The construction industry has contracted sharply, partly due to Covid, and needs to rebalance its focus if it wants to survive
COMMENT
The coronavirus has given legislators a good excuse to correct what is wrong and inefficient in many areas of South African public life. It has provided a policy window to address pertinent issues. Engineers in public service preside over inhibitive policy scenarios that even militate against what the government wants to achieve.
Scholars of infrastructure policy such as political economist Patrick Bond believe that the lack of experienced engineers with technical and policy understanding in 1992, when the ANC conceptualised the democratic construction sector, is to blame. Today, the sector has the benefit of hindsight and the ANC has hundreds of ideologically rooted engineers who are also public policy experts such as Dr Kgosientso Ramokgopa.
Minimum price in the purchase of furniture may bring value for money because one submits a bid knowing what the exact cost of a table will be, but minimum price in road construction brings pot holes or an incomplete road. We must reflect on how we appoint contractors based on points for price formula and black economic empowerment points.
Has this policy position yielded our intended goals with regard to industry transformation, sustainability and value for money? Can we ignore the engineer’s estimate, as the treasury has instructed in regulation 28, and still build meaningful infrastructure? Bids are coming in lower than the breakeven point by as much as 50% while meeting all other requirements.
Construction industry development board regulations only suggest that any bid that is 25% off the engineer’s estimate is too risky to consider while regulation 28 insists on taking them if they score the highest points. In bid selection committee meetings, it is almost impossible to convince finance and legally trained people who follow rules as they are written
In 1994, the KwaZulu-Natal provincial department of transport launched a comprehensive contractor development programme called Vuk’uzakhe and 37 000 construction start-ups were admitted. Many were able to expand their construction companies into competitive businesses doing work that the department had set aside for them to compete among themselves solely based on the best price. Similar programmes were starting to take root around the country between 2000 and 2006.
The treasury issued an instruction in 2006 prohibiting reserving of small projects for emerging local contractors. It set aside any bids beyond the prescriptions of the Preferential Procurement Policy Framework Act. The effect of this was to render programmes such as Vuk’uzakhe unworkable. The regulations have stopped public institutions from mounting meaningful local contractor development programmes. In frustration, aspiring contractors joined forces with thugs. These are semi-organised formations of aspiring contractors that use force, intimidation, violence and negotiations to ensure they get a 30% stake on larger construction projects because that is currently the logical way to get construction work and grow your start-up business.
The disruption of construction projects started in KwaZulu-Natal soon after Vuk’uzakhe was no longer viable and has now spread to other provinces. In the Vaal, the Emfuleni municipality MMC for infrastructure, Khethiwe Ntombela, has lamented how most construction projects are stopped by aspirant contractors demanding a cut of 30% on the project. Bullets have also been fired several times and contractors’ employees beaten up on many projects. This can only be stopped by mounting viable contractor development programmes. But it unfortunately requires set-asides, which the treasury prohibits.
In Tanzania, President John Magufuli has given an instruction that environmental impact assessments must take three days to decide whether a project must go ahead or not. The rest of the report can follow later when construction is underway. In South Africa, if this decision is made within eight months, a mayor or premier has intervened. In one instance, an official from the department of environmental affairs took five years to arrive at our offices to ask for the exact location of the project.
Our regulations governing the supply chain committees are in such a way that three bid committees must sit before a contractor is appointed. The first is the bid specification committee, where the tender document is compiled and the scope is clarified. The second is the bid evaluation, where the technical exercise of evaluating bids against a predetermined criterion is undertaken. The third is the bid adjudication committee, where the bid evaluation report is assessed by the senior managers in the public institution.
On each of the three committees, the engineer has to debate with a legal representative, a supply chain expert, a budget manager and chief financial officer and three or four other executives that are typically from backgrounds in human resources, social services, finance and town planning. These colleagues are not engineers but they are a majority in the committee. If one has no engineering background, it is difficult to explain to them why a contractor who has only worked on gravity sewer lines must not be recommended to build a pressurised portable water pipe line. To them, they are both pipes and you dig and lay them before backfilling. It is not immediately obvious that a steel pipeline may require cathodic protection and arch welding which are highly specialised and sensitive activities.
The ANC has shown an interest in steering the country in the developmental state trajectory. This requires our best brains to be in government. Technical experts find public service to be stifling because of a legislative framework that inherently diminishes their input while expecting them to take responsibility when what they were fighting against happens.
The industry needs standardisation of procedures. Engineers faced with a decision of whether to pay the contractor an advance before working or to keep 10% or 20% of the payment as insurance against latent defects at the end of the project must be able to arrive at the same decision under the same circumstances. Scotland has a construction project manual that provides a detailed guide to the various scenarios that can arise in capital projects and, since the adoption of this standardisation manual, the industry has made good progress in reducing human error in decision-making.
The repertoire required to replace a contractor who fails to deliver a project midway is vexatious and wasteful. When a contractor fails, the process of replacing that contractor starts with the sitting of bid evaluation and then bid adjudication. In certain scenarios, there will be an audit finding if a public notice was not issued and a report not tabled in the municipal council to that effect. This can take between three weeks and eight months.
By the time a replacement is found, the inclement weather has destroyed millions of rands worth of incomplete work. Unprotected layers of road works can be wiped out by rain. If an engineer acts to curb the wastage by bypassing these processes, it becomes unauthorised expenditure. In local government, this is enough for politicians to dismiss the engineer based on the auditor general’s finding of unauthorised expenditure. Especially if the engineer was not helping them with nefarious activities.
Should we not eliminate the clash between engineering codes of practice and legislation conceived with minimal engineering input? This question was asked by Bond more than 10 years ago in the housing context. In civil engineering, the quantum of uncertainty of soil conditions based on how geotechnical investigations and soil tests are done is very high. Yet we still appoint the bidder with the lowest price.
When unprotected work on sensitive soils is exposed to heavy rains, the engineer must order a removal of the affected layers to guarantee the quality of the road foundation. When this results in project price escalations, the auditor general calls it “wasteful expenditure” and the media reports is at corruption and incompetence.
When the engineer overlooks the damage and the road deteriorates soon after opening to traffic, it is also wasteful expenditure. Shouldn’t we take advantage of the need to optimise infrastructure delivery after this pandemic and legislate what we have overlooked for the past 20 years? We compromised efficiency to manage corruption, but both corruption and inefficiency are thriving side by side. We are surely due for rational policy changes, aren’t we?
Gundo Maswime is a civil engineer with a master’s degree in public administration and is studying towards a PhD in public infrastructure policy