The link between climate, development and infrastructure is unalterable and firmly anchored in the 2030 Global Goals Agenda. But the increasingly stringent international environmental and social requirements are forcing international donors and governments in charge of public procurement to thoroughly rethink the decision-making processes and tools that support these projects. Hiding behind standards is a gamble. Standards can certainly provide an impetus. Operational experience shows that the heart of the issues at stake are located upstream – in the design phase. And downstream – in the operational translation of the standards into the contextual reality of the projects. Ksapa’s operational experience with various donors, project owners and project managers across a wide range of markets leads to several lessons shared in this article.
An Observation Shared by All
There is a consensus, especially in emerging economies, to encourage the arrival of new infrastructures to support development. It is in the interest of public project owners. It is at the heart of the mandate of many donors. However, it is important to ensure that these new infrastructures do not further degrade the climate footprint of countries and do not violate human rights.
- In application of climate commitments, governments are now committing to Nationally Determined Contributions (NDCs). In collaboration with international donor partners who are also committed to the Paris Agreements, it is necessary to rethink the entire cycle of design, production and use of infrastructure in line with an acceptable climate trajectory.
- Also, in coherence with a set of convergent and cohesive regulations pushing for a better consideration of human rights (Biden’s Clean Energy Plan, EU Green Deal efforts …), here again, donors and countries must work with the necessary vigilance along the life cycle of infrastructure.
It is already clear that the issues raised in this article are consensual and largely shared by the donors themselves.
Thus, we can see the importance of the field. And the lack of coherence in which too many infrastructure projects are currently embedded in the territories: climatic incoherence, lack of spin-offs on the territories, lack of consideration of the maintenance and sustainability issues of these infrastructures in view of environmental imperatives and local deficits in adequate skills for example.
5 Lessons for Aligning Public Procurement with Global Goals
Ksapa has worked on various programs side by side with international multilateral donors, development agencies, private investors (CIB type), States or organizations in charge of project management and especially companies taking responsibility for project management in the realization of infrastructures (mobility, energy, housing, technological infrastructures, water and sanitation for example…).
These programs have been widely deployed in the world: OECD, Latin America, Africa, Middle East, Asia Pacific, Oceania. Ksapa’s interventions have sometimes allowed us to accompany donors in the evaluation of programs. Or to accompany the project owner or the project manager in the operational integration of the expectations carried by different standards, in the technical, contextual and territorial reality of infrastructure projects.
Our teams have been able to work with different international standards. These lessons are therefore drawn from these different works and do not seek to question the relevance of this or that standard. We have thus been able to base our work on the following standards in particular: Asian Infrastructure Investment Bank (AIIB), World Bank (IFC Performance Standards), OECD (Guiding Principles for Multinational Enterprises), Guide on Social Responsibility for Chinese International Contractors, United Nations Guiding Principles on Business and Human Rights, ILO conventions. We were also able to study and work with other more specific or granular standards included in a database of over 300 references.
We were able to draw several lessons from these different interventions that we are sharing in order to contribute to the debate and the implementation of targeted responses that we believe are likely to significantly align new infrastructure projects with the impact trajectory clearly desired and communicated by their financiers and project owners.
1. Prior alignment between donors and project owners on the typology and degree of requirement to be given to environmental and social considerations from the project design stage
Let’s put it simply: the consideration of social and environmental dimensions in infrastructure projects is multidimensional. On the other hand, decision-makers generally carry other expertise and have little knowledge of the subjects. Let’s take two examples:
- The project owner is primarily interested in the sovereign issue of the development of the territory carried by the arrival of a new infrastructure. The calibration of an infrastructure project on a climate trajectory consistent with the Paris Agreements may require a serious review of the copy. Asymmetric information and insufficient technical studies from the design phase onwards can create a lasting climate misunderstanding in the project, which can be dragged along like a burden in the subsequent stages.
- Without trying to state the obvious, it is very likely that about 50% of the beneficiaries of public infrastructure are women and girls. Yet, the few cases of good practice demonstrated by the limited literature on these issues, including ensuring a stand alone gender assessment is performed in the design of these infrastructure projects, reveal many surprises and points of vigilance. Ignorance of these issues leads to the inclusion of various determinants in the life cycle of these projects, which run counter to the equity objectives often supported by public and financial partners
Behind the development issues, it is essential to ensure a good understanding of the environmental and social issues likely to be involved in infrastructure projects between donors acting as public guarantors and the project owners responsible for territorial development projects and the design of these structures. There are various tools available to ask the right questions upstream. If an impact study makes it possible to take issues into account, a material review of the issues upstream ensuring a good alignment on the themes and the criticality of taking them into account upstream is essential to serve as a compass throughout the definition and then supervision of projects thereafter.
2. Knowledge and qualification of potential contractors (skills and track records)
The public order must respect the stakes of free competition and anti trust. Of course. The public order is accountable for public expenditure. Certainly. However, various scandals have plagued the development of infrastructure projects. Exceeded costs and deadlines. Construction sites causing various problems that are widely reported and identified. For example, we were able to work on a project where one of the service providers was dumping waste that polluted wells, creating tensions with the local population. In another project, cases of rape of local women by workers in base camps were documented. Yet another project where workers made a bad mistake (!) and used the ablutions site of a religious site as a latrine due to a lack of knowledge of the location and local practices.
We are talking here about the construction of infrastructures that are particularly expected and emblematic in the host countries. A bridge that will permanently break down the barriers of a territory. An energy production site (renewable energy of course) that will revolutionize the daily life of the people it targets. A sanitation system that will significantly reduce childhood diseases that are of concern to health authorities as much as to families. A stadium that is supposed to make the people proud for the festive moments to come. Associating these emblematic constructions with so many examples of avoidable scandals is all the more necessary as these scandals undermine the very meaning of the development project carried out by the donors and the project owners.
In this regard, we are too often surprised to identify simply deficient due diligence procedures in the selection of service providers invited to share their technical offers. At the very least, these due diligences should explore two questions, while obviously allowing the supplier to argue:
- Has there been a history of delivery that did not meet technical, environmental, and social expectations on previously funded projects in the previous 3-5 years?
- Has the potential provider been involved in an environmental/social scandal documented in the institutional or social media regarding a particular recent project?
If the identified providers are obliged to answer yes in view of identified and documented facts, it is interesting to listen to the lessons they will have learned in their ability to improve the design and execution of services. This is not necessarily an opportunity to exclude these providers, but it is an opportunity to understand whether conclusions that could have fed a continuous improvement process could have been drawn. It is also an opportunity to use these lessons to reinforce the specifications or the points of scrutiny to be included in the monitoring of the performance of the services.
3. Comparability of the technical offers in their capacity to factor in the costs necessary to take account of environmental and social commitments in the execution of the services, as well as in the maintenance costs to be considered for the infrastructures in consideration
We have been able to consult technical bids that are committed to comparable environmental and social criteria, while charging prices that vary significantly between them. This generally raises two questions:
- Has the business developer responsible for submitting the technical offer at the bidder level fully understood the commitments to respect the standards to which he/she apparently intends to align himself/herself?
- Considering that this is the case, to what extent does the detail of the technical offer permit an in-depth understanding of the technical and human resources provided to ensure the proper operational integration of the resources required to fulfill the contractual commitments?
We are not here to challenge the competitiveness of private players. It is up to each player to identify and harness the many levers at their disposal to ensure the best possible price competitiveness in response to the various technical and time constraints imposed. Ultimately, it is up to each bidder, in a competitive bidding process, to propose the most attractive pricing profile.
However, we come up against the rigor of a public order too generally focused on the price that will simply be the lowest in absolute value. It is true that it is necessary to be accountable when spending public money. Certainly, the public purchaser is accountable for strict procedures. Certainly, the debt and the increasing cost of the debt require an ever more thorough reflection on the control of public spending.
Yet none of these arguments should prevent the public purchaser from benefiting from comparable elements between different bids, ensuring that the price asked is indeed the right price necessary to carry out the activities in accordance with the social and environmental ambitions of the various infrastructure projects. Whether the price charged ensures access to sustainable infrastructure, the maintenance of which will not adversely affect the control of public spending in the future.
Thus, we observe that the assessment of calls for tender requires both a general strengthening of skills and tools. This is needed to ensure a well-founded and comparable assessment that makes it possible to understand the capacity of the proposed services to be carried out in an operational manner, in accordance with the commitments expressed in the standards. Without information allowing to understand how different activities would be achievable within a given cost or timeframe, it is appropriate to disqualify offers that are deemed not credible. More specifically, we have identified 4 points of caution:
- Question and compare the offers in the architect’ s and technical choices proposed in a logic of taking into account the conduits induced in terms of maintenance by the choices made. We have seen a number of energy-drainining buildings designed by architects who did not consider the environmental consequences of their design proposals. The use of cheap sea sand in concrete can raise questions about human rights, while at the same time being likely to affect the quality of the construction, as the salt and chloride can corrode the steel reinforcement and require regular and rapid repairs once the structure is in operation… As we can see, questioning the cost of maintenance induced by technical choices is a good way of broadening the review of risks and questioning the notion of fair price.
- Question and verify the skills and references of the project managers who will be responsible for carrying out the projects submitted. In addition to the necessary technical expertise, it is important to work with a team of decision-makers who have a good understanding of environmental and social standards, a strong track record of engaging diverse stakeholders beyond a few institutional actors who are unfortunately not always representative of the realities on the ground, and a solid ability to uphold and enforce rigorous integrity procedures
- Question and compare the activities proposed by the different bidders to understand to what extent the correct operational application of the standards is factored into the cost of the services: recruitment and training efforts, qualification and certified accreditation of subcontractors responsible for sensitive activities, traceability of sensitive supplies, provision of auditing resources and possible controls
- Question and compare the methods proposed by the bidders to mitigate the risks of deviations from the quality/cost/time commitments that could call into question the continuity of efforts to apply the standards. For example, the problems of corruption appear more acutely in situations operating under very tight deadlines
4. Funds should be released only when credible operational plans are in place and aligned with contractual commitments
Here again we have a strategic and operational challenge, which is all too common. Two scenarios may arise all too often:
- The project owner’s insufficient understanding of the risks expected in 1. and/or what the operational implementation of donor-imposed standards requires on the ground may have resulted in an insufficient prior assessment of the local environmental and social risks carried by an infrastructure project. Deficient public hearings. Controversial land acquisition. Minorities or marginalized populations not taken into account in the project’s territorial footprint. Private operators are then facing an underestimated operational reality, mainly due to a lack of competence and tools in the project owner’s charge.
- For the project manager, an insufficient quantifying of the costs generated by the operational implementation of the standards to which he/she is committed also poses major challenges. Too often, a team in charge of business development does not work sufficiently in coordination with a team in charge of operational execution once the contracts have been awarded. These two teams operate on agendas that are focused on winning business on the one hand. On the other hand, to execute within the imposed costs and deadlines. Between the two, the proper appraisal of the efforts required to take into account social considerations (e.g., training and issuing accreditations to subcontractors takes time), or environmental considerations (e.g., sanctuarizing spaces devoted to species protected by the IUCN takes time), or cultural considerations (e.g., ensuring the peaceful coexistence of activities aimed at integrating an infrastructure footprint into a territory that already has its own social and cultural life takes time).
In both scenarios, it is not only an assembly of skills, but also a set of reference documents that commit the project owner and the project manager to a detailed implementation of the activities and the translation of theoretical expectations supported by standards into a particular contextual set-up. Intense fieldwork is essential. This type of work cannot be done remotely by hiding behind concepts, standards and tools.
Once a call for tenders has been awarded, the ability of the service provider (or consortium) to agree and propose an execution plan ensuring that social and environmental criteria are taken into account throughout the execution of the service is essential. In line with the contractual commitments, it should not generate any unexpected surprises, but allows to enter an operational phase that organizes and interprets the different considerations along the operational execution of the projects.
5. Monitoring and control of contractual execution
The validation of the execution phases of the projects focuses on the technical specifications, opening to the funds release by the donors and under the responsibility above all of the project owner and the experts accompanying him. Once the tender has been awarded, there are few clauses requiring the project owner to provide evidence of the application of the environmental and social commitments made in the contract.
Admittedly, quality reviews are regularly organized. Indeed, many contractors work in a disciplined way in the respect of the contractual commitments signed. It is also clear that feedback from the local population, elected officials, the media and other stakeholders can always help identify deficiencies and corrections that need to be made in the execution of projects.
However, if activities are deployed in accordance with contractual expectations and in application of plans that ensure that the standards in question are taken into account operationally, nothing should make proactive and regular reporting difficult. This is a way for the donor and the project owner to collect information along the project’s progress, documenting the proper execution of commitments. In the event of any difficulties, this type of reporting ensures that all stakeholders have a shared and enforceable basis of information. We have even seen cases where intermediate releases of funds were conditional on prior reporting at regular intervals. In our view, this is again an excellent practice to consider. Here are some examples:
- In order to avoid any risk of illegal work on a construction site, we have been able to consult reports concerning regular listings allowing us to verify that the names on the construction site were consistent with the declarations of workers subject to the payment of labor taxes (in compliance with confidential and sensitive data, excluding, of course, the data in figures for example)
- In order to monitor the proper implementation of a program aimed at recruiting and training locally, with a cost associated with these activities guaranteeing spin-offs along territories impacted by infrastructure projects, we were able to observe the annual sharing of information allowing us to verify attendance sheets giving information on the number of people trained, supply vouchers showing that specific equipment was purchased
- In order to justify the additional costs associated with the supply of sensitive materials, we were able to consult reporting documents providing evidence (certificates, delivery slips) guaranteeing that the materials were indeed purchased from qualified subcontractors and that in the meantime the service providers had not changed their supplies in order to increase their margins to the detriment of the social and environmental guarantees contractually agreed upon
There are always limits and ways to circumvent reporting mechanisms. When you don’t want to comply, you don’t want to comply. There are always limits to control systems. When you don’t want to see the problems, you don’t want to. In a context where regulatory compliance, notably with respect to energy transition, human rights and the circular economy, these proactive and regular reporting systems, which monitor infrastructure projects that are often emblematic and closely scrutinized by many stakeholders, make it possible to document and have enforceable elements that illustrate a genuine best effort.
The consideration of these different points of progress is mainly subject to 3 challenges:
- The articulation with the regulatory systems of public order which are not very flexible and which should be reformed accordingly
- The lack of skills and resources allocated to the analysis and monitoring of these projects
- These points are particularly affected in the next few years by the increasing cost of public debt, which will not make it easier to increase the resources to be devoted to them
Digitalization appears to be an essential lever for productivity and efficiency. It is indeed possible to set up documented and opposable digital devices, which can significantly assist the work of the public decision-maker, in a logic of better taking into account the “total quality” of the infrastructure projects, in their complexity and in the duration.
Ksapa works with a network of 150+ experts across the G20 economies, Africa and Asia Pacific and remains available to provide further guidance and advance these complex and critical issues with great interest.