Memorandum submitted by the Institution
of Civil Engineers (ICE) and Engineers Against Poverty (EAP)
1. INTRODUCTION
The Institution of Civil Engineers (ICE) was
established in 1818, and today represents almost 80,000 professionally
qualified civil engineers members worldwide. ICE seeks to advance
the knowledge, practice and business of civil engineering, to
promote the breadth and value of the civil engineer's global contribution
to sustainable, economic growth, and ethical standards, and to
include in membership all those involved in the profession.
Engineers Against Poverty (EAP) is an international
non-governmental organisation that aims to promote social development
in engineering projects and services. EAP is supported by the
UK Department for International Development (DFID), the ICE, and
the Institution of Mechanical Engineering (IMECHE).
The evidence for this submission arises out
of an ICE/EAP research report, entitled `Modifying Infrastructure
Procurement to Enhance Social Development' published in November
2006. A copy of the report is attached. The report sets out how
current procurement practices are hindering or enabling social
development in low and middle income countries in Africa and Asia.
Workshops were held with a number of donor agencies in early 2007
to discuss the findings and recommendations of the report. The
workshop with the African Development Bank was chaired by their
Head of Procurement, Ahmed Benbarka, and attended by 17 representatives
from the Project Appraisal, Operations and Procurement Units.
2. AFDB'S
PRIORITIES AND
OBJECTIVES
Prioritising infrastructure investment
With the African Development Bank prioritising
infrastructure projects in its plans for accelerating economic
growth and as the lead agency to facilitate the NEPAD agenda for
regional integration, this submission focuses on the inhibiting
factors in the procurement of infrastructure and the consequential
failure to maximise development opportunities.
Participants expressed three areas of concern
at the AfDB workshop:
a. Developing a local contracting and supply
base
AfDB was very concerned that much of the funding
invested in African infrastructure flows straight out again in
the form of contracts awarded to foreign contractors and suppliers.
Procuring services and goods from local contractors and suppliers
and using techniques adapted to the local resource endowment,
would generate income and employment locally and could make a
substantial contribution to economic growth and poverty reduction.
African economies also need to diversify and develop some industries
in order to grow and the high weight/volume to value ratio means
that construction is a good industry to support.
b. Maintenance of infrastructure
A developed local construction industry is also
essential for the maintenance of infrastructure assets. Maintenance
is a long neglected issue. A recent estimate puts the need for
investment in new infrastructure projects to meet the Millennium
Development Goals in sub-Saharan Africa at 5% of GDP, while the
investment required for the maintenance of existing assets is
estimated to be only slightly less at 4%.[1]
Reliance on foreign enterprises to design and construct facilities
means that they are often not sustainable as the expertise disappears
as soon as the construction is complete. This is a further reason
why the development of local suppliers is important.
The ICE/EAP delegation explained that there
are ways to facilitate the use of local enterprises on large and
small scale projects throughout the procurement process. As a
consequence of this discussion ICE and EAP are currently drafting
a guidance note suggesting how this can be achieved.[2]
c. Poor project implementation
AfDB acknowledged that, despite the widespread
use of foreign contractors, implementation of infrastructure projects
is often poor. There is still too much emphasis on the quantity
of loans and grants disbursed and too little on the outcomes of
a project. In particular, social policies are not carried forward
into tender and contract documents and as a consequence are not
implemented. ICE and EAP suggested that AfDB change its approach
to focus on `best value' rather than `lowest price' and to consider
placing a higher emphasis on quality in the evaluation of bids.
AfDB acknowledged this was desirable, but would require a fundamental
change in the way it does business. They also believe that their
current policies and rules are sufficiently flexible to achieve
good project outcomes and delivery of social development objectives.
However they were uncertain how to enforce and monitor these.
3. THE LEADERSHIP
ROLE OF
THE AFDB—REGIONALLY
AND ON
GLOBAL ISSUES
Leading on regional integration
AfDB's is the lead agency in developing the
Infrastructure Short-Term Action Plan (I-STAP) for the New Partnership
for Africa's Development (NEPAD). This policy has been driven
by the demand for regional integration in order to reduce poverty
through growth and full participation in the world economy.
However, there are problems in AfDB's attempts
to address Africa's infrastructure shortfalls. The main problem
is identifying investment sources, but the emphasis on large-scale
construction projects has also led to criticisms that they are
costly and have little impact on the poor. DFID has argued that
there is a need for large projects to promote national and regional
integration, but past investment has been skewed towards these
large projects at the expense of the promotion of local services
to meet the needs of poor people.[3]
At the workshop, AfDB recognised these criticisms
and stated that they are looking at how they move from funding
trans-national projects to smaller-scale projects that are thought
to have more impact on alleviating poverty in local communities.
In support of this objective a five fold increase in funding for
water projects since 2003 has been accompanied by a shift from
large urban projects to small projects in the rural areas with
a focus on sustainability. The AfDB has also recently set up the
Rural Water Supply and Sanitation Initiative (RWSSI), which was
established in response to the challenge of supporting the water-related
Millennium Development Goals, as well as addressing the problem
of low access to water supply and sanitation in rural Africa.
Whilst wishing to encourage smaller development
focused projects, ICE and EAP believe that it is possible to increase
the developmental impact of both large and small scale projects.
To achieve this, it is very important to consult potential users
and affected communities in order to tailor projects to local
circumstances. Well designed surveys of intended beneficiaries
and other affected communities should reveal what kind of asset/service
is sustainable by the community. It may be that lower cost solutions
to service delivery which draw on local resources in the construction
and maintenance of the assets are better able to meet the needs
than high tech alternatives. Whether or not this is the case,
the planning, design and implementation of projects should take
account of national development objectives, such as the creation
of opportunities for productive employment which is much needed
throughout the region.[4]
4. COHERENCE
BETWEEN DFID OBJECTIVES
IN AFRICA
AND THOSE
OF THE
AFDB
DFID has for some years been providing Poverty
Reduction Budget Support (PRBS) to a number of African countries
including Rwanda, Tanzania, Uganda, Ghana, Mozambique, Zambia,
Ethiopia and Malawi. Under PRBS donors provide funds directly
into a partner government's own financial system to support national
poverty reduction strategies. The provision of aid as budget support
means that DFID will automatically be using the recipient country's
financial systems, including the country procurement systems.
DFID's pre-conditions for providing aid as budget support are
that the receiving country's government prioritises poverty reduction,
has open and transparent financial systems, and respects human
rights and other international obligations.[5]
DFID has also been in the forefront of policies
to untie aid. Aid untying and using country procurement systems
are key objectives of the `Paris Declaration' to which a large
number of bi-lateral and multi-lateral development institutions
have signed up.
In the AfDB the use of country procurement systems
has not yet progressed very far. Within the AfDB the water department
is taking the lead in delegating responsibility for project implementation
to borrowing countries. This department is using country systems
for International Competitive Bidding in Uganda and Tanzania and
for small projects let under National Competitive Bidding in other
countries. However, in other departments the Bank retains considerable
control over procurement, with some dedicated Project Implementation
Units (PIUs) still being used. Recently AfDB procurement has been
decentralised to 26 field offices but they have little authority
and major decisions still have to be approved in headquarters,
causing considerable delay.
The system is now being reviewed to give more
autonomy to the field offices, but it would seem to make more
sense to instead push ahead with delegating responsibility for
procurement to country organisations and systems. ICE and EAP
would encourage AfDB to make greater use of country procurement
systems, so long as they are transparent and stand up to scrutiny,
in order to build their capacity.
5. THE RELATIONSHIP
BETWEEN WORLD
BANK AND
THE AFDB
Harmonised procurement policies
Procurement reform in Africa has been driven
by World Bank led attempts to harmonise procurement policies.
AfDB has reviewed and updated its procurement policies as part
of the process of harmonisation with the remaining Multi-lateral
Development Banks. The procurement policies are guided by four
basic considerations:
— Development of Regional Members Countries
contractors and suppliers
Despite recognising the need to balance local
development with other procurement objectives, the MDB procedures
for procurement of works generally insist on International Competitive
Bidding (ICB) and acceptance of the lowest evaluated bid. Although
there is a technical component to the bid evaluation, in reality
lowest price invariably wins. Hence, there is a focus on competition
at the expense of development objectives. This is reflected in
the new procurement regulations in many African countries which
are reforming their procurement procedures under the direction
of the World Bank.
The World Bank promotes ICB and acceptance of
the lowest price bid, as it believes that these methods are the
most likely to reduce opportunities for corruption.[6]
The lowest price is easier to police and less open to abuse.[7]
However, corruption is rife under the current regime and lowest
price does not necessarily offer the best value for money with
a detrimental effect on the quality of the infrastructure asset.
Furthermore, there has been no systematic attempt to evaluate
the extent to which these restrictions may themselves have a negative
impact on development.
Whilst recognising the desire to enforce strict
rules where previously few existed, ICE and EAP recommends that
AfDB and the Multi-lateral Development Banks review the UK Office
of Government Commerce guidelines for Achieving Excellence in
Construction, particularly how to achieve best value in construction
procurement. We also suggest that procuring entities in borrowing
countries be encouraged to take advantage of the provision in
the UNCITRAL Model Law (upon which many countries have based their
procurement regulations) to allow consideration of economic development
criteria in tender evaluation.[8]
These criteria may include the impact of a bid on the Balance
of Payments and foreign exchange reserves, the extent of local
content, economic development potential, encouragement of employment,
transfer of technology and development of managerial, scientific
and operational skills. Unfortunately this provision in the Model
Law may not be reflected in national legislation, or if present
may not be taken up in practice. It is recommended that countries
should, if necessary, adjust their national regulations to include
it.
6. CONCLUSIONS
In summary ICE and EAP recommends that:
— Procuring services and goods from
local contractors and suppliers and using techniques adapted to
the local resource endowment, would generate income and employment
locally and could make a substantial contribution to economic
growth and poverty reduction. The development of local suppliers
is also necessary for the maintenance of infrastructure assets.
— To increase the developmental impact
on both large and small scale projects, it is important to consult
potential users and affected communities in order to tailor projects
to local circumstances.
— AfDB makes greater use of country
procurement systems, so long as they are transparent and stand
up to scrutiny, in order to build capacity.
— AfDB and the Multi-lateral Development
Banks review the UK Office of Government Commerce guidelines for
Achieving Excellence in Construction, particularly how to achieve
best value in construction procurement.
— Procuring entities in borrowing countries
be encouraged to take advantage of the provision in the UNCITRAL
Model Law (upon which many countries have based their procurement
regulations) to allow consideration of economic development criteria
in tender evaluation.
John Hawkins, Manager Management Procurement
and Law, Institution of Civil Engineers
Jill Wells, Programme Manager, Engineers Against
Poverty
Submitted on behalf of the Institution of Civil
Engineers and Engineers Against Poverty
March 2008
1 Antonio Estache, Africa's infrastructure: Challenges
and opportunities,2006 www.imf.org/external/np/seminars/eng/2006/rrpia/estach.pdf. Back
2
A first draft of the guidance note will be available shortly Back
3
DFID "Making connections: Infrastructure for poverty reduction",
2002 Back
4
In October 2007, Ministers of Labour and public Works from 11
Southern African countries, meeting in Durban, issued a statement
in which they committed to support the creation of appropriate
policies, institutions and tools to ensure the employment intensity
of infrastructure investment is increased to its full potential. Back
5
DFID, "AfDB Development Effectiveness Summary", 2007. Back
6
A further factor is the influence of the `business community'
in donor countries. For many years there has been some expectation
among the major donors that benefits in the form of contract awards
will be commensurate with the size of donations and donor country
firms. That there is still some connection between contributions
and awards would seem to be borne out by the fact that the United
Nations supports purchasing from developing countries but still
has to include on tender lists firms from `Under-utilised major
donors countries'. Back
7
Harland, C., L.Knight, N. Caldwell, J. Telgen, Government reform
and public procurement: Executive report of the first workshop,2003,
International research study on public procurement, University
of Bath, Centre for Research in Strategic Purchasing and Supply
and University of Twente, Initiative for Purchasing Studies Back
8
UNCITRAL Model Law on procurement of goods, construction and services,
Article 34 Back
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