Proposed 400 middle-income housing u

AP (5010) Office Management - Essay

H M K I B PITAWALA

142159X

Level V

Department of Architecture

University of Moratuwa
Proposed 400 middle-income housing units at Elliot Place, Borella

CONTENTS

Project Overview

Tendering process and Procurement System

Tender Process
Tender Documents
Tendering stage
Decisions taken during Evaluation stage
Impact of procurement system
Performance of Contractor
Lesson learnt/Drawbacks/Alternatives
Suggestions for improvement

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PROJECT OVERVIEW
Middle Income Housing Program- UDA

Housing for middle-income community of the country has been an unresolved

problem; especially close to the capital city, which has been made very clear during
the past two decades.

Having analyzed the demand exists for housing amongst upper Middle and high-
income categories in urban areas, the UDA has found the demand for housing to be
greater than ever. Hence the Government has decided to provide 500,000 housing
units to middle-income groups within the next 5 years. Based on the above scope, the
UDA has initiated several housing programs to meet the above objective at the earliest
possible time. The Urban Regeneration Program for Colombo City (URPCC) of UDA
has launched a housing scheme for government sector employees, which comprises
608 housing units which one unit worth for Rs 8.5 million with facilitation of
obtaining a loan on decent terms from commercial banks of Sri Lanka. Having
observed the success of the first attempt, URPCC has decided to propose more
housing solutions with fair profits to UDA. The objective of these projects is to break
the barriers for access for housing for middle income community and to lobby the
middle-income group to live in an urban area granting easy access to job destinations.

Proposed 400 Middle-Income Housing Units at Elliot Place, Borella.

The Proposed 400 middle-income housing units (850m 2-20%, 1050m2-50%, 1250m2-
30%) at Elliot Place, Borella was a result of this previous success and was initially
proposed to commence in December 2017. The project was a 28 storey building on a
1.2-acre site, with the basement and first two floors dedicated to parking, the third
floor dedicated to parking and common activities, and the fourth level and above
providing housing apartments. The apartments range in price from Rs.8.5 million to 11
million per apartment, which is a lot lower than the apartment prices in the market.
People were eligible to apply once it was advertised in newspapers.

The project was initially awarded to Yanjian Group Co. Ltd., which outsourced
consortium services to Design Consortium Limited (DLC). After encountering a few
problems, the project was then re-tendered to Access Engineering PLC, who then
outsourced the design task of the project to Avant Garde Urban Design Partnership.

The client for this project was also the UDA, and the targeted users for the building
were people of the upper-middle-income community. The funding was done in the
form of 50% financing, where the government provided half of the funding and the
contractor invested the other half.

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Proposed 400 middle-income housing units at Elliot Place, Borella
The initial estimate for the project was Rs.5 billion and was estimated to be completed
in 30 months.

TENDERING PROCESS AND PROCUREMENT SYSTEM

Tender Process
As the first stage of the process, the UDA invited sealed bids from eligible bidders by
publishing the invitation to tender through newspapers. The bidding was conducted
through the procedure known as National Competitive Bidding (NCB). To be eligible
to bid, the contractors had to match the qualification criteria below.

1.

Only two bidders, Yanjian Group Company and Maga Construction, qualified through
the technical evaluation. The UDA Director General Sumeda Ratnayake stated how
Yanjian Group Company won the bid in the final awarding process:

“The project is a design and build job. So 25% of the points were awarded for the
design and 75% were awarded to the financial proposal. In the Yanjian proposal, they
had offered a 100% financing solution where the Government has to pay the total only
at the end of the project. We don’t need to pay anything before that. So they got higher
marks as they had 100% in the financial proposal.”

Therefore, Cabinet granted approval to award the construction job for the project
costing Rs. 7.799 billion (excluding tax) to Yanjian Group Company Ltd, which was
also the construction company that constructed the Nelum Pokuna theatre.

The project was to be completed in 30 months, with the first 3 months allocated for
finalizing the design proposal, the second 3 months for piling, and the rest for the
remaining construction work. However, Yanjian Group Company Ltd could not
complete the piling in 3 months but rather took 9 months to complete due to cash flow
problems and inconsistent funding. This was due to the company not being able to
fulfill a requirement for a loan requested through a Chinese bank. And since the
project was tendered to be funded mainly by the contractor at the initial stages, the
project dragged on without progress for 3 years which ultimately ended in the
contractor’s termination.

The project was re-tendered in September 2020 under NCB with the same project
scope but to be designed to the existing piling layout, to which only Access
Engineering PLC and MAGA Engineering (Pvt) LTD applied, and after considering
the new design proposals, the project was awarded to Access Engineering PLC for Rs.

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9.37 billion (without tax), who were also the piling subcontractors for the previous
contractor.

Tender Documents

Tendering Stages
DECISIONS TAKEN DURING THE EVALUATION STAGE
A major concern for projects of this scale was the inability of the government to solely
fund it (especially stagewise), how they could award consortium to the contractor
without bearing too much financial weight on the government. Therefore, it was
imperative that the project needed an investor and it was decided at the inception
stages that the project would be funded under the 50% financing method, where the
government funds half of the project and an investor puts in the other half.

The contractors and architects were to be reimbursed in stages on their investment

through pre-selling procedure of apartments, thus the project was not exclusively
funded by the government on their part, it was partly paid for by the people.

Before calling for bids, it was necessary for the UDA to create a strict evaluation
criterion for the contractors eligible to apply for a project of this scale and complexity,
checking for factors such as previous experience on similar projects, annual turnover
and financial stability.

IMPACT OF PROCUREMENT SYSTEM

The project was decided to be carried out by the Design-Build construction method, as
it is usually the case with government projects of this magnitude. Design-Build is a
project delivery system that includes planning, design, and construction under one
contract. This procurement system includes selecting an appropriate contractor for the
project through bidding and then awarding them with the contract for full consortium
services. The contractor selects an Architect for the project to carry out the design
aspects. The UDA Architects act as supervisors for the project from inception to the
end.

This method is still used commonly in large projects around the world for many
reasons. It allows the construction team to fully engage and concentrate on the design
and related construction work with complete freedom, especially in complex projects
such as this, where the input of the design team during the construction process is
critical without diverting it. The process also facilitates constant teamwork and

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Proposed 400 middle-income housing units at Elliot Place, Borella
communication between related parties, ultimately thereby reducing adversarial
conditions that would otherwise arise during the project. Design build contracts
usually ensure faster project delivery as well.

In relation to SLIA Coed of professional conduct, one of the key merits in design build
process is that they the Chartered Architects, Architects, Architectural Licentiates and
practices will have the opportunity to provide a wide range of services and a holistic
product to the public/ clients.

However, the design-build contractor will determine most decisions based on

economic benefits over other considerations will negatively impact the quality of work
and services provided for the client. Hence, will bring disrepute to the profession.

In a case where the contractor subcontracts design work or complete it using an

inhouse Architect, the contractor will always be aiming at profits than the required
quality of work. The contractor will supersede the architect and his work, therefore
will not allow the designer to explore and experiment.

Design build process lack the involvement of the client, which might result in too
much control to the design build contractor. This will allow the design build contractor
to act rashly leading to issues with the client.

PERFORMANCE OF CONTRACTOR
The project was handed over to Yanjian Group Company Ltd on November 11 th, 2017.
The first three months was for finalizing the design, and the second three months was
for piling. But there were cash flow problems for the contractor and the piling process
took three times longer than expected (9 months). This was due to the contractor not
getting a load that they applied for from a Chinese bank due to not fulfilling a certain
criterion. The project was halted for a long time until this issue was rectified. The
contractor was later terminated from the project in mid-2020 due to inability to
provide financial assistance.

After the re-tender for the same project in September 2020, it was awarded to Access
Engineering PLC. They selected their own Architect (Avant Garde Urban Design
Partnership) and changed the design, which resulted in the abandoning of 110
previously installed piles. The cost increase for installing around a hundred new piles
however was mitigated through avoiding of the transfer floor which was initially
present in the design done by Yanjiang. The cost was further reduced since the initial
apartment block which was done in 4 blocks was simplified and designed in 2 blocks,
tallying as much as possible with the parking grid. Therefore, it is the opinion of the

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UDA that Access Engineering PLC did a commendable job in mitigating the adverse
consequences of the activities of the previous contractor.

LESSONS LEARNT/DRAWBACKS/ALTERNATIVES
The project highlights the importance of thoroughly evaluating contractors before
awarding them a contract, since the first contractor failed miserably in terms of
financing the project. The incompetence of the contractor resulted in the delay of the
project by three years, when it was set to be completed in late 2019. It is also
important to question the fact as to why the UDA did not terminate the contractor
sooner and start the re-tendering process. The change in design by the second
contractor also led to abandoning of 110 piles that were already installed, which is a
complete loss for the client. An alternative would have been to continue with the same
design to avoid this wastage. This was however not possible as the previous contractor
was not willing to release the design.

When the first contractor was terminated, all the apartments of the initial design had
been applied for (but not sold/paid) by middle income citizens. These applications had
to be called back due to the change in design.

The project which was initially quoted for Rs.5 billion ended up being awarded to the
second contractor for Rs9.37 billion, almost twice the estimated cost.

SUGGESTIONS FOR IMPROVEMENT

There should have been better communication between the client (UDA) and the
contractor (Yanjiang Group Company Ltd) to discuss the issues they faced so that the
project would not initially fail as it did. It would have ensured smooth workflow
through an alternative mode of continuous funding.

The contractor should have only applied for such a large-scale project if they were
sure of their ability to fund the project. It was a gamble on their part that did not pay
off. Also, the UDA should have terminated the contractor as soon as his primary
funding source was disrupted, as they were awarded the project due to their promise to
completely fund the project during the initial stages. It would have saved an
exponential amount of money and time if they acted much sooner.

A much more strict and organized process of inviting to tender and filtering the
winners would have assured the project being handed over to a more capable
contractor.

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Proposed 400 middle-income housing units at Elliot Place, Borella

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