Partnerships prove effective

THERE are many traditional delivery models such as tenders, but the time has come to examine alternatives that may better suit the South African environment.

Naren Bhojaram, president of Consulting Engineers SA (Cesa), says mechanisms such as framework agreements and public-private partnerships (PPPs) need to be considered where they offer a more effective solution.

Around the world PPPs are proving to be an effective mechanism for delivering infrastructure and making the best use of scarce resources. At the same time, projects have to be suited for a PPP arrangement and there must be an appropriate transfer of risks.

SA has many active PPPs including toll roads, hospitals, prisons, government buildings and the Gautrain.

“PPPs may be used where there are funding constraints or where the private sector has the better skills set to build and operate the project,” says Bhojaram.

“However, while we have sophisticated PPP legislation developed by the Treasury, there are still some bottlenecks that need to be addressed.

“For example, the unsolicited bid process is so full of obstacles that few entrepreneurs will consider taking the risk of bringing forward innovative solutions through this mechanism.”

Abe Thela, deputy president of Cesa, says amended procurement regulations that came into force at the end of last year place a limit of 25% on subcontracting.

“This means that, for example, a large firm that wishes to subcontract some of the work to smaller enterprises is limited as to the extent it may do so.

“This is an impediment to the growth of smaller firms, many of which are black-owned and, therefore, the new regulations also act against transformation.”

In addition, he says joint ventures are discouraged as they are required to have a consolidated empowerment scorecard that takes time and effort to generate, particularly given the time constraints often associated with making such arrangements.

Turning to framework agreements and contracts, Bhojaram says these mechanisms are proving effective in some environments. Under such agreements, consulting engineers are pre-approved for work and their fee ranges for particular types of work is determined upfront. As projects become available so firms are taken from the list and allocated work.

“Framework agreements are not the answer to every scenario, but where appropriate they are proving effective in both the public and private sector,” says Bhojaram.

“There has been some pushback from the smaller firms as they suggest that once an agreement is in place it eliminates firms for the period of the agreement. However, agreements can be designed to include and encourage participation by smaller firms.

“At Cesa, we support framework contracts that include provision for smaller firms.”