Strengthening the Institutional Capacity in Construction Steering Along the Aphorism of Good Governance
Posted on February 27th, 2015

By Dr. Chandana Jayalath

Any governance system that works well is as old as the idea of government itself. Governance is the process of decision-making and the process by which decisions are implemented. It deals with how public institutions conduct public affairs and manage public resources. Amongst 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 minimized.

 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, monitoring MPs, etc. Such, informal decision-making led to corrupt practices fully preventing transparency. Decision taking and their enforcement were done in a manner contradicting accepted norms and traditions of a civilized society. For example, there had no public hearings at least for large scale projects spearheaded by the previous regime. Information were not freely available neither directly accessible to those who actually affected by the enforcement of these decisions eventually resulting in agony amongst the masses.

 The most important aspect is therefore the rule of law that perpetually implies the 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 stood by the root of this crisis of governance. The up rise of then the government pressurizing the general public to tolerate impropriety and lax procurement culture not only aggravated the malaise but almost every state organization ended up in large scale disarray.

 A fact is that accountability cannot be enforced without transparency and the rule of law. For example, effective legal remedies should be available in the case of the breach of a legal duty by a procuring entity. In public procurement this will, amongst 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 individuals of the country, the ill-legalization 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 then President Chandrika Kumaratunga, the President cited an urgent need to formulate a National Procurement Strategy and streamline the National Procurement System and Procedures with a view to eliminate corrupt practices, waste of time and funds and improve transparency and efficiency pertaining to government work. This Cabinet Memorandum was based on a Country Procurement Assessment Report on guidelines on the 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 of Sri Lanka, the Asian Development Bank, the Japan Bank for International Cooperation and the National Construction Contractors Association of Sri Lanka.

 Had no avail, in December 2007, the government officially 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 11 May 2004, as time consuming, permitted corrupt practices and also resulted in exceptionally delayed implementation. Sources said that up 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, scheduled to be held in Sri Lanka in May 2008 was cancelled. Furthermore, plans to establish a training and research centre in Sri Lanka which the WB had agreed to finance was abandoned- to my understanding.

 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 standardization of goods specifications. In the medium term, some of the recommendations were to create a Procurement Regulatory Agency, establish 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 swept away with the foregoing shut down.

 The other side of the same coin is contractor registration where different client organizations had been registering contractors during the past using different criteria. To avoid anomalies and to maintain uniformity, the earlier governments had decided to register contractors centrally. In 1989 Central Registration scheme was started by Institute for Construction Training and Development (ICTAD) and it was revised in 1993, 1995 and 2008. As known to anyone, registration and grading is a screening process for the capabilities of prospective contractors to determine their general 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 capability, the technical ability with staff and plant & machinery, and the experience gained in relevant fields. Initially under this scheme the contractors were classified under 10 grades (M1 to M10) on financial terms. This M grading system was revised in 2008 and new grading system C1 to C10 was introduced. Meanwhile ICTAD registration is a requirement for obtaining government contracts and there were over 2500 Construction Contractors registered with ICTAD. However, this amount remained unchanged over a period of 5-6 years, apparently because of the lack of concern over the ICTAD registration by state sector organizations. Who cares for something unwanted?

 Under 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 a considerable powers including acquisition of property if necessary. It provided for the establishment of two serious entities namely 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 amongst the job specification of the foregoing council. This council is to guide the CIDA in achieving the desired objectives by formulating a national policy on construction. It is said, such a policy shall comprise matters relating to the construction industry and its goals. On completion of the national policy, this council is required to put forward it to the Cabinet of Ministers for approval. However, the subject Minister may, from time to time, for the purpose of implementing the national policy give directions as he may consider necessary. This is in addition to the powers retained with the Minister to appoint four individual members apart from those designated in the Act. Council is a group of nearly 32 persons representing the industry yet, the independence of this council is dubious. Also said is such a policy may, from time to time, be revised in keeping with the developments of the construction industry. Keeping a room for policy changes definitely means a lot since by definition, a policy is a principle, quite firm in 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 in order to lessen the chances that a given policy will have unexpected or unintended consequences.

 The functions of the proposed CIDA are to implement the policy in keeping with the directions issued by the Minister in that regard, anyway. This is what ICTAD has been geared to since its inception. Its function of collating and publishing materials and information is well known. 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. Further it could not maintain a national data base on construction industry and establish standards for technical auditing, for example. If so, the question arises as to why CIDA came into effect while ICTAD is 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 last 10 years due to poor management offers nucleus for the above proposal so that it will no longer exist with the effect of this enactment. Therefore, let us hope the proposed National Council will take a total stock and prepare a balance sheet of the ICTAD in terms of intangible assets such as expertise and liabilities such as lethargy.

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