Construction projects in Uganda often exceed their initial budgets, raising concerns about whether public procurement laws allow price adjustments or whether underestimated budgets are to blame. For example, the Ministry of Finance’s Budget Implementation Circular (2024/2025) warned government ministries, departments and agencies (MDAs) against distorting the development budget due to the changing scope of ongoing projects .

A recent High Court ruling upheld a 20 percent increase in the price of the National Theater renovation contract, despite arguments that this exceeded the limit permitted by public procurement regulations. The court clarified that the increase was legitimate based on the work actually carried out. Uganda’s public procurement laws, such as the Public Procurement and Disposal Authority (PPDA) Act, 2003 and subsequent regulations, permit changes to contract prices under specific conditions.

The 2023 PPDA regulations allow price adjustments ranging from 1 to 25 percent of the original contract to account for unforeseen costs. Although these laws provide flexibility, they may not be the primary reason for frequent cost increases. The budgeting process typically involves MDAs or hired consultants collecting market price information to create an estimated budget, called an engineer’s estimate or reserve price.

This budget often includes a 5 to 10 percent contingency amount for unforeseen costs. Tenders are then issued, with contractors expected to submit proposals within 10 percent of the reserve price. Negotiations may take place if bid prices are controversial, as permitted by PPDA regulations.

For long-term projects, public procurement laws also allow price adjustments based on the Uganda Bureau of Statistics or Bank of Uganda consumer price indices. Given this structured process, one would expect stable project prices. However, significant changes often occur during execution, mainly due to the preparation of bills of quantities (BoQ).

The BoQ details all work items required for the project, including descriptions, quantities, unit prices and total costs. While some elements are simple, others are complex and require significant time and resources to accurately estimate, which can lead to initial budgets being underestimated. If reserve and contract prices are significantly underestimated, substantial price changes may occur during project execution, as seen in the National Theater renovation project.

To address these issues, MDAs should strengthen their capacity to develop accurate reserve prices. This could involve investing in the training of technical managers, adopting more accurate cost estimation methods and improving monitoring during the budget preparation process. By ensuring more accurate initial budget estimates, project costs can stabilize, thereby avoiding significant changes during execution and improving the efficiency of public infrastructure projects.

Stabilizing project prices is crucial for the timely completion of infrastructure, which is essential to maintaining and improving the quality of life in Uganda. By addressing the root causes of fiscal instability, whether in public procurement laws or budget forecasts, Uganda can improve its infrastructure development and ensure efficient use of public funds.

The author, Mr. Angello Murekye, is the Managing Director of SAKM Engineering Ltd.
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