The ANC recently released a 10-point economic recovery plan. The fourth point in the plan is to improve the capacity of the state to manage major projects.
SA is not unique in experiencing challenges with the management of major public infrastructure projects. According to Google AI, global studies have found that only 2% of megaprojects finish on or under budget and on or ahead of schedule, with an average increase in cost of 80% and an average 20-month delay beyond the original schedule.
Overruns are often rooted in flawed initial planning and execution, including inaccurate initial estimates, scope creep and failure to identify and mitigate risks that are beyond a project’s control, such as unforeseen site conditions.
To improve the capacity of the state to manage major public infrastructure projects, three priorities should be addressed.
Keep politics out of project management
First, the political management of projects needs to improve. There should not be political requests to change the scope of the project after it has moved into the implementation phase, which is one of the common causes of scope creep. In addition, political leaders need to be careful about applying pressure for project schedules to be compressed. While this is well-intentioned, it frequently results in the opposite unintended consequence of time and cost overruns.
This was the case with Eskom’s Medupi and Kusile power stations. Once the political decision to proceed with the projects was taken, intense political pressure was put on Eskom to set compressed completion schedules in the context of a looming electricity supply shortage. The compressed completion schedules resulted in rushed planning, design and procurement processes. This in turn was one of the causes of design errors, plant defects and implementation delays that eventually resulted in the projects being completed about 10 years late and R300bn - almost 200% - over initial cost estimates. While project planning and design should be done efficiently and expeditiously, it must also be done thoroughly and carefully.
Strengthen delivery management
Second, the delivery management capacity of the state needs to improve. There are adequate engineering and project management skills in the private sector in SA and these skills can be procured for major infrastructure projects. The procured project managers can provide day-to-day management and co-ordination of contractors and professional service providers on behalf of the state.
However, there are certain delivery management roles that cannot be outsourced, such as decision-making related to the project objectives, scope, affordability, financing, risk management, contract management and procurement strategy for the project. For a project to be delivered well, these decisions need to be taken timeously and wisely by a suitably qualified and experienced project delivery manager. Delivery managers need to be given the necessary decision-making authority to deliver projects. For example, a lack of effective delivery management resulted in delays in decision-making which was one of the main causes of the second phase of the Lesotho Highlands Water Project starting 10 years late.
Professionalise infrastructure procurement
Third, the infrastructure procurement capacity of the state needs to be improved. Traditionally, infrastructure procurement in SA has been managed in the same way as any other procurement. However, infrastructure procurement is more complex than procuring a ready-made product. It involves procuring a construction process that is unique to a specific project, with many role players and more potential risks. Infrastructure procurement strategies should be customised to be appropriate for the specific characteristics of the project or programme, rather than taking a standard one-size-fits-all approach, which is now the norm.
Successful infrastructure procurement requires professional judgment. Appropriately qualified, adequately experienced and professionally registered procurement specialists should manage the procurement of major public infrastructure projects. Procurement managers should work under the leadership of the delivery manager and should heed the advice of the professional engineers involved in the project.
The need for professional judgment in the procurement process needs to recognised by all parties. For example, an insistence by some of the financiers of the second phase of the Lesotho Highlands Water Project that the major contracts must be awarded to the lowest bidders, regardless of the engineers’ concerns regarding their capacity to deliver, contributed to the situation where the two main contractors are behind schedule.
Procurement reform still lagging
While procurement reforms introduced by the National Treasury in recent years have resulted in a more enabling regulatory environment for a different approach to be taken to infrastructure procurement, most public institutions that deliver major projects have not yet put in place more appropriate processes for infrastructure procurement.
In most government departments and municipalities procurement for major public infrastructure projects is managed by administrative supply chain staff in the finance section, who follow rigid bid evaluation rules and bid adjudication formulae, with no room for professional judgment and with little involvement of line-function engineers. This approach often fails to deliver the best value for money.
Professionalisation of the procurement management function, together with requiring procurement processes to be transparent, is also the best way of managing the risk of corruption in the procurement of large public infrastructure projects.
There are many other actions that need to be taken to improve the ability of the state to manage major infrastructure projects, such as reining in the construction mafia, reducing metal theft, ringfencing revenues from trading services such as water and electricity to enable projects to become bankable, and improving community consultation. However, addressing these priorities will go a long way towards building the required state capacity.
- Phillips is director-general of water & sanitation. He writes in his personal capacity.
