Draft construction law delayed


The Ministry of Urban Development and Construction (MoUDC) tabled a new amendment to the contractors’ registration directive in view of the existing realities on the ground.

Both the ministry and concerned sector stakeholders accept that the current directive, which was amended 11 years ago, needs to be re-examined. Stakeholders are now reviewing the proposed amendment and submit their comments to the ministry. 
MoUDC had initially aimed to have the draft amendment of the construction law to be discussed and ratified before the end of the fiscal year (2012/13). But the fiscal year ended yesterday with stakeholders still working to further develop the draft with inputs from the construction sector and other related actors.  
In the proposed draft amendment registration criteria for contractors in all categories have changed based on the grade for which the contractor is applying.
The amendment draft includes an increased capital requirement for Building, General and Road Contractors, categorised as BC, GC and RC respectively, to obtain an operating license.
According to the draft, Grade One Contractors (the highest grade) in the BC, GC and RC category require a capital of 15 million, 34 million and 26 million birr, respectively. “Grade One and Two applicants require a capital of 20 million birr to register for the three categories in the construction sector to obtain a license under the current directive,” experts said.
The draft amendment also includes a different capital-requirement scheme for the various grades in the construction sector under the three stated categories.
According to the existing directive, Grade One and Grade Two contractors in all three categories require a capital of 20 million birr. Grade Three contractors are required to come with 15 million birr for registration, with the smallest amount being 100,000 birr for Grade Ten contractors.
The new draft proposes that Grade One GC contractors’ capital investment be 34 million birr , Grade Two GC contractors’ 24 million birr, while 300,000 birr was designated for Grade Seven GC contractors, who currently need 1 million birr to register for a license.
Likewise, those applying for Grade One licenses under the BC category, only have to come up with15 million birr, a decrement of 5 million birr from the current directive, while nine million birr is required to obtain Grade Two licenses under the proposed draft.
On the other hand, the requirement for RC category licenses has increased by six million birr from the current directive for Grade One applicants to 26 million birr for license registration, while Grade Two RC contractors are only required to have a capital of 17 million birr.
The new draft amendment also specifies the types of projects that contractors are allowed to undertake, based on the grade they have registered for.
The construction cost of projects also determines which contractors are eligible to seek or bid for such undertakings based on the grade of their licenses in all categories. For example, the amendment specifies that Grade One GC, BC and RC contractors can compete for construction projects that cost above 350 million, 210 million and 300 million birr, respectively.
The draft also specifies the required equipment, number of experienced professionals and other relevant information needed for registration.
Related with the construction boom and rapid growth of the sector, the Ministry has implemented and is implementing several amendments to its directives and the law. It recently held a discussion with sector actors about a new construction industry development policy and establishment of a council.