Business Forums vs Contractors
In the last few years, there has been a growing trend affecting various construction projects but mainly projects linked to service delivery.
Local community small to medium enterprises have come together under the banner of Local Business Forums and wanted to participate in the project as a contribution of around 30% of the projects works.
This figure of 30% comes from Preferential Procurement Regulations 2017 for Tenders and is not to be confused by whatever EPWP labour targets the projects have to comply with.
Why have Business Forums Emerged?
Service delivery projects by their nature work within communities but large contractors have sometimes failed to engage the community with regards to certain skills that can be found locally.
In the past, it was possible for a service delivery project to start and finish with little to no benefit to local business as the contractor would bring 100% of its staff to complete the works or would only employ general labour with no real intention of up-skilling the local labour or engaging local business.
These local businesses have come together to engage projects as soon they are announced to see how they can form part of the 30% project participation goals. They need to see what work and which skills can be transferred from the larger company to the community. The business is meant to act as a mentor company and assist the local contractor in accessing a portion of these projects.
Why the Conflict?
There are many reasons why some of these engagements between business forums and main contractors end up in conflict.
At times the main contractor is not interested in engaging the local contractors, and this sometimes leads to protests or lockouts as a tool to force the contractor to engage. Once the client hears of unrest, it is usually a motivator for engagement to begin.
Another reason is that local contractors are not always lifelong built environment professionals and do not have the skills or staff to execute the project at the level of quality required.
However, they still want access to the project and to a scope of work that may delay or affect the quality of the works because of their lack of ability to execute to the required standard. The oversupply of will and deficit in skills can also result in conflict on site.
Another major reason for turbulent engagement is the unreasonable expectation of rates from both main contractor and potential subcontractor with neither willing to negotiate to a position that is suitable for the other.
The main contractor may not want to pay a fair rate to the subcontractor, and in turn, the local subcontractor may have a rate in mind, which far exceeds what is available even to the main contractor. The subcontractor may not understand what is a fair and reasonable rate.
On some projects that I have worked on, I have been told that contractors make as much as 70% from a project and in these tough times in our industry 70% is not even a dream.
Is there a Solution?
The reality is that business forums will be here for the foreseeable future as their birth is not motivated by the lack of contractors but the lack of access to opportunities in projects developed in their communities.
When the client is planning for service delivery projects, they should consider the challenges the contractor may face. The project deliverables should not only be “on time and within budget” but also consider that the project is a service delivery project, and skills transfer, as well as business and technical mentorship, should be part of the main contractor’s scope.
It is also necessary for government, as the client, to properly announce these projects and educate the local business forum on what is a realistic expectation from the main contractor.
The government as the authority on the project must set the standard that both main and subcontractor adhere to so that both parties can start the project on a note of partnership and inclusivity to achieve project completion.
It should also not be an exercise done simply to fill a compliance checklist but a deliberate effort to foster a professional and profitable working relationship with all parties.
The future of these types of projects must be reconsidered as it can be used as a way of solving many of the societal and infrastructure problems at once. It is delicate to balance business social responsibility with the responsibility it has to the client and to itself as a professional entity.
However, I believe that through fair engagement, communication, education and transparency, a lot of these challenges can be turned into collaborative strengths that keep businesses profitable and the local community benefitting from service delivery projects.