Archive | February, 2012

Mainstreaming Community Contracting

Posted on 11 February 2012 by Ingming Aberia

The Manila Office of the International Labour Organization (ILO) recently piloted community infrastructure projects that sought to achieve multiple objectives. The objectives included capacitating organized communities to become contractors for small infrastructure projects, generation of “green jobs” in the countryside, and putting up infrastructures that addressed climate change issues or promoted disaster risk reduction strategies.

Dubbed “Local Development through Infrastructure and Jobs,” the ILO projects were separately implemented in Dolores, Eastern Samar (Lined Drainage Canal), Iloilo City (small community infrastructures), Tatalon, Quezon City and Binan, Laguna (both drainage rehabilitation). Impact evaluation data showed that these projects have generally achieved their objectives.

The satisfactory implementation of the ILO projects suggested that “community contracting” (as it is called by some of its advocates) as a mode of implementing infrastructure projects is a viable proposition. This approach required community members to organize themselves into a corporate entity—sanctioned by the regulatory power of government (through either the Securities and Exchange Commission, Cooperative Development Authority or the Department of Labor and Employment—that is, with a legal standing to enter into a contract with the project owner, which is the ILO in this case. After having been awarded the contract, the community contractor then proceeded to construct the infrastructures and to bill the ILO for payment upon work completion.

It was the community contractor’s task to manage its operations. This meant somebody would be assigned to procure construction materials. Another one would supervise and rotate the laborers. Still another one would handle the payrolls, prepare progress reports, etc. Of course the ILO had to provide training support to improve their skills in those so-called management functions, including skills in construction and carpentry work.

Similar models have been tested in other places. An example is KALAHI CIDSS. The Department of Social Welfare and Development, with support from the World Bank and the Millennium Challenge Corporation, is now on its tenth year of implementing this project. KALAHI CIDSS has been reviewed as generally successful in raising the capacity of communities to manage their own projects—from planning to implementation and maintenance. These projects included infrastructures such as water systems, day care centers, health centers, basic education facilities, road regravelling, drainage canals, etc.

However, the KALAHI CIDSS was not meant to promote community contracting. It has a strategic community development agenda. Communities are regarded as more than just a contracting entity. They own their issues and, given capacity development inputs, the ways by which they could address those issues, as shown for example by the infrastructure facilities they were able to put up. In short, KALAHI CIDSS facilitates the transformation of communities from being project beneficiaries to being masters of their fate.

But while the ILO and KALAHI experiences have shown that the capacity of community contractors to implement infrastructure projects can be enhanced, there is nothing to show that, as a player in the contracting industry, they have reached a level where they can compete with the big guys, so to speak. To successfully bid for infrastructure projects, and for government infrastructure projects in particular, a would-be contractor needs to comply with a rigid set of eligibility and qualification requirements. A contractor’s license and proof of financial capacity are just two of the basic requirements, and community contractors that can comply with them hardly exist. Apart from eligibility and qualification difficulties (assuming they overcome them), the prevailing view is that community contractors getting ranked and considered for possible contract award would be exceptions to the norm.

To repeat, what keeps community contractors from staying in the business (again where bidding for government infrastructure projects is concerned) is their inability to compete. The Government Procurement Reform Act (also known as RA 9184) requires that all procurement in government (such as for infrastructure projects) must undergo a process of public competitive bidding. Thus, given their “fledgling handicaps,” the only way by which community contractors can gain entry to the bidding market—and stay there while they grow their feathers—is to make the most of conditions under which “alternative modes of procurement” are allowed. There are three possibilities:

1) Small Value Procurement (SVP). With community contractors in mind, government agencies (including first class cities and provinces) can contract out infrastructure projects costing Php .5 million or less (eg for basic education facilities, health centers, road maintenance, etc.) using less stringent bidding procedures. For “poorer” local government units (second class and below), the SVP thresholds range from a low of Php 50,000 to a high of Php 400,000.

2) Joint Venture Agreement (JVA). For community contractors who cannot qualify under GPRA’s standard bidding procedures, they may explore the possibility of bidding for infrastructure projects through JVAs with established contractors. The latter helps resolve the eligibility issue; the community contractor can help reduce operating costs with its readily available supply of labor. The challenge would be to present an enticing JVA offer, such as showing how profitable such an arrangement would be to all parties concerned.

3) Non-government Organization (NGO) preference. The GPRA allows procurement where bidders are limited to NGOs. However, the law or ordinance that appropriates funds for such procurement must specify that there is such a limitation. There is also a GPRA provision for government agencies wishing to implement projects through “Community Participation,” the route—along with World Bank procedures—which the DSWD has taken for KALAHI CIDSS.

Both the ILO and KALAHI projects have shown higher-than-average cost-efficiency ratios. The ILO projects cost 25 percent less than similar projects completed in nearby localities. Road upgrading (gravel to concrete) in KALAHI (2006) cost an average of Php 2.6 million per kilometer; the average ranges from Php 10 million to Php 12 million per kilometer for DPWH-designed similar road upgrading projects.

Thus, aside from empowering communities, and in the process helping them achieve economic objectives enroute to promoting the ends of social leveling, community contracting offers government avenues by which it can implement quality projects at less costs. Every taxpayer would do well to see the community contracting mode mainstreamed into the procurement process for government infrastructure projects.

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