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PERFORMANCE AUDIT REPORT ON ROAD WORKS
The Ministry of Infrastructure Development and TANROADS Performance in Controlling Road Construction Time, Cost and Quality
A REPORT OF THE CONTROLLER AND AUDITOR GENERAL OF THE UNITED REPUBLIC OF TANZANIA March, 2010
Performance Audit Report on Road Works
TABLE OF CONTENTS
PREFACE ..................................................................................................................................................iii ABBREVIATIONS.................................................................................................................................. v LIST OF TABLES AND FIGURES ................................................................................................ vi EXECUTIVE SUMMARY ................................................................................................................vii Chapter One ...................................................................................................................... 1 Introduction ............................................................................................................................................... 1 1.1 1.2 1.3 1.4 Background. .............................................................................................................................. 1 Focus of the conducted study............................................................................................... 2 Audit scope and performance. ............................................................................................. 3 Structure of the report. ........................................................................................................... 6
Chapter Five .................................................................................................................... 34 Quality Control of Road Works ....................................................................................................... 34 5.1 General standards for planning and conducting road works. ................................... 34 5.2 The system of quality control. ........................................................................................... 35 5.2.1 The design phase............................................................................................................... 35 5.2.2 The construction phase. .................................................................................................. 35 5.3 Quality assurance in practice. ............................................................................................ 37 5.4 TANROADS and its engaged consultants. .................................................................... 41 5.5 Consequences. ........................................................................................................................ 42 Chapter Six ...................................................................................................................... 43 Conclusions ............................................................................................................................................... 43 6.1 6.2 6.3 6.4 Organization of the work..................................................................................................... 43 Management and quality control. ..................................................................................... 44 Conditions for transparency and self improvements. ................................................. 45 Working systems to address delays, cost overrun and quality problems of road construction. ............................................................................................................................. 45
Chapter Two ...................................................................................................................... 7 The Road Works System ....................................................................................................................... 7 2.1 2.2 2.3 2.4 Responsibility and policy...................................................................................................... 7 The operative system.............................................................................................................. 8 Key players outside MoID/TANROADS....................................................................... 11 Additional time and costs.................................................................................................... 13
Chapter Seven ................................................................................................................. 47 Recommendations.................................................................................................................................. 47 7.1 7.2 7.3 Institutional improvements................................................................................................. 47 Project planning and design. .............................................................................................. 49 Project management and quality control........................................................................ 50
Chapter Three ................................................................................................................. 17 Time variations in Road construction projects ......................................................................... 17 3.1 3.2 3.3 Original, revised and actual time of road projects....................................................... 17 Factors Contributing to delays........................................................................................... 21 Consequences of the Delays............................................................................................... 25
REFERENCES............................................................................................................................................. 52
APPENDICES ......................................................................................................................................... 53 Appendix 1: Appendix 2: Appendix 3: Appendix 4: Appendix 5: Appendix 6: Appendix 7: Appendix 8: Appendix 9: Appendix 10: Genaral Information of the Audited Projects. ................................................ 54 Organization Structure of the MoID. ............................................................... 55 Organization Structure of TANROADS. ........................................................... 56 Time Variations........................................................................................................ 57 Reasons for the Delays.......................................................................................... 58 Reasons behind revision of programme of works for each road project 61 Reasons behind cost increase for each road project audited.................... 62 Partial Deductions of Liquidated Damages.................................................... 62 Cost Variations......................................................................................................... 65 Reasons for Cost Overruns. ................................................................................. 66
Chapter Four ................................................................................................................... 26 Cost Deviation and Cost Overrun ................................................................................................... 26 4.1 4.2 4.3 4.4 4.5 Introduction............................................................................................................................. 26 Original and revised budgets and actual costs.............................................................. 26 Revised budget and actual costs........................................................................................ 29 Requested and granted request for additional costs.................................................... 30 Factors contributing to cost overrun................................................................................ 31
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PREFACE
preparation of this report. My thanks should also be extended to the auditees for their fruitful interaction with my office.
The Public Audit Act No. 11 of 2008, Section 28 authorizes the Controller and Auditor General to carry out Performance Audit (Value-for-Money Audit) for the purposes of establishing the economy, efficiency and effectiveness of any expenditure or use of resources in the MDAs, LGAs and Public Authorities and other Bodies which involves enquiring, examining, investigating and reporting, as deemed necessary under the circumstances. I have the honour to submit to His Excellency the President of the United Republic of Tanzania, Dr. Jakaya Mrisho Kikwete and through him to Parliament the first Performance Audit Report on MoIDs and TANROADs Performance in managing road construction time, Cost and Quality of Road Works in Tanzania. The report contain conclusions and recommendations that directly concern the Ministry of Infrastructure Development (MoID), Tanzania National Roads Agency (TANROADS) and Financiers on ensuring that our roads are completed on time, within set budgets and also in required quality and standards. The Ministry of Infrastructure Development and TANROADS have been given the opportunity to scrutinise the factual contents and comment on the draft report. I wish to acknowledge that the discussions with the auditees have been very useful and constructive. My office intends to carry out a follow-up at an appropriate time regarding actions taken by the auditees in relation to the recommendations in this report. In completion of the audit, the office subjected the report to the critical review of the following experts namely, Professor Theophil Rwebangira, Dr. Damas Nyaoro from the College of Engineering and Technology of the University of Dar-es-Salaam and Eng. Kimambo from K & Associates Professionals Services Ltd (KAPSEL), who came up with useful inputs in improving the output of this report. This report has been prepared by George Haule, James Pilly, Wendy Massoy, Michael Malabeja and Elizabeth Augustino under the guidance of Gregory G. Teu with support from the experts of the Swedish National Audit Office, Mr. Tony Angleryd and Ms. Elisabeth Carlsund. I would like to thank my staff for their assistance in the
Ludovick S. L. Utouh Controller and Auditor General Dar es Salaam, March 2010
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ABBREVIATIONS
ADB CAG CRS FIDIC GOT KAPSEL LGAs MDAs MoID MLHSD NCC PFF PWD SAI TACECA TANESCO TANROADS TRA TSh TTCL UWSS VOP African Development Bank Controller and Auditor General Crushed Stones Aggregate Federation International Des Ingenious Conseils Government of Tanzania K & Associates Professionals Services Ltd Local Government Authorities Ministries, Departments and Agency Ministry of Infrastructure and Development Ministry of Lands and Human Settlement Development National Constructions Council Price Fluctuations / Adjustment Formula Public Works Department Supreme Audit Institutions Tanzania Association of Civil Engineering Contractors Tanzania National Electricity Company Tanzania National Roads Agency Tanzania Revenue Authority Tanzanian Shillings Tanzania Telecommunication Company Limited Urban Water Supply and Sewerage Variation of Price
LIST OF TABLES AND FIGURES

Tables
Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 5.1 Table 5.2 : : : : : : : : : : : : Total number of time revisions in programme of works per stage Original and actual time for the ten examined projects Difference between revised and actual time for road construction Request for extensions of time granted to contractors by TANROADS (days) Factors influencing delays and their frequencies (official version) Revised budgets during the construction stage Revised budgets during the construction stage (Billion Tshs) Original budget and final Costs (Billion Tshs.) Revised budget and final costs (Billions Tshs) Requested and granted cost increase (Billion Tshs) Effect of each category to cost increase of the road projects Supervising, monitoring and inspection activities among the ten examined projects Conducted evaluations of the quality of studied road works
Figures
Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 : : : : Systems Graph showing relationship between different actors Key stages in the process of road construction Procedure for approving a claim for additional costs Procedure for Extension of Project Timeframe
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EXECUTIVE SUMMARY
Road construction uses 13% of the national budget Road sector is an important sector in the economy of any nation due to its impact on the welfare of its citizens and the investment involved. Good quality of road works is important for both safety and economic development reasons in any society. This importance is propounded by the fact that the transport sector has a major role to play in the socio-economic development of a country as it provides access to markets, production, jobs, health, education and other social services. Construction and repair of roads utilizes a great part of government expenditure. The estimates for roads construction amounts to almost TSh. 800 billions, equivalent to 13% of the national budget. The Ministry of Infrastructure Development (MoID) and Tanzania National Roads Agency (TANROADS) have a major influence on the road construction industry as sponsors, regulators and procurers of road projects. Problems with delays, cost overrun and quality The road construction sector in Tanzania is evidenced from many studies to experience mainly three kinds of extended problems. One problem concerns time management, i.e. road works are not completed within the agreed time and benefits of the works to the public are delayed. Second problem concerns cost overrun, i.e. additional but avoidable costs to the decided budgets for varying reasons, and A third problem concerns the weaknesses in quality control system of the road works which results into early wear and tear necessitating repair and maintenance. Purpose of the audit The purpose of the conducted performance audit study is to assess whether the Government, through the MoID and TANROADS, has an effective system of road works in the country. This includes assessing the extent the system is working to minimize delays, cost overruns and quality problems on road works.
Audit scope The audit scope was initially limited to the post-contract stage of the 12 road construction projects which were completed in the financial years 2004/2005, 2005/2006 and 2006/2007. Due to failure in obtaining sufficient data for two projects, the examination in the Performance audit study had to be confined to the ten road projects.
Major findings, Conclusions and Recommendations Audit findings

The major findings of the audit are as follows:
Extension of time is common in most road projects

It is common with time revisions for the road works project plans. These time revisions have been done as requested by the contractors when coming across different problems which prompted them to request for the extension of time. For example from the selected ten projects, all of them were revised during the construction phase and seven (7) or two thirds at the design phase. Review of extension of working days is granted as requested by contractors MoID/TANROADS has a role to play when it comes to both reviewing and recommending extensions of time. The consultant is required to review the contractors extension of time request and give his recommendations. Also, MoID/TANROADs are required to review consultants recommendations and grant their own recommendations on time extension. However, MoID/ TANROADS have approved almost all requests for the extension of time as requested by contractors and approved by the consultants. Our findings indicate that MoID/TANROADS and its consultants did not carry out any independent analysis to verify the adequacy of the time requested. Inadequate design results into cost overrun According to the project files, a number of factors causing cost increase were new design and new specifications, inadequate project management and/or quantities and variation of price factors. A huge part of the increasing costs were related to mis-calculation of some kind already in the design stage.
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Others factors like changed conditions, values; priorities etc. have also affected the outcome. Quality control system needs to be improved Despite the fact that TANROADS officials insist that the quality control system is working very well, our audit has found that there is still a need for improvement. The quality control in the design phase is obviously not effective. There are also several problems in the construction phase. Inspections and monitoring are not conducted as planned, documentation is not in order and the engaged consultants are given conflicting tasks without any proper follow up by TANROADS.
Recommendations
Basing on the findings and conclusions, we recommend the following to MoID/TANROADS: The Ministry of Infrastructure Development and TANROADS need to improve the process of the start-up activities, such as fulfilment of loan conditions and procurement processes. TANROADS need to have a budget covering the whole project period and strong budgetary control throughout the project. For each project it is important that clear roles and responsibilities among various parties are set regarding time, cost and quality issues. Moreover, measures need to be taken to enhance TANROADS capacity in identifying and managing risks. Files must be kept in better order and MoID/TANROADS should establish register to record the performance of contractors and consultants for each road project. MoID/TANROADS should, therefore, take proactive steps to reduce time and cost overruns by continuing its efforts to improve coordination with utility companies (eg. TANESCO, DAWASCO) and other parties who are involved in the road construction sites. MoID/TANROADS should recruit and keep their own independent strategic competent professionals who will act with full professionalism and integrity for monitoring and inspections even if MoID/TANROADS will continue engaging specialists or consultants for the actual followup of implementation of various kinds of work. Government should ensure that MoID/TANROADS have the leadership and capacity required to manage its functions. We recommend that the Government and the Ministries concerned to set up a commission which will be responsible for finding solutions to these shortcomings as this will be cost effective to make TANROADS properly equipped with human resources for its tasks. MoID/TANROADS should have a discussion on how far it should go in supervising contractors. There are risks with too much involvement by TANROADS. It may undermine and confuse the contractors implementation responsibilities on one hand and the oversight role of
Conclusions
We conclude that the road works system in Tanzania is not managed efficiently and timely. Road works project plans and budgets are often revised, resulting in significant delays and cost overruns. Engaged consultants are determining their own schedule, have multiple roles and are not being managed well. There is serious lack of independent analysis to verify the adequacy of the time extension requested by contractors. Design works is not done properly and efficiently which resulted into redesigning leading to inevitable cost overruns. All put together indicates that ten roads built and audited were not produced in a way that best serves the public interest. Management of Consultants by the client (MoID/TANROADS) is not adequate. There is lack of monitoring mechanism of these consultants who are involved in planning, preparation and design and in controlling activities of the road constructions like supervision, monitoring, inspections and evaluation of the works done by contractors. There are obvious conflicts of interests in the involvement of the same consultant in several steps of the process. Quality assurance system does not function well. The MoID/TANROADS inspections and evaluations were obviously not able to detect certain weaknesses of the road works. All ten studied road projects were approved at the final inspections though most of all the roads started to undergo repair and improvement soon after the road have been approved. Sanctions were not properly used for addressing and correcting the frequent and extended delays, cost overrun and also quality assurance problems.
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TANROADS on the other hand. MoID/TANROADS should specify the responsibilities for the consultants they use. If for instance a consultancy firm is engaged for design work, its advisable to clarify in the contract that the firm is financially responsible for mal practice. The Government should review the possibility of making vital road constructions documents be made available to the public. Designs and final inspections could perhaps be made available or disclosed as soon as they are approved by the parties involved. The Government should give TANROADS clear instructions on how to manage consultants. This include the setting up of a commission to review and strengthen MoID/TANROADS integrity and professionalism and its performance of strategic functions, and examine transparency and accountability issues The Government and TANROADS should deliberately take steps on the pre-contract stages of projects implementation to ensure that the designs are improved to reflect the reality on the ground and avoid unnecessary alterations during the implementation stage. The Ministry of Infrastructure Development and TANROADS need to institute a mechanism to review the designs and estimates of the project as they are prepared by the consultants before they are implemented. TANROADS should significantly improve project management and quality control system in order to avoid delays, cost overruns, to avoid being forced to conduct repair works and maintenance services soon roads are opened to the traffic.
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Chapter One Introduction

1.1 Background
Road sector is an important sector in the economy of any nation due to its impact on the welfare of its citizens and the investment involved. This importance is propounded by the fact that transportation sector has a major role to play in the socio-economic development of a country as it provides access to markets, production, jobs, health, education and other social services. The Tanzanian Road construction industry is also a significant contributor to the national economy accounting for 8 per cent of Gross Domestic Product (GDP) and employing more than 1.9 million people. The Ministry of Infrastructure Development (MoID) and Tanzania National Roads Agency (TANROADS) have a major influence on the road construction industry as sponsors, regulators and purchasers of road projects. These road projects are ranging in size from repair works to large road projects. Road construction industrys turnover is mainly funded by the Government and donors. Construction and repair of roads utilizes a great part of government expenditure in the 2007/2008 budget. The estimates for roads construction amounts to almost TSh. 800 billion, equal to 13% of the national budget. The countrys road network is estimated to be 85,000 km long and includes trunk, regional, district, feeder and urban roads. Urban, district and feeder roads which are estimated to be over 56,000 km are managed by Local Government Authorities (LGAs) while regional and trunk roads (29,000 km) are managed by TANROADS. In addition to this, some road networks which are in National Parks and Game Reserve Areas are managed by the Tanzania National Parks (TANAPA) and other institutions. Irrespective of the importance and expenditure recorded above, the road construction sector is evidenced from many studies to experience extended problems. These problems are mainly grouped into three types. One problem
1 2 3 2007/2008 Budget of Tanzania MoID Documentation and studies from the Annual Roads Convention 2008 Road Financing and investment: Opportunity and Challenges.
concerns time management, i.e. road works are not completed within the agreed time and benefits of the works to the public are delayed. Another problem concerns cost overruns, i.e. additional but avoidable costs to the decided budgets for varying reasons. A third problem concerns the quality of the road works, i.e. rates of deterioration are higher than anticipated which implies early repair and maintenance. Tanzanias underdeveloped transportation network remains a key structural weakness. Nearly 80% of the population still live in rural areas, engaged in agricultural activities. These rural areas are not adequately served by the transportation system. Moreover, the countrys transportation system also serves to handle transit traffic for Tanzania landlocked neighbours including Burundi, Malawi, Rwanda, Uganda and Zambia. Given the importance of the road construction sector and the above mentioned problems a Performance Audit (PA) study on the management of Road Works has been conducted by the National Audit Office of Tanzania (NAOT).
Assessment criteria For answering the above mentioned audit questions, the following criteria was used: MoID and TANROADS ought to have a documented performance measurement system regarding time delays, cost overruns and lacking quality for different steps of road constructions. TANROADS should also have a policy on how to deal with these issues. MoID and TANROADS should take all necessary actions to reduce problems of time delays, cost over runs and lacking quality of road constructions. This implies the following activities: the contracts should be well designed when it comes to issues like phasing of works, requirements to the contractor, time frame, budget and quality assurance system as well as responsibilities and sanctions. the implementation process should follow a timely manner. Where alterations to the original contract are inevitable, action should be taken to prevent undue time delays, cost overrun and lacking quality. sanctions should be applied when appropriate.
1.2 Focus of the conducted study

Purpose and audit questions The purpose of the conducted performance audit study is to assess whether the Government, through the MoID and TANROADS, has an effective system of road works in the country, i.e. to what extent the system is working to minimize delays, cost over runs and quality problem on road works. In short, the audit questions used in this study were as follows: (1) To what extent are problems with delays, cost overrun and lacking quality of road constructions common in executed road projects in Tanzania? (2) What are the possible causes of delays, cost over runs and quality problems of road constructions? (3) Are there working systems in place to address delays, cost overruns and quality problems of road construction?
1.3 Audit scope and performance

The audit objective The objectives of the audit has been to study whether MoID and TANROADS are identifying problems of delays, cost over runs and quality in the system of road works and minimize these problems within available activities. The PA study is focused on development projects that are administered from the TANROADS head office and MoID. The selection of development projects is based on the fact that the investment involved per project is relatively higher than for other road projects.
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From the Work Plan, p. 3-4 National Population Policy, Ministry of Planning, Economy and Empowerment, 2006 6 Until December 2007 MoID was responsible for two of the studied road projects.
The audit scope was limited to the post-contract stage of the development projects that was completed in the financial years 2004/2005, 2005/2006 and 2006/2007. This selection covered 12 roads projects. However, the examination in the Performance audit study is based on the following ten road projects: Butiama Kyabakari Roadworks (phase 2) Morogoro Dodoma Road maintenance works Mutukula Muhutwe Road upgrading project Nzega - Tinde - Isaka Road Upgrading Project Songwe - Tunduma Road Rehabilitation Project Tinde Mwanza/Shinyanga Border Upgrading project Muhutwe Kagoma Road Upgrading project Mwanza Region Transport Project Shelui Nzega Kyabakari Butiama
Addenda (instructions to approve changes) to the contracts project documents such as progress reports, quarterly and annual progress reports and final completion reports Minutes for Project Site meetings Planning documents such as MoID Strategic Plan 2007/2008 2009/2010 and Tanzanias Construction Industry Policy book, 2003. Reports from other Supreme Audit Institutions (SAIs) and other documents were also used in order to get a context and references for assessment of the provided picture of Tanzanian road construction projects.10 A lot of interviews were conducted for many reasons, mainly to confirm or explain information from the documents reviewed; give clues to relevant information in cases where information in the formal documents was lacking or missing; and provide context and additional perspectives to the picture from MoID/ TANROADS documents. Interviews and discussions were thus carried out with representatives of executives as MoID, TANROADS (including consultants), National Construction Council (NCC) and contractors experts like professional Associations11 from the road sector or universities in Tanzania12 development partners representing the financiers.13 Finally site visits were conducted on five of the ten studied road projects.14 The purpose of these visits was specifically on assessing conditions of the road works and also to gather evidence and opinion on quality issues.
Design and methods The audit work was designed by dividing the above audit questions into sub-questions. For performance of the study, the audit team used varying methods. The formal picture of management and performance of the selected cases was studied from MoID/TANROADS documents. This information was further analysed through information provided by interviews with auditees and different stakeholders. Thus, the audit office has strived to get a picture as comprehensive, relevant and reliable as possible of the studied road constructions. Many kinds of documents were reviewed in order to get the formal picture of the agreement between MoID/TANROADS and the contractor and the performance of each road project. The following kinds of documents were reviewed: Contracts between MoID/TANROADS and contractors for roads construction as well as for MoID/TANROADS supervision of road construction
7 8 9 Post contract stage refers to the period after signing of contract to the completion of works This selection of road projects was executed during the period 20012007. Muhutwe Kagoma Road and Mwanza Region Transport Project were the last two road projects that were administered by MoID until December 2007 when they were eventually handed over to TAN ROADS.
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PA Managing Procurement, Road Construction and Restoration Contracts, a report by the Auditor General of Malta; Roads and Traffic Authority of New South Wales- Planning for Road Maintenance by the Audit Office of New South Wales, 1999; Country Roads Division audit report by the Board of Supervi sors of the country of Santa Clara. Association of consulting Engineers of Tanzania (ACET); Contractors Registration Board (CRB); Tanza nia Roads Association (TARA); Tanzania Association of Civil Engineering Contractors (TACECA). The College of Engineering Technology (COET) of the University of Dar es salaam (UDSM); Civil Engi neering consulting firms; African Development Bank (ADB); World Bank (WB); Danish International Development Agency DA NIDA); Japanese International Cooperative Agency (JICA); European Union (EU) Mwanza Town Roads; Muhutwe Kagoma; Mutukula Muhutwe; Songwe Tunduma
The MoID and TANROADS directly concerned with this report have been given the opportunity by the audit team to comment on the figures and information presented in this report. They confirmed the accuracy of the figures used and information presented. Also, external experts and scientists in the field have gone through methods, evidences and findings.
Chapter Two The Road Works System

2.1 Responsibility and policy
The MoID has the responsibility for instituting the system for road constructions. The MoID is also responsible for management of the system. This implies overall activities as formulation of policies, plans and strategies, as well as development of Construction industry, transport, communications and meteorology services. According to the Establishment Order GN No. 293 2000 of TANROADS under the Executive Agencies Act, 1997, the role of MoID is to concentrate on its primary responsibilities of policy formulation, strategic planning and regulation of roads sub-sector. TANROADS should take over from the MoID the day to day management of the roads and ferries in Mainland Tanzania and operate as a semi-autonomous Executive Agency. TANROADS thus enters into contracts with Contractors and Consultants in its own name.15 The MoID was still directly administering some of the road projects until December 2007 when they eventually were handed over to TANROADS. The Construction Policy guides roads constructions. The following objectives stipulate the governments intentions on the road construction sector:16 To develop an efficient and self sustaining roads network that is capable of meeting the needs for construction, rehabilitation and maintenance of civil works for trunk, regional, district and feeder roads network; To ensure efficient and cost effective performance of the construction industry that will guarantee value for money on constructed facilities in line with best practices; and To improve co-ordination, collaboration and performance of the institutions supporting the development and performance of the construction industry.
1.4 Structure of the report

The remaining part of the report covers the following: Chapter two gives the account of the audit area with the construction policy, system set up, procedure for approving time extension and additional costs and the actors. Chapter three, four and five present the findings on time variations, cost overrun and quality respectively. Chapter six provides conclusions and chapter seven narrates recommendations which can be implemented in order to improve the situation.
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The MoID was still directly administering some of the road projects until December 2007 when they eventually were handed over to TANROADS Tanzanias Construction Industry Policy, 2003
2.2 The operative system

TANROADS enters into two Performance Agreements each financial year: one with the Roads Fund Board for the provision of road maintenance and the other with the Ministry of Infrastructure Development for the provision of project management services for road projects funded by Government and Donor Agencies. An over viewing graph of the system set up is shown in figure 2.1. Figure 2.1: Systems Graph showing relationship between different actors
Parliament
financing by the two sources. The Treasury is responsible for coordinating the funding. Figure 2.2: Key stages in the process of road construction The process involves a number of various steps as detailed hereunder:
TANROADS/ MoID strategy Project planning Consultants, interested governmental institutions
Feasibility study Detailed engineering design Preparation of Tender Documents
Procurement regulations
Packaging and development of contracts Funding approved
Application for funding
MoID LGAs Donors FINANCING

Design review by MoID/ TANROADS
Call for tenders
OTHERS
ACET, TARA, UDSM
Treasury
Receipt of tenders
TANROADS REGULATORY AUTHORITIES ERB CRB Consultants NCC PPRA Contractors
Public utilities e.g. TANESCO, Water and Sewerage Authorities, and TTCL
Compilation of Evaluation report
Evaluation of tenders Contract variations Award of tenders (lowest evaluated) meeting Quality control of works
Consultants, interested governmental institutions and utilities
Project implementation Extension of time frame Completion works Payments to contractors Payment of retention money
MoID and TANROADS are responsible to liaise with the authorities responsible for public utilities to ensure that construction works is not interfered with by delayed relocation of the utilities. The sources of funding for the projects were from governments own sources, funding by development partners or joint
Key implementing actors within TANROADS At TANROADS, two key directorates deal with the implementation of projects, the directorate of projects and the directorate of maintenance. This audit focused mainly on the projects that fall under the directorate of projects. Directorate of Projects This Directorate has the overall responsibility for the delivery of road and bridges construction projects set out in the annual plans. At the national level, Project Managers are responsible to the Director of Projects for the delivery of projects assigned to them. The Project Managers are assisted by senior project engineers and project engineers. The assignments of the projects to the various Project Managers are on the basis of the sources of finance. These sources might be Government of Tanzania, multilateral17, bilateral18, Private or combinations of these sources. At the regional level, Project Engineers in the Projects Section are responsible for monitoring of major projects that are not delegated from the headquarters, being outside the limits of delegation. For the purpose of the Public Procurement Act 2004, this Directorate is the user directorate for all major works that are directly procured at TANROADS headquarters. Directorate of Maintenance The role of this Directorate is to implement the annual maintenance plan; i.e. that the roads of all types are being maintained in accordance with the guidelines set down and; that maintenance contracts are providing value for money. This Directorate takes care of the products of the Directorate of Projects, i.e. maintaining the newly built or upgraded roads in accordance with the agreements on road maintenance. This is further described in chapter five.
2.3 Key players outside MoID/TANROADS

Besides MoID and TANROADS, there are other important actors in the audited road construction projects. The consultants MoID/TANROADS hire consultants who are responsible for preparing designs and for supervising the implementation of the road works. MoID/TANROADS is of course responsible for all its tasks, also even when they are conducted by consultants. This means that MoID/TANROADS is also responsible for supervising and monitoring the work done by the consultants. Consultants are engaged in all phases of road projects. They are for instance engaged in making designs as well as safe guarding their quality. They are also engaged in supervision of construction work; serving the interest of clients (MoID/TANROADS) as general supervisors and advisors throughout the whole construction periods of road projects. In that capacity they are expected to safeguarding the correct implementation of the designs, while keeping the cost low. Their supervising duties include monitoring of the contractors activities on site, performing different tests to check the quality of the works. They are also expected to examine and approve the contractors claim for having the designs, the plans or the budgets changed. In addition, they prepare progress reports and final accounts of the projects. Moreover, consultants are also engaged in intermediate and final inspections or evaluations. The same consultant or at least the same consulting firm may in fact be involved in all functions and activities mentioned above. The consultants roles and tasks are regulated in a contract between TANROADS and the consultant in accordance with the Public Procurement Act. The contractors MoID/TANROADS procures contractors who are responsible for the actual construction of the roads. They manage people, materials and equipment in order to be able to produce the intended results. Contactors enter into contracts with the client (MoID/TANROADS) who is responsible for paying them. Contractors perform their duties under the supervision of the consultants.
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IDA, AfDB, EU and Nordic Fund NORAD, DANIDA, and JICA
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Utility Bodies These are entities responsible for provision of public utilities. They include: Urban Water Supply and Sewerage (UWSS) which are responsible for water supply and waste water disposal; TANESCO which is responsible for generation and supply of electricity; and TTCL who deals with landline telephone services. Sometimes, especially when the road works are in urban areas, these utilities need to be relocated to give way to the contractors to do their job. Arrangements for relocation must be done prior to contractors mobilization at site to avoid construction delays. Ministry of Lands and Human Settlement Development (MLHSD) The MLHSD is responsible for communicating with land owners when there is a need for relocating them. The ministry normally collaborates with the Local Government Authorities which are close to the land owners. Regulatory Authorities Regulatory Authorities are governments watch dogs who monitor professional conducts of the parties involved in the construction projects. They include: Contractors Registation Board (CRB), who authenticate and monitor professional conduct of the contractors; Engineers Registration Board (ERB), who certify the engineers and engineering consulting firms and keep an eye on their professional conduct. Local Government Authorities The Local Government Authorities (LGAs) come into play when there is a need to relocate people and arrange for compensations to give way to the project. Financiers and others Financiers provide funds for implementation of the project. They include the Treasury and Development Partners. The most important issue on project financing is the timeliness of approvals and disbursement of funds to the beneficiaries since delays may paralyse the project delivery. Other stakeholders with vested interests in the road sector include Association of Consulting Engineers Tanzania (ACET), the Association of Civil Engineering Contractors, Tanzania Roads Association (TARA) and the University of Dar es Salaam (UDSM). These entities share a lot of information dealing with road projects construction directly.
2.4 Additional time and costs

The contract documents spell out rights and responsibilities of various parties involved in the contracts. Responsibilities for additional costs in these projects can be summarized as follows: Roles and responsibilities The client, MoID/TANROADS, is generally responsible for additional costs of executing the works in a project whenever the reasons for additional costs are beyond the control of the contractor and the supervisor. The contractor has the responsibility of delivering the works on timely and in accordance with specifications. If the works do not meet set standards and specifications, they are supposed to be rejected until adequate remedies have been carried out at the expense of the contractor. The consultant is only liable to pay compensation to the client arising out of or in connection with the agreement if it is established against him that he did not exercise reasonable due care and diligence in performing his obligations. The consultants liability can be insured upon request by the client and the cost of such insurance is at the expense of the client. Implementation of a road construction project is guided by the programme of work which is prepared by the contractor and approved by the supervisor (consultant). Depending on the circumstances that arise during the implementation of the project, the programme of work may be revised from time to time with or without affecting the agreed completion date and the project budget (i.e. by extending the project duration). When it comes to responsibility there are mainly four categories of extension of time and cost overrun: a. One category is when there is an extension of time due to the default by the contractor though the original agreement between the client and the contractor is still valid. This extension is a responsibility for the contractor who has signed the agreement in the contract to pay the liquidated damage. b. Another category is when extension occurs within the origin formal contract conditions though the contractor, for good reasons, can claim that the real conditions have been changed in a way that was not predictable. If the contractor for good reasons can claim that the changed conditions are caused by the client, the client will be responsible to pay for the extension.
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c. A third category is when there is an extension caused by a changed procurement and contract. This is also caused by the client who will be responsible to pay for the extension. d. A fourth category is caused by conditions that no one can be blamed for. This is force majeure. Contractually, alterations might also be compared to the original programmes or the revised and approved program. Deviations from the revised programmes without approval of time extension are contractually not acceptable. Noncompletion of the works within the agreed time frame thus formally is assumed to result into sanctions being imposed to the contractors and are required to pay the client (MoID/TANROADS) for every additional day beyond the agreed completion date. Procedures for approving a claim for time extension and additional costs The procedure for approving of additional cost covers the following steps: 1. Contractor raise claim to consultant. 2. Consultant evaluates the claim and makes recommendation to the client (normally MoID/TANROADS) to justify the genuinity of the claim. 3. Employer after reviewing and assessing the genuinity of the reviewed claim by the consultant after satisfying themselves the approved claim is forwarded to the financier (If it is donor funded project to seek for approval) but if it is financed by GoT then, the claims will be forwarded to the TANROADS Tender Board for approval. 4. After approval, either from the Tender Board or Donor, MoID/ TANROADS will prepare Addendum for variation. The addendum should be signed by the client, the contractor and the representative of the Donor if it is donor funded project. 5. Lastly, after signing the addendum, the document is normally returned to the financier to be used as a basis for payment of additional cost.
Figure 2.3: Procedure for approving a claim for additional costs

MoID/TANROADS Management instructs Supervisor to prepare details of variation
Application of existing rates
Application of new rates
Contractor suggests the new rates
Supervis or checks rates Variation works recommended by Supervisor
New rates recommended by Supervisor
Donor funded
Locally funded
No Objection is granted by the Financier
MoID/TANROADS Management requests authorization for variation to Tender Board
Variation is approved
End
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Figure 2.4: Procedure for Extension of Project Timeframe

Contractor requests extension for the completion of works to supervisor
Chapter Three Time variations in Road construction projects

This chapter provides details on the time variations in road construction projects compared to original or revised time. Roads can be finalised before set time, but in most cases time variations means delay. Delays may be measured in different ways. One can for instance measure delays in relation to original set time, regardless of whether this has been altered by later decision. It can also be measured in relation to revised time set; and if several revisions are made, in relation to the final revised time set. The content in this chapter is presented in the following order: Time variations among the examined road projects Causes to the time variations Consequences of delays
Supervisor analyses the reasons given
Does not support extension
Supervisors stance
Supports extension
Supervisor informs the contractor
Supervisor recommends to MoID/TANROADS on period of extension
End
MoID/TANROADS tender board approves extension
3.1 Original, revised and actual time of road projects

In a single road project the time for completion of a road construction is stated in the contract between MoID/TANROADS and the contractor. This time might be revised by MoID/TANROADS once or a couple of times depending on different reasons.19 The time revisions might occur at different stages of the project implementation. But most of the time revisions have been experienced at the mid of the project implementation and towards the end of the project. Since this audit is aimed at analyzing the system for the management of road projects, delays of road constructions are analyzed related to original as well as revised time. In projects where the time was revised more than once the measurement of delays is related to the last revision of time.
Contractor notified of terms of extension
End
19
The decision to revise the completion time is done by TANROADS upon receiving the contractors requested which normally reviewed by Consultants and later on passed to TANROADS for decision. See section 2.4.3.
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Decisions of revised time might imply delays for road construction projects. The impact on delays can be referred to both the frequency of time revisions and the extent of time revisions. Time revisions According to project and contract documents between MoID/TANROADS and the contractors, it is common with time revisions for the project work plans. These time revisions have been done as requested by the contractors when coming across different problems which prompted them to request for the extended time. This is illustrated in table 3.1 below. Table 3.1: Total number of time revisions in programme of works per stage Number of revised plans Total Number of Road Project Design revisions Construction stage stage Somanga Matandu 0 1 1 KyabakariButiama 0 1 1 Mwanza Town 0 2 2 Shelui Nzega 1 1 2 TindeShinyanga /Mwanza 1 1 2 MorogoroDodoma 1 1 2 NzegaTindeIsaka 1 1 2 MuhutweKagoma 1 2 3 SongweTunduma 1 3 4 MutukulaMuhutwe 1 4 5
All road projects 7 17 24
An assessment of delays in road constructions can be based on four dimensions of time periods. One dimension is the original time period for completion as stated in the contract between MoID/TANROADS and the contractor. Another dimension is the revised time which is the time period, according to MoID/TANROADS decisions on revised time. A third dimension is the actual time period for completion of the road construction project. A fourth dimension if that occurs is the additional time after the revised time for completion. The difference between original time and actual time is shown in Table 3.2. Table 3.2 Original and actual time for the ten examined projects
Time to complete the road Planned months 16 30 31 24 34 30 30 24 12 30 261 Actual months 17 32 36 32 46 42 47 39 23 58 372 Difference between original and actual time Months 1 2 5 8 12 12 17 15 11 28 111 Percentage 6 7 16 33 35 40 57 63 92 93 43
Road project Kyabakari Butiama Somanga Matandu Shelui Nzega Morogoro Dodoma Mutukula Muhutwe Nzega Tinde - Isaka Tinde Shinyanga/Mwanza Songwe Tunduma Muhutwe Kagoma Mwanza Town Total
Source: Project Files and Contract documents of the ten road projects audited20 The table above shows that all projects had undergone time revisions of their work programmes. All of them were revised under the construction phase and two thirds during the design phase. Delays in relation to the original plan The work programme is a mutually approved part of the contract between MoID/TANROADS and the contractor. The work program outlines the activity plan and set date for the start and completion of the road project.
20 Reasons for extension of time See Appendices 6 and 10
Source: Data from project files and reports from MoID/TANROADS. As seen in the Table 3.2 above, all projects have exceeded the original set time. The extension is quite significant for most projects. This was also the case for those projects (SomangaMatandu and SheluiNzega) that were completed after a decision to reduce the scope and ambition for the projects. If those two projects are disregarded it means that the actual time exceeded the contracted and originally set plan by more than fifty percent (51%).21
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The original set time for the remaining eight projects were in total 215 months. It took 110 additional months to finalise them.
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Time variation in relation to the last revised plan The picture is thus somewhat different when the actual time (calendar months to build the road) is compared to the last revised time approved by MoID/ TANROADS. In table 3.3 the actual time is compared to the last revised time for each one of the studied road construction projects. Table 3.3: Difference between revised and actual time for road construction
Contract Name Nzega Tinde Isaka Kyabakari Butiama Morogoro Dodoma Shelui Nzega Somanga Matandu Tinde Shinyanga/Mwanza Mutukula Muhutwe Songwe Tunduma Muhutwe Kagoma Mwanza Town Total Approved and actual total production time in months Last revision 54 19 32 36 32 47 43 35 17 40 355 Actual 42 17 32 36 32 47 46 39 23 58 372 Difference between revised and actual time Months -12 -2 0 0 0 0 3 4 6 18 17 Percentage -22 -11 0 0 0 0 7 11 35 45 6%
Table 3.4: Request for extensions of time granted to contractors by TANROADS (days)22
Road project Muhutwe Kagoma Shelui Nzega Kyabakari Butiama Mwanza Town Somanga Matandu MutukulaMuhutwe Nzega Tinde Isaka Morogoro Dodoma Tinde Shinyanga/Mwanza Songwe Tunduma Total Request for extension of time 450 175 58 180 45 175 720 228 312 324 2667 Reviewed and recommended time 450 175 58 180 45 175 720 228 312 324 2267 Granted by MoID/ TANROADS 450 175 58 180 45 175 720 228 312 324 2267 (100%)
Source: Information from the project files and contract documents23 According to the table above, MoID/TANROADS have approved almost all requests for the extension of time as requested by contractors and approved by the consultant. The figures above indicate that MoID/TANROADS and its consultants did not carry out any independent analysis to verify the adequacy of the time requested.
Source: Data from project files and reports from MoID/TANROADS. As seen (Table 3.1) revisions were done in all projects (sometimes two times or more during the construction stage) during the overall process. The revisions were often done in the middle or later stages of the construction phase; still its common with deviations. In some cases the differences were quite significant. Only in four out of ten projects the revised plan was followed. Two projects were ready ahead of time, and four were delayed. This may be interpreted as an indication of shortcomings in planning and monitoring. Review of extension of working days As described (section 2.22.3) MoID/TANROADS has a role to play when it comes to both reviewing and recommendation of time extensions. Table 3.4 shows the extensions of time granted to contractors by MoID/TANROADS as per their request.
3.2 Factors Contributing to delays

Knowledge and understanding about factors contributing to the delays is of importance for possibilities of preventing and limiting delays. Of the same reason it is important to know where and when in the road construction procedures the problems occur and how they affect the procedures for the road constructions. Thus problems connected with the delays have been examined for the ten studied road construction projects.
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There are six working days per week. However, all weeks do not consist of six full workings days and adding to that there are vacations. In short, calendar time in days or months is not the same as working time. 365 calendar days might for instance mean less than 300 days of working time. Reasons for extension of time See Appendices 6 and 10
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Though delays related to the original time were dominating, delays related occur to both the original and the revised time for completion. The examination of factors contributing to delays has thus covered deviations from both the original and the revised completion time. This implies that reasons for approval of revised completion time also have been examined. The examination of factors contributing to delays is based on the projects files as well as interviews with MoID/TANROADS officials including the consultants and the contractors. In most of the projects extension of time has been approved based on a number of reasons. Factors influencing the completion time and the responsibilities There are many factors influencing the completion time of road constructions. The responsibility, however, is always the Governments and its authorities or the contractors, if problems occur. The responsibility of the Government and its authorities implies reasons caused by the Government authorities or other circumstances that the contractor cannot be responsible for, like force majeure, e.g. earth quake, heavy rains or flooding. MoID/TANROADS (with consultants) is responsible for planning and preparation, including the quality of the design or redesign works, conducted before signing of the contract. The contractor can thus take a proper conducted planning and preparation for granted, before signing of the contract. Delays caused by MoID/TANROADS can be affected by having to redesign part of a project or to somewhat change the scope of the quantities required. It could also be caused by shortcomings in MoID/TANROADS management, like delayed information, late decisions, poor supervision and monitoring etc. Delays could occur as a result of other factors, like late payment by the financiers, processing time for approval of tax exemptions or force majeure. Lack of coordination with local authorities may also be a factor that causes delay. Some utilities are required to be relocated before the start of the construction projects (telephone lines, water piping etc.) MoID/TANROADS is not in itself responsible for this. However in relation to the contractor MoID/ TANROADS have to take a responsibility for this situation by liaising with the Ministry of Land and Human Settlement which is responsible for relocation. The contractor also has responsibilities. The contractor is responsible for conducting the work according to the applicable standards and the requirement set by the design and the contract. Insufficient skills or lack of expertise competence of staff is an example of a factor that may hamper the contractors performance and which the contractor is responsible for. Lack
of capacity in mobilising plants and equipment is another. Poor management by the contractor is a third example, such as a poorly developed system for supervising and control. Factors influencing the revision of plans and causing delays In the table below the factors explicitly referred to by MoID/TANROADS as motives in the documents for revisions of plans are presented. Table 3.5 Factors influencing delays and their frequencies (official version)
FACTORS INFLUENCING DELAY Redesign/new specifications
Change in scope of work Weaknesses in design Additional designs
NUMBER OF PROJECTS CONCERNED Main categories Sub categories 9

4 3 9
Changes in scope without redesign

Additional quantities Other changes
10
10 3 1 1 1 1 1 1 3
Management issues
Inadequate projects supervision Inadequate Contract management
Contractors factors
Lack of skills of the contractors personnel Lack of adequate equipment Contractors work program miscalculations
Other factors (not influential by TANROAD)

Force majeure (mainly heavy rains) Late payments/processing time for tax exemption.
Source: Information from the project files and contract documents As seen above in nine out of ten projects TANROADS/MoID or the Government is seen as fully responsible for the delays. Only for one project the contractor is partly blamed as a motive for one of the two revisions done and the delay caused. But even in that project the causes were mainly considered of being beyond the contractors control (the main factors were late payments to the contractor, redesign and changes in scope within the given scope). In general, the dominating causes were changes in scope (additional quantities of various items were required to fulfil the design) or to make some
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kind of redesign, from wishes to add new objects or things to the originally approved design. As seen its obvious that shortcomings on behalf of the contractor are not decisive factors for MoID/TANROADS revisions. Its also rare that MoID/TANROADS refer to shortcomings in its own management as a cause for revision. One reason for changing design and scope is the time lag between the design stage and the construction stage. Among the examined projects, it was quite common that it took 3-6 years after a design had been approved until the construction work actually started. During those years, conditions or preferences may have changed, resulting in new demands etc. Another potential explanation is of course that the original design was not properly done or safe guarded. According to MoID/TANROADS officials, the many old designs made it necessary to review the design before its implementation. According to the same officials, even though they know that there are going to be changes after the design, they allow contractors to start the work. This is because of the often long time it took to secure funding. So far it has only been the officially stated causes to the revisions that have been presented. To get a more comprehensive picture, the Audit office has also asked the various stakeholders (officials at MoID/TANROADS, supervisors or consultants and staff among the contractors). They share most of the official version presented above, but they all claim that it does not provide a full picture of the causes. According to the stakeholders there were frequent delays caused by MoID/ TANROADS less efficient management. Unofficially, they also share the view that contractors lack of efficiency was a common cause to delays; and just as for MoID/TANROADS shortcomings more common than officially documented. Moreover, all stakeholders stated that lack of coordination between MoID/ TANROADS and local authorities was a common cause to delays.24 Impact of the causes in terms of additional work days Based on MoID/TANROADS own calculation almost all of the extra working days approved by the revisions was caused by redesign and changes in scope without redesign. A minor part (4%) was linked by late payment to the contractor, and another small part (4%) was stated to be caused by poor
24 Interviews with different stakeholders
management by the contractor. Heavy rains was stated to have even less (2%) impact on the additional working days required as a result of the revised plans.
3.3 Consequences of the Delays

Delayed completion of the road construction projects implies different kinds of immaterial and material losses and delayed benefits for the society. The society is losing the opportunity of having new roads which would be able to reduce accidents, traffic delays as well as vehicle wear and tear. In material terms it is also possible to calculate on the losses. Calculated capital costs Delays involve capital costs. This means that a proportion of the final costs are caused by the longer than planned duration time. With a calculated interest rate of 18% that means a total capital cost of around 31 billion Tshs or 13 % of the total final cost, just due to the extended time in relation to the original plans.25 These costs are not caused by anything else than the time factor itself. Additional administrative costs for TANROADS Due to the extended processing time, TANROADS and its consultants need to spend more time than expected to conduct the work required. For these ten projects, it has been calculated that these additional costs are close to 5 billion Tshs.26 Additional costs for the society in a long term perspective The calculated capital and additional administrative costs for only these ten projects is about 36 Billion Tshs. In a longer perspective, covering a greater number of projects, these costs will naturally be much higher. Still, the cost for the society of not having the roads built in time is likely to be significantly higher than these figures. Better roads will reduce transport costs and stimulate the economy. It will ensure safe life and reduce accidents. It has not been within the scope of the audit to calculate on these savings or costbenefits. But in most countries which conduct such calculations it is obvious that delays or poor time management are costly, especially for the society as a whole in a long term perspective.
25 In total the projects exceeded the original plan by 111 months and the revised plan by 17 months (see table 3.2 and table 3.3). With a calculated interest rate of 18% that means a total capital cost of around 31 Billion Tshs or 13 % of the total final cost, just due to the extended time in relation to the original plans. In relation to the revised plans the capital cost is marginal or 0.4 Billion Tshs or 2 % of the total costs minus the last revised budgets. 26 See appendix 10 for more detailed information.
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Chapter Four Cost Deviation and Cost Overrun

4.1 Introduction
Cost overrun is defined as exceeding of the Contract sum, i.e. the agreed budget sum between the contractor and the employer, MoID/TANROADS. The contract sum is specified and based on a number of concerned items including the rate for each item and the total amount of required money for the project. Linked to the contract sum is also a formula for updating the rates, i.e. prices per unit. The updating of rates is decided by MoID/TANROADS based on advice from its supervisors (supervising consultants). The revised budget is reached when the original budget is added by other cost elements which were not included when preparing the original budget. The revised budget might occur for many reasons and at different stages of the project implementation. But frequent revisions have been experienced at the mid of the project implementation and towards the end of project completion. In a single road project, budget can be revised more than once depending on the nature and reasons for the revision of the budget. According to the contract documents, whenever there is an increase of the quantities/volume of materials at site (when the project is in construction stage), contractor is supposed to inform the client through the consultant who is supervising the construction of the project on behalf of MoID/TANROADS. Then the consultant is supposed to review the request and re-measure the quantities on question and inform the client on the matter. Then MoID/ TANROADS can review the calculations made by the consultant and then, if they are in good order, they can accept the quantity increase.
Almost all projects had their budgets revised during the construction stage, as seen in the table below.
Table 4.1: Revised budgets during the construction stage Road Project Budget revisions 0 Shelui Nzega Somanga Matandu road 1 Muhutwe Kagoma 1 Kyabakari Butiama 1 Mwanza Town 1 Morogoro Dodoma 1 Mutukula Muhutwe 2 Tinde Shinyanga /Mwanza 3 4 Nzega Tinde Isaka Songwe Tunduma 4 Source: Project Files and Contract documents As shown above, four out of ten projects were revised two times or more. Only one project did not have its budget revised (even though that project got its time plan revised by five months). The total amount of added funding through the revised budgets was quite significant, as seen in the table below.
4.2 Original and revised budgets and actual costs

Minor changes can be approved without budget revisions, but if the requests are huge or the total changes done or planned are many, it is required to adjust the budget. In short, the number of revised budgets is an indication of how often major changes with cost consequences have occurred in the projects.
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Table 4.2: Revised budgets during the construction stage (Billion Tshs)
Road Project
Shelui Nzega Somanga Matandu Songwe Tunduma Kyabakari Butiama Mwanza Town. Mutukula Muhutwe Muhutwe Kagoma Morogoro Dodoma Tinde Shinyanga/Mwanza Nzega Tinde Isaka TOTAL
Original budget
20.7 12.3 10.2 1.7 16.4 13.8 4.4 25.3 28.3 20.6 153.7
Last revised budget

20.7 12.4 11.2 2.0 19.0 17.6 6.2 41.0 53.2 41.6 223.9
Change (%)
0 1 10 11 18 28 41 62 88 102 46
As shown, most of the projects had cost overrun, and in several projects to a high degree. Two projects used less money than budgeted, since these projects had been limited in scope (see under table 4.3). The largest cost overruns in both relative and absolute terms were most common among the big projects.
4.3 Revised budget and actual costs

Cost variation can also be measured as difference between the last revised budget and the final cost of each project. This is shown in the table below. Table 4.4: Revised budget and final costs (Billion Tshs)
Revised budget
Muhutwe Kagoma Shelui Nzega Kyabakari Butiama Mwanza Town Somanga Matandu Mutukula Muhutwe Nzega Tinde Isaka Morogoro Dodoma Tinde Shinyanga/Mwanza Songwe Tunduma TOTAL 5.2 20.7 2.0 19.0 12.4 17.6 41.6 41.0 53.2 11.2 223.9
Final cost
4.7 19.5 1.9 18.2 12.0 17.6 44.2 43.9 65.2 14.1 241.3
Deviation (%)
-11 -6 -5 -4 -3 0 6 7 18 21 15
Source: Project Files and Contract documents As seen above, the calculated cost for the ten projects had increased by close to 50% from the original budgets. For three projects, the changes were huge in both relative and absolute terms. Original budgets and actual costs Cost variation can be measured in various ways, and below it is measured by comparing actual costs with the original contract sum. Table 4.3: Original budget and Final Costs (Billion Tshs)
Road Project
Shelui Nzega Somanga Matandu Muhutwe Kagoma Mwanza Town Kyabakari Butiama MutukulaMuhutwe Songwe Tunduma Morogoro Dodoma Nzega Tinde Isaka Tinde Shinyanga/Mwanza TOTAL
Source: Project Files and Contract documents As seen above, four projects were not even able to keep their cost in line with the last revised budget. Notable is that those three projects that had got their budgets revised several times were also among those who had difficulties to even cope with the last revised budget. Two projects (SheluiNzega and SomangaMatandu) had spent less money than the original budget, since some of the tasks were not executed. According to the contract document, payment is done as per work done, and if there is any change of scope (e.g. omission) then contractor is not paid for that. Finally, its worth noting that the term final costs means final cost both in that sense that it covers the total and final cost and also equals the money being paid by MoID/TANROADS. In other words, the contractor got paid not only for the approved last revised budget, but also for the upcoming costs thereafter,
Original budget
20.7 12.3 4.4 16.4 1.7 13.8 10.2 25.3 20.6 28.3 153.7
Final Cost
19.5 12.0 4.7 18.2 1.9 17.6 14.1 43.9 44.2 65.2 241.3
Deviation (%)
-6 -2 9 11 12 28 38 74 115 130 57
Source: Project Files and Contract documents

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after having gone through the accounts.27 To sum up, this means that the contractors got basically all the money they requested throughout the whole process in all these projects and no contractor had to pay the stipulated fee for being delayed (for more information, see below and also chapter 5.)
Table 4.5: Request for claim and granted cost increase (Billion Tshs)
Requested for claim by contractor 23.1 0.34 0.8 1.0 1.9 2.6 2.8 12.4 15.7 24.9 85.54 Reviewed and Approval by MoID/ Recommended TANROADS by consultant 23.1 0.32 0.8 1.0 1.9 2.6 2.8 12.4 15.7 24.9 85.52 23.1 0.32 0.8 1.0 1.9 2.6 2.8 12.4 15.7 24.9 85.52 (100%)
Road Project Nzega Tinde Isaka Kyabakari Butiama Muhutwe Kagoma SongweTunduma Shelui Nzega Mwanza Town Mutukula Muhutwe Somanga Matandu MorogoroDodoma Tinde Shinyanga/Mwanza TOTAL
4.4 Requested and granted request for additional costs

The management and supervision of road projects is done by MoID/ TANROADS for all roads which are under them. To execute this task MoID/ TANROADS as a client has employed consultants to supervise the works on its behalf. According to the contract documents, if there is any problem which can affect the cost of the road project, the contractor is required to notify the consultant. After issuance of that notice, the contractor is required to prepare a request and submit it to the consultant. The consultant evaluates the claim and gives recommendations. MoID/ TANROADS will then decide to accept or reject the claim. The most important things to check are the quantities of work to be executed and their accompanying costs. Depending on those two factors, evaluation of that request can result into dropping of some works, changing the quantities or negotiating to reduce the rates applied etc. The table 4.5 below shows the amount requested by contractors, what have been approved by consultant and final amount approved by MoID/ TANROADS. Its worth noting that these requests presented below are not by necessity linked to revisions of the budgets. Requests may occur at various times, but put together with other cost increasing issues they can create incentive for revising the budget.
Source: Project Files and Contract documents According to the table above, MoID/TANROADS and its consultants have in principle approved all the money as requested by contractors.
4.5 Factors contributing to cost overrun

As shown above, when the final costs were related to original budget all projects that fulfilled their undertakings had cost overruns. Information on the causes to cost overrun is thus of interest in order to find possibilities of improvements. According to the project files, a number of factors causing cost increase were identified. The various causes can roughly be divided into the two main categories: (1) increased costs as a result of a new design and new specifications, and (2) increased costs due to quantities and variation of price factors. In the table below the impact to cost increase of each category is presented. The information has been obtained from the project files as documented by MoID/TANROADS and consultants.
27
TANROADS did not disagree with any final accounts (see chapter 5)
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Table 4.6: Effect of each category to cost increase of the road projects Reasons for cost increase New specification of works (new design) Additional insurance costs Interest on delayed payment (0.5) and financial compensation to land owner (0.5) Increased volume and prices - Increased quantities - Project cost increase (VOP) TOTAL Additional amount Bill Tsh s % 20.0 23 2.1 1.0 64.6 (33.5) (31.1) 87.7 2 1 74 (38) (36) 100
Cost overrun according to MoID/TANROADS, consultants and contractors All costs have been approved and found reasonable by MoID/TANROADS. According to files and documents and officials at MoID/TANROADS, the main causes to the increasing cost and the need to revise the budgets, are changes in specification or unforeseen increased amount of work that have to be carried out. According to consultants and Association of Consulting Engineers, there are several reasons why road projects often have high cost increase. The reasons are inadequate planning, due to failure to come up with the good cost estimates of each element. Most of the time, the rates which are used are the ones taken from what has been used by contractors in other projects and then modified a bit. But there is no thorough study carried out to establish the actual cost of each work item and used them as a basis for contracting with contractors. The way the procurement is executed is another aspect. It may turn out that the lowest bid may not be the most economical solution in a long term perspective. Moreover, inadequate design which resulted into change of scope of work during the construction stage is a common cause to cost overrun, according to both consultants and contractors. There are also problems with inadequate project management. As examples they refer to the frequent failures to pay the contractors on time, resulting in interest payment, failure to process contractors claims, or inspect and approve the completed work of the contractor. Most of these remarks are shared by the contractors and Contractors Registration Board of Tanzania. Final quantities are almost always quite different from the original ones, according to their experience. And the site conditions do often differ from design and planning documents (this could include everything from soil profile, borrow pit and water sources, to price materials).
Source: Project Files and Contract documents As seen above volume related factors had great influence on the increasing cost. First, it was common with new specifications, which have been shown earlier (chapter 3 and 4). Such changes often meant higher volume (not only additional objects). Second, adjustments of volumes occurred quite frequent during the implementation stage and the costs for that were quite high, as seen above. Less remarkable to some extent is the cost increase, since these projects had a long duration time and were executed in an environment where rapid price increases are rather common. Design and starting time of the project As earlier seen, a huge part of the increasing costs are related to miss calculation of some kind already in the design stage. This in turn could for instance be linked to insufficient preparation (ground work) when the design was done or by less effective quality control. Other factors like changed conditions, values, priorities etc. have of course also affected the outcome. One finding is however less expected: among these road projects there were not any obvious correlation between short and long delay in commencement of the projects. The expectation was that projects that started with a design conducted several years ago ought to have greater difference between the contract sum and the final costs than other projects. Still its obvious that those older designs got more expensive than originally planned, due to the long processing time from having the design ready and starting the construction work.
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Chapter Five Quality Control of Road Works

Good quality of road works is important for both safety and economic reasons in any society. Thats why governments set quality standards that need to be met and require government authorities to establish systems of quality control. In order to be effective these control systems need to cover the whole process of planning, conducting and maintenance services. The Audit Office has found frequent problems among the ten examined road projects linked to planning and supervising. This can be seen as an indication of a quality control system problem. The chapter focuses on the road construction stage.
Generally, these documents are similar except for minor differences concerning the procurement procedures and some conditions, e.g. for approval to release varying finances. Thus, for the single cases the actual choice of guiding standard documents depends on who is the financier. In addition TANROADS sets a minimum standard for the road to be constructed. According to the standard contract document between the client (TANROADS) and the contractor a quality control system shall be established by the client and stated in the contract.30 MoID/TANROADS is responsible for the road works, including the quality control.
5.2 The system of quality control

The system of quality control covers several activities. The main steps in the process of building roads are the design phase and the construction phase. 5.2.1 The design phase Planning, preparation and review The design is a plan or set of drawings and details produced to show the look and function of the road before it is built. Designing is expected to be done after thorough investigation of the sites. The investigations should include, but are not limited to, soil investigations, geotechnical investigations, hydrological studies, topographical surveys and interviews with stakeholders, including local people within the vicinity of the project area. This could be done by use of in-house engineers or outsourcing to private consulting firms. At this stage, specifications need to be set, and bills of quantities, cost estimates and tender documents have to be prepared. The design has to be reviewed in order to safe guard its quality. 5.2.2 The construction phase Introduction For the construction stage, contractors are expected to be engaged.31 Based on the conducted design with the specifications of quality standards, the contractors provide bids which have to be scrutinized and evaluated by MoID/ TANROADS who proves the contractors technical and financial capability of performing road projects.
5.1 General standards for planning and conducting road works

Quality control of road works in Tanzania is guided by the national standards and guidelines specially developed for the local environment of the road sector. The guidelines provide guidance on acceptable quality standards set as well as procedures for testing the compliance with these standards in the stages of the road project. The guidance for establishing of standards is stated in the following documents: Pavements and Materials Design Manual (PMDM 1999); Standard Specifications for Road Works (SSRW 2000); Laboratory Testing Manual (2000); and Field Testing Manual The general standards and guidelines are supplemented by the standardized tender and contract documents, provided by various local and international institutions for works of civil engineering construction.28 These documents provide the rules and procedures for managing the construction process in order to achieve the desired results and include rights and responsibilities of various parties during the implantation of the different project stages.29
28 29 The institutions providing the documents include Fdration Internationale Des Ingnieristes Conseils (FIDIC) and Public Procurement Regulatory Authority (PPRA). For an overview of the road works procedures see chapter 2.
30 31
Contract for consultancy services for the supervision of Roadworks The consultants and the contractors are engaged according to the Public Procurement Regulation, 2005 government Notice No. 98 of 15th April, 2005.
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According to the contract documents, some of the most important items which determine the quality of the roads and need to be reviewed by MoID/ TANROADS periodically are: Identification of defects; tests of materials; correction of defects; presence of qualified contractors and consultants staff; and early warning. TANROADS/MoID quality control of construction work is conducted by supervising, monitoring, inspections and evaluations. Supervising is a continuously ongoing activity, which is supposed to be carried out both by the responsible project manager at MoID/TANROADS and to a large extent by hired consultants. Monitoring is also an ongoing activity, but more periodically, in order to follow how the project is developing in relation to the activity plan etc. Inspections are carried out as monthly inspections and also in the form of final inspections with the aim to detect problems to be addressed and adjusted. Evaluations are to be conducted during critical steps in the process when more comprehensive and perhaps independent assessments are needed. Supervising and Monitoring MoID/TANROADS is responsible for executing supervising and monitoring functions. Laboratory tests and tests done at site have to be performed to ascertain compliance with specifications. Defective works should be reworked or improved prior to approval by the supervisor. Materials to be used for the works must also be subjected to tests, where necessary, prior to their use. MoID/TANROADS should also monitor the projects through its own staff or through the engaged consultants in participation with the contractors at site meetings. Inspections Inspections are required to be conducted monthly as substantial completion and as final inspections of the construction. Both kinds of inspections are expected to be conducted jointly by MoID/TANROADS, the consultant (if engaged) and the contractor. The monthly inspections should be documented in progress reports. In the period in between the monthly and the final inspections, the contractor has to rectify identified snags. When all adjustments are done, the contractor is relieved from obligations to MoID/ TANROADS. If the work is delayed the contractor is required to pay a fee
per each day of delay (the daily fee that has to be paid is 0.01% - 0.1% of the contract sum or a fixed figure of UDS 20,000 for some projects32).33 Evaluation The evaluation on quality of the work is part and parcel of quality assurance of the roadwork. TANROADS is supposed to conduct periodic evaluations of the performance of the engaged consultant and contractor in order to satisfy itself that the work meets the set standards and quality desired. Monthly meetings TANROADS is, through its consultants, expected to continuously check the quality of the construction work at site. The purpose is to approve all materials and to ensure compliance with required technical specifications and qualifications of the staff in accordance with the contracts. The duties imply different specified tests, evaluation of existing systems and checking that the present staff both the contractors and the consultants staff have required qualifications. The results of all these activities are dealt with in monthly meetings which should be well documented. The meetings are expected to be conducted jointly by TANROADS or its consultants and the contractor. Monthly progress reports, mainly as a result of the monthly inspections, have to be prepared with the result of the meetings and recommendations.
5.3 Quality assurance in practice

Reviewing quality of designs The design work is in most cases conducted by private consulting firms. Once the designs are completed, the consultants prepare a design report which is submitted to TANROADS, where it is supposed to be reviewed by an in-house engineer to ascertain its adequacy. This is the way quality is expected to be safeguarded. In practice, consultants are often engaged in this work to assist TANROADS in reviewing the quality of the designs. Design problems were rather common among the examined projects, but they were far from often discovered by the reviews. In the ten examined projects it was for instance common with underestimations of the quantities of materials, due poor soil investigations, geotechnical investigations, hydrological studies and topographical surveys. There were several projects
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If there is a sectional handover the liquidated damage is charged on the unremained work The fee for delays could be rather costly for the contractors. Therefore, its within their interest to have the plan revised if they run the risk of being delayed. Moreover, cost overrun, increased budgets or minor delays are in general easier for the contractors to cope with than significant delays.
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with incomplete designs. Since these problems were not detected in the review, costs consequences and delays appeared during the construction phase. According to TANROADS officials and other stakeholders, this is a common phenomenon in road projects. Similarly, according to TANROADS officials, reviews of earlier approved designs were not done though it took between 2 to 5 years after its completion of the design before the commencement of construction started. During that time the road was still in use and by the time construction work starts the design deemed invalid and supposed to be reviewed. Quality assurance during the construction phase In the ten examined projects almost all conducted activities of supervising, monitoring and supervision were carried out by the engaged consultants who also prepared the monthly reports. TANROADS thus to a high degree relies on the engaged consultants to carry out the quality assurance work. In other words, TANROADS is fully dependent on their consultants who have genuine insights. The effectiveness of the quality assurance is to a large extent determined by how well the consultant has fulfilled his or her duties. It has not been within the scope of this audit to examine the quality of the work conducted by the TANROADS and (mainly) its consultants. However, it has been possible to get an estimation of how often different kinds of supervising, monitoring and inspection activities have been carried out during the construction phase. Such estimation based on documentation files and interviews with consultants and TANROADS officials are shown in the table below.
Table 5.1 Supervising, monitoring and inspection activities among the ten examined projects
Parameters to be addressed Identification of Defects Tests Tests on soils and gravel Tests on aggregates and concrete Tests on Asphalt and Bituminous Correction of Defects Presence of qualified contractors and consultants staff as identified during the bidding Early warning in case of poor work of the contractor, delays or cost escalation Often Monthly Seldom V Never
V V V V
Source: File documents; interviews with consultants and TANROADS officials As seen above the quality assurance was not executed as expected. The only monthly checking was done on the tests and early warning in case of poor work of the contractors delays or cost escalation. The other parameters were seldom or never checked, according to the estimations. Not even evaluations were conducted as expected. This is shown in the table below. The table shows the number of conducted evaluations on road quality and the reasons for the evaluations, as a routine or something else.
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Table 5.2 Conducted evaluations of the quality of studied road works

Road Projects
Tinde Shinyanga/Mwanza
no fees for delays were paid regarding the ten examined projects. To be fair claims from the contractors for additional costs due to delays caused by long processing time of the tax exemptions for donor funds at the Tanzania Revenue Authority (TRA) was not approved by TANROADS, since it was considered not to be a problem caused by TANROADS. According to the contractors they got additional cost of several billion Tsh as a result of the complicated and long procedures at TRA.
Number of conducted evaluations on road quality

1 1 1 1 1 Several Several 1 1
Reasons for the evaluations

Routine after completion of the project. Routine after completion of the project. Routine after completion of the project. Routine after completion of the project. Routine after completion of the project. Routine before and after completion of the project. Routine before and after completion of the project. Routine after completion of the project. Routine after completion of the project.
Songwe Tunduma
Somanga - Matandu Shelui Nzega Morogoro Dodoma Makuyuni - Ngorongoro Chalinze - Melela Mutukula Muhutwe Kyabakari -Butiama
5.4 TANROADS and its engaged consultants

According to standards and good practice its important to engage experts that are competent and independent. Even though it may have advantages, its vital to secure that the same consultant or consultancy firm is not engaged in conflicting roles.34 This has however not been secured in the ten examined projects. In fact, the same consultancy firm (and often exactly the same consultants) were used in every stage of the process and for many conflicting tasks. The same consultants could be engaged in design work, monitoring and supervising activities. They provided technical and other advices in various areas to both contractors and TANROADS. They were also mainly the only ones from TANROADS who conducted monitoring and supervision of the actual construction work35. In addition, the consultants examined and approved request for revised plans or additional costs. They also approve the whole construction stage when the final inspections are conducted. Another important issue is to what extent the set up system for quality assurance is transparent. In other words, does the system with the consultants duties and activities provide TANROADS and other concerned interests as financiers and other stakeholders with a proper overview of whether the quality standards are met with. This is depending on the provided and documented information from the consultants and on TANROADS conducted evaluations of the system.
Source: Files and documents at TANROADS According to the table above just two of the conducted evaluations were performed before and after the completion of the road project. This implies that TANROADS evaluations dont cover the design stage, where severe quality problems seem to start with the way the quality standards are set. Further on the evaluations just to a limited extent cover the construction stage where many problems appear with the poorly set quality standards and the poorly conducted monitoring and supervision. The completion of the construction stage is thus started by an evaluation, also called final inspection. The purpose is to approve the quality of the conducted road work and if this is the case to transfer the responsibility of the road work from the contractor to TANROADS. Also this inspection is, however, conducted jointly by TANROADS, its consultant the supervisor and the contractor. Weaknesses noted in quality assurance system imply that all ten studied road projects had experienced quality problems resulting in delays and cost overrun. As seen in chapter 3, it was common with delays. But most of the delays were reduced (from 111 to 17 months) by revised plans. This resulted in that
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The consultants need to be engaged according to the Public Procurement Regulation, 2005 govern ment Notice No. 98 of 15th April, 2005. The supervision contract between TANROADS and the consultant covers monitoring, compliance and good performance of the works discharged by the consultants.
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However, beyond the documentation in the progress reports, prepared by the consultants, there is hardly any more regular documentation of conducted quality control. Moreover, there is no written report showing how TANROADS have assessed the work of the consultants in order to satisfy itself with the quality of the conducted road works. This indicates that there is no systematic monitoring of the satisfaction of the consultants work. The reason given by TANROADS officials is that it is very difficult to go into details with a lot of projects for the responsible engineers. TANROADS monitoring of its consultants is done through monthly site management meetings. According to TANROADS officials they had no problem with the performance of any consultant in the ten studied projects.
Chapter Six Conclusions

The road works system in Tanzania is not managed efficiently and timely. Plans and budgets are often revised, resulting in significant delays and cost overruns. Consultants are the ones who determine their own schedule, have multiple roles and are not managed well. All put together indicates that ten roads built and audited were not produced in a way that best serves the public interest. Despite of the weaknesses mentioned above, MoID/TANROADS has shown that there is room for improvements since it has already started to take some actions to address the above mentioned problems. Possible causes of delays, cost over runs and quality problems of road constructions According to the project documents; inadequately prepared designs is the main cause of problems in the construction phase. The Audit Office shares the view that the design works need to be reviewed. Similarly, the Audit Office has also found several other influencing causes to address, as shown below.
5.5 Consequences
Despite the fact that TANROADS officials state that its quality control system is working well, this audit has found that there is still need for improvement. The quality control in the design phase is obviously not effective. There are also several problems in the construction phase. Inspections and monitoring are not conducted as expected, documentation is not in order and the engaged consultants are given conflicting tasks without any proper follow up by TANROADS. It might also be worth mentioning in this context even though its not within the scope of the audit to examine this, soon after the finalising inspection where all studied ten road constructions were approved most roads built started to undergo repairs (not only regular maintenance).36 This situation can exist largely due to the fact that it isnt possible for the public to get insights into the running of things. Even for the Audit Office it has been difficult to get all documents and information needed, due to lack of transparency and of disorder of document files. As a consequence roads built in Tanzania end up to be more expensive than needed and with many quality problems.
6.1 Organization of tasks and roles problematic

MoID/TANROADS procures contractors for the constructions stage and consultants for activities carried out during the design and construction stages. There are good reasons for using experts. But the way MoID/TANROADS has organized its use of consultants and contractors provides some problems for the road work system. Consultants are engaged in various steps in the process. They are involved in planning, preparation and design. They fulfill important tasks in the construction phase; serving the interest of employers (TANROADS and MoID) and advises them on the conduct of contractors. The same consultant may be engaged in controlling activities like supervision, monitoring, inspections and evaluation of the works on behalf of the client. Consultants are also often engaged to conduct daily, monthly and final inspections of road construction projects. The inspection protocol forms the basis for MoID/TANROADS final approval decision, for which they fully responsible.
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According to documents and files an interviews with TANROADS officials and various stakeholders.
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When signing the contract agreement, the contractor can take a proper design of the road project for granted. If this is not the case, which is more or less always, the contractor is not responsible for being prepared to meet the situation. This might influence the contractor to put blame on all the problems arising during the construction on the earlier design which is also the common argument when problems occur. Thus, an important task for the consultants should be to meet those arguments, in protecting the client by promoting an efficient use of public resources. Consequently, it appears that procurement of different consultancy firms makes it difficult for MoID/TANROADS to properly make use of the experiences from conducted road works in order to improve the activities. In fact, the same kind of problems appears repeatedly in a more or less similar way from case to case. Thus, if mixed roles and responsibilities of consultants are not managed properly they may endanger the economy, efficiency and effectiveness of the whole road work system. This becomes even more obvious as MoID/ TANROADS hires the same consultancy firm for all stages and tasks in each project. In short, MoID/TANROADS is largely dependent on consultancy firms to fulfill its tasks and has to act with integrity when dealing with consultants and contractors. The way the work is organized and conducted, according to the Audit Office raises questions of TANROADS/MoIDs efficiency and accountability taking into account of several delays in completing road works, cost overruns, poor quality of road works and management of the work of consultants.
to be timely. Also, it seems that contractors were systematically getting their requests approved. The contractors seem to systematically be able to get their requests approved. The quality of the final inspection can also be discussed. All ten studied road projects were approved at the final inspections though most of all the roads started to undergo repairs soon after this approval. MoID/TANROADS inspections and evaluations were obviously not able to detect certain weaknesses of the works. Moreover, sanctions were not properly used for tackling and correction of the frequent and extended delays, cost overruns and also quality assurance problems.
6.3 Conditions for transparency not fulfilled

The road works system represents a great part of the public sector. A good transparency and improvements of the activities and the proper use of money will increase the trust of an efficient use and an effective exchange of public resources. In spite of this, the records show serious weaknesses on time and cost management of road works. Last but not least, construction and repair of roads represents a great deal of the government expenditure and ranged to almost TSh 800 billion, equal to 13% of the Tanzanian budget 2007/2008. This money is intended for important issues of the country as a whole as well as for the individual citizens. The combination of dealing with huge amounts of public money and the severely lacking of transparency on the use of this money is a problem in itself. This implies there are weaknesses in public administration of public resources. Proper documentation made available to the public is lacking.
6.2 Management time, costs and quality is weak

MoID/TANROADS has difficulties in managing costs and time. The costs of the road projects are less calculated and controlled. This makes it difficult to manage the process; from assessing designs and contractors bids to managing contractors requests for additional funding or extended time. During the construction stage, MoID/TANROADS deals with the repeated problems by revising the originally set time tables and budgets, often more than once and probably in many cases more than what is really needed, if things had been better planned and managed. Also, contractors are systematically being paid even for costs that exceed the last revised budgets. The contractors therefore do not have driving force to keep the costs low and
6.4 Unsolved systematic issues cause delays, cost overrun and quality problems of road construction
Problems in the road work system and for the society Not properly examined and corrected problems related with delays and cost overruns implies problems for the road work system as well as for the society as a whole.
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Beyond the above described problems, the audit office has seen many problems to tackle in the road work system with the following main examples: Weaknesses in conducted planning; preparation and design with underestimations of quantities have caused quality problems during the road constructions and are followed by delays, cost overruns and poor quality roads. Experienced quality problems from the design are not detected and corrected before decision and delivery of the design report. Lacking calculation of the actual costs for the road works implies inefficiency for MoID/TANROADS assessment of bids during the tendering and the procurement of contractors. Lacking coordination with local authorities implies that relocating of e.g. issues belonging to water piping system and electrical system hamperes the road constructions. The contractors performance are not measured and not used for corrections or future improvements of hired contractors. Unsolved disputes with the contractors concerning reimbursed taxes. The main problem for the society is that the required roads are not completed in time which means increased both social and economic disadvantages. Calculations based on the ten examined projects indicate the following increased expenses for the public sector as well as for the society generally: With an interest rate of 18 % the delays involve increased capital costs, just caused by the time factor to around 31 billion Tshs. MoID/TANROADS and its consultants have to spend more time and money than expected for prolonged time which is ranging to close to 5billion Tshs. In a longer perspective and with a greater number of projects these costs will be even higher, without compensation for increased quality and without having the roads in time when they are needed.
Chapter Seven Recommendations

MoID/TANROADS has problems with efficiency in managing its road projects. This means that MoID/TANROADS perhaps due to lack of competence in certain areas has difficulties in managing its role towards financiers, contractors and consultants. MoID/TANROADS is expected to professionally lead functions like planning, designing, managing and quality control within its mandate, but that is not the case today. This in turn has serious consequences for the society. Even though the situation is understandable and may prove difficult to change, it needs to be addressed by MoID/TANROADS as well as the Government, since the Government has the overall responsibility for the conditions concerning national road works in Tanzania. This chapter contains recommendations to the Government and TANROADS. The Audit Office believes that these recommendations need to be considered if the national road works in Tanzania are to be better planned and managed ensuring that the 3Es of Economy, Efficiency and Effectiveness is achieved in the use of public resources.
7.1 Institutional improvements

Its important that MoID/TANROADS has the strength, competence and capacity to manage all kinds of national road works. This means that MoID/ TANROADS must be able to recruit and keep strategic competencies, even if MoID/TANROADS will always have to engage specialists or consultants for various kinds of work. Moreover, its vital that MoID/TANROADS acts with full professionalism and integrity, regardless of financier, designer, consultant and contractor. So, if for instance donors dont show sufficient interest in economy and efficiency aspects, MoID/TANROADS still has to do so, if MoID/TANROADS are expected to earn the citizens trust. The Government must ensure that MoID/TANROADS has the leadership and capacity required to manage its functions. The Audit Office recommends the Government and the Ministries concerned to set up a commission to find solutions to these shortcomings. The Audit Office believes that it is cost effective to make TANROADS properly equipped for its tasks as regards human resources.
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Moreover, MoID/TANROADS needs to discuss how far it should go in supervising contractors. There are risks that too much involvement may undermine the contractors responsibilities. The Audit Office realizes that it is not easy to find the right balance here, but the aim must be to make contractors (regardless of whether it concerns design or construction works) more responsible for their undertakings. Consultants and contractors should not expect that MoID/TANROADS and financiers will compensate for their shortcomings. MoID/TANROADS needs to specify the responsibilities for the consultants they use. If for instance a consultancy firm is engaged for design work, it is advisable to set it clear in the contract that the firm is financially responsible for malpractice. This could later be used by MoID/TANROADS as a basis for complaint against the design work done by the firm, if it is likely to believe that problems in the construction phase are caused by poor design work. The same idea is applicable to firms engaged for final inspections. If it turns out that an engaged firm has not detected faults that it ought to have seen, if the inspection would have been carried out professionally, MoID/TANROADS should put charge on the firm for neglect or malpractice. The same kind of thinking applies to MoID/TANROADS when it is fully responsible for the design work. If this work is proved poorly done, the contractors are entitled to request additional funding when needed to fulfill the contract agreement. However, if it turns out as for the ten examined projects that projects are systematically affected by poor design work conducted or approved by MoID/TANROADS, the long term solution is not to continue providing additional funding but to improve the quality of the design works and the reviews. Finally, the Audit Office has found that the way the work is carried out and filed does not meet reasonable standards of order or transparency. The Audit Office recommends to the Government to review the possibility of making vital documents better available to the public. Designs and final inspections could perhaps be made available or disclosed as soon as they have been approved to the parties which are supposed to have an access to them. To sum up, the Audit Office recommends to the Government to: Set up a commission to review the possibility of strengthening MoID/ TANROADS integrity and professionalism and its performance of strategic functions, and in doing so also examine transparency and accountability issues Give TANROADS clear instructions on how to manage consultants
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7.2 Project planning and design

The planning of the projects and the design processes are strategic phases in road projects, and it is obvious that TANROADS and its consultants are unable to conduct these activities efficiently. Preparation work is not done as expected, calculations are not accurately made, the quality control seems to be superficial, coordination work has shortcomings etc. This can be seen as a result of insufficient planning and design. It may also be linked to the fact that consultancy firms are engaged in services that stands in conflict with each other. They may be engaged in design work or in reviewing designs, as well as in supervising activities during the construction phase. As seen in chapter 5 the engaged consultants involved in the examined road projects approved almost all requests for additional money from the contractors, and TANROADS accepted this without questioning the merits of the consultants for their previous design work. This means that the financier through TANROADS behaviour systematically had to bear the full financial responsibility for poorly done reviews or design works. In addition, no one seems to have done anything to change the situation. The Government and TANROADS are recommended to deliberately exert efforts to pre-contract stages of projects implementation to ensure that the designs are improved to reflect the reality on the ground and avoid unnecessary alterations during the implementation. The Ministry of Infrastructure Development and TANROADS need to institute a mechanism to review the designs and estimates of the project as are prepared by the consultants before they are implemented. To sum up, the Audit Office recommends to the Government to: On a non regular basis conduct evaluations of the efficiency of TANROADS design work and how TANROADS procures, instructs and manages its design consultants Give the earlier recommended commission the instruction to examine how to best address the above mentioned responsibility issues in design works Based on the work of the recommended commission, give TANROADS clear instructions on how to improve the design work and the reviews of the design work.
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7.3 Project management and quality control

As shown in this audit, TANROADS need to significantly improve project management and quality control in order to avoid delays, cost overruns, and to be forced to conduct repair works and maintenance services soon after opening the roads to be used by traffic. The following text contains a number of suggestions and statements that may serve as a basis on how to move forward. In short, the Audit Office recommends to TANROADS and the Ministries concerned to consider the following suggestions and principles: 1. Project management The Ministry of Infrastructure Development and TANROADS need to improve start-up activities such as fulfilment of loan conditions and procurement processes. Since the loan conditions are set and agreed upon during negotiations (between the government and development partners), the government should ensure that loan conditions that are set can be achieved within the anticipated timeframe. TANROADS need to have a budget covering the whole of the project and strongly affects budgetary control throughout the project. For each project it is important that clear roles and responsibilities among various parties are set, one of whom should decide on time, cost and quality issues. Moreover, measures need to be taken for the capacity of identifying and managing risks. This is crucial for contractors to complete projects within the specified time, within the cost agreed upon and end up with roads of acceptable quality. Files must be kept in order. MoID/TANROADS should establish a register to record the performance of contractors and consultants for each road project. This will help in monitoring and assessing their performance and distinguish performers from non-performers for consideration during awarding of contracts. Also, it is important for the TANROADS to take measures to improve its procedures for documentation. A lot of the files seem to be in disorder, and it has for instance not been easy for the Audit Office to get all information needed for this audit. Procurement of contractors should be based on calculations of the final costs of completed roads. And the requirements of the road quality in the contracts should state a standard that clearly excludes the general need for
early repair after completion. In addition, the contracts should include clear sanction clauses for contractors that do not stick to contract conditions of time, budgets and quality of the roads. Also, it is important that TANROADS states clear conditions in the contracts for reimbursement of taxes to the contractors. Since utility companies (Water Authorities, TANESCO and TTCL) often lack accurate records about the precise locations of their underground utility lines, contractors frequently encounter utility lines that need to be moved before construction can proceed. This situation result in delays and cost overruns. TANROADS (and the Ministry) should, therefore, take proactive step to reduce time and cost overruns by continuing its efforts to improve coordination with utility companies and other parties who are involved in the road construction sites. 2. Quality control and learning The controlling activities supervision, monitoring, inspection and evaluation should be put in use for detection of delays, cost overruns and quality problems. In addition, adequate activities should be used for correction and prevention of deviations from the set program and contractual conditions. TANROADS should reduce the time for applying Price Fluctuation Formula. This might be done through breaking the road projects into packages with shorter deadlines. The purpose with the final inspections when the road project is approved and handed over to TANROADS has to be improved in order to exclude early repair of the roads. The system with sanctions stated in the contracts has to be applied in accordance with the conditions for consultants and contractors. In addition, evaluations should be used to measure and analyse the achieved results. Experiences gained should be used for better planning and for learning and improvements. In addition, TANROADS should take action to improve its statistics and performance reporting and make it available to the public. Finally, a register or road inventory ought be kept and be monitored over the life time of the roads to facilitate determination of maintenance needs and recording of the maintenance activities performed.
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REFERENCES
1. Conditions of Contracts for Works of Civil Engineering Construction, part I, by FIDIC, 4th ed, 1992; 2. National Population Policy, Ministry of Planning, Economy and Empowerment, 2006; 3. Pavement and Materials Design Manual by Ministry of Works of the United Republic of Tanzania, 1999; 4. Performance Audit Handbook 5. Performance Audit Report: Managing Procurement Road Construction and Restoration Contracts, A Report by the Auditor General, Malta, 2004; 6. Standard Specifications for Roadworks by Ministry of Works of the United Republic of Tanzania, 2000; 7. Tanzanias Construction Industry Policy, 2003; 8. Success Factors for Road Management Systems, World Bank, 2005
APPENDICES
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Appendix 1:
SN Contract Name
Genaral Information of the Audited Projects

Length (Km) Contractor Astaldi S. p. A Tanzania Branch China Road & Bridge Corporation China GEO Engineering Corporation Grinaker - LTA Ltd China Henan International cooperation Group Co. Ltd China GEO Engineering Corporation China Road & Bridge Corporation Grinaker - LTA Ltd NCC International Denmark AS CHICO Consultant C. Lotti & Associati Consulting Engineers S. p. A Norconsult International A S Parkman Ltd in Association with M-Konsult Ltd Louis Berger S.A Financier European Development Fund Opec Fund for International Development GoT European Development Fund ADB/GoT Client
Appendix 2: Organization Structure of the MoID
Mwanza Region Transport Project Upgrading of Muhutwe Kagoma Road Upgrading of Somanga Matandu Road Tinde - Mwanza/ Shinyanga Border Mutukula Muhutwe Road upgrading project Shelui - Nzega Road Upgrading Project Songwe Tunduma Road Rehabilitation Project Nzega - Tinde - Isaka Road Upgrading Project Morogoro Dodoma Butiama Kyabakari
MINISTER
55.741
MoW
PERMANENT SECRETARY
PROCUREMENT MANAGEMENT UNIT PRINCIPAL SUPPLIES OFFICER
24.014
MoW
ADMINISTRATION & HUMAN RESOURCES MANAGEMENT DIVISION
POLICY AND PLANNING DIVISION DIRECT0R
33.04
MoW
96.7
TANROADS
SUPPLIES AND SERVICES
INTENAL AUDIT UNIT CHIEF INTERNAL AUDITOR EXECUTIVE AGENCIES: TAA TGFA TMA TANROADS TBA TEMESA
113
BCEOM
TANROADS
112
Norconsult International A S Norconsult International A S Hydroarch SRL consulting Engineers Carl Bro (Denmark) Ambicon
GoT, ADB
TANROADS
INFORMATION, EDUCATION AND COMMUNICATION UNIT PRINCIPAL INFORMATION UNIT
70
NORAD European Development Fund European Development Fund GoT
TANROADS
73
TANROADS
SAFETY AND ENVIROMENT UNIT DIRECTOR
TRANSPORT DIVISION DIRECTOR SURFACE TRANSPORT MANAGEMENT SECTION
COMMUNICATION DIVISION DIRECTOR INFORMATION TECHNOLOGIES SECTION
ROAD DIVISION DIRECTOR REGIONAL ROADS SECTION TRUNK ROADS SECTION
256
TANROADS
10
12
TANROADS
MARITIME TRANSPORT MANAGEMENT SECTION AIR TRASPORT MANAGEMENT & METEOROLOGY
COMMUNICATION SERVICE SECTION
Proposed or already an Executive Agency
54
55
Appendix 3: Organization Structure of TANROADS
56
Contract Name Leng th (Km) Start date Original Completion Date Revised completion date Actual completion date Origina l time for comple tion Revis ed time Actua l time Total Additio nal time above revised time Total Addit ional time Estimated % Time Variance over and above the revised time Days Estimated % Time Variance over and above the original estimated time
Appendix 4: Time Variations
Mwanza Region Transport Project
1-Nov-00 5-May-02 33.0 4 96.7 113 112 70 73 10-Jul-02 11-Feb-04 15-Mar-01 14-Aug-02 26-Feb-02 26-May-04
30-Apr-03 5-May-03 25-Dec-04 11-Feb-06 17-Dec-03 16-Feb-05 24-Feb-04 25-May-06
18-Feb-04 5-Oct-03 10-Feb-05 30-Jun-07 30-Sep-04 10-Aug-05 13-Jan-05 25-May-08
22-Jul-05 6-Apr-04 10-Feb-05 30-May-07 31-Dec-04 10-Aug-05 25-Apr-05 25-May-07
911 366 900 732 1,008 918 729 730
1,205 519 947 1,236 1,296 1,093 1,053 1,461
1,725 703 947 1,205 1,388 1,093 1,155 1,095
520 184 0 -31 92 0 102 -366
814 337 47 473 380 175 426 365
43 35 0 -3 7 0 10 -25
89 92 5 65 38 19 58 50 Shelui - Nzega Road Upgrading Project Songwe - Tunduma Road Rehabilitation Project Nzega - Tinde - Isaka Road Upgrading Project Morogoro - Dodoma Butiama - Kyabakari Upgrading of Muhutwe Kagoma Road Upgrading of Somanga Matandu Road Tinde Mwanza/Shinyanga Border Mutukula - Muhutwe Road upgrading project
256 12
28-Jun-04 19-Feb-04
27-Jun-06 30-Apr-05
17-Feb-07 31-Aug-05
17-Feb-07 31-Aug-05
730 437
965 560
965 560
0 0
235 123
0 0
32 28
57
Appendix 5: Reasons for the Delays S/N 1. Road project SomangaMatandu Additional month 2 Reasons for extensionof time Increase in volume of work due to miscalculations in the original design Out of date design and survey data: 58 days1 Late payment of interim certificates: 30 days2 Reduced production due to heavy rains: 423 (with no financial compensation) Ordered additional works: 45 days4 (without additional compensation) Increase in work volume due to omission of important activities in the original design5 586 days S/N 4. Road project Morogoro Dodoma Additional month 8 Reasons for extensionof time Additional work volume due to changes in site conditions resulting from delay in implementing the designs 7 69 days for late delivery of survey data (need for re-survey due to late implementation of the design by 8 years) 30 days for widening of road surfacing 30 days for additional borrow case 2 (additional quantities of borrow materials) 159 days for omitted works Additional works8 Change in design due to delay in implementing the design (5 years) Increased quantities New works First extension9 Additional items (rockfill)10 Increase in quantities some existing bill items11
2.
Shelui- Nzega
175 days (5 months)
5.
Mutukula - Muhutwe Road
13
3.
KyabakariButiama
6.
Nzega Tinde - Isaka Road Songwe Tunduma Tinde Mwanza/ Shinyanga Border
24
1 Due to long period from the design to the commencement of the works, some of the survey points including temporary bench marks were either displaced or destroyed and they had to be re-established before works could commence. The works were supposed to start on 14th august 2002. However, the contractor at this point was not sufficiently mobilised to start works until 1st September 2002 (i.e. delayed for 19 days). The survey data were issued to the contractor on 28th October 2002. This implies a delay of 58 days from the day the contractor was ready for work and 77 days from the contract start date. 2 3 4 5 6 During the period between November 2003 and July 2004 the ADB who were funding 89.7% of the project costs, suspended the payments due to expiry of the loan closing date. This forced the contractor to slow down the production due to financial difficulties. A total of four IPCs (Nos 6, 7, 8 and 9) amounting to US$ 1.02 million were delayed for payment. The extension of time for 88 days (i.e. 58 days due to displaced survey points and 30 days due to delayed IPCs) fell into the rainy season at the project site. This resulted into a further extension of 42 days to compensate the contractor for reduced rate of production resulting from rainy weather. This made a total extension of 130 days. TANROADS instructed the contractor to carry out additional works including road reserve marker posts and additional kerbstones for protection of the edges on built up areas, curves and on bridge approaches. This made a total extension of 175 days. Bus bays, access roads, catch water drains, ditch lining and T-junctions details at the start of the road were not considered in the original design. During construction, the original design was found to be deficient of the following aspects: It did not take into account earthwork quantities involved in road widening at sharp curves A number of culverts were found to be shorter than the width of the road and required to be extended to cover the full width of the road. Further, on commencing construction the original design was found to be inadequate in that the road alignment passed through soft and water logged areas. Moreover, the design not incorporate special design measures for the sections in soft and water logged areas. The associated increase in work volume amounted to TSh 316.5 million. The request for approval of extension of time as submitted to the TANROADS Tender Board by the Director of Development indicates an extension from 19th June to 31st August 2005 as being 58 days instead of 73 days. In addition, according to the Final completion Report, the revised completion date was 19th August 2005 and not 31st August 2005.
7.
14
8.
17
7 8 9 10 11
It took 4 years between completion of the designs and the start of construction. The increase in work volume due to changes in the designs resulted into a cost increase from 20.6 billion to 41.5 billion TSh (over 100%). The road had deteriorated to the extent that the rehabilitation as provided for in the contract would not suffice (Administrative Order No. 1 -AO1). Other reasons were poor estimates in AO1, introduction of rockfill to paddy fields and inadequate hydrological studies that led to too small drainage channels (AO2). The first extension approved 252 additional working days which is approximately 15 calendar months (calendar months include both working and non-working days). No item was scheduled for rockfill. New items were introduced for rockfill, i.e. materials from the cut and materials from the crusher sites amounting to 221,825 m3, in addition to this, an item for overhaul was introduced for the rockfill with a quantity of 1,584,000 m3.km. There was an underestimation of some bill items. The original bill of unsuitable material was 380,000 m3. During construction the amount of unsuitable material increased to 925,612 m3 (i.e. an increase of 144%).
58
59
S/N
Road project
Additional month
Reasons for extensionof time Additional work volume due to changes in site conditions resulting from delay in implementing the designs (7 years) Commencement delay (took long time to fulfil loan conditions) Additional work (6 month)12 Contractors problems not authorized by MoID (21 months)
Appendix 6: Reasons behind revision of programme of works for each road project
9.
Muhutwe Kagoma Road Mwanza town roads Transport Project
Road Project
Muhutwe Kagoma SheluiNzega Kyabakari Butiama Mwanza Town Proj. Somanga Matandu road Mutukula Muhutwe Morogoro Dodoma Tinde Shinyanga /Mwanza Border -
Reasons behind revision of programme of works

Additional quantities to works Delay in effecting payment to the consultant, incorrect setting out data and additional quantities to works quantities Modification of overlay sections in different sections of the road project Retrospective extension of time due of two months, due to delayed payments
10.
27
Increased overhaul quantities Inadequate design, delay in mobilization by the contractor, incorrect survey data and change of scope of work, variation order and claims from contractor Change of scope due to late start of rehabilitation works after completion of design Design: El Nio rainfall affected the original design Construction: Change of scope of work to overcome unforeseen black cotton soil Design: change of scope due to late start of rehabilitation works after completion of design Construction: - increased scope of works due to delay in commencement - due to rain season - additional works (construction of weighbridge, construction of no mans land and construction of parking areas)
Songwe Tunduma
Source: Project Files and Contract documents of 10 road projects audited
12
The extension of time was attributed to omissions of important items, change in specifications (i.e. widening of 4 existing bridges and modification of pavement layers thickness) due to excessive deterioration of the because it took a long time to implement the design.
60
61
Appendix 7: Reasons behind cost increase for each road project audited
Road Project MuhutweKagoma SheluiNzega KyabakariButiama Mwanza Town Proj. Somanga Matandu MutukulaMuhutwe Reasons behind cost increase for each road project a) - Additional quantities to works b) - Variation of price of inputs c) - Changes in design due to inadequate design d) Additional work quantities - Modification of the overlay sections in Mwanza roads project - Changes in design due to inadequate design e) - Increased overhaul quantities Additional works which were omitted during design Variation order Claims Variation of price of inputs Increased scope of works Changes in design due to inadequate design Increased scope of works due to inadequate design, increased cost of works, provisional sums for variation of price and claims Increased scope of works due to delay in commencement construction of weighbridge, no mans land and two parking areas Interest on delayed payments to contractor Variation of price of inputs
of TSh 1,392 million. Deductions of TSh 17,710 million per day to a maximum of TSh 2,657 million imply that it would take 150 days to reach this limit. Reaching this limit would lead to termination of the contract. If the rules were followed this limit would have been reached on 17th July 2004. Payment records show that MoID delayed in starting to apply the clause for liquidated damages. The deductions started in October 2004 instead of February 2004. Summary of the monthly amounts deductible for liquidated damages in TSh
Number of days in Rate per day delays delays (TSh.) 1 Feb 2004 11 17,710,309.56 2 March 2004 31 17,710,309.56 3 30 17,710,309.56 April, 2004 4 May, 2004 31 17,710,309.56 5 June, 2004 30 17,710,309.56 6 July 2004 17 17,710,309.56 Total liquidated damages Deducted amounts (see table below) Undeducted amount of liquidated damages S/N Month Monthly amounts (TSh) 194,813,405.16 549,019,596.36 531,309,286.80 549,019,596.36 531,309,286.80 301,075,262.52 2,656,546,434.00 1,264,200,110.79 1,392,346,323.21
MorogoroDodoma Tinde Shinyanga /Mwanza Border
SongweTunduma
Summary of the monthly amounts deducted for liquidated damages in TSh

S/N 1 Month Oct 2004 Nov 2004 Dec 2004 Jan 2005 Feb 2005 Mar 2005 Apr 2005 May 2005 IPC No 46 47 48 49 50 51 52 53 Amount Certified 223,446,786.57 240,035,964.89 197,046,626.82 204,103,881.23 235,595,506.30 45,409,060.06 36,276,988.66 82,285,296.26 1,264,200,110.79 Amount Deducted 223,446,786.57 240,035,964.89 197,046,626.82 204,103,881.23 235,595,506.30 45,409,060.06 36,276,988.66 82,285,296.26 1,264,200,110.79 Amount Paid to Contractor -
Source: Project Files and Contract documents of 10 road projects audited Appendix 8: Partial Deductions of Liquidated Damages Case 1: Mwanza road works The contractor was supposed to be charged liquidated damages at a rate of TSh 17,710 million per day from 19th February 2004 (i.e. monthly certificate for February 2004). The maximum amount of liquidated damages was TSh 2,657 million (i.e. 15% of contract price excluding provisional sums and dayworks). Evidence of deductions indicates that the amount that was actually deducted was TSh 1,264 million out of TSh 2,657 million leaving un-deducted amount
2 3 4 5 6
62
63
Case 2: Songwe-Tunduma road

Increase in Cost (in relation to revised contract) (TSh) 17,359,832,309.00 19,483,138,735.20 11,946,379,328.49 (844,406,232.82) 5,178,295,534.00 (427,398,663.60) 2,906,619,053.50 2,614,559,241.00
18,156,820,171.52
65,176,737,805.49
17,359,832,309.00
19,483,138,735.20
14,135,419,316.50
44,164,559,160.00
43,899,296,962.00 40,967,000,000 25,259,000,000 Morogoro Dodoma 9
11,994,501,730.80
The project completion was delayed by 102 days beyond the revised completion date. Full amount of Liquidated Damages that should have been deducted from the monies due to the Contractor was TSh 1,529 million. However, through an amicable agreement, only 26% of this amount, which amounts to TSh 394 million, was deducted from the monies due to the Contractor leaving the un-deducted amount of 1,135 million. The basis for calculation was the percentage of the outstanding works instead of the contractual rate of US$ 20,000 for every additional day. In addition, it was stated that the delays had partially been caused by the resident engineers disruptive actions through arbitrary decisions since some of the decisions were not always based on the specifications. The resident engineer, however, was not held responsible for the said disruptive actions. There is no evidence as to how the supervisor has compensated the client for causing the delay and subsequent failure to get the contractually agreed financial remedy. Instead, the delay has lead to cost escalation of the supervision contract from NOK 11.6 millon to NOK 18.1 million (i. e. an increase of NOK 6.5 million or 56%). The beneficiary of this increase was the supervisor. The fact that TANROADS did not claim for any compensation from the supervisor implies that the conditions in the contract are more inclined to favour the supervisor.
2,932,296,962.00 18,640,296,962.00
36,932,132,055.49
(1,240,705,829.80)
Increase in Cost (in relation to original contract) (TSh)
23,551,181,397.00
1,787,222,348.52
3,524,045,804.00
3,942,127,433.50
(292,101,011.20)
793,136,616.00
Revised contract sum (TSh)
19,001,226,404.34
5,178,295,534.00
53,230,358,477.00
12,421,900,394
41,549,999,919
11,228,800,263
16,369,597,823
12,286,602,742
28,244,605,750
13,835,786,505
20,723,844,565
10,193,291,883
20,613,377,763
Appendix 9: Cost Variations
4,385,158,918
Songwe - Tunduma Road Rehabilitation Project
Upgrading of Muhutwe - Kagoma Road
Tinde - Mwanza/ Shinyanga Border
Nzega - Tinde - Isaka Road Upgrading Project
Contract Name
Mutukula Muhutwe Road upgrading project Shelui - Nzega Road Upgrading Project
Upgrading of Somanga Matandu Road (33.09Km)
SN
64
10
Butiama Kyabakari
1,685,000,000
Original contract sum (TSh)
2,022,000,000
2,022,000,000.00
Final contract sum (TSh)
337,000,000.00
65
Appendix 10:
SN 1 Road Project Somanga Matandu
Reasons for Cost Overruns

Additional Costs (TSh. Million) Reasons for Cost Overruns SN Road Project Additional Costs (TSh. Million) Reasons for Cost Overruns
Shelui Nzega
Had Cost Savings, however there were elements of increase in costs as follows: Price adjustment: 3,110,431,123 Financial compensation: 476,881,47 Loss of interest: 38,546,102 Revision 316,449,600 Inadequacies in the original design13 led to additional works such as introduction of Access roads, bus bays, culvert extension catchwater and mitre drains which increased costs as follows: Road Bases (5,277,316) for Bus bays and access roads Bituminous & Surfacing (3,124,578) for Bus bays and access roads Earthworks (197,417,606) for common excavation, rock excavation, embankment fill, and construction of 3 access roads and 2 bus bays Extra drainage requirement (57,675,800) for provision of extra length of concrete culverts headwall and aprons at selected areas Incidentals (52,954,300) for provision of concrete and rubble paved water ways
Morogoro Dodoma14 4 15,707
First revision (15,707,612,741) Additional15 works that led to modification and up dating BOQ including new rates for additional works, e.g. the quantity of CRS in reconstruction sections increased from original 21,400m3 to 148,000m3; The quantity of levelling course required has increased 3,900 tones to 43,283 tones; the quantities of asphalt increased from 80,900 to 89,600m3; etc. First Revision (TSh 1,311,008,369) Modifications in the road design; elements affected include: earthworks, surfacing and drainage structures. Second Revision (TSh 154,257,732) Design modification and relocation of Ngono Bridge which was designed as too short and construction of a bridge (instead of arch-pipe culvert) at Akimbiri River. Total: TSh 1,465,266,101 No further revisions were presented for verification. However, the Project Completion Report presented by TANROADS in February 2006 gave the following explanations: Increase in quantities due to incorrect design, adverse ground conditions, underestimations of quantities: TSh 1,394,068,112; Additional quantities that were not provided for in original BoQ: TSh 762,212,910; Price escalation that was provided for in the conditions of contract but not provided for contract price: TSh 1,367,764,782 Total 3,524,045,804
316 3 Butiama Kyabakari (But Tanroads record shows 337)
Mutukula Muhutwe
3,52416 millions
13
The length of all culverts was the same without taking note of earthworks above the culverts and the sharp corners which require widening; Control points by the designer were verified to be wrong without correct levels and coordinates (These were corrected jointly by the contractor and TANROADS. Some of the control points were completely changed); The geotechnical study report had inadequate information to identify all rock outcrops and areas with weak sub grade; Access roads and bus bays were not considered in the original design; and Minor drainage works like catch water/mitre drains, ditch lining and scour checks were not fully addressed in the original design.
14 15 16
It has been reported by TANROADS that there is an additional cost of TSh 8779.34 Million which involved Claims and Disputes. This amount needs evidence from TANROADS. Also it has been indicated that there are two revisions in this project, but we have seen only one revision. The design of the road was completed in 2000, but it took 4 years to implement the project, and as a result deteriorated further than anticipated in the design. This figure has been computed based on TANROADS report where the final cost has been reported as TSh 17,359,832,309. According to the consultants report, however, the final cost was TSh 17,581,602,207.30 resulting into an additional cost of TSh 3,746 million.
66
67
SN
Road Project
Additional Costs (TSh. Million)
Reasons for Cost Overruns First revision (i.e. Administrative Order No.: 7,742,785,756) Updating of BOQ including new rates for additional works as a result of changes in the design to accommodate further deterioration of the existing road (original design was not adequate). Second revision (i.e. Administrative Order No.: 2: 12,383,947,590) Updating BOQ to reflect increased cost of works and provision sum of prices due to further changes in the design that led to additional cut, change of drainage channel cross-section from triangular to trapezoidal, and introduction of rockfill to areas of black cotton soil. Third revision (i.e. Administrative Order No. 3, Contractors Claim: 809,888,810) Updating BOQ to reflect approved claims resulting from: haulage of water; additional insurance costs; additional costs for performance bond; and standby costs for crushing and surfacing equipment. Fourth revision (i.e. Administrative Order No. 3, Contractors Claim: 2,207,496,886) Contractors proven costs for extension of time, Escalation related to extension of time claim Claim for costs related to delay of bridge 17 design Claim related to effect of forex and Claim for the interest on the reimbursement of VAT, Duties and Levies, late payments Other Revisions Destination inspection scheme (DIS): TSh 37,062,355 VOP: TSh 150,000,000 Emergence repair works: TSh 220,000,000
SN
Road Project
Additional Costs (TSh. Million)
Reasons for Cost Overruns 3,942,127,933 First revision (TSh 43,594,758) Workplace interventions on HIV/AIDS/STIs Second revision (TSh 712,624,243) Additional work: construction of Mpemba weighbridge station. Third revision (TSh) Not presented for the audit Fourth revision (TSh 68,954,328) Additional parking area and surface drainage at the No mans land between Tanzania and Zambia Fifth revision (TSh 181,499,982) Additional quantities based on Addendum No 1 for consultancy services. First revision (10,201,182,201) Additional items (rockfill) Increase in quantities some existing bill items Second revision (13,338,961,171) Additional works Provisional sum for variation of price Third revision (1,445,609,355) Haulage of water: TSh 288,000,000 Additional cost of insurance: TSh 247,903,923 Standby costs for crushing and surfacing equipment : TSh 857,263,560 Additional performance bonds: TSh 52,440,447 Other Interest on late payments TSh 510,214,639 Variation of price: TSh 9,151,335,989 Fuel, VAT, duty and levy: TSh 7,630,780,293 First revision (793,136,616) Increased costs in fuel during the 5 month time extension Additional works17 (Addendum No.1 not presented for audit) First revision (2,631,628,581) Reasons Additional works due to change in specifications and modification of overlays, widening of existing bridges and additional side drains
Songwe Tunduma
3,942
23,144 6 Nzega - Tinde Isaka But in the report is 23,551
Tinde - Mwanza/ Shinyanga Border
Muhutwe Kagoma
793
10
2,632
17
Change of alignment to minimize infringement into properties and water sources for the villagers. This increased the quantities of earthworks and bases significantly.
68
69
70
71
Controller & Auditor General National Audit Office Samora Avenue/Ohio Street P.O. Box 9080, Dar es Salaam Tanzania Telephone: +255 22 2115157/8 Fax: +255 22 2117527 E-mail: ocag@nao.go.tz Website: http://www.nao.go.tz
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PERFORMANCE AUDIT REPORT ON ROAD WORKS

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

LIST OF TABLES AND FIGURES

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Major findings, Conclusions and Recommendations Audit findings

Extension of time is common in most road projects

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Chapter One Introduction

Performance Audit Report on Road Works

1.2 Focus of the conducted study

1.3 Audit scope and performance

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Chapter Two The Road Works System

1.4 Structure of the report

15 16 Performance Audit Report on Road Works

Performance Audit Report on Road Works

2.2 The operative system

Feasibility study Detailed engineering design Preparation of Tender Documents

Packaging and development of contracts Funding approved

Application for funding

MoID LGAs Donors FINANCING

Call for tenders

TANROADS REGULATORY AUTHORITIES ERB CRB Consultants NCC PPRA Contractors

Compilation of Evaluation report

Consultants, interested governmental institutions and utilities

Performance Audit Report on Road Works

Performance Audit Report on Road Works

2.3 Key players outside MoID/TANROADS

IDA, AfDB, EU and Nordic Fund NORAD, DANIDA, and JICA

Performance Audit Report on Road Works

Performance Audit Report on Road Works

2.4 Additional time and costs

Performance Audit Report on Road Works

Figure 2.3: Procedure for approving a claim for additional costs

Application of existing rates

Application of new rates

Contractor suggests the new rates

Supervis or checks rates Variation works recommended by Supervisor

New rates recommended by Supervisor

No Objection is granted by the Financier

MoID/TANROADS Management requests authorization for variation to Tender Board

Performance Audit Report on Road Works

Performance Audit Report on Road Works

Figure 2.4: Procedure for Extension of Project Timeframe

Chapter Three Time variations in Road construction projects

Supervisor analyses the reasons given

Does not support extension

Supervisor informs the contractor

Supervisor recommends to MoID/TANROADS on period of extension

MoID/TANROADS tender board approves extension