Chris Campbell
As a country we are in crisis – of this there is no doubt! Drastic change is needed in order for what was once the economic powerhouse of the African Continent, to again take our rightful place, and for this we need effective service delivery in order to provide our citizens with the infrastructure to enable economic growth leading to prosperity
To enable effective service delivery, we need efficient procurement systems that value quality, innovation, and sustainability over cost. This is of particular importance when procuring complex infrastructure projects.
Should the National Treasury be the custodians of Public Procurement?Research will reveal that the responsibility for procurement in both the public and private sector should not reside within the ambit of finance but rather as close as possible to functions responsible for operational delivery. In keeping with many other structural reforms required to turn the fortunes of our Country around, should we too not be thinking differently about integrating the oversight role for infrastructure development and service delivery with that of procurement oversight?Determining budgets remains the responsibility of the accounting officer, approved and monitored by the Treasury. Delivery and subsequent reasons for non-delivery remain the sole responsibility of the entity responsible for such delivery. No fingers can be pointed away from themselves to Supply Chain Management (SCM), which does not bear the responsibility for delivery. The buck should stop there and flouting of good governance and the law in managing public funds, should be dealt with decisively and harshly. Prof. Geo Quinot, Director of the African Procurement Law Unit at Stellenbosch University commenting on the Public Affairs Research Institute’s (PARI) paper on ‘Reforming the Public Procurement System in South Africa’ developed in repositioning South Africa in a post State Capture context, states that public procurement is an important driver of development in South Africa, but that it is also clear that our procurement system is not particularly healthy and that this is not just a matter of corruption or state capture.Public procurement in South Africa faces very serious systemic problems that are undermining it’s potential as a developmental tool and that unless we find solutions to these problems, we will continue to spend vast amounts of public funds with little to show for it by way of development. In his analysis of the PARI report he strongly suggests moving public procurement out of its current public finance management straight jacket, into a more strategic function, that a new regulatory body should not be situated within Treasury or any other Department for that matter.He believes that procurement is a cross cutting function and that should be reflected at the highest level in the organizational set up of a National Regulator. We have an Inspector’s General for oversight in many areas and maybe it is time to consider such a role for Infrastructure Delivery & Public Procurement, capacitated of course with qualified, competent, and experienced personnel , if we are serious about changing the current narrative.
Tenders awarded based on lowest cost leads to massive Discounting destabilizing the construction industry and putting lives at riskThe second significant error is to think that you are going to get innovative, sustainable, and safe infrastructure that is designed to last, with minimal maintenance costs over its life, if you procure the services of contracted parties for planning and delivery, whether consulting engineers, other built environment professions or construction companies based purely on the lowest price without taking quality and risk into account. What we need is quality and cost-based selection (QCBS). QCBS means the method of evaluating proposals in which the consulting engineers are ranked in order of weighted evaluation awarding minimum eighty per cent for technical proposal and up to twenty per cent for financial proposal. QCBS ensures that the most appropriate professional or firm is selected based on qualifications such as knowledge, skill, experience, and other project-specific factors, rather than purely on fees.Currently, the method for the procurement of our infrastructure is based solely on least cost and this has led to massive discounting of consulting engineering fees in order for these organisations to win tenders and remain viable businesses. Discounting of fees has dire consequences on both the quality of our infrastructure but also on the commercial viability of the consulting engineering industry and the broader construction industry. Both the service providers and the client bodies are at fault. The one not knowing what such quality of professional services ought to cost, with the other conceding to unsustainable professional services fees, discounted up to 50%, hoping to maintain a reasonable cashflow.Professional service providers and consulting engineering companies, need to be united in not conceding to less than affordable, quality compromising fees, as would have been the case if we all subscribed to the professional codes of conduct and ethics.Likewise, client bodies, in both the public and private sectors, need to know what the lower thresholds are for deriving value for money professional services without compromising quality and increasing risk to their own projects. And yes, it is a ‘fool’s paradise’ to assume that you can transfer ALL of this risk to the consulting engineer, who is likely remunerated at a level of 2% of the total cost of ownership of this infrastructure over its anticipated 30-year lifecycle.
What are the risks associated with the practice of Discounting and the impact on Public Safety?In Khulile Siqiti’s paper on ‘The Impact of Discounting Fees by Civil Engineering Consultants’, the results show that the practice of discounting professional fees is widespread, affecting small, medium, and large consulting firms. The results also indicate that prevailing market conditions in the civil engineering profession are the primary reasons why consulting engineers offer discounts on fees. Respondents agreed that projects are awarded to the lowest bidder during the tender process. Respondents also agreed that experienced engineers are allocated less time on projects to manage project costs.The findings of Siqiti’s paper suggest that discounting of professional fees is a great concern that needs to be addressed in order to attain professional business sustainability. It is suggested that the Engineering Council of South Africa (ECSA) should regulate the fee structures and ensure that all professionals, whether employed in the public or private sector, understand the basic finances related to providing professional services for effective and efficient quality service delivery support where in-house expertise is lacking.Any perspective that upholding a legal and regulatory function encourages anti-competitiveness, is counterproductive to the role that a statutory body ought to be able to play. These fee guidelines are actually minimum fees, so competition is encouraged to provide the quality professional services at the commensurate cost, provided that it is not below that minimum threshold.The statutory body is after all doing so, to protect public funds while ensuring quality of professional services and sustainable local professional capacity and capability. This does not even factor in the motive that these fees are inclusive of costs for investment in training and mentoring future generations of these professionals. This opportunity is sadly lost with discounted fees. In a paper by P. N. Okonkwo and J. Wium, titled, ‘The impact of discounted professional fees on the risk exposure of the civil and structural engineering services consultants in South Africa’, they state that the abolition of mandatory fee scales and the prevalence of lowest-cost bidding for the procurement of consulting services in South Africa have seen engineering services consultants compete based on price for engineering contracts.They go on to state that discounts benchmarked against ECSA (Engineering Council of South Africa) professional fees guidelines demanded by clients have resulted in declines in professional fees over the years. The capacity to deliver professional services that are of a high quality that meet a client’s expectation, professional and ethical standards when working at low fees is one of the biggest challenges facing consulting professionals today. A key finding of this study is that discounted fees accentuate several project level risks and create organisational level risks for the consulting engineering professional. These results are very concerning as they not only impact the sustainability of the consulting engineering profession but also the quality of design, leaving no place for research and innovation. In addition, it has been proven that scrimping on project design has a dramatic impact over the life of the infrastructure – cheap design = higher maintenance costs and the risk of failure of the infrastructure, risking the lives of our people.We must guard against decimating our local expertise and capacity and focus on growing ‘our own timber’ by developing future generations, across all races and genders and be careful not to think that we can import capacity, while hoping to maintain an affordable cost base for local infrastructure development, delivery, and maintenance.
ReferencesThe impact of discounting fees by civil engineering consultants By Khulile Siqiti A research treatise submitted in partial fulfilment of the requirements for the degree of Master of Science in the Built Environment (Project Management) in the Faculty of Engineering, the Built Environment, and Information Technology at the Nelson Mandela UniversityImpact of discounted professional fees on the risk exposure of civil and structural engineering services consultants in south africa Okonkwo, P. N. ; Wium, J. (2018-03)
