'local'ownership'

and'stability.''Because'if'you’re'in'a'village,'number'one'you’re'likely'to'know'what'pieces'of'

infrastructure'you'want'built.''Number'two'you’re'going'to'be'happier'building'it'yourself.''Number'

three,'if'you'have'a'job'building'it,'you’re'going'to'be'more'content'than'if'a'bunch'of'outsiders'come'

in…''In'a'post$conflict'society,'the'last'thing'you'want'is'a'bunch'of'outsiders'coming'into'your'village'

–'that'can'lead'to'tensions,'conflict…'''

So'yes,'initially,'it'was'an'important'part'of'the'toolkit'–'to'use'the'construction'industry'as'part'of'

the'post$conflict'stability,'peace'toolkit;'an'important'part'of'that.''Because,'put'it'this'way'–'you'

didn’t'have'a'choice,'because'if'you'didn’t'use'it'…'it'could'become'a'reason'for'conflict.''And'again,'

in'post$conflict'country'things'either'cause'conflict,'or'they'help'mend'things.'''

So,'we'though'ok,'we'heard'from'people'that'they'were'unhappy.''You'have'to'listen'vary'carefully,'

and'people'said'they'are'unhappy'$'you'have'to'do'something'about'it'–'take'some'risks.''We'took'

some'risks.''There'weren’t'the'best'controls'in'place'at'the'time,'but'we'did'manage'to'account'for'

everything.'''

You’ve'got'to'do'that''$'you’ve'got'to'be'flexible'at'that'time.''Over'time'you'can'be'less'flexible,'but'

the'closer'you'are'post$conflict,'the'more'flexible'you'have'to'be.''Even'though'that'means'taking'a'

lot'of'criticism'from'the'international'community,'because'they'don’t'like'that,'they'expect'you'have'

to'be'100%'accountable,'but'you'can’t'at'that'time'–'you’ve'got'to'focus'on'stability.'''

Another'way'that'the'Prime'Minister'put'it'was,'that'conflict'on'average'costs'$3B'–'we'spent'$30M'

to'avoid'conflict'–'that’s'money'well'spent.''People'might'say'you'only'got'half'the'number'of'roads'

that'you'could'have'done,'but'we'got'stability.''That’s'a'really'good'price'for'that.'

It’s'been'three'years'since'I'was'here'–'the'development'of'construction'companies'is'obvious.''I’ve'

just'met'with'the'head'of'a'construction'consortium'–'CNT'–'talking'about'how'his'company'has'

developed…'''

I'wanted'to'delve'a'bit'deeper'–'I’ll'be'clear'there'that'this'isn’t'an'expose'and'I'subscribe'to'some'of'

the'ideas'about'broadening'the'measurement'of'the'value'of'public'works.''I’ve'been'told'about'

construction'projects'being'awarded'to'people'of'certain'political'affiliation,'in'order'to'build'peace'

in'that'way.''People'who'might'otherwise'be'disgruntled'$'that'the'award'of'public'works'contracts'

has'sought'to'give'them'a'greater'stake'in'government.''Is'that'an'official'strategy…?'

TLS$08'

Page'9'of'17'

No.''If'you'look'again…'at'what'I'was'saying'about'thresholds.''One'of'the'things'that'the'government'

did'was'say:'ok,'anything'above'$1M'–'we'need'to'be'really'serious'–'very'rigid,'very'strict.''So,'

everything'above'$1M'was'put'in'the'infrastructure'fund.''Procurement'is'done'by'an'international'

contractor'–'it’s'all'handled'by'specialists'–'…international'firms.''That'is'super$strict'$'the'firm'

manages'the'tender.''Our'key'focus'was'transparency.'''

Because'people'–'this'is'post$conflict'–'people'are'going'to'point'fingers.''We'need'to'be'as'

transparent'as'possible.''You'don’t'want'the'Ministry'of'Finance'stopping'everybody...''You'want'to'

be'transparent'–'you'want'people'to'see'that'so'they'can'say:'hey'that’s'wrong…'Then'you'can'

address'that.'''

Now,'anything'above'$1M'is'currently'handled'through'the'infrastructure'fund.''Then'you’re'left'

with'capital'works'(?)…'which'is'much'smaller'stuff.''And'then'again,'anything'below'a'certain'

threshold'was'placed'within'these'PDID'1'and'2.''So'you’re'only'left'with'a'limited'amount'now'in'the'

ministries'to'procure.''Now,'I’m'not'saying'it’s'all'brilliant.''But…'everything'is'on'the'internet.''And'

secondly'this'year'$'because'what'was'happening'was'sole'sourcing,'we'noticed'that'$'so'now'again'

there’s'another'layer'–'a'ruling'that'only'10%'of'the'projects'can'be'sole'sourced.''And'because'the'

system'shows'how'many'sole'sourcing'(contracts)'we'can'track'it.''So'this'year,'ironically,'the'impact'

of'that'has'been'that'people'are'now'criticising'the'system'saying'this'is…'slowing'the'country'down,'

but'it’s'not.'

You'mean'limiting'single'source'award'is'slowing'procurement'down?'

In'effect'yes'$'because'all'of'the'controls'has'slowed'execution.''That’s'what'he'systems'for'–'that’s'

what’s'happening.''All'the'time'you'want'to'be'becoming'more'accountable,'more'transparent.''So'

it’s'a'good'thing'that'the'system’s'slowing'down'now.''But'at'the'same'time,'it’s'not'the'system'

that‘s'at'fault'–'it’s'the'people'that'are…'

Expectations'have'been'built'up'regarding'the'pace'at'which'things'should'proceed.'

Yes,'and'it’s'harder'to'do'these'naughty'things,'so'the'people'who'were'doing'these'naughty'things'

tend'to'be'the'ones'complaining.'''

The'other'thing'is'that…'we'devolved'procurement.''Before'it'was'all'centralised.''That’s'not'a'good'

thing'to'do'either.''You'can’t'have'five'white'guys,'which'used'to'be'the'case,'in'the'Ministry'of'

Finance,'controlling'all'the'procurement.''That’s'not'good.''So'it'was'decentralised.''Each'line'

ministry'does'their'own'procurement'–'done'through'the'computer'system,'so'it’s'all'transparent.'''

But'again,'you'know,'when'you'first'do'that,'people'make'mistakes,'and'I'would'say'that'eight'out'of'

ten'times'things'that'people'suggest'are'corruption'are'just'plain'mistakes.''There'might'be'cases'of'

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corruption,'I’m'not'saying'there'wasn’t,'but'in'my'experience'this'is'a'lot'less'corrupt'country'than'

many'I’ve'seen.'''

Now'the'other'thing'is'that'you'don’t'battle'corruption'by're$taking'control'in'the'centre.''You'battle'

corruption'by'giving'people'information.''Were'going'to'make'things'completely'transparent...''So'

now,'people'are'starting'to'say'that'this'system'is'terrible,'because'it'works.''So'again,'it’s'one'of'

those...'there’s'two'things:'there’s'thresholds,'you'want'to'get'he'lower'the'threshold,'the'more'risk'

you'want'to'take,'the'higher'the'threshold,'the'less'risk'you'want'to'take;'and'then'there’s'

incremental'improvement.''You'want'to'make'every'threshold'level'a'bit'tighter'every'two'or'three'

years.''But'you'don’t'want'to'go'to'the'platinum'standard'of'control'on'day'one,'because'that’s'not'

applicable.'

So,'what'stage'is'the'system'at'now?'You'mentioned'10%'single'source'is'the'target'at'the'moment?'

It’s'controlled'by'the'system.''Now…'I'think…'it’s'the'most'transparent'system'in'any'developing'

country'–'that’s'a'good'thing.''It'works'well...'the'problem'now'is'that'were'moving'from'financial'

reconcentration'to'quality'control.'''

Once'the'financial'systems'are'strong,'we'now'need'to'build'the'quality'control'systems.''And'that’s'

going'to'take'time.''These'are'things'like'the'National'Development'Agency,'building'codes,'

construction'codes,'implementing'them'with'civil'engineers…''now,'that’s'going'to'take'a'few'years,'

but'we’re'at'that'stage'now.''Again,'it’s'a'step$by$step'process,'we’ve'got'the'systems'in'place,'but'

now'you'need'the'checks'and'balances'in'place,'working'better.'''

So'this'is'the'second'phase'where'you'say,'now'we'need'the'engineers'to'check'work…''Again,'it’s'a'

phase'by'phase'thing,'so'the'priority'now'is'quality,'and'maintenance.''But'at'least'were'talking'

about'quality'and'maintenance'–'five'years'ago'we'were'asking:'is'there'anybody'out'there.''There'

was'no'private'sector;'there'were'no'local'firms.''Now'we’re'talking'about'quality'and'maintenance,'

and'that’s'a'good'thing.''We’re'talking'out'things'that'I’m'glad'were'talking'about,'but'you'have'to'

get'to'this'stage.''It’s'good'–'this'is'the'right'debate'now.''Now'we'should'be'talking'about'quality,'

maintenance,'strengthening'the'supervisory'capacity'of'public'works'–'that’s'really'important.'

…'At'the'moment,'if'my'understanding'is'correct,'you'have'the'Ministry'of'Public'Works,'and'then'

you'have'the'National'Development'Agency,'that'essentially'retains'authority'to'certify'works'and'

then'to'approve'payments.'

They'were'started'as'an'extra'check'and'balance,'because'if'they’re'(Public'Works)'doing'the'

procurement,'you'want'somebody'else'to'be'quality'assurance.'''

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Is'there'any'longer'term'strategy'to'decentralise'that'function'as'well,'or'will'that'remain'centralised'

for'the'foreseeable'future?'

I'think'ultimately'for'the,'again,'its'a'threshold'issue.''For'the'lower'threshold'stuff,'probably'that'will'

be'sent'back'to'Public'Works'and'the'line'ministries'eventually.'And'then,'the'ADN'will'keep'the'$1M'

plus'projects.''Once'the'line'ministries'have'a'bit'more'capacity,'I'can'see'that'happening'–'that’s'

quite'likely.'

To'go'back,'you'mentioned'that'procurement'has'been'decentralised…'

We'did'it'in'2008.'''

So,'for'anything'above'$1M,'it’s'centralised'with'the'Infrastructure'fund,'and'everything'below'is'

with'the'line'ministry?'

Yes.'''

I'want'to'go'back,'I'don’t'want'to'harp'on'a'point,'but'I'want'to'draw'a'distinction,'which'I'think'is'

not'made'enough,'between'individual'corruption'$'individuals'or'communities'seeking'financial'gain'$''

from'patronage,'which'could'be'seen'as'increasing'stability.''Again,'awarding'work'to'particular'

groups'to'gain'their'support'for'government.''That’s'not'an'official'policy,'your'saying,'unlike'the'

stability'strategy'you’ve'been'discussing'which'is'dealing'with'smaller'projects.'''

I'would'say'that'I'never'saw'the'political'type'of'corruption'that'you’re'talking'about…''I’ll'say'that'

because,'at'the'time'it'was'interesting'that'the'opposition'–'I'knew'who'were'getting'the'contracts'–'

the'contracts'were'actually'all'going'to'the'opposition.'

This'is'actually'what’s'been'suggested'to'me.'

But'it'was'not'by'design.''There'wasn’t'a'deliberate'policy'to'by'them'off.''It’s'just'that'they'were'

efficient'at'bidding…'

Essentially,'that’s'what'I’m'getting'at;'was'it'official/unofficial'policy?'''

It’s'because'they'were'the'original'government.''You'know'what'happens'–'if'you’ve'been'in'the'

administration'before'–'you'know'haw'it'works,'so'when'the'taps'open,'they’re'the'first'to'know'

how'to…'I'think'it’s'much'more'of'that'than'anything'else.'''

What'was'interesting'was'that'the'government'didn’t'react.''The'government'didn’t'say:'ok,'we’re'

going'to'try'to'give'more'to'our'side.''They'let'the'system'work'itself'out.''That'was'a'very'brave'

decision'–'let'the'system'working'itself'out.''Even'though'the'opposition'were'caning'the'

government,'saying'you’re'corrupt'–'a'lot'of'the'contracts'were'on'the'other'side.''He'said'no,'let'the'

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system'work,'we'must'let'the'system'work,'because'if'we'start'interfering'in'the'system,'then'we’ll'

never'stop'interfering'with'it.'

And,'I'guess,'it’s'a'demonstration'that'the'government'is'open'to'sharing.'

Yes.''And'that'was'the'other'thing;'it'wasn’t'just'about'seeing'the'resources'directed'to'one'group'or'

the'other;'it'was'about'sharing'it'with'the'people.''It'was'very'important'–'this'idea'that'the'nation’s'

wealth'is'being'shared.''And'that’s'why,'you’ve'got'to'remember'at'the'same'time'they'introduced'

the'social'welfare'programme:'the'elderly,'the'veterans,'and'disabled'–'all'at'the'same'time.''Our'

idea'was,'this'is'the'nations'wealth'–'it’s'not'one'parties'–'this'is'the'nations'wealth,'you'must'make'

the'best'use'of'it.''In'combination'with'things'like'social'transfers'(?)'as'well.''It’s'part'of'a'package'of'

things'we'were'trying'to'do.'

The'peace'dividend.'

Yes.''And'again,'our'argument'has'always'been'that'this'is'cheaper'than'civil'conflict.'''

Is'it'fair'to'say'that'infrastructure'spending'peaked'around'2011?''What'are'the'current'spending'

level'–'trends?'

That'was'because'of'the'electricity'project.''It'depends.''Now'it'will'be'lumpy'–'it'will'depend'on'a'

couple'of'these'mega$projects'$'like'the'port'and'the'airport'$'they’ll'cause'spikes.''Other'than'that,'it'

should'be'plateauing'out.''

So'aside'form'these'major'projects,'there'should'be'fairly'consistent'spending'looking'into'the'

future?'

Yes,'our'fiscal'framework'suggests'that'as'well.''Government'has'agreed'to'that'as'well.''The'idea'

was'to'front'load,'and'then'focus'more'on'maintenance,'so'that’s'what'the'government’s'done...''

That’s'why'if'you'look'at'the'books'on'construction'spending,'that’s'what'it'has.''We'needed'to'front'

load'to'kick$start'the'economy,'then'focus'on'the'maintenance,'then'once'you'start'with'the'social'

benefit'payments,'it'comes'down'to'about'$1B'(?),'which'is'where'we’re'at'now.'''

And'then'this'infrastructure'fund'–'so'that’s'everything'over'$1M'–'around'what'percentage'of'total'

infrastructure'spending'does'that'represent?'

That’s'most'of'it.''You'could'look'at'the'budget,'but'I'think'around'80$90%.'''

So'the'small'district'level'projects'are'relatively'insignificant?'

They’re'pretty'small'–'under'$100M.'

In'the'infrastructure'fund,'is'this'just'national'incomes'going'in,'or'is'it'donor'funds'also?'

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No,'government'funds,'but'also'borrowing'–'concessional'borrowing.'''

Because'the'borrowing'has'to'be'at'a'rate'less'than'the'return'on'the'petroleum'fund.''That’s'the'

rule'that'we’ve'applied.''So'the'government'has'said'they'wont'borrow'unless'the'rate'is'less'$'that'

way'you'know'you’re'making'more'money'than'you'spending'to'pay'the'debt'back,'so'it’s'limited.'''

But'the'World'Bank,'ADB….'Are'doing'all'the'roads.''The'road'projects'–'they’re'all'concessional'

financing.''Some'of'the'm'are'grants,'some'of'them'are'loans'–'it’s'a'combination.''If'you'look'at'the'

budget,'it’s'a'programme'of'about'$100M,'I'think'this'year'we'might'do'$20'–'30M.'''

In'accepting'the'funds'–'grants'or'loans'–'to'what'extent'are'strings'attached'in'terms'of'financing'

management'–'procurement'policies'–'these'sorts'of'things?'

…'The'donors'are'quite'comfortable'using'the'national'procurement'commission,'this'is'the'process'

for'over'$1M,'because'they'know'it’s'done'by..'they’re'very'happy'with'it.''So'in'most'cases'it'goes'

through'the'National'Procurement'Commission.''It’s'usually'a'case'of'the'donors'working'with'the'

National'Procurement'Commission.''So'it’s'a'combination:'we'meet'the'donor'requirements,'they'

also'meet'the'government'requirements.''We'ensure'that'they'meet'our'requirements,'because'ours'

are'probably'quite'different….''It'can'be'a'drama'in'some'countries,'particularly'with'World'Bank'

projects,'because'they'can'be'quite'painful'in'terms'of'procurement.'

This'is'what'I'was'getting'at'–'I'was'wondering'whether'you'guys'had'felt'some'of'the'pain,'or'I'guess'

the'tensions…'

Yes,'it'can'be'slow.''Some'donors'can'be'quite'quick.''The'ADB'have'been'very'good'here.''You'

should'really'speak'to'them'–'they’re'quite'good.''They’re'the'biggest'one…'and'JICA.''But'some'of'

them'like'JICA'do'their'own.'''

I'guess'from'a'government'point'of'view'as'well,'you'know'that'the'donors'might'be'a'little'more'

painful'in'terms'of'procedure,'but'the'quality'is'usually'excellent.''The'challenge'that'we'have'is'

making'sure'that'we'have'good'contract'supervisors'for'large'projects.''Because'if'you'get'a'bad'

contract'supervisor,'it'doesn’t'matter'who'does'the'project,'it'can'still'be'bad.''So'that’s'another'

lesson'that'we’ve'learned'–'we'need'to'have'not'just'the'contract,'but'also'the'contract'supervisor'–'

two'tenders'that'we'need'to'do.'''

The'quality'of'the'work'of'the'donor's'is'really'good,'and'that’s'important.''When'you’re'spending'

$90M'on'a'road,'you'don’t'want'it'to'be'low'quality.''So'even'if'it'means'a'bit'of'a'pain'to'go'through'

their'process,'it’s'worth'it'for'the'quality.'

What'are'some'of'the'larger'bilateral'funded'projects?'

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In'construction?...''JICA'do'roads'–'they'do'a'lot'of'roads.''JICA'are'probably'the'biggest'bilateral'in'

infrastructure.''Also'China'–'they'did'the'president’s'palace.''That'was'before.''In'the'old'days'I'don’t'

think'we'did'good'contract'supervision,'but'nowadays'they’re'quite…'the'Chinese'(…?)(44:18)'is'

quite'advanced,'quite'modern'nowadays,'so'it’s'quite'feasible'that'there'would'be'a'project'that'

would'be'funded'through'a'Chinese'(…?),'should'then'end'up'engaging'a'Chinese'company'at'their'

end.''So'that’s'conceivable'in'the'next'year'or'two,'but'at'the'moment'it’s'mainly'Japanese'grants'for'

roads.'''

…'

Anything'else'that'you'think'would'be'important'for'me'at'the'moment'to'understand?'

I'guess'$'you’ll'know'this'because'you’ve'worked'in'these'countries'$'the'issue'is'that'you'don’t'want'

to'go'to'platinum'standard'on'day'one.''And'if'you'try'you'actually'cause'problems.'''

The'challenge'for'us'has'always'been'moving'step'by'step,'and'taking'the'criticism,'but'making'sure'

that'the'criticism'doesn’t…'protecting'the'government'so'they'can'handle'the'criticism'and'move'to'

the'next'step,'then'the'next'step,'then'the'next'step.''Because'sometimes,'particularly'at'the'start,'

when'we'did'the'PDID,'criticism'was'so'heavy,'it'was'only'because…'

Criticism'from'where?'

The'international'community,'NGOs,'everybody.''Because'it’s'easy'to'say:'he’s'corrupt,'he’s'corrupt,'

that’s'corrupt;'and'you'can'very'easily'get'negative'and'do'nothing,'and'that’s'not'a'good'mindset.''

We’re'very'lucky'that'we'have'a'very'strong'Prime'Minister,'and'…'Minister'of'Finance.''Despite'all'

the'accusations'we'were'able'to'keep'the'programme'running.''And'that'is'quite'successful,'because'

it’s'a'different'country'to'what'it'was'when'that'first'came'in'–'completely'different.'''

People'forget'you'know…'now'were'looking'at'quality'and'maintenance'–'we'should'be'looking'at'

these'things.''But'if'you’d'come'in'2008'and'mentioned'maintenance…'you’d'have'seen'there'are'no'

companies.''It'is'massive'achievement'–'people'forget'that.''And'it’s'very'easy'to'forget'that'this'is'an'

incremental'process.'

And'post'conflict'you’ve'got'to'take'risks.'And'risks'mean'you'have'to'give'up'a'bit'of'control,'and'

giving'up'control'means'you’re'going'to'see'mistakes.''You’ve'got'to'get'over'those'mistakes.''The'

point'isn’t'to'avoid'making'mistakes'–'it’s'to'learn'from'them.''This'is'something'a'lot'of'the'

international'community'and'NGOs'don’t'understand.''They'tell'you'off'for'making'a'mistake,'rather'

than'helping'to'get'over'the'mistake.''And'as'a'result,'a'lot'of'people'want'to'do'nothing,'and'doing'

nothing'post$conflict'is'not'an'option.'''

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That’s'probably'the'biggest'lessons'we’ve'learned'–'that'you’ve'got'to'do'something,'and'you’ll'have'

to'take'the'criticism.''You'just'have'to'learn'from'your'mistakes.''And'then'international'community'

will'take'a'long'time'to'come'to'that'realisation,'so'you’ve'got'to'keep'moving.'

Were'there'any'precedents'that'you'looed'at'when'formulating'this'strategy?'

None.''We'just'took'a'risk.'''

Looking'forward,'you'mentioned'before'this'World'Banka'analysis.''What'steps'are'you'taking'to'

document'the'lessons'learned?'

That’s'what'we'wanted'them'to'do'$'being'the'World'Bank,'they’re'useless.''They’re'very'slow'–'it'

took'them'nearly'a'year.'''

What'we'wanted'to'do'is'to'get'an'independent'view,'and'then'lessons'learned'and'factor'that'in'to'

the'next'stage'of'the'PDID'programme;'what'tighter'rules'should'we'have,'etc.''But'at'the'same'time'

try'and'come'up'with'some'key'lessons'learned.''Because'from'a'Ministry'of'Finance'point'of'view'

we'wanted'to'share'those'key'lessons'with'the'G7'countries.'''

That'was'quite'important'to'us'–'to'go'to'South'Sudan:'this'is'what'we'did,'we'think'it'was'pretty'

successful,'we'think'it'could'be'even'more'successful'in'retrospect,'but'we'didn’t'have'anyone'else'to'

look'at;'this'was'us'just'trying'it,'and'here'are'some'pointers'on'what'to'do.''We'still'want'to'do'that'

–'some'lessons'for'the'G7+,'and'we'were'hoping'that'the'Bank'would'give'us'that.'''

The'problem'with'the'Bank'people'is'that'original'it'was'criticised'–'too'small'a'sample'size.''They'

came'out'with'good'results,'but'they'only'looked'at'50'projects'out'of'3,000'or'something,'so'now'

they’ve'increased'the'sample'size.'

So'what'was'their'methodology'$'to'talk'to'people'in'national'ministries'to'understand'the'strategy…'

Yes.''Then'go'out'and'see'the'projects,'talk'to'all'the'players,'and'based'on'that'make'a'preliminary'

assessment'of'jobs'created,'or'companies'created.''But…'it'was'too'small'–'so'now'they’ve'asked'for'

a'bigger'sample.''Hopefully'now'they’re'working'on'that.'''

I'can'give'you'the'preliminary'findings.''For'us'it’s'an'interesting'process'–'we'want'to'take'the'

lessons'and'feed'them'into'the'next'round'of'the'project.''We'don’t'want'to'stop'the'projects,'we'

want'to'say'let’s'learn'the'lessons'and'make'it'a'little'bit'tighter,'and'a'little'bit…'let’s'go'for'it'again.'

And'we’ll'get'more'criticisms'again'–'fine'–'let’s'talk'about'those…'and'each'time'we’ll'get'better'and'

better.'

So'we’re'looking'at…'a'period'of'about'three'years?'

2009'was'the'first'year.''Six'years'later.'

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Six'years'down'the'track.'''

Were'now'on'PDID'3.''If'you'look'at'the'project,'I’m'really'happy'with'the'fact'that'each'district'gets'

a'list'of'every'project'in'their'district,'from'every'line'ministry.'''

This'is'online?'

All'online;'it’s'great.''It’s'in'English'and'Tetun.''We'give'that'to'the'sucos,'and'tell'them'you'should'do'

your'own'plans'and'feed'that'into'the'system...''I’m'not'saying'it'definitely'works'that'way,'you'

know,'but'you’ve'got'to'start'somewhere.''At'least'now'we'can'show'everybody'where'the'projects'

are...''When'you'see'one'of'those'PDID'projects,'a'sign'goes'up:'designating'the'PDID'project,'

awarded'to..,'budget'line…'so'everyone'knows'who'got'it,'what'hey'were'supposed'to'do'$'the'

community'actually'knows.''That’s'a'nice'thing.'

So'this'system'covers'all'the'PDID'projects.''Then'you'have'separately'the'+$1M'projects'for'the'

infrastructure'fund…'

Yes.'And'in'between'you'have'the'line'ministries'projects.''Between'$250,000'$'$1M…'''

Thanks.''I’d'really'like'to'take'a'look'at'this'World'Bank'report'if'it’s'available.''Also,'do'you'have'any'

ADB'contacts?'

Shane'Rosethaal.''Sarah'will'have'their'contact'for'sure.''They’ve'got'a'project'management'unit'–

they’re'really'good'–'they'might'be'the'better'team'because'they’re'on'the'ground'a'bit.''ADB'have'

done'a'lot.''I’ve'worked'with'them'quite'a'bit.''It'hasn’t'always'worked'well'with'them'in'other'

countries,'but'here'its'really'impressive.'

I’ll'keep'your'details'–'I'might'want'to'contact'you'again'in'the'future'to'follow'up.''I’m'interested'in'

–'something'I'haven’t'seen'recognised'this'clearly'before'–'the'interplay'between'public'works,'

economic'development,'stability'and'peace'building.'

Post'conflict….'This'is'the'interesting'thing.''This'idea'didn’t'come'from'genius'development'thinkers.''

It'came'from'the'boss'–'this'is'how'we’re'going'to'do'it.''He'spoke'to'a'lot'of'people,'then...'this'is'

how'it’s'going'to'work…'

And'it'contrasts'interestingly'with…'Afghanistan'where'they'have'a'lot'of'similarly'scaled'work,'

though'it’s'been'approached'in'quite'a'different'manner.'

We'had'a'lot'options'…''World'Bank…'But'they'would'have'taken'years'to'set'up...''Post$conflict,'you'

don’t'have'years.''You'don’t'have'time'–'time'is'not'something'you'can'play'with'–'you'have'to'move'

quickly.''And'they'can’t'take'as'many'risks.''Timor'is'lucky'–'(in)'having'it’s'own'money'in'particular.'

And…'the'smaller'population…'

TLS$08'

Page'17'of'17'

Yes.'And'the'geographic'distribution'here'is'small…'compared'to'Afghanistan…'it’s'a'bit'easier'to'

quickly'mobilise'resources…'

I’ll'go'back'and'have'a'think'about'this'–'you'might'hear'from'me'in'a'month'or'two.'

'

'

[I’m,here,until,Saturday,,then,I,go,on,leave,,but,I’m,always,on,the,internet.,,My,base,is,Vanuatu,,so,

I’m,always,in,the,region.,,,

Pacific,Solutions?,

It’s,an,NGO,that,I,started,in,2006.,,I,retired,,and,then,I,came,out,of,retirement,to,do,this,job.,,In,

between,I,set,up,a,think,tank,,because,I,was,tired,of,the…,thinking,of,a,lot,of,the,development,

partners.,,And,having,worked,so,much,in,postNconflict,countries,,and,in,the,pacific,,I,knew,there,were,

differences…,so,I,set,up,the,think,tank,,which,is,now,quite,big,,addressing,issues,of,public,policy,–,

mainly,because,somebody,needed,to,publish,these,ideas.,,,

Nobody,was,coming,out,with,simple,policy,papers,that,we,could,give,to,governments,and,leaders,in,

small,countries,in,the,pacific.,,Because,we,need,to,share,these,ideas…,,it’s,one,thing,–,there’s,a,lot,of,

clever,people,in,universities,having,ideas,,but,you’ve,got,to,share,them,with,decision,makers,in,these,

countries.,,So,that’s,what,we,tried,to,do,–,to,set,up,a,think,tank,that,would,take,these,ideas,and,

experiences,and,share,them,with,the,pacific,islands,and,show,them,there,is,a,different,way,of,

thinking,out,there,,and,some,of,these,things,have,been,tried,and,developed,by,other,countries,and,

they’ve,tried,and,they’ve,worked.,,Let’s,try,and,share,the,knowledge.,,That’s,what,we,try,and,do,with,

the,institute.,,That’s,why,I,have,two,emails,–,I,have,my,government,email,,and,institute,email,

Within,this,grouping,,in,the,pacific,,you,have,a,lot,of,similarly,sized,populations,,comparable,

economies…,

And,also,the,G7,,you,have,postNconflict,,so,it’s,quite,cool,working,in,both,groups,,and,TimorNLeste,–,

it’s,quite,nice.,,Because,there’s,so,much,knowledge,sharing,,and…,in,a,way,,were,educating,the,

donors,as,well.,,They,see,a,lot,of,things,we,do,,and,they,replicate.,,Fine,,I,don’t,mind,,I,don’t,want,to,

take,credit,for,this.,

I,think,that’s,why,it’s,important,to,document,these,past,five,or,six,years…,the,things,that,have,been,

done,here,in,terms,of,public,works…,

Great….],

,

Minerva Access is the Institutional Repository of The University of Melbourne

Author/s:Ullal, André

Title:Clear, hold and build - conditions and practices characterising construction in conflict andpost-conflict settings

Date:2017

Persistent Link:http://hdl.handle.net/11343/221848

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http://hdl.handle.net/11343/221848