Sustaining consulting engineering is key to growing the economy

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Consulting Engineers South Africa’s (CESA) newly appointed President, Abe Thela, recently presented his presidential message and theme for the year at a function held in Johannesburg. With the theme of ‘Sustaining Consulting Engineering is Key to Growing the Economy’ Thela stated that the National Development Plan (NDP) was created in order to develop the South Africa’s economy. Government through the NDP has identified infrastructure development as key to the socio economic development of the country.

Thela believes that the NDP and its objectives will never come to fruition unless there is involvement of consulting engineers at the forefront of this development. Consulting Engineering, although a relatively small sector, has a large multiplier effect on the development of infrastructure as consulting engineers are the designers that create the large scale infrastructure projects that employ large numbers of people during the construction, operation and maintenance phases of infrastructure.

NDP Project Pipeline key to long term planning

CESA is pleased that Government has prioritized infrastructure development as a key component of accelerated economic development. In his 2013 medium term budget policy statement Minister Pravin Gordhan allocated R827billion to infrastructure for the three year period ending 2015/16. They welcome this announcement but are concerned government has not yet revealed the project pipeline going forward. The industry needs this information to commit to long term planning and investment in more resources. Although there were delays in implementation since the NDP which was adopted at the end of 2012, the organisation is looking forward to an acceleration of this programme in 2014.

With Government’s plan to grow the economy and triple GDP by 2030 the Consulting Engineering Industry has a significant role to play in achieving this growth through infrastructure development.  Thela stated, “The Consulting Engineering industry is facing a number of challenges but by far the most challenging is how consulting engineering services are currently procured, as it is stifling the industry”:

Quality a key component of Procurement

While CESA does not oppose competitive bidding, which is a constitutional imperative, they do not believe that price should be the determining basis. The organisation believes that it should be based on quality taking into account the bidder’s qualifications, experience, capability and innovation.

The bulk of infrastructure cost lies in construction and maintenance with the cost of consulting engineering only being 1 – 2% of the project lifecycle cost. So it makes perfect sense that a procurement system that takes the entire project life cycle into account should be implemented when procuring consulting engineering services.  Consulting engineers need to go back to their very important role of being trusted advisers to the client providing advice on planning and design and its impact on construction operating and maintenance costs.

As an interim measure CESA calls on Government to reintroduce quality as part of the total procurement points calculation alongside price and BBBEE points. At the same time they challenge Government to conduct a comprehensive research and review of the current procurement system to determine its impact on the consulting engineering industry and infrastructure development in the country.

Access to opportunities for Emerging and Small Firms

There is a strong outcry from emerging and small consulting engineering firms, particularly those who are not specialist, over the lack of access to large projects from government and public entities. These firms provide an important vehicle for empowerment within, and transformation of, the industry. CESA believes that the participation of emerging and small firms in large projects can be best facilitated by using targeted procurement procedures by either specifying minimum participation goals as a percentage of the contract amount or specifying portions of services which must be subcontracted to targeted enterprises.

Infrastructure Investment

KPMG estimated an infrastructure spending gap of R6.5 million between the planned MTEF and PICC infrastructure spending and the infrastructure spending based on the NDP target of 10% of GDP. Part of this spending gap will have to be funded by the private sector. The NDP also intends to raise the private sector infrastructure contribution from 10% to 20% of GDP to drive the intended growth. CESA states that a clearer project pipeline, more standardisation of deal structures, policy stability and better information about the performance of projects at their various stages would all encourage infrastructure debt investment. SA business has further identified regulatory uncertainty, inclusive growth, education and skills and labour relations as affecting investor confidence.

CESA is committed to working with Government to address these constraints where they affect the consulting engineering sector. The potential of PPPs to entice private sector investors into infrastructure development is not fully appreciated in SA.  Government needs to address regulatory constraints to unlock this potential.

Call for changes to the regulatory environment

CESA supports BBBEE as necessary to transform business and contribute to the eradication of inequality – a NDP objective. However, the current requirement for a consolidated / joint BBBEE scorecard for joint ventures discourages the formation of joint ventures which are crucial for skills transfer between large and small firms, international and local firms as well as for creating critical mass between smaller firms to enable them to handle larger projects. CESA proposes that a formula be developed to enable calculation of consolidated BBBEE scorecards of two or more entities forming a JV.

With projects getting bigger and some taking more than three years to implement from design to construction completion, CESA urges Government to review and align the Municipal Finance Management Act and Municipal Systems Act. This will sort out the issue when appointments are made for consulting services for a fixed 3 year term and the project runs over this period.

CESA is also lobbying to have consulting engineering alongside other built environment professions designated as a local service to receive preference over international companies, who do not have a presence in South Africa, when bidding for work.

Infrastructure needs a cadre of engineers focused not only on planning, design, tender specification, evaluation and adjudication but also on maintenance and operation – localization needs to be looked at carefully as you cannot create employment and address inequality unless South African companies are utilized to their maximum capacity.

Lack of Technical Capacity in Government

An added challenge is the serious lack of technical capacity within Government. In order for tender documents to be effective they need to be prepared, and subsequently tenders need to be evaluated, by competent engineers in Government or a Consulting Engineering Consultant with input from Government’s supply chain. Minister of Finance, Pravin Gordhan, recently acknowledged that consulting engineers are key, and the exception, to Government’s ban on the use of Consultants. Government does not have the capacity and this is particularly poor at Provincial and Local Government level.

CESA has made a number of proposals to partner with Government to assist with capacity. CESA member firms have the skills and the capacity to assist Government in unlocking infrastructure development.  The biggest issue is that the working environment for engineers in Government needs to be improved. Properly qualified and experienced individuals need to be appointed to critical Government technical posts and their contracts need to be based on their performance of technical work.

Eradication of corruption

CESA is committed to fighting corruption in procurement processes and has increased its capacity and ability to do so by recently creating a litigation fund and also forming partnerships with other corruption fighting organisations.

Basic education key for development of engineers

Education is another challenge facing the industry.  Basic education is key to the development of mathematics and science capabilities within the country forming the foundation required for the development of engineers. Teaching must be made to be a career of choice and attractive to top achievers by paying salaries comparable to those of other professions. When looking at investment in a country the level of skills that the country has to offer is one of the many factors considered.

CESA ready to assist Government

CESA fully supports the NDP but implementation is key and this is where Government falls short and CESA and its member firms are able to assist.  CESA is ready to engage and partner with Government to address these challenges.  The organisation has been lobbying Government for years on these issues and more recently with National Treasury who are reviewing procurement regulations following CESA’s interaction with them.

CESA strongly contends that the NDP and its objectives will never materialise unless there is involvement of consulting engineers

Contact details:

Lefadi Makibinyane (CEO)                                           Dennis Ndaba

Consulting Engineers South Africa (CESA)                      CESA Media Liaison

Tel: 011 463 2022011 463 2022                                                     073 981 2066

Email:                                            [email protected]