The Con­trac­tors As­so­ci­a­tion re­cent­ly cel­e­brat­ed its 55th An­niver­sary. It is a mixed group of gen­er­al con­trac­tors and pro­fes­sion­al ad­vis­ers (ar­chi­tects, civ­il en­gi­neers, quan­ti­ty sur­vey­ors, trans­port) which to­geth­er com­prise the con­struc­tion sec­tor and ac­count for ap­prox­i­mate­ly five per cent of GDP ($9 bil­lion). The sec­tor is im­por­tant to na­tion­al phys­i­cal de­vel­op­ment and is an in­di­ca­tor of the econ­o­my’s health. Con­struc­tion booms when the econ­o­my booms. Be­cause it em­ploys labour quick­ly, it is of­ten the first tar­get for fis­cal in­cen­tives in any ef­fort to re­vive the econ­o­my.

But growth in the con­struc­tion sec­tor has been un­even mov­ing from boom to bust in line with en­er­gy prices. Five broad pe­ri­ods can be iden­ti­fied since in­de­pen­dence. The pre-1973 years of slow growth, the oil boom years of  1974-84, fol­lowed by the de­pres­sion of 1984-1999, the gas boom years 1999-2014 fol­lowed by the de­pres­sion of 2015-22.

In the pre-1974 pe­ri­od, the Gov­ern­ment was large­ly re­spon­si­ble for its con­struc­tion. NHA built low­er-in­come hous­ing, and MOWT built and re­paired roads with its in-house civ­il en­gi­neer­ing ca­pac­i­ty, un­der the five-year de­vel­op­ment plans. There was a sig­nif­i­cant in­crease in pub­lic sec­tor con­struc­tion ac­tiv­i­ty which gave rise to pub­lic com­plaints about fi­nan­cial mis­man­age­ment and cor­rup­tion. This led to the es­tab­lish­ment of a Cost Ac­count­ing Di­vi­sion in the Min­istry of Fi­nance to over­see De­vel­op­ment Pro­gramme ex­pen­di­ture; and the Cen­tral Ten­ders Board (CTB) in 1965.

The 1974-84 oil boom re­moved the fi­nan­cial con­straints on the gov­ern­ment de­vel­op­ment pro­gramme fa­cil­i­tat­ing a wide ar­ray of projects; the Point Lisas In­dus­tri­al Es­tate, elec­tric­i­ty gen­er­a­tion to pow­er the Pt Lisas es­tate, pipelines criss-cross­ing from east to west The Ca­roni Are­na Wa­ter Project came on stream. A mul­ti­tude of hous­ing projects were ini­ti­at­ed along the East-West cor­ri­dor by the pri­vate and pub­lic sec­tors. The North-South and East-West cor­ri­dors were built in ad­di­tion to the Er­ic Williams Med­ical Sci­ences Com­plex, Er­ic Williams Fi­nan­cial Com­plex, the Hall of Jus­tice, the up­grade and de­vel­op­ment of ar­te­r­i­al and con­nec­tor roads, and the con­struc­tion of a pletho­ra of sec­ondary schools. This was a mas­sive un­der­tak­ing in a very short pe­ri­od. The sheer scale was too much.

In the process, there were op­por­tu­ni­ties avail­able as sub­con­trac­tors which led to the rise of sev­er­al trans­porta­tion and civ­il works firms. Do­mes­tic con­struc­tion sec­tor ca­pac­i­ty was the prob­lem, not mon­ey. The mul­ti­plic­i­ty of projects ex­ceed­ed the do­mes­tic con­struc­tion sec­tor’s ca­pac­i­ty. This led to the use of for­eign con­trac­tors un­der the guise of gov­ern­ment-to-gov­ern­ment arrange­ments. Con­se­quent­ly, for­eign con­trac­tors got the li­on’s share of the con­struc­tion work on of­fer. Dur­ing the sub­se­quent eco­nom­ic de­cline gov­ern­ment ex­pen­di­ture con­tract­ed sig­nif­i­cant­ly re­duc­ing its ca­pac­i­ty to main­tain a big con­struc­tion pro­gramme. Many con­trac­tors faced rev­enue re­duc­tions with sev­er­al go­ing out of busi­ness.

This same cy­cle was re­peat­ed dur­ing the 1999-2014 boom, the on­ly dif­fer­ence was the na­tion­al­i­ty of the for­eign con­trac­tors. This pe­ri­od al­so co­in­cid­ed with a “Su­per com­mod­i­ty cy­cle” oc­ca­sioned by the rise of Chi­na and the im­pact of ris­ing Chi­nese de­mand on in­ter­na­tion­al com­mod­i­ty mar­kets (2000-2013). This pe­ri­od co­in­cid­ed with T&T’s boom and the in­crease in im­port prices fu­elled spec­u­la­tive com­ments about graft and cor­rup­tion and a de­mand for the in­sti­tu­tion of stan­dard­ised pro­cure­ment reg­u­la­tions and laws.  

Lo­cal con­trac­tors called for the pro­cure­ment leg­is­la­tion to give them a fair (big­ger) share of the con­tract work in the full knowl­edge that a more com­pli­cat­ed pro­cure­ment sys­tem would slow the de­vel­op­ment process.

The prob­lem is sys­temic, not sim­ply pro­cure­ment. First, the gov­ern­ment’s in­fra­struc­ture de­vel­op­ment takes place in spurts when it is fi­nan­cial­ly vi­able. Sec­ond, the tim­ing of these con­struc­tion projects con­forms to an elec­toral cy­cle. Third, con­trac­tors can­not main­tain the scale of op­er­a­tions to meet gov­ern­ment peak pe­ri­od de­mand in a down­turn. Pri­vate sec­tor con­struc­tion ac­tiv­i­ty does come close to the vol­ume of work done by the Gov­ern­ment dur­ing these boom pe­ri­ods. Fur­ther, the con­struc­tion de­liv­ery meth­ods used by lo­cal con­trac­tors lead to cost­ly vari­a­tions and cost over­runs.

There are oth­er is­sues. The size of the gov­ern­ment’s of­fice build­ing pro­gramme in the last boom has cre­at­ed a sur­plus in the of­fice rental mar­ket, thus de­press­ing rents in the met­ro­pol­i­tan area. Pri­vate sec­tor prop­er­ty de­vel­op­ment is un­der stress as rental de­mand has fall­en. The pan­dem­ic has ex­ac­er­bat­ed this trend. In ad­di­tion, the sheer vol­ume of gov­ern­ment hous­ing con­struc­tion at the mid­dle and low­er end of the mar­ket at sub­sidised pric­ing has un­der­mined the pri­vate sec­tor hous­ing mar­ket. The re­sult is that larg­er con­trac­tors have be­come de­pen­dent on gov­ern­ment work. How­ev­er, the Gov­ern­ment fi­nances do not al­low it to main­tain a high lev­el of ac­tiv­i­ty for a pro­longed pe­ri­od which is what con­trac­tors want. Ad­di­tion­al­ly, the Gov­ern­ment rou­tine­ly pays late harm­ing con­trac­tors and sup­pli­ers alike.

What is the al­ter­na­tive to de­pen­dence on gov­ern­ment con­struc­tion ac­tiv­i­ty? Skills are eas­i­ly lost to a coun­try. Ap­prox­i­mate­ly 300,000 peo­ple who were born in T&T are liv­ing legal­ly in the Unit­ed States. Not count­ing their off­spring, that means that T&T lost 21 per cent of its pop­u­la­tion to one coun­try. To keep their op­er­a­tions func­tion­al and re­tain key staff, the con­trac­tors must ex­port their ser­vices.

To do so suc­cess­ful­ly means that firms must im­prove their tech­niques and train­ing to al­low them to com­pete in oth­er mar­kets wher­ev­er those mar­kets ex­ist. This is not a new chal­lenge. If for­eign con­trac­tors can op­er­ate suc­cess­ful­ly in T&T, can’t T&T con­trac­tors do the same else­where?

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.