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Lubowa hospital developer blames rain, COVID-19 for construction delays

Part of Lubowa hospital construction site

Part of Lubowa hospital construction site

The much-publicized International Specialized Hospital Uganda in Lubowa is still at foundation level - a month to the initial completion schedule. 

The project developer has indicated that they have been derailed by COVID-19, heavy rains, and cash flow issues. In 2019, parliament guaranteed a Shs 1.4 trillion loan to SPV Finasi/Roko led by Italian investor Enrica Pinetti for the construction of the 264-bed specialized health care project.

However soon after the approval, news emerged that the joint venture between Finasi and Roko had collapsed amidst reports that up to Shs 240 billion had gone missing before the project even kicked off.  

When the ministry of Health handed over the site on June 10, 2019, it hoped that the construction would be completed by June 2021. However, the project remains at the foundation level and, according to the minister of Health Dr Jane Ruth Aceng, construction has been extended by a further 15 more months.

Aceng told the parliamentary health committee this week that on February 10, 2020, the project owner Eng. George Otim revised the works program and approved an extension of three months because of bad weather conditions in the Lubowa area caused by high rainfall. Another extension of 12 months was sought in addition to the three months due to the effects of COVID-19 lockdown.

"The project duration currently signed and approved is 39 months, the lapse duration is 689 days. The project finish date is 9th September 2022. The main performed activities - completion of the substructure and scaffolding of the main hospital building, main auxiliary building, and utility plants. Two is; completion of site camps and labour accommodation, three is completion of the batching plant, four is submission of staff training protocols in Uganda and Italy, and lastly confirmation of orders for key medical equipment from the manufacturers," Aceng said. 

So far at least Shs 406 billion in promissory notes have been issued and the value of work completed now stands at Shs 204 billion - representing 22.7 per cent of the total construction while the planned value which is the amount of work that should have been done by now if conditions were normal is at Shs 305 billion.

In terms of work progress, the work is late by 11.4 per cent, which stands at Shs 102 billion not yet paid to the contractor because work has not yet been done.

According to the project owner Otim, the construction is at 35 per cent with some main activities already undertaken to completion. Otim said the heavy rains affected the construction work, especially because the area was dug but was soon filled with water and looked like a dam. He says the rains especially of July 2020 and August left them stranded.    

"The earned value refers to work that is actually done, now it is $6.9m - constituting 20% of the entire work that is supposed to be done. Now land value refers to what should have been done by now. So if everything were to be normal, the contractor should have done work worth $85.4m which constitutes 34.1%. It means that we have lost in terms of work progress 11 per cent," Otim said. 

Brian Luswata, the legal officer of the Lubowa project explained that because of the COVID-19 lockdown, workers were trapped abroad, shipments couldn’t move, while in Uganda they also had to struggle on how to keep their workers during the pandemic.

"Now one of them is that we couldn't mobilize staff outside because you all remember the first 3 months of the lockdown there was no free movement of persons so it was hard to mobilize...the airspace was closed, no flights were landing in Entebbe actually the entire management team from Italy and Dubai and it was not only Uganda but other countries. You know that Italy is just opening up, the contractor which is a Chinese firm [Power China Guizhou Engineering co.Ltd] also couldn't bring their staff here because their management team is Chinese and that time mostly last year they couldn't come," said Luswata. 

But Mbwatekawa Gaffa, the Kasambya County MP said that the COVID-19 and weather excuses do not hold, because the project was suspicious from the onset. He asked why despite the COVID pandemic other projects in the country have been moving on and not Lubowa.

"I think we shouldn't be handing under the disguise of COVID. You can see the developer trying to hide under force majeure - meaning that neither of the two parties, nobody is liable for any of the changes. That is why they are using that terminology...But I wish to ask you honourable, minister sincerely, you're the ones who have been in charge of COVID here in Uganda, we have seen other projects moving on," Mbwatekawa said. 

During the meeting with MPs, it also emerged that the project was delayed by cash flow issues arising from the lender's failure to purchase two guarantees due to the fact that the said promissory notes were not issued according to the agreed cash flow statement. 

“The funding structure creates a very rigid link between the execution of works and pre-determined groups of milestones on one hand and funding on the other, which makes no room for any possible delay or disruptions or adjustments in the sequence of works,” Aceng said.

Aside from the two extensions, another delay was a standstill agreement signed, which meant that work would stop or utmost continue moderately between January and April 2021. This was still in relation to COVID-19 force majeure events. This period saw the project operations slow down and continue at a reduced pace up to April. Accordingly, the project will now be completed on June 9, 2022. 

Herbert Kinobere the Kibuku county MP questioned whether when the team was signing the agreement, they did not anticipate any rains. He also said that looking at the trend of the things, the developer might have to come back to ask for more time. He says the project should revert to government.

"I was asking myself when you're signing the contract, didn't you have it in mind that there will a rainy season? If a contractor starts putting in the issue of rain, I think it is a sign that work is becoming a little bit challenging and may need to be advised otherwise," Kinobere said. 

Committee chairperson Micheal Bukenya said that as MPs they are shocked to hear of the developments, but emphasize that they now plan to meet Finasi and other stakeholders before writing their report to the house.

"The project was started in 2019 and was supposed to last two years and the two years have elapsed and we're still at the foundation. But I think when the minister says that the contractor is to blame, it is because government is doing its part. The challenges are with the contractor affecting the works. It is an agreement where government has to fulfil its obligations and so government is fulfilling and the contractor has challenges which they termed as weather and epidemic," Bukenya said. 

Comments   

+3 #1 WADADA rogers 2021-05-02 15:05
Is this not the so called Investor who came here with no money, not even for his return ticket and we gave him land and even borrowed for him money to start the construction of the hospital.

So what exactly did he bring for us, the idea of building the hospital as if we did not see the need for it. it is only in this country where every none black man is an investor even if he has not money or even if he trades in pancakes.
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+2 #2 Lysol 2021-05-03 06:38
What a lame excuse! Construction works have boomed in many countries during the COVID-19.
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0 #3 kabayekka 2021-05-04 13:53
One has sympathy with the lose of 240 billion shillings cash. Is this crime still under investigation by the police.

Because surely such a large amount of cash had an insurance policy. And the insurance agent needs the police report to repay the cash to help to continue this very important work!
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