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Procurement and delivery

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 Build maintenance provision into procurement
 Maintenance for social and economic gain

•  Build maintenance provision into procurement

  Card 64
  Topic: Procurement and delivery
  

  • How can we secure better long term value for money by employing new procurement models?

    • Think of maintenance as an investment in asset preservation.
       
      
      Why maintenance matters
      ■ One-third of Africa’s infrastructure assets need rehabilitation, indicating that historic neglect of maintenance is endemic [1]
      ■ Timely expenditure of $12 billion on road maintenance in Africa would have saved $45 billion in reconstruction [3]
      ■ The extra costs of poor maintenance in Africa amount to about $1.2 billion annually [3]
      ■ The return on investment from road maintenance is estimated to be almost twice as high as that from new construction [3]
      
      References
      1. Foster, V , World Bank (2008) Overhauling the engine of growth: Infrastructure in Africa
      2. ICA (2008) Infrastructure Public-Private Partnerships in Africa
      3. Eng. M. R. Meghji The Cost of Corruption for Infrastructure Development in Africa
      4. HM Treasury, UK (2008) Infrastructure procurement: delivering long-term value
      5. OGC, UK (2007) Procurement and Contract Strategies
       
    • Currently, the overwhelming majority of investment in African infrastructure is delivered through traditional procurement techniques using public capital (see Figure 1 and ‘Conventional Procurement’ below).
      
      
      
      
      Conventional procurement
      Characterised by input based specifications, public sector funding and short-term contracts. Generally limited contractual integration with maintenance and operational phases. Design and construction may be procured separately or by a “Design and Build” (D&B) contract.
      
      
       

  • Choose the most appropriate model – innovative, incentivised, practical

    • Some varied solutions:
      Private Public Partnership – scale up funding and incorporate operation and maintenance into design and construction contracts.
      
      Framework agreements – fast-track approach to improve efficiency and develop maintenance market/skills.
      
      Create ownership – turn public assets into community assets and engage local people to operate and maintain their assets.
      
      
      
      Framework agreements
      Definition: an agreement with suppliers, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and quantity.
      
      Key benefits: no requirement to re-bid for each individual project; continuous improvement by transferring learning from one project to another; improved working relationships; continuous workflow; speed of procurement.
      
      Consider: collaboration with other local municipals.
    • Public Private Partnerships (PPPs)
      Definition: a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies.
      
      Key benefits: output based; fixed price; risk transfer to the private sector; efficiency gains through competition and innovation; strengthened planning process ensuring that both the capital and maintenance portions are fully funded over the long term; incentive for the private sector to maintain the assets to agreed standards over the full working life.
      
      What is required at the country level?
      Refer to “Infrastructure Public-Private Partnerships in Africa” by ICA, 2008.
      
      Case studies:
      St James’ University Hospital, UK (PPP) – HM Treasury, UK (2008) Infrastructure procurement: delivering long-term value
      Framework Agreement
      Create ownership – EAP (2008) Increasing local content in the procurement of infrastructure projects in low income countries

• Maintenance for social and economic gain

  Card 65
  Topic: Procurement and delivery
  

  •  How can we solve a lack of capacity for infrastructure maintenance?

    • The direct consequence of investing in roads is the generation of:
      ■ jobs
      ■ incomes
      ■ transport links
      ■ business opportunities (particularly if the development and maintenance of these rural roads is targeted in favour of local resource based methods)
      
      Longer lasting impacts such as improved access to goods and services and greater productivity, further contribute to sustainable poverty reduction and local economic and social development.
      
      Impacts will only be sustainable if the roads are maintained. A lack of maintenance affects the stream of future benefits and reduces the economic returns.
       
    • Local labour can continue to reap the benefits through helping to maintain the infrastructure.
      
      Some consequences of not maintaining roads:
      
      ■ Farmers may be reluctant to grow a marketable surplus second crop because it cannot be sold or because of the difficulty and expense of transport
      ■ Information, goods and services don’t reach the population
      ■ School enrolment is low and absenteeism is high
      ■ Standards of health care are low because clinics are hard to reach and health workers cannot travel easily
      ■ Food and medical aid cannot reach areas in crisis
       

  • Serve local poverty reduction and employment needs, by meeting the need for road maintenance

    • Zibambele Poverty Alleviation Project, Durban, SA
      This project links the need for maintenance of rural roads to the alleviation of extreme poverty in the rural townships.
      
      Communities meet and nominate the poorest households and these households are then given the tools and training to maintain a stretch of road close to where they live. In return they are paid.
      
      In addition the communities are offered help and advice to register as citizens, open bank accounts and are encouraged to form cooperatives to collate money from which people can apply for loans to start their own businesses.
      
      The women gain a sense of pride because they have earned money for their family and can use it to pay their children’s school fees. Their position in society is elevated and a renewed sense of confidence and worth has enabled some to use the cooperative money to continue employment.
       
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      Further reading
      www.irp-af.com
      www.unhabitat.org
      www.ilo.org