CHRIS CAMPBELL: SA infrastructure sector, from boom to bust

SA finds itself in chaos, with our once pride and joy, the construction industry, on the brink of collapse, professional skills leaving the country for greener pastures at an alarming rate and businesses struggling to stay afloat. Unemployment is at an unprecedented level, and the jobs promised by our president, underpinned by the government’s infrastructure build programme, have not seen the light of day due to the slow project preparation process, worsened by tender cancellations on the back of suspicions of poor governance and corruption.

The numbers do not lie — as a country we have gone from boom in 2010 to bust in 2022. The construction sector is on the brink of collapse. The feast-or-famine situation that companies operating in the built environment find themselves in is unsustainable, and our once vibrant construction sector is a shadow of its former self. It is well known that this sector underpins economic growth and has a multiplier effect on the creation of jobs for our people.

In the latest biannual Economic Capacity Survey covering July to December 2021 produced by Consulting Engineers SA, the trend for gross fixed capital formation (GFCF) when compared with previous years as far back as 1960 illustrates the feast-or-famine cycles. This is not conducive to consistent stimulus for economic growth, and makes the planning and absorption of critical skills, especially engineering skills, almost impossible to manage. This is yet another element, among many others, affecting our ability to retain young talent.

In many pronouncements this reduced GFCF spend is not necessarily attributed to a lack of funds but largely to issues around procurement and the shortage of the required skills to manage the procurement of infrastructure delivery services optimally. Aside from corruption and largely inadequate scoping, one of the biggest issues is the way infrastructure development and delivery projects are procured.

It is critical that a distinction be made between “general” procurement and “strategic” procurement. Consulting Engineers SA has been lobbying for this to be made for nearly a decade through the chief procurement office at the National Treasury. The inefficiencies in our procurement system are costing SA companies an extortionate amount to respond to bids, when most of the tender standard returnable documents could be uploaded onto a central database similar to the Central Supplier Database and kept updated by companies bidding for public sector contracts.

Far more could be said about whether an open tender bidding system is the most effective method for procuring professional services in the first place. After all, lawyers and medical professionals are not subjected to such open tender processes. Why must engineers and other built environment professionals have to submit to a process that competitively drives costs down without considering the impact on the quality of services procured?

More thought needs to be put into the maintenance and maintainability of infrastructure. It is critical that clients invest in the future by appointing reliable and forward-thinking consulting engineering companies that allow them the flexibility to include future-thinking and innovation in the design of their projects. By allowing for this innovation, and taking into consideration the operation and maintenance costs over the life cycle of the project, the inclusion of innovative design thinking can save clients considerable costs over the life cycle of their projects.

The typical project design costs are only 1%-2% of a project’s total life cycle cost. Does it not therefore make sense to procure these critical design skills based on more than the cheapest price, which frequently provides no room for innovation or design-thinking and will result in increased operating and maintenance costs, making the total life cycle cost far higher?

Engineers are at the mercy of their clients in both the public and private sectors, who often do not understand that cheap can mean nasty. Without a common purpose between client and professional service provider it is unlikely that innovation and future thinking factors can be expected to result from such a process. The infrastructure development process needs to be a partnership between the client and the service provider, focused on providing a value-for-money solution based on the lifecycle costs of the infrastructure, most of which is designed to last for 30 to 50 years or more.

The impact of negligence in maintenance programmes for infrastructure can put investments at risk and accelerate the need for capital investment to replace prematurely failed infrastructure. Unless there is economic growth, this could prove unaffordable. More importantly, we cannot put public health and safety at risk, and persons charged with such duties of care should be held liable for acts of negligence. Negligence in ensuring timely maintenance of infrastructure and constantly deferring essential “aftercare” of public assets should be viewed in the same light as the fruitless and wasteful expenditure prescripts in the Public Finance Management Act and Municipal Finance Management Act.

The lack of technical skills in the public service is endemic. Just one example of this is that there are about 200 municipalities that do not have a single engineer in their employ. This is a national crisis. Public officials charged with procurement processes related to infrastructure development lack the knowledge required.

In addition, since one often has to contract for the services of professional service providers and contractors in the infrastructure development process, there are further shortcomings in specific competencies even with legal and financial professionals providing advice on matters relating to risk and liability in the contracts between the parties.

All too often unlimited liability clauses and even elements that seek to transfer excessive risk from the client to the contractors are ill conceived. This anomaly exists in both the public and private sectors. The best contract is one that seeks to be fair to both parties; anything else is short-sighted and could prove to be onerous and costly to the client in the long run.

We need to flatten the cyclical nature of infrastructure development to create a sustainable construction industry. We need to create a stable project pipeline to ensure consulting engineering and construction companies can retain and attract professional engineering skills in the country and encourage young people to consider engineering as a career. We need a fit-for-purpose procurement process coupled with resources with the requisite skills and competencies related to infrastructure procurement and development.

We need to embrace future-thinking and innovation and be prepared to pay for it. Maintenance must become a non-negotiable part of the lifecycle cost of the infrastructure. We need to ensure that the contract between client and service provider is approached with a fair and balanced partnership mindset, to avoid situations where both parties lose instead of both parties winning. We need to once again see our skyline dominated by cranes as we build the future and economic prosperity of SA together.

• Campbell is CEO of Consulting Engineers SA.