Fixing the Leakage in Infrastructure Investment

President Cyril Ramaphosa announced Government's eagerly awaited economic stimulus package at a briefing in Pretoria on Friday aimed at driving economic growth. While Consulting Engineers South Africa (CESA) applauds this bold move by our President aimed at kick-starting our economy and creating jobs, with the limited public funds that are available the organisation believes that it is critical that these funds are used responsibly to gain true ‘value for money’.

Chris Campbell, CESA CEO states, “Over the past few years we have embarked on a campaign of partnerships with Government in order to assist and advise the public sector on how to maximise investment in infrastructure and ensure that they have the correct capacity in place to design and implement large-scale projects that will stand the test of time.”

CESA believes that the first step in the process would be to call out corruption where it is still taking place. It has to stop! 

“Whilst blatant corruption, namely, getting paid for professional services and delivering nothing is bad. Appointing companies for infrastructure projects who lack both the capacity and the expertise and simply ‘sell-on’ projects adding no value to the process is equally bad. We would argue that this is tantamount to fronting and defeats the objective of developing future capacity in the Consulting Engineering industry, as part of a credible transformation process for our industry. Often too, Supply Chain Management Regulation, Section 32 is misinterpreted and abused to make such appointments possible and often goes unnoticed and unchallenged.” says Campbell.

Campbell states, “To put this in its fullest context we need to understand that public sector investment in infrastructure is often no less than a 30-year investment, sometimes in excess of 50 years, especially when we look at major roads, bridges and dams. The upfront planning and design phases could take between 3 and 5 years before construction commences and the relative lifecycle cost contribution to the infrastructure investment is as little as 3%”.

 

 

“The next stage, construction, constitutes a cost contribution of 20% and may take place over a period of between 3 and 5 years. Therefore, after a period of 6 to 10 years an investment of up to 23% of the total cost of ownership has been expended even before the infrastructure has been rendered available for use. Public sector entities are then left with an asset which is meant to last for a minimum of 30 years provided that it is correctly utilised and regularly maintained. The latter is known as the operation and maintenance phase. This phase in reality constitutes the remaining 77% of the total cost of ownership in the investment process.”

 

“Our current public infrastructure procurement process counter-intuitively drives costs down in the 3% area when appointing Consulting Engineering professional service providers and seem to be oblivious to the opportunity to rather invest more in this phase so that the best professional service providers can maximise the quality of service that would derive savings in the remaining 97% cost component of the investment.”

 

Campbell asks, “How do we then indeed fix this problem?  We can start by appointing recognised companies with the appropriate expertise and capacity to do the upfront engineering, planning and design. We have at least 550-member companies and there are probably other credible companies who are members of our partner industry associations. Starting with companies affiliated with these credible organisations is the first step towards stemming the tide against bogus service providers.”

 

Optimising monies invested from a total cost of ownership perspective in infrastructure starts with the first 3% invested in the procurement of the appropriate consulting engineering services. Essentially then we need to also dispense of the notion of expecting discounts on these professional services. Such demands are not made of legal or medical professionals so it is hard to understand how such a simplistic a practice would be encouraged as it only destroys value in the process. Campbell states, “We should learn from evidence from other countries, such as in Quebec, Canada why such practices are destructive if we indeed choose not to listen to our own local professionals. We need to discourage this counter-intuitive approach to procuring professional services if we are going to make optimal investment in infrastructure. The public sector as the owner and custodian of our public infrastructure should set the example for optimally managing the process of ensuring that we invest holistically in infrastructure and not simply assume that procuring the services of professional consultants at least cost with discounted fees, is responsible behaviour on behalf of government, the main investor in infrastructure.”

 

CESA is aware of the capacity challenges and the dire shortage of procurement practitioners in the public sector who understand the difference between procuring for infrastructure development and general procurement. Campbell says, “It is for this reason that we volunteered our offer of partnership with the State shortly after the President made his ‘Thuma Mina’ address during his inauguration earlier this year. Unless we act to correct this flawed process, we will not as a country be able to afford to operate and maintain these assets optimally, as potential ‘in-built’ shortcomings through cheap designs, poor equipment choices and lack of quality supervision during construction will mean more frequent maintenance at higher cost to operations or simply that maintenance will be deferred or not done. This means re- capitalising these assets long before the 30 year design life has been reached. You end up spending twice as much in half the time.”

 

Campbell says “We unashamedly would rather advocate for a more informed and holistic approach to be adopted, one that drives investment in infrastructure with a ‘long game’ vision, to use a good golf analogy. We need to drive this in a manner that ensures that future generations are not saddled with the plague of early failure of functional infrastructure or unsafe infrastructure and the continuous challenge to rebuild what should have been lasting infrastructure. It starts by commissioning the services of Built Environment Professionals who are able to deliver quality services that provide long term value solutions to lasting infrastructure now. We need to get more ‘bang for our buck’ especially at a time that our economy has flat-lined into what some would like to call a technical recession. Spending responsibly will enable more infrastructure delivery at a time that the need for functional and lasting infrastructure grows daily.”

 

In conclusion Campbell believes that, “We desperately need to focus on the role infrastructure investment plays in stimulating our economy by not only spending more money but spending it right!”