Before contractors, architects and engineers undertake any construction work, they need to be licensed and registered. The requirements for licensing and registration may vary from country to country or from one legal system to the other. In this section, we will look at the requirements for licensing and registration of the above mentioned individuals in the context of The Ethiopian laws.

The present rationale for licensing of contractors in Ethiopia is to ensure that applicants for a project have the necessary capacity and capability. For contracts works in other countries and for multilateral donor projects, this requirement is met through the prequalification process for each tender. This requires information on the current status and past performances of the contractor. The current procedure of registration and issuance of graded licenses rely on ownership of relevant equipment and number of staff. These criteria for licensing and registration relate neither to past performance nor to the contractor’s (architect's, engineer's or consultant's) ability to lease or hire equipment; thus making it difficult for contractors, with sound technical and financial performance in other fields, to enter new markets.

Contractors

All contractors desiring to carry out construction works are required to register with the Ministry of Works and Urban Development (hereinafter referred to as MoWUD) in accordance with the Guidelines for the Registration of Construction Professionals and Contractors (hereinafter referred to as the Guidelines). According to Part 3 of the guidelines, all contractors registering under the guidelines are required to register first with the Ministry of Trade in accordance with the Commercial Code of Ethiopia and related directives of the MoWUD. It is after securing a registration certificate from the Ministry of Trade that an application for registration with the MoWUD can be entertained. Accordingly, every contractor has to submit a photocopy of such a certificate to the MoWUD before being licensed as a contractor.

Every contractor has the option of submitting an application for registration as a contractor in any one of the following categories:

1) General Contractors: These are contractors who are qualified to undertake a variety of construction works such as buildings, roads, railways, bridges, etc.

2) Building Contractors: These are contractors who are qualified to undertake building construction and related works.

3) Road Contractors: These are contractors who are qualified to undertake construction of roads and other related civil engineering works.

4) Specialized Contractors: These are contractors who are qualified to undertake construction activities in specialized trades such as electro mechanical installation works, painting and decorations, sanitary installation works, wood and metal works and landscaping and other related activities.

The criteria for registration of a contractor in any of the categories listed above differ based on the grade to which the contractor is applying. There are 10 grades which are categorized accordingly based on the construction cost of the project That the contractor is seeking to undertake. General Contractors, Building Contractors and Road Contractors can register in the ten grades based on the following criteria.

Grade 1 - Construction cost of Birr above 20,000,000

Grade 2 - Construction Cost of Birr up to 20,000,000

Grade 3 - Construction cost of Birr up to 15,000,000

Grade 4 - Construction cost of Birr up to 10,000,000

Grade 5 - Construction cost of Birr up to 5,000,000

Grade 6 - Construction cost of Birr up to 2,500,000

Grade 7 - Construction cost of Birr up to 1,000,000

Grade 8 - Construction cost of Birr up to 500,000

Grade 9 - Construction cost of Birr up to 250,000

Grade 10 - Construction cost of Birr up to 100,000

As far as Specialized Contractors are concerned, they can register in the ten grades based on the cost of the construction or installation of the specialized trades.

Grade 5 - Construction (Installation) cost of Birr up to 5,000,000

Grade 6 - Construction (Installation) cost of Birr up to 2,500,000

Grade 7 - Construction (Installation) cost of Birr up to 1,000,000

Grade 8 - Construction (Installation) cost of Birr up to 500,000

Grade 9 - Construction (Installation) cost of Birr up to 250,000

Grade 10 - Construction (Installation) cost of Birr up to 100,000

Once a contractor who wishes to register in any of the ten grades fulfills the criteria of the cost required, he/she has to have certain experience and qualification as well as staff requirements that he/she needs to fulfill. While registered a contractor is used, the work permit license under the name of the Technical Manager (the names of both the owner and the Technical Manager will be listed on the identification to be issued). For all categories of contractors, Grades 1 and 2, the general or technical manager should be a registered as Professional Engineer IV; for Grades 3 and 4, the general or technical manager has to be a registered as Associate Engineer IV or a Professional Engineer III; for Grade 5, the general or technical manager has to be a registered as Professional Engineer or Associate Engineer III; for Grade 6, he/she shall be a registered as Associate Engineer or Professional Engineer I; for Grades 7 and 8, he/she shall be a registered Engineering Aid or Construction Superintendent with eighteen years of relevant experience; and for Grades 9 and 10, the applicant can either be a Graduate Engineering Aide with four years of construction experience or a Graduate Associate Engineer with at least two years of construction experience or any person able to read, understand and interpret blue prints with at least seven years of practical experience in construction works.

After fulfilling the experience and qualification requirements, a contractor has to fulfill staff requirement before he/she can be registered as a contractor. The staff requirements vary from grade to grade and sometimes from category to category. The staff requirements for the different categories of contractors of different grades can be seen from the following chart.

General Contractors, Grades 1 and 2 – two Professional Engineers IV or above

One Associate Engineer IV or above

One Associate Engineer III or above

One Engineering Aide III or above

Two Engineering Aides II or above

General Contractors, Grades 3 and 4 - One Professional Engineer III or above

One Associate Engineer III or above

One Associate Engineer II or above

One Engineering Aide II or above

One Engineering Aides I or above

General Contractors, Grade 5 - One Professional Engineer II or above

One Associate Engineer II or above

One Associate Engineer I or above

Two Engineering Aides I or above

Building and Road Contractors, Grades 1 and 2 - One Professional Engineer IV or above

Two Associate Engineers IV or above

Three  Engineering Aides II or above

Building and Road Contractors, Grades 3 and 4 - One Professional Engineer III or above

One Associate Engineer III or above

One Engineering Aide II or above

One Engineering Aide I or above

Building and Road Contractors, Grade 5 - One Associate Engineer II or above

One Engineering Aide I or above

General, Building and Road Contractors, Grade 6 - One Associate Engineer II or above

One Graduate Engineering Aide or above

General, Building and Road Contractors, Grade 7 - One Engineering Aide I or above

One Graduate Engineering Aide or above

General, Building and Road Contractors, Grade 8 - One Engineering Aide I or above

Once a contractor fulfills the above mentioned requirements and pays the registration fee set by the Guidelines, he/she is expected to submit a record of past performances and an audited statement of accounts along with the number, type and capacity of the equipments he/she intends to use. There are various equipment requirements set by the Guidelines for the registration of different categories of contractors in different grades. Categories and grades to which a contractor is registered may be varied, upon the application of the contractor, by decision of the Registration Committee after having examined the financial, experience and staff and other resources or quality of performance of the contractor. This decision of the Committee, however, is subject to the approval of the Minister of Works and Urban Development. Contractors may apply for grade and category change only once in a fiscal year provided that they are able to meet fully all the requirements set by the Guidelines.

Once a contractor is registered as such, the registration shall be valid for a period of one calendar year beginning form the year of such registration. At the end of the one year’s period, each contractor is expected to be renewed every calendar year thereafter. The renewal of registration is only be effected only after the person seeking the renewal complies with the requirement of registration set forth by the Guidelines. If the renewal year has lapsed, the contractor has the option of having the registration renewed within three years of the expiry date upon payment of the arrears plus a fifty percent of the renewal fee for the period within which the registration has not been renewed. Any registration that is not renewed within three years of its expiry date shall be deemed to be cancelled automatically.

Architects and Engineers

Architects and engineers may be registered as professional architects and engineers, graduate architects and associate engineers, engineering aides and associate engineering aides after having fulfilled the registration requirements set forth in Part II of the Guidelines. Moreover, the applicants must also fulfill registration fees specified under the Guidelines.

For registration as professional architects and engineers, applicants must hold at least a B.Sc degree or the equivalent in architecture or engineering from a recognized university or a similar institution. The applicant must also submit satisfactory evidence of at least four years of relevant and progressive design and supervision experience acquired after graduation. Moreover, the applicant may be engaged in the preparation of design documents and in the supervision of construction works for projects sponsored by his/her employer. For registration as graduate architects and engineers, the applicants must hold at least a B.Sc degree or the equivalent in architecture or engineering from a recognized University or a similar institution. The applicant must also have up to four years of relevant experience in the field for which he/she is applying. Moreover, the applicant may be engaged in the preparation of design documents and in the supervision of construction works for projects sponsored by his/her employer.

For registration as associate engineers, the applicants must hold a diploma or the equivalent in an approved course in construction from a recognized university, or a similar institution. The applicant must also submit satisfactory evidence of at least six years of relevant experience acquired after graduation in construction or supervision works of projects. Moreover, the applicant may be engaged in construction superintendence or supervision for projects sponsored by his/her employer. Similarly, for registration as Graduate Associate Engineers, the applicants must hold a diploma in building engineering or the equivalent in an approved course in construction from a recognized university, or a similar institution. The applicant must also submit satisfactory evidence of at least six years of relevant experience in the fields of construction or supervision works of all projects. Moreover, the applicant may be engaged, either on part-time bases or full time, in construction or project supervision.

For registration as engineering aide, an applicant must hold a technical school certificate or the equivalent from a recognized university, or a similar institution. The applicant must also submit satisfactory evidence of at least six year’s of relevant experience in the fields of construction acquired after obtaining such certificate or the equivalent qualification. Moreover, the applicant may be engaged in drafting and in surveying works. Similarly, for registration as associate engineering aide, the applicants must hold a technical school certificate or the equivalent in an approved course in construction from a recognized university or a similar institution. The applicant may also be engaged, either part time or full time bases, in drafting and surveying works of projects.

Consulting Offices

Applicants may also submit applications for registering as consulting offices under consulting architects and engineers, consulting architects, general consulting engineers, or specialized consulting engineers. Consultants registering in office for consulting architects and engineers may participate in the preparation of total design documents for building and civil projects befitting their categories. Those consultants registered in the Office for Consulting Architects may participate in the preparation and design of building projects befitting their categories. Those consultants registered in the Office for General Consulting Engineers may participate in the preparation of all engineering design works befitting their category. On the other hand, applications for registration in the Office of Specialized Consulting Engineers may be submitted in the specific fields of engineering like structural, road, sanitary and mechanical, foundational, electrical, quantity surveying, and surveying. Consultants registered in any of the above specialized fields may participate in the preparation of design projects befitting their categories.

All applicants wishing to register in any of the consulting offices have to submit satisfactory evidence that the owner or manager at the consulting office being applied for is a registered practicing architect or engineer along with satisfactory evidence that the firm or organization has the finance, equipment, and office and office facilities required for the consulting office applied for. Moreover, the applying offices are required to submit satisfactory evidence showing that the firm or organization has the minimum number of registered staff set out by the Guidelines as well as a certificate of registration from the Ministry of Domestic Trade in accordance with the Commercial Code of Ethiopia.

Coming up with a precise definition of a construction contract is a rather difficult task. However, different authors have tried to formulate a universally accepted definition of construction contracts. Generally speaking, a construction contract is one type of ordinary contracts; it’s only different from ordinary contracts in that it deals with the construction of various infrastructures. A major distinguishing feature between construction contracts and ordinary contracts is that the latter is bilateral, affecting only two parties, whereas the former involves more than two parties.

The different definitions given by the different authors are considerably similar. For instance, Hudson defines a construction contract as "an agreement under which a person, called variously the builder or contractor, undertakes for reward to carry out for another person, variously referred to as the building owner of employer, works of a building or civil engineering character." Similarly, Keating defines a construction contract as "any contract where one person agrees for valuable consideration to carry out building or engineering works for another."

According to the General Conditions of the Contract for Construction, a construction contract represents:

The entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The contract may be amended or modified only by modification. The contract documents shall not be construed to create a contractual relationship of any kind (1) between the architect and contractor, (2) between the owner and sub-contractor or (3) between any persons or entities other than the owner and contractor. The architect shall, however, be entitled to performance and enforcement of obligations under the contract intended to facilitate performance of the architect's duties.

Article 2610 of the Civil Code of Ethiopia defines a construction contract as "a contract of work and labor is a contract whereby one a party, the contractor, undertakes to produce a given result, under his own responsibility, in consideration of a remuneration that the other party, the client, undertakes to pay him."

Article 2876 goes further to elaborate that a contract whereby one of the parties undertakes to deliver to the other party a house, a flat or another building which does not yet exist, is a contract of work and labor relating to immovable.

From this, it can be understood that a construction contract, wether in our country or in any other country, covers the relationship between the parties to the contract. It, therefore, stipulates the rights and obligations of each party and addresses the issue of remuneration and payment that is rightfully due to a party.

Pre-Contract Preparatory Works

Before a person (be it physical or legal) signs a construction contract, there are certain pre-contract preparatory works that need to be undertaken. These pre-contract preparatory works include soil tests, site surveys, securing of building permits as well as consideration of various rights of different parties. Soil tests and site surveys are needed before a person can plan a suitable design for the construction he/she intends to undertake.  In addition to these, it is necessary to get a building permit from an authorized organ of the government of the country where the construction takes place, before starting any type of construction whatsoever. Moreover, a person needs to consider the various rights of different parties so that the construction he/she considers to undertake will, in no way, infringe upon other's rights.

Soil testing is usually required for securing of building permits. While conducting soil tests, the soil engineers conduct a thorough investigation into the soil’s interaction with the construction that is sought to take place. Soil tests will help to identify and clean up contaminated areas within the proposed construction site prior to the construction. The soil engineers investigate the site for the construction, analyze the site as well as the subsurface conditions and make recommendations for work to take place. Once the soil testing is successfully undertaken, the builder moves on to request a building permit from the authorized agency of the area (country) where in which the construction takes place. A building permit is a document you receive from a local building department actually allowing persons to do the construction they seek to undertake. In order to secure a building permit, a builder is expected to submit plans, sign-offs from the architect and engineer, and soil reports showing the condition of the construction site. In our country, a builder wishing to undertake a construction in a certain sub-city has to secure a building permit from the sub-city administration where the construction work is to be undertaken.

Once a builder secures a building permit for the construction, he/she wishes to undertake, he/she proceeds to have the construction site surveyed. The American Congress on Surveying and Mapping defines surveying as

the science and art of making all essential measurements to determine the relative position of points and/or physical and cultural details above, on, or beneath the surface of the earth, and to depict them in a usable form, or to establish the position of points and/or details.

Land surveying includes the study and inspection of legal instruments and data analysis in support of planning, designing and establishing of property. Accordingly, land surveying includes services such as mapping and construction layout surveys. Construction layout surveys refer to the process of establishing and marking the position and detailed layout of the new structures of building constructions.

Before looking into the historical background of the construction industry, it is necessary to look at what exactly constitutes the construction industry. In trying to define the construction industry, it may not be easy to come up with a universal definition. This is because of the fact that the definitions bestowed to the phrase in different societies tend to contain different aspects pertinent to that society. Of the definitions given, the definition given to the phrase by Australian Bureau of Statistics to its construction industry survey seems appropriate and widely applicable. Accordingly, the construction industry is described as including:

"all units mainly engaged in constructing buildings (including the on-site assembly and erection of prefabricated buildings), roads, railroads, aerodromes, irrigation projects, harbor or river works, gas, sewerage or storm water drains or mains, electricity or other transmission lines or towers, pipelines, oil refineries or other specified civil engineering projects. In general, units mainly engaged in the repair of buildings or other structures are also included.... as are those engaged in the alteration or renovation of buildings, preparation of mine sites, demolition or excavation.

Construction has been an aspect of life since the beginning of human existence. The first buildings were huts and shelters constructed by hand or with simple tools. As cities grew during the Bronze Age, a class of professional craftsmen like bricklayers and carpenters appeared. Occasionally, slaves were used for construction work. In the 19th century, steam-powered machinery appeared, and later on diesel and electric powered vehicles such as cranes, excavators and bulldozers. Traditional construction, might be considered as having properly, commenced between 4000 and 2000 BC in Ancient Egypt and Mesopotamia when humans started to abandon a nomadic existence, that caused a the construction of shelter. The construction of Pyramids in Egypt (2700-2500 BC) might be considered the first instance of large structure construction. Other ancient historic constructions include the Parthenon by Iktinos in Ancient Greece (447-438 BC), the Apian Way by Roman engineers (312 BC), and the Great Wall of China by General Ming T'ien under orders from Ch'in Emperor Shih Huang Ti (c. 220 BC). Similarly, the Romans developed civil structures throughout their empire including aqueducts, insulae, harbors, bridges, dams and roads.

Population growth and urbanization led to an increasing need for shelter developments, and focused attention on the importance of local building materials and techniques. Accordingly, the construction industry in many parts of the world started to grow with an increasing demand. In line with this, construction companies are growing at a fast pace all over the world. With this growth of the construction industry and subsequent growth of construction companies, contractual relationships related to construction are increasing. Thus, there is a dire need for a coherent and efficient law to deal with such contractual relationships.

Coming to our country, the growth and increasing demand for the construction industry has followed a similar pattern as observed in the trend of the world. Currently, construction is one of the sectors leading the way towards modernization and industrialization in Ethiopia. The construction sector in Ethiopia, generally in the world, contributes to the realization of about fifty percent of the total capital. Being the second largest employer in the country, it’s also an engine for technology, innovation and overall development.

In the past history of Ethiopia, the construction industry was not considered as an independent sector of the national economy. It was rather considered as incapable of generating national wealth. As a result, no comprehensive strategy for its development was considered. This, in turn, has led to the undesirable features of the current construction sector. These features include lack of clear developmental objectives for the industry; inadequate co-ordination of planning between the industry and infrastructure programs in the various sectors of the economy heavy dependence on foreign resources such as materials, equipment and expertise representation of the role players in the construction sector by inadequate and ineffective organizations inadequate numbers of suitably qualified and experienced personnel at all levels that include engineers, technicians, mechanics, operators and foremen, etc. inadequate relevant local construction regulations and standards, and inadequate consideration given to the use of local resources (including community participation in labor-based works).

Ethiopia witnessed a decline in the performance of almost all sectors of the economy during the various periods of government prior to 1991. The post-world war period in Ethiopia registered significant changes from the time of Emperor Haile Selasie (1941-1974) to that of the Derg (1974-1991) culminating in the events of 1991 which resulted in the formation of the Transitional Government of Ethiopia (hereinafter TGE). Even though various market based economic reforms have been introduced to the various industries of the country, including the construction industry, since the downfall of the Derg regime in 1992, the domestic construction industry has still faced several hindering factors in its development.

In the New Economic Policy statement issued in 1992, the TGE made clear its intention to transform the stagnant command economy inherited from its predecessors into a functioning market-based economy. This transformation is sought to be achieved through an Agricultural Development Led-Industrialization (hereinafter ADLI) strategy for the country which is supported by similar strategies in education, health and transport sectors. However, even if the country is well endowed with natural resources with 60% of its total land area estimated to be potentially arable, its road density is amongst the lowest in Africa nations and other developing countries. Furthermore, the existing road network has deteriorated to the extent that only eleven percent of paved roads and nineteen percent of gravel roads are in good condition, making it the worst in comparison with other developing countries. It is evident from the above that the success of the ADLI strategy and the consequent economic recovery and development of the country is highly dependent on the restoration of the country’s road infrastructure.

With the above considerations in mind, the construction industry is being given special focus in the policies of the country. The construction industry is one of the three sectors of the economy identified by the Ethiopia Government for special consideration to foster the country’s economic development.  However, the general state of the domestic construction industry in Ethiopia is still characterized by inadequate capital base, old and limited numbers of equipment, low levels of equipment availability and utilization, deficiencies in technical, managerial, financial and entrepreneurial skills, limited experience and participation of the private sectors in construction and consultation works, and insufficient and ineffective use of labor-based road construction and maintenance technology.

The construction industry in Ethiopia is a sector that opens the door for the growth of many additional industries. Building works require high input. For instance, they require different metal products, clay works, and cement and cement products, etc. As such, the growth of these industries will surely follow the growth of the construction industry. Similarly, when the construction and renovation of housing increase, the demand for household furniture increased; thereby, indirectly, opening the door for the growth of the furniture industry. All in all, the construction industry is a sector that can entertain big micro companies, that is widely labor based. All these being taken into consideration, the industry policy of the Federal Democratic Republic of Ethiopia has sought to pay special attention to the construction industry of the country.