Delivering critical mega infrastructure: World Bank urges Pakistan to re-engineer construction industry
FAISALABAD (January 28 2008): If Pakistan wants to deliver on the planned critical mega infrastructure, there is an urgent need to re-engineer the construction industry and the processes typically followed in delivering to mega projects.
Construction efficiency is presently constrained due to the segregated processes through which they are generally planned, designed, constructed, operated and maintained, said Infrastructure Implementation Capacity Assessment Report of the World Bank.
According to he WB report, these processes reflect the fragmented structure of the industry, which contributes to a contractual and confrontational culture promoting inefficiencies.
The generally sequential process adopted in the industry is due to separate teams being engaged in designing, supplying inputs, constructing and for operations and maintenance of infrastructure. This typical process is followed with the aim to minimise risks to constructors by precisely defining through specifications and contracts what each of the players in the process is supposed to do.
However, this strategy is now recognised to be inefficient and does not protect well the client's interests. It acts as an effective barrier in using the skills and knowledge of suppliers and constructors effectively in the design and planning of projects. These segregated processes are illustrated in the following figure with discontinuous relationships between all players and a built-in lack of ownership of the end product.
According to the WB report, the conventional processes require procurement of a new team at each stage of the process and for every project a client implements, in the belief that selection of new designers, constructors and suppliers competitively on a least cost basis for each project provides value to the client. Contrary to this belief, repeated selection of new "teams" inhibits learning and the development of the construction industry.
The team found that while current stakeholders in Pakistan's construction industry feel that the total number of contractors available is a constraint, a similar study in UK in 1998, found the reverse that rather the very large number of contractors, working in a segregated environment, is a constraint to the development of the industry.
Processes need to be explored which focus on delivery of the end product, especially large mega infrastructure projects at cost, in time, with quality and functionality.
The findings of report show that the challenges facing Pakistan are not any different from those faced by other developing countries. These challenges have been documented to include a lack of adequate education and training (insufficient HR); a lack of government commitment; absence of long-term vision and planning for the industry; ineffective planning and budgetary procedures; fluctuations in work load; defective contract documents; corrupt contracting procedures; a lack of protection against adverse physical conditions; delays in payments to contractors; problems of bonding and insurance; absence of adequate credit (a lack of financial resources); restrictions on imports; foreign exchange constraints; unfair competition from state-owned contractors and consultants and problems relating to availability of equipment and spare parts; delays, cost overruns, and miscommunication of information.
The WB report pointed out that sustainable development of the construction sector requires a long-term commitment from the government. The impetus for change has to come from the demand-side as many of the key factors requiring significant improvement are related to the role of the government itself. Overtime, the government together with other industry players will have to shift from being just an external player and move towards self-improvement and taking responsibility.
Infrastructure development holds the key to Pakistan's future growth. The infrastructure development sector is greatly benefiting from the government's ambitious infrastructure drive, but much is still required to be done to ensure that adequate capacity is available to ensure the achievement of targets set.
Recognising the enormity of the challenge, the Pakistan government should improve infrastructure industry-related policies through enhancing public-private partnerships, bringing about regulatory reform; improving in governance and removing corruption and focusing on developing the required pool of skilled HR.
Changing mindsets and improving capacity of government are tasks that require immediate attention, the way the Pakistan government conducts business and the culture of government agencies has to be modified.
The thrust of the Infrastructure Implementation Capacity Assessment study of the World Bank was to assess the implementation capacity for delivering the planned large infrastructure projects. However, considering the unique nature of the industry and the supply chains involved, the large infrastructure projects cannot be viewed in complete isolation from smaller projects.
The existing gaps in the quality and quantity of inputs available to the industry have to be addressed and solved to ensure delivery of both through appropriate measures.
The solutions to remedy the shortfalls can be classified as being either short-term or long-term. Short to medium-term measures are needed to assist the Pakistan government in delivery of mega projects and also contribute towards enhancing local capacity, while long-term sustained measures and committed policy and industry reforms are required to optimise and build up the capacity of the local industry over time.
Short, medium and long-term measures would accordingly help the Pakistan government in delivering both "normal" and mega infrastructure planned under the MTDF by optimising, enhancing and supplementing local capacity. However, given that the crunch faced is imminent, delivery of planned projects in the MTDF will remain a challenge.
The WB report observed that the Pakistan government needs to act now to curtail market distortions and stimulate growth by carefully implementing interventions for structural change. The international case studies and the literature highlight the effectiveness of demand-side interventions and the need for a sustained long-term holistic approach for the development of the industry. The interventions can be broadly categorised as:
(A) POLICY INTERVENTIONS:
-- To adopt long-term planning at all levels.
-- To provide strong government support for the industry by establishing robust, high-level liaison between the government and the industry, investing in strengthening and promoting trade associations.
-- To use procurement to drive behaviour and improve transparency.
-- Policies-backed with legislative and regulatory measures have to be proactively pursued to promote the use of least evaluated cost methods of procurement instead of least cost. The method of lowest bid selection is universally recognised to be the greatest barrier to improvement.
-- Introduce policies to develop the small to medium-sized industry stakeholders as these players deliver a major portion of the actual physical works in partnership with large contractors.
-- Set targets, select relevant performance indicators for the construction industry and monitor and evaluate change on a continuous basis.
-- Improve charge rates for professional services and the construction rates in the industry.
Business Recorder [Pakistan's First Financial Daily]
