Abe Thela10 November 2014

SA Socio – Economic Context

National Development Plan

About Infrastructure

Role of Engineering in the NDP

Challenges

Conclusion

SA is a Democratic Developmental State• Previous Initiatives: RDP, ASGISA, GEAR, NGP,

etc.Achievements:

• Economic growth• Growth in infrastructure investment: o Access to serviceso Mega infrastructure projects• Growth of the CE sector:2004 2013

Employment 12,600 24,360

Turnover R4.6 billion 24.5 billion

Overarching developmental challenges:

• Unemployment – over 25%

• Poverty - 48% below poverty line

• Inequality

o Richest 20% earning 70% of national income

o Poorest 20% earning 2,3% of national income

Lower economic growth – 1,4%

Policy instrument to Develop SA Economy

Infrastructure Development – Key to socio – economic development

National Infrastructure Plan (NIP) – 18 Strategic Integrated Projects (SIPs):

• Promote balanced economic development • Unlock economic opportunities • Promote mineral extraction and beneficiation • Address socio-economic needs • Promote job creation • Help integrate human settlements and economic development

Supported by:

o Presidential Infrastructure Commission (PICC)o Infrastructure Development Act:

o Committed government spending – R847 billion

• To provide for the facilitation and co-ordination of public infrastructure development which is of significant economic or social importance to the Republic;

• to ensure that infrastructure development in the Republic is given priority in planning, approval and implementation;

• to ensure that the development goals of the state are promoted through infrastructure development;

• to improve the management of such infrastructure during all life-cycle phases, including planning, approval, implementation and operations; and

• to provide for matters incidental thereto

Generates employment opportunities for millions of unskilled, semi-skilled and skilled workers

table courtesy of KPMG

Infrastructure Systems

Needs

Science

Technology

Engineering

Theories

Tools

Needs

Society, Economy

andNature

Resources andNeeds

Infrastructureand Benefits

a product of an integrated efforts and contribution of the:

Consulting Engineers:o Provide solutions predicted in often uncertain

contextso Provide independent advice to clientso Technical advise in the procurement of contractorso Design and supervision of construction worko Facilities management serviceso Services for the safe decommissioning of old

infrastructureo Transfer of skills and knowledge to clients

The role of “Trusted Advisor” or “Trusted Partner”

• Contractor: “Independent entity that agrees to furnish

certain number or quantity of goods, material, equipment, personnel, and/or services that meet or exceed stated requirements or specifications, at a mutually agreed upon price and within a specified timeframe to another independent entity called a project owner (Employer).”

Role engineering impeded

Regulatory and Institutional challenges

Key challenges:

•Procurement of Consulting Engineers•Lack of & inadequate Capacity in Government

Current Procurement – o Price and BBBEEo Functionality and Quality – only minimum pre-

qualification threshold“Is price the appropriate basis for competing for

consulting engineering services?” Reduces consulting engineering to a commodity which

is demand driven Compromises the ability of the profession to: o innovate, o train staff and o attract young engineers to the profession.

Relegates relationship from “Trusted Advisor” status

to “contracting”

Associated problems common in contracting:

o Scope creep,

o Variation orders, etc.

Reduced quality of service

Results in client dissatisfactions

Extract from recent CESA interaction with the City of Tshwane:

“………… Fees on completion of services have also been deviating from original tendered pricing by multiples of up to 2 or 3 which is unacceptably higher than the best practice limit of 20% variance from budget.”

What should be the basis for Procuring Consulting Engineering Services?Constitutional Imperative – equitable, transparent, fair, competitive and cost effectiveAim: to procure on best possible termsOptimise the total project life cycle costsConsulting engineering:odictates how infrastructure is constructed and maintainedoimpacts on construction and maintenance costs.

International Best Practice – Qualifications Based Selection (QBS)o Quality and Competenceo Project scope developed jointlyo Services required to develop scope mutually agreedo Negotiate equitable fee Advantage:o Reinforces “Trusted Advisor” status of consulting

engineero Deployment of adequate resourceso Innovate and add valueo Savings for taxpayer and community

Proposals

•Interim: Reintroduce quality as part of the total procurement points calculation alongside price and BBBEE – cidb Method 4•Separation of procurement of BEPs from the procurement of general goods and services•Conduct a comprehensive review of the existing procurement system:oImpact on infrastructure provisionoSustainability of the consulting engineering sectoroDevelop QBS procurement system incorporating B-BBEE requirements

Lack of & inadequate Capacity in GovernmentInability to:ocreate consistent project pipelineoAdequately define project scopeoappropriately procureoManage & monitor contractsPersistent infrastructure budget underspendingWhat is needed is political will / leadership:

o Employ appropriately qualified peopleo Improve working environment

Interim:o Secondment & PMOo Use retired engineers

Regulatory:o Access to work opportunities by small and emerging CE

firmso International competitiono Consolidated / joint BBBEE scorecard requiremento Scope versus fixed term appointments Institutional:o Corruptiono Erratic Infrastructure Investmento Education

Access to work opportunities by emerging and small firms

Outcry over lack of access to large projectsSignificant portion of membership of CESA – 80%Vehicle for empowerment in the sectorLack of resources, expertise and experienceProposal: Targeted procurement procedures for participation in large projectsSet goals: fair, equitable and cost effectiveProcess: streamlined and monitored

International competition

Proposal: To have built environment professional services designated as localAdvantages:

o Preferencing of local companies over international companies without a presence in South Africa

o Contributes to the growth & development of the sectoro Contributes to local employmentProcess:o Application rejected by DTI o SA signatory to WTO services agreement

Requirement for a consolidated/joint BBBEE scorecard

for unincorporated Joint Ventures / consortium / trusts:o Discourage formation of JVso JVs crucial for skills transfero Add a cost burden to the sector

Proposed formula / calculator for consolidated JV B-

BBEE scorecard:

Where: JVB-BBEE level is the joint venture consolidated B-BBEE

scorecardMpoints (a, b, c, etc.) is the B-BBEE points of each memberMinterest (a, b, c, etc.) is the percentage (%) interest of the

members in the joint venture Calculated at bid evaluation stage

Scope versus fixed term appointments for consulting engineering services

Municipal Finance Management Act:o Fixed 3 year term appointments o Increase costso Delays infrastructure implementation

Proposal: oConsulting Engineers be appointed based on scope of work their services are required for; and oThe Municipal Finance Management Act is revised accordingly.

Corruption

Still rampant – 2012/13 financial year:o R2bn – wasteful expenditureo R26,4bn – irregular spendingo R2,3bn – unauthorised spending

Hinders development, depletes of public purse, distorts markets and hinders investmentWelcome - Public Administration Management BillCESA committed to fight corruption through litigation fund and partnerships

Cyclical Nature of Infrastructure Investment

Creates uncertainty:

oSkills development

oResources planning & development

oBusiness investment

Consulting Engineering Sector’s Plea:

“Uninterrupted and growing infrastructure spending

for the NDP period”

• Government engagements in progress:

o Relevant Government Departments

o Treasury / Chief Procurement Officer

o State Owned Companies

o Presidential Infrastructure Task Team – Combined

business and government

Needs

Science

Technology

Engineering

Theories

Tools

Needs

Society, Economy

andNature

Resources andNeeds

Infrastructureand Benefits

Needs

Science

Technology

Theories

Tools

Needs

Society, Economy

andNature

Resources andNeeds

Infrastructureand Benefits

Abe Thela07 August 2014