Strengthening institutional capacity in construction industry

By Dr. Chandana Jayalath

Any governance system that works well is as old as the idea of government itself. Governance is decision-making and the process by which decisions are implemented. It deals with how public institutions conduct public affairs and manage public resources. Among the characteristics in good governance are that it is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive. It follows the rule of law and assures that corruption is minimised.

Unfortunately, it is bad governance we have been experiencing as one of the root causes of all evil within our societies, where for example lot of decisions of national importance were taken in modalities such as 'kitchen' Cabinets, advisory boards and monitoring MPs.

Such, informal decision-making led to corrupt practices preventing transparency. Decision-making and their enforcement were done in a manner contradicting accepted norms and traditions of a civilised society.

For example, there had been no public hearings at least for large scale projects spearheaded by the previous regime. Information was not freely available and neither directly accessible to those who were actually affected by the enforcement of these decisions eventually resulting in agony among the masses.

Legislature

The most important aspect is, therefore, the rule of law that perpetually implies scrupulous respect for the law at every level of government, transparent accounting of public monies and independent public auditors responsible to a representative legislature, not to an executive.

The widespread perception was that the appropriation of the machinery of government by the elite to serve their own interests was the root of this crisis of governance. An increase in the then Government pressurising the public to tolerate impropriety and lax procurement culture not only aggravated the malaise but almost every state organisation ended up in large scale disarray.

Accountability cannot be enforced without transparency and the rule of law. For example, effective legal remedies should be available in the case of breach of a legal duty by a procuring entity. In public procurement this will, among others, ensure accountability, equitability and the integrity of the procurement regime.

A number of international instruments contain prescriptions on remedies that will vindicate the rights of participants in the procurement process. It is generally accepted that a range of remedies may qualify as effective and that effective remedies are not limited to orders ad pecuniam solvendam.

This was one of the areas that came under nepotism, favourism and ultimately the sovereignty of one or two people of the country, the ill-legalisation of which started with the closing down of then the NPA, National Procurement Agency.

Originally formulated by a Cabinet Memorandum dated May 6, 2004 by the then President Chandrika Bandaranaike Kumaratunga, the President cited an urgent need to formulate a National Procurement Strategy and streamline the National Procurement System and Procedures to eliminate corrupt practices, waste of time and funds and improve transparency and efficiency of government work.

WB report

This Cabinet Memorandum was based on a Country Procurement Assessment Report on government tender procedure submitted by the World Bank (WB) in June 2003. The WB Report was carried out with the full cooperation and participation of the Government, the Asian Development Bank, the Japan Bank for International Cooperation and the National Construction Contractors Association of Sri Lanka.

In December 2007, the government informed the NPA to close down operations and hand over its assets, liabilities and staff before January 31, 2008. Since then the functions of the NPA were taken over by the Public Finance Division of the Treasury Department, under a process described by a Cabinet Memorandum dated May 11,2004.

It was time consuming, permitted corrupt practices and also resulted in exceptionally delayed implementation. According to informed sources until December 2007, all government contracts had gone through the NPA but that there have been none since.

However, there are still procurement guidelines that have to be adhered to and it became the responsibility of the Public Finance Division to enforce them. Following the government's decision to close the NPA, an international conference on public procurement management and global communications network, due to be held in Sri Lanka in May 2008 was cancelled. Plans to set up a training and research centre in Sri Lanka which the WB had agreed to finance was abandoned.

The principal recommendations of the WB report were presented in three time frames. In the short term, recommendations were made to strengthen the Procurement Support Bureau, simplifying the review and approval process, revision of guidelines, development of standard tender and contract documents and the standardisation of goods specifications.

Swept away

In the medium term, some of the recommendations were to create a Procurement Regulatory Agency, set up a Procurement Accreditation System, strengthen the Bribery Commission and the Auditor General's Department and to introduce a code of conduct.

Recommendations on long-term actions included enacting a Public Procurement Law if necessary and reviewing, revising and implementing a procurement training master plan. Everything was swept away with the foregoing shut down.

The other side of the same coin is contractor registration where client organisations had been registering contractors during the past using different criteria. To avoid anomalies and maintain uniformity, earlier governments had decided to register contractors centrally.

In 1989, a central registration scheme was launched by the Institute for Construction Training and Development (ICTAD) and it was revised in 1993, 1995 and 2008. Registration and grading is a screening process for the abilities of prospective contractors to determine their ability to undertake different types and sizes of projects without reference to any specific contract.

Registration and grading is determined by evaluating a contractor mainly on his financial ability, the technical ability of staff and plant and machinery and the experience gained in relevant fields. In the beginning, under this scheme, contractors were classified under 10 grades (M1 to M10) on financial terms.

This M grading system was revised in 2008 and a new grading system C1 to C10 was introduced. Meanwhile ICTAD registration is necessary to obtain government contracts and there were over 2,500 construction contractors registered with ICTAD.

However, this amount remained unchanged over 5-6 years, apparently because of the lack of concern over the ICTAD registration by State sector organisations. Who cares for something unwanted?

Considerable powers

Under the circumstances, an Act to provide for regulating the domestic construction industry came in last year though it had suggested no significant reforms, either structurally or otherwise. Rather it purported some leverage in terms of registration and fund collection with considerable powers including acquisition of property if necessary.

It provided for the setting up of two serious entities, a national advisory council for construction and the Construction Industry Development Authority (CIDA) enjoying not only a perpetual succession and a common seal but also a heavy influence on the construction supply chain.

Working out a strategy for the 'well-being' of the construction industry is among the job specification of the council. This council has to guide the CIDA in achieving the desired objectives by formulating a national policy on construction.

Such a policy should comprise matters relating to the construction industry and its goals. On completion of the national policy, this council has to put it forward to the Cabinet of Ministers for approval. However, the subject Minister may, give directions from time to time to implement national policy.

This is in addition to the powers retained with the Minister to appoint four members apart from those designated in the Act. The Council is a group of nearly 32 persons representing the industry yet, the independence of this council is dubious. Also such a policy may, from time to time, be revised in keeping with the development of the construction industry.

Keeping room for policy changes definitely means a lot since by definition, a policy is a principle, quite firm in the long run, to guide decisions and achieve rational outcomes with a solid statement of intent. I believe, the council will have to assess as many areas of potential policy impacts as possible to lessen the chances that a given policy will have unexpected or unintended results.

The functions of the proposed CIDA are to implement policy in keeping with the directions issued by the Minister. This is what ICTAD has been geared to do since its inception. Its function of collating and publishing material and information is well known.

Priceless

No one can say it did not promote best practices. It has successfully implemented the standards in consultation with the other relevant bodies. It has also been supporting and interpreting national procurement guidelines.

It has provided for and regulated the presentation of national awards for construction excellence. Its contribution in promoting the standards of professionalism is also priceless.

It provided for grading of construction contractors. What it did not do (comparing the provisions in the Act) was registration and issuing of craft identity cards to skilled workers in construction trades.

It could not maintain a national data base on the construction industry and set up standards for technical auditing. If so, the question arises as to why CIDA came into effect while ICTAD was there? The answer is pretty simple.

A sizeable fund collection via a comprehensive registration process inter-alia is expected from two main sources namely, construction industry development fund and fund of the construction industry development authority.

Almost every stakeholder of the industry including professionals, manufacturers, suppliers, contractors and craftsmen has been earmarked as the target population.

The Institute for Construction Training and Development (ICTAD) tilting for the past 10 years due to poor management offers nucleus for the proposal so that it will no longer exist with the effect of this enactment.

Therefore, let us hope the proposed National Council will take stock and prepare a balance sheet of the ICTAD in terms of intangible assets such as expertise and liabilities such as lethargy.

Finally, professions have evolved, developed and established. History is full of diversifications demanded by genuine circumstances in society.

A recent example is delay analyst with technical acumen and claims consultants with a legal background.

In all cases, professionals carry moral responsibilities to society because professionals are supposed to make and act on informed decisions in situations that the public cannot. They are trained to produce certain outcomes which take moral precedence over other functions of society.

The white-collar mafia spearheaded by few leading professionals which is beyond the control of even Ministers, hinders good governance and is something that cannot be overlooked any longer.