GUIDELINES ON 20% SUB-CONTRACTING Presentation by :

Eng. Kanyuka Mumba Director – Planning & Design April 30, 2013 GUIDELINES ON 20% SUB-CONTRACTING Presentation by: “Empowering Zambians through Enterprise and Job Creation” RDA

Presentation Focus • Introduction • Objectives • Scope & Eligibility • Selection Criteria • Procurement • Administration • Road Map RDA

1. Introduction – About RDA • RDA was established by the Public Roads Act of 2002 and is responsible for Construction, Care and Maintenance of all Public Roads and Bridges in Zambia • RDA commenced operations in 2006 • RDA’s core functions are to Plan, Manage and Coordinate the Road Network in Zambia RDA

Introduction – Sub-contracting Definitions • What is a Sub-contract? “a contract assigning to another party some obligations of a prior contract” “a subordinate contract under which the supply of materials, services, or labor is let out to someone other than a party to the main contract” • Who is a Sub-contractor? “an individual or in many cases a business that signs a contract to perform part or all of the obligations of another's contract (General, Prime or Main Contractor)” RDA

Sub-contracting (Cont’d) Types of Sub-contractors • Domestic Sub-contractor A Sub-contractor who contracts with the Main Contractor to supply or fix any materials or goods or execute work forming part of the main contract. Essentially this contractor is employed or ‘NAMED’ by the main contractor • Nominated Sub-contractor A Sub-contractor who: • Is stated in the Contract as being nominated or • The Client or his representative instructs the Contractor to employ as a Sub-contractor RDA

Background to Sub-contracting in Zambia • Not new phenomenon, most common type is DOMESTIC • Nominated sub-contractors are usually specialists on Bridges, piling, electricals, surfacing, etc. • Road Sector has seen increasing minimum threshold for sub-contracting in last 13 years Increasing threshold for Sub-contracting RDA

Sub-contracting in Zambia • Ministerial Statement on July 25, 2012 directed RDA to ensure minimum of 20% sub-contracting on all major road contracts to Zambian-Owned Companies with shareholding structure as specified in the CEE Act No.9 of 2006 • RDA has since developed Guidelines and Modalities for 20% Sub-contracting • To date (106 Sub-contracts) • 54 Sub-contractors have been engaged and working • 52 Sub-contracts are in Approval process RDA

2. Objectives - 20% Sub-contracting • Empower local contractors; • Create jobs for Zambian citizens; • Create sustainable local contracting capacity; and • Systematic and eventual upgrade of local contractors from grade six (6) through to grade one (1) • N/B: Sub-contractors MUST have technical capacity with Engineering background RDA

3. Scope & Eligibility - 20% Sub-contracting • Scope (What to Sub-contract) • 20% of the Contract sum of all major contracts (> KR 30 million) • RDA to specify initial items in the Bidding Document to be sub-contracted • Main Contractor can offer other items or alternatives (at Bidding stage or before contract signing) • Eligibility • Zambian citizen-owned companies with at least 50.1% Zambian Citizen shareholding, and in which citizens have significant control of management; • Registered with NCC in Grades 1 to 6 RDA

4. Selection Criteria - 20% Sub-contracting • DOMESTIC and/or NOMINATED Sub-contracting can apply depending on the nature, complexity, urgency and value of the main contract • Preferential treatment shall be applied to indigenous contractors domiciled in project area • Sub-contractors shall be selected based on minimum technical and financial capabilities, legality and experience RDA

…Selection Criteria (Cont’d) • No Sub-contractor shall be committed to more than one Main Contractor over the same on-going works period, depending on and in relation to the scope of the sub-contracts and, the grades and categories of their registration with NCC • No sub-contractor shall be committed to the same Main Contractor more than twice within a period of three (3) years RDA

5. Procurement - 20% Sub-contracting • The works by proposed Sub-contractors may be classified in lots of different scopes provided they amount to the minimum total of 20% • Ideal No. of five (5) Sub-contractors shall be permitted per contract. However, depending on prevailing circumstances, RDA may approve more or less than five (5) • Should the Main Contractor’s submission fail to meet the prescribed criteria, opportunity shall be provided to re-submit or submit an alternative proposal within 14 days RDA

6. Administration - 20% Sub-contracting • The sub-contract shall be treated as part of the Main Contract • Main Contractor shall be responsible for all of the works • RDA to provide a standard form of agreement between the Main Contractor and Sub-contractor, which shall form part of the solicitation documents, where applicable. RDA

…Administration (Cont’d) • The Sub-contractor’s rates shall be incorporated together with the Main BoQs on which the payments will be based • Bidders shall include in their rates a management fee for the Sub-contracts. The fee shall not be more than 5% of the value of the proposed Sub-contract RDA

…Administration (Cont’d) • The Main Contractor shall appoint a Sub-contract Manager, whose responsibilities shall include, inter alia, management of all the Sub-contracts, including project management, contract management, financial management and operations management • The Sub-contract Manager shall be appointed subject to the approval of RDA and shall be paid directly from the fee for management of the Sub-contracts RDA

…Administration (Cont’d) • Payments to Sub-contractor • The Main Contractor may advance the Sub-contractors at the same percentage (usually 15%) as the main contract, where the Sub-contractor has ability to provide advance payment security • Alternatively, the Sub-contractor may be advanced equivalent of materials, plant & equipment, etc. • Payments to Sub-contractors shall be made directly to the Sub-contractors by NRFA • The Main Contractor may advance funds to the Sub-contractor for certified works, whilst waiting for payment from NRFA RDA

…Administration (Cont'd) • Chain of Instructions shall be from RDA’s representative or Project Manager to the Main Contractor and from the Main Contractor to the Sub-contractor, etc. RDA/Representative Instruction Responsibility Main Contractor Sub-Contractor RDA

…Administration (Cont’d) • Supervision of Sub-contractor • The Main Contractor shall be responsible for the supervision and management of the Sub-contractor on site • Works done by Sub-contractor will be certified by Main Contractor • Certification by Main Contractor will not imply acceptance of the works!!! • The works shall only be accepted by the Engineer or Project Manager as per normal process KEY: For initiative to succeed, Main Contractors, Sub-contractors, NRFA and RDA must play their part. RDA

7. Road Map • Road Map to finalisation of the Guidelines and Modalities... RDA

Risk Warning!!! • This policy is targeted at genuine and hardworking Zambian construction firms • Aware of unscrupulous individuals who see this as an easy cash venture – i.e., Zero work done and maximum returns • RDA shall NOT permit sub-standard work and shall act sternly and severely punish Sub-contractors for poor works (Vendor Rating) • We must all be on guard against such selfish tendencies KEY: The 20% is not a ‘CUT’! Sub-contractors to be adequately technically, financially and experientially qualified to undertake the works. First deliver the work, which must be inspected, verified and certified before payment.

Quote of the Day: “Opportunity is missed by most people because it is dressed in overalls and looks like work” – Thomas Edison RDA

GUIDELINES ON 20% SUB-CONTRACTING Presentation by :