SA Contractor Development Programmes; Status Quo

1. SA Contractor Development Programmes;Status Quo German Mphahlele cidb 28 May 2009

2. Background • Contractor Development Programmes (CDPs) can play a very important role in supporting the development of the construction industry and the development of emerging contractors • Currently, more than 18 CPDs of various forms in South Africa, with more than 1 300 contracting enterprises currently participating in these Programmes

3. Background • National Contractor Development Programme (NCDP) a sector-specific intervention led by the Minister of Public Works and the Provincial MEC’s • Geared at enhancing capacity and promoting equity ownership across the different contracting categories and grades, as well as improving skills and performance in the delivery of capital works and maintenance across the public sector • Partnership between the cidb, national and provincial public works and other willing stakeholders

4. Background • cidb carried out a review of major public sector sponsored CDP’s to: • identify challenges faced and lessons learned from these Programmes • identify good practices for promotion across all CDP’s

5. Background

6. Key Findings

7. i) Development Models Key Findings

8. i) Development Models Key Findings

9. i) Development Models Key Findings

10. i) Development Models Key Findings

11. i) Development Models Key Findings

12. i) Development Models • No single contractor development model will apply to development across all grades of contractors, and all levels of business maturity Key Findings

13. i) Development Models • Different models are more appropriate to different levels of development: • EPWP learnership type models for, typically, Grade 1 and 2 construction workforce development • Emerging Contractor Development Programmes (ECDPs) for, typically, Grade 2 to 3 emerging contractors, incorporating predominately mentorship models supported by formal business and technical training • Enterprise Development Programmes (EDPs) for, typically, contractors in Grades 3 to 6 who exhibit potential to develop • Programmes focusing on performance improvement of established contractors in, typically, Grades 4 to 7 Key Findings

14. i) Development Models • Scope exists for CDPs to address all these components, BUT: • it is important that these objectives should not be convoluted within a single Programme – as is the case with many current Programmes • Specifically, it is recommended that Programmes focusing on contractors in Grades 1 to 2 should not be designed as incubator programmes, but should form part of the Extended Public Works Programme (EPWP) Key Findings

15. i) Development Models; Best Practice • ESKOM Construction Academy: separate sub-programmes for: • developing the necessary business and construction management competences within employers • uplifting the technical skills of employees Key Findings

16. ii) Demand Side Support Key Findings

17. ii) Demand Side Support • Various distinct models exist: • compete for projects through normal public procurement methods (sometimes form part of the pre-qualification for contractors to enter into a development programme) • preferential access to projects through limited bidding schemes or similar Key Findings

18. ii) Demand Side Support Key Findings

19. ii) Demand Side Support • Preferential access: • contractors often view participation in development programmes as an opportunity to gain access to work opportunities and not as an opportunity to gain access to developmental opportunities • particularly where screening and evaluation of contractors is not sufficiently rigorous • Required in-house capacity and business processes often not adequate, and several CDPs (particularly within Works Departments) are not able to provide the intended work opportunities to participants within the Programmes: • undermines the sustainability of the participating contractors and the credibility of the Programmes Key Findings

20. ii) Demand Side Support; Best Practice • The ESKOM Construction Academy draws on contractors that have already been awarded line construction contracts within ESKOM, and whose performance records show that the contractors need developmental support to attain ESKOMs standards • Emerging contractors within the KZN eThekwini Large Contractor Mode emerging contractors were appointed as sub-contractors through a public tender process to a consortium of large contractors: • expected duration of the project awarded to the consortium is at least three years, guaranteeing project budgets for a sufficiently long developmental period Key Findings

21. iii) Quality & Performance Standards Key Findings

22. iii) Quality & Performance Standards • No uniformity in the level, relevance and quality of: • training provided • quality of mentors • performance standards that contractors are expected to achieve at the time of exiting Programme • In many cases the only performance standards in place are criteria in terms of an increase in turnover or in cidb Grade achieved during the programme Key Findings

23. iii) Quality & Performance Standards Key Findings

24. iii) Quality & Performance Standards • Competence requirements are being incorporated into the cidb Best Practice Contractor Recognition Scheme grading framework currently being developed, and it is appropriate that CDPs align their development models with the cidb Best Practice Contractor Recognition Scheme Key Findings

25. cidb Contractor Competence Assessment Key Findings

26. iii) Quality & Performance Standards • Attainment of output performance standards for contractors should then form the basis of: • selection criteria and screening of contractors for entry into CDPs • quality control of mentoring and training provided within the CDP • ongoing evaluation and assessment of contractors during the development phase • assessment of contractors on exiting a CDP • assessment of the overall success of a CDP Key Findings

27. iii) Quality & Performance Standards; Best Practice • The ECDC IECDM undertakes strict quality control procedures to ensure the quality of all training provided: • Programme only uses mentors accredited under the mentorship programme of the University of Free State (all of which are accredited by the SACPCMP) • The ESKOM Construction Academy undertakes strict quality control procedures to ensure the quality of all training provided Key Findings

28. iv) Risk Sharing Key Findings

29. iv) Risk Sharing • Risk sharing, amongst all parties, is an important component of any best practice enterprise development model – but is almost totally absent in most CDPs! • in CDPs assessed, the risk of contractor development is carried almost exclusively by the Works Departments and by the CDP • mechanisms include preferential access to projects, wavering of guarantees or sureties, sub-prime interest rates, and mentorship and training Key Findings

30. iv) Risk Sharing; Best Practice • SEDA CDP levies participants 0,05% of contract value for the services provided • ESKOM Construction Academy draws on contractors that have already been awarded line construction contracts within ESKOM, and whose performance records show that the contractors need developmental support to attain ESKOMs standards • contractors also screened to meet the necessary entrance criteria for the Academy Key Findings

31. v) Information Key Findings

32. v) Information Key Findings

33. v) Information • Very difficult to obtain quantifiable information on the development of contractors that have been, or currently are, participants on CDPs • lack of accessible information limits a deeper under understanding of contractor development Key Findings

34. Recommendations

35. Demand side support Supply side support Theoretical and practical training; Mentorship Screening and evaluation Graduation (standards) Exit, with reducing support Risk sharing Evaluation (standards) Development Model Recommendations

36. Separate focus required within CDPs on contractors in (say) Grades1 to 2, 2 to 4, and 4 upwards: • typically these require different development models • CDPs should set clear targets for contractor development that take cognisance of possible capacity constraints in various classes of works: • in the absence of demonstrable capacity constraints, CDPs should not focus on new entrants, but on developing existing capacity • CDPs within Works Departments must lie within ambit of the department to ensure that the CDP business processes are aligned to department’s business processes Recommendations

37. CDPs should: • align formal training provided with the contractor competence model of the cidb Best Practice Contractor Recognition Scheme (under development) • implement systems to ensure the quality of training provided by training providers – possibly through a “Training and Mentorship Section” within the CDP or Works Department to continually monitor and evaluate the training and mentoring processes • only use mentors registered with the SACPCMP • CDPs should be designed to graduate contractors with: • achieving a higher cidb grade; and/or • achieving recognition on the cidb Best Practice Contractor Recognition Scheme • CDPs should establish graduation targets, and should be measured against such targets Recommendations

38. The merits and demerits of providing demand side support need to be carefully considered: • CDPs should focus on providing developmental opportunities, and not work opportunities • CDPs should not provide expectations of sustainable work opportunities to contractors within the CDP • CDPs should provide support services to contractors to assist then in accessing work opportunities • CDPs should: • comply with a 14 day payment cycle rule • adopt appropriate payment dispute resolution mechanisms • be encouraged to use the JBCC or GCC standard contract documentation • not compromise on project quality requirements Recommendations

39. CDPs should adopt mechanism and/or business processes to ensure that entry level contractors that have succeeded and shown potential in the Programme are continuously supported after they have exited the Programme • Risk (or cost) sharing should be an integral part of any CDP • The NCDP should establish a CDP database, linked to the cidb register of Contractors, to enable tracking the development of participants within CDPs Recommendations

40. Supporting Contractor Development

41. cidb • Growth & Contractor Development: • promotion of enterprise development, investment and spending as the basis for a stable, developing industry and the participation of the emerging sector • Construction Contact Centres: • hubs for industry wide initiatives on contractor development • Procurement & Delivery Management: • enhanced public sector construction procurement and infrastructure delivery management capability of public sector clients • Construction Industry Performance: • improved performance and best practice • Construction Registers Service: • registration of contractors and public as well as private sector projects and regulation thereof in order to effect improved performance and best practice by clients and suppliers Contractor Development

43. Thank You