Getting better value from public infrastructure procurement
Corruption in public procurement comes at a huge price to the government, industry and citizens, leading to untold costs on the environment, jobs and lives. Alongside incapacity, mismanagement and inefficiency, corruption is having unprecedented ramifications for the infrastructure sector’s stability and contribution to inclusive development. By Adv Gary Pienaar and Dr Michael Cosser
South Africa has recently been rocked by revelations of large-scale, widespread corruption involving the state and private sector – especially in state-owned enterprises such as Eskom, Transnet and Prasa, which, while massively expanding infrastructure, have been subject to political meddling and tender process abuse, becoming vehicles for patronage instead of service delivery.
The auditor-general has regularly highlighted fruitless and wasteful expenditure in state-owned enterprises and other public entities. His 2017/18 annual report highlighted that such expenditure had increased by 200% to R2.5 billion among national entities. More than half of auditees engaged in uncompetitive and unfair procurement processes, totalling R28.4 billion among state-owned enterprises.
In recognition of these issues, South Africa’s National Development Plan: Vision 2030 identified the lack of accountability in public institutions as a leading factor undermining the country’s ability to deliver not only on its developmental mandate, but on the creation of a fair and stable society.
Recently, the government has recognised the impact of these weaknesses on economic growth and on the failure to reduce unemployment, poverty and inequality. The national treasury has been a leader in identifying and implementing improvements in the governance of public procurement, including public infrastructure. It has worked closely with other public sector stakeholders to develop the Framework for Infrastructure Delivery and Procurement Management, which took effect on 1 October 2019. The National Development Plan identified public infrastructure as a priority area for government investment and the Ramaphosa administration has begun raising and allocating funding for this programme.
Treasury’s 2018 medium-term budget policy statement emphasised that infrastructure expenditure was a key ingredient in economic recovery that could unlock private investment. It recognised that greater transparency could improve the efficiency of public infrastructure expenditure. However, it also acknowledged that weak project preparation, planning and execution had led to lengthy delays and to over- and underspending, and that problems with quality were due principally to a lack of proper pre-construction planning and design.
A scoping study
CoST – the Infrastructure Transparency Initiative – is a global initiative that works to improve transparency and accountability in public infrastructure. Established by Engineers Against Poverty, CoST works with governments, industry and civil society to promote the disclosure, validation and interpretation of data from infrastructure projects. The programme also helps to inform and empower citizens, enabling them to hold decision makers to account.
In 2018, CoST commissioned the HSRC to undertake a scoping study of the levels of transparency, accountability and stakeholder participation in delivering public infrastructure in South Africa, with a view to considering how CoST might assist.
In addition to desktop research, the HSRC interviewed a broad spectrum of stakeholders including national and provincial treasury officials, interested civil society organisations, senior representatives of several large state-owned enterprises and metropolitan municipalities, senior representatives of private sector professional associations, and a number of private construction companies.
The researchers found considerable support for the CoST methodology, which focuses on disclosure, assurance, multistakeholder working and social accountability. Many respondents were hopeful that the model could offer a practical and systematic means for increasing transparency and accountability, and restoring mutual trust and cooperation in South Africa.
Increasing infrastructure transparency
Significant improvements could be made to transparency in public infrastructure procurement. South Africa’s Promotion of Access to Information Act 2000 provides a framework for disclosing information reactively (i.e., upon request), but the legal framework for proactive disclosure is less explicit and practice is uneven.
Many of the 40 data points in the joint CoST-Open Contracting for Infrastructure Data Standard (OC4IDS) already have to be legally disclosed. This information is likely to be proactively disclosed in procuring entities’ reports to legislatures. However, this disclosure comes far too late in the infrastructure design, procurement and delivery process for it to be useful for enhancing the real-time effectiveness and efficiency of infrastructure procurement and delivery.
The law also requires some information on procurement and delivery processes to be proactively disclosed by procuring entities and on treasury’s e-tender publication portal. However, we found that actual disclosure is much more limited than the law stipulates, and uneven in practice. Mismanagement and corruption are therefore identified too late for preventive or corrective action.
There is also significant lack of awareness, uncertainty and confusion about existing information disclosure requirements at various stages of the infrastructure procurement cycle, and ignorance about what information should be proactively disclosed.
Greater disclosure of information by procuring entities, whether reactively or proactively, is appreciated by private sector actors, inspiring greater confidence in the integrity of the procurement process.
OC4IDS is a new data standard that was developed jointly by CoST and the Open Contracting Partnership. OC4IDS builds on best practice in open data and disclosure of public procurement and infrastructure information globally.
The adoption of OC4IDS and consideration of its impact through CoST multistakeholder groups can provide clarity, enhance trust and deliver improved performance.
Evidence to improve accountability
Besides confusion about disclosure, there is limited engineering and procurement capacity and experience in some procuring entities, and a paralysing fear among many officials regarding the potential legal and personal financial consequences of getting procurement wrong. Confusion surrounds, among other things, the legal requirements for public participation in the planning and delivery of infrastructure, and the definition and requirements for local content.
CoST’s independent assurance review could be of great assistance in producing evidence from practice to help clarify these issues. Such reviews could reassure officials, helping to relieve fears about the quality of their colleagues’ work and any resulting legal responsibility. The effect would be speedier assessment, evaluation, adjudication and award of bids.
Restoring trust among stakeholders
Incidents of corruption have contributed to mutual mistrust between stakeholders. CoST’s multistakeholder working and assurance review of both disclosed and non-disclosed information could help restore trust through sharing of information from independent and credible sources.
Respondents expressed broad support for finding a better way for the government and citizens to collaborate. CoST’s model of multistakeholder working presents an opportunity to explore an approach that had yielded efficiencies and savings in several other countries.
It is recommended that the National Treasury consider further discussions with CoST and key sector stakeholders. Specifically, the following should be considered:
1. With the support of CoST and private sector and civil society stakeholders, pilot the CoST model to ascertain the true value that the approach adds in practice in ensuring greater transparency, accountability and efficiencies in infrastructure procurement.
2. Include OC4IDS
a. in the Framework for Infrastructure Delivery and Procurement Management;
b. on the Vulekamali website (treasury’s online budget data portal); and
c. in the Draft Public Procurement Bill.
3. Collaborate with CoST and key infrastructure industry bodies to clarify how the features of the CoST model address the legal, regulatory and policy misconceptions that abound in the sector.
4. With the Department of Justice and Constitutional Development, strengthen, through the parliament, the operationalisation of the Promotion of Access to Information Act 2000, especially regarding the obligation on public entities – particularly procuring entities – to proactively disclose procurement-related information, in line with the OC4IDS.
5. Convene provincial information sessions with stakeholders from relevant sectors to explain information disclosure standards at every stage of the infrastructure procurement cycle, using OC4IDS as a template.
Adv Gary Pienaar, research manager, and Dr Michael Cosser, acting research director, in the HSRC’s Democracy, Governance and Service Delivery research programme