Contractor Incubator Programme NDPW 2008 Presentation: Overview.

Contractor Incubator Programme

NDPW 2008

Presentation: Overview

Background

The NDPW has since the inception of the procurement reform in 1995 been actively involved in conceptualising and implementing programmes to promote emerging contractors, These include: Targeted or Affirmative Procurement Policy

(TPP/APP) Emerging Contractor Development Programme

(ECDP) CIDB Construction Transformation Charter

Why Incubator Programme?Experience of the DPW & The Status Quo Report (2002/2004)• Achievements

– Increased participation of HDIs in the mainstream economy– Increased economic activity in depressed areas– Minimum premium

• Challenges – Oversupply of small contractors– Lack of sustainability of the targeted enterprises and the inability of these

enterprises to compete in the open market– Issues that limit the growth of emerging contractors include

• Perceived low entry• Market conditions – fluctuating work for contractors• Client related constraints – e.g. delayed payment • Contractor related constraints - lack of business management skills, and• Ineffective support

Objective of the Incubator Programme

To create an environment that enables the growth and development of small to medium sized construction enterprises to become sustainable construction enterprises.

Key Elements

The environment is composed of: Steady access to work opportunities to ensure

sustainability Supply side measures underpinned by an

enterprise development programme including: mentorship, training, finance and information

Enabling environment namely: uniform and standard procurement and contract documentation and practices, and prompt payment

The key elements are contained overall guideline ie. the CIP management plan - distribution.doc

Entry CriteriaTo participate in the CIP, prospective participants should adhere to the following acceptance criteria:

Active CIDB grading 3 – 7 Construction experience or construction related

training (Works Capability – CIDB criteria) Financial capability and track record (CIDB min

criteria for grade 3) Access to skilled staff Level of contractor development (SACEM) Preference given to blacks, women, youth and the

disabled

Envisaged outcomes To create sustainable contracting enterprises….

• Entities who have knowledge and capability to integrate finance, human and material resources to produce a construction product.

At the end of year three (contractor duration on CIP): Increased number of sustainable black contractors

able to execute relatively large projects (R1,5m– R30m)

Improved commercial and managerial capacity of black contractors in the construction industry

Invitation to Register for

CIP (HO/RO)

Selection of

Applicants (CIP Guidelines)

(HO & RO)

Approval(HO)

identify suitableProjects

(Steering Comm)

Create CIPRegister of

Participants (HO)

Invite MentorsTo

apply(HO/RO)

Call for expression

Of Interest in Projects

(HO & RO)

AppointMentors

Finalise Available work

programme

FinaliseExpression of

Interest list(CIDB Category

Invite CIPContractors to

bid(SCM)

Enterprise Development

Plan(mentor & contractor

Evaluation Of

Bids (RBC)

Award of

contract (RBC)

Structured Mentorship,

Training, Finance & Institutional

support

Stage 1 CIP Processes

MentorsAssessment of

Contractor's Level of

Development

Monthly, Quarterly &

Annual Assessment

FinalAssessment

(SustainabilityIndicators)

Contractor exit –

end of yr 3

Access to Work Opportunities

Work opportunity not guaranteed DPW to allocate work to CIP to:

• Enable project-based mentorship and training

• Ensure contractor sustainability Procurement with the PPPFA and DPW Supply Chain

Management framework

• Closed tendering (nominated procedure) Expression of interest

• Consolidation of interest and opportunities

• Inviting suitable participants to bid

Project Identification

Identify potential projects though strategic planning and budgeting (MTEF)

Categorise the projects by value, risk, priority, complexity and size

Consideration for• Match to existing contractors• Size and value of the contracts (grading 3 – 7)• DPW priority• Complexity (general building and structural civil)• Term (maintenance) projects are likely to be highly

desirable

Procurement Strategy

The procurement policy makes provision for nomination from a pre-qualified CIP list (i.e. nominated procedure)

Strategy allows for direct tendering, sub-contracting, joint ventures and other forms of tendering (CIDB prescripts)

Access to Mentorship Mentor responsibilities:

• Assists the contracting enterprise to assess its level of development and strengths and weaknesses (SACEM)

• Guides the contracting enterprise through a development programme

• Provides both technical (project related) and business (enterprise development) support and coaching based on development plans

• Selects appropriate training• Facilitate (with Programme Management Team) access to the

support mechanisms e.g. technology and institutional support• Assesses the contracting enterprise for improvement on a

monthly, quarterly, annually and upon exit to the programme

Access to Training

Contractor assessments provides a framework for determining training requirements

Training is incorporated in the contractor development plans All training intervention should be within the SAQA (& CETA)

framework and guidelines

Access to Finance

Arrangement with SBSA to facilitate efficient access to working and asset based capital (guarantee finance, purchase materials, pay labour)

Internal enabling environment (DPW guarantee scheme, shorter payment intervals)

Other Support (within the NCDP):• Financial support from NURCHA • Strategy for sustainable access to finance …

being developed

Incubation Process

CIDB Registers

Select contractors

Select contracts

MTEF

ResponsivenessCriteria

[selection criteria]

INCUBATION

Secure budget

Sustainable contractors

Development ProcessENTRY

(Entry/selectioncriteria)

INITIALASSESSMENT(Sustainability

indicators)

EXITASSESSMENT(Sustainability

indicators)

EXITEXAMINATION

Sustainable?

YES

NO

INCUBATION /MENTORSHIP

TRAINING

CERTIFICATION

This process will be continuously monitored and evaluated by the Incubator Management Team

Monitoring & Evaluation

Incorporates contractor, mentor and project performance Contractor performance: SACEM assessments (reports

and development plans) Mentorship: mentor reports Project: project management reports Monthly, quarterly, annual and exit reports Interpretation of the contractor business results e.g.

improvement of the financial bank rating, profitability, cidb grading

Exit Strategy

At the end of three years, the contractor will exit the CIP at the level where the sustainability criteria have been met over the last three assessments.

In brief, the contractor exit criteria is: • CIDB grading at the level to which being

mentored, i.e. satisfies CIDB criteria for grading one level higher than currently registered.

The afore-mentioned criterion is based on the contractor's potential and capability to profitably deliver projects as required by the clients.

Business Results To be considered sustainable, a contracting enterprise

must meet the following criteria:

• is legally established and appropriately registered;• has a market niche that is not stretched too widely across different types of work;• understands the various construction processes and has the required networks

for contracting;• has the staff with the necessary technical and managerial skills and knowledge

to carry out work;• has established technical and business systems and processes and has access

to other resources to execute the work;• has delivered consistently good results; and• has a stable and positive cash-flow and a growing assets base.

Resources

The main resources required are: DPW project managers

Programme Management Team Steering Committees

Contractors (commitment) Mentors Training management support (External) Technical consultants Budgets

Risks

Mismatch of contractors with available contracts Contractors falling out before the end of the

programme Inappropriate sustainability indicators Problem with stakeholder understanding and buy-in

Key Success Factors

Selection of Right Project Team as well as mentors Selection of appropriate contractors and contracts Communication and buy-in by stakeholders Phased approach to implementation (Implementation

will be used to validate the indicators) Clear project guidelines and procedures Realistic schedules and delivery deadlines Regular reporting (monitoring and evaluation) Understanding of individual responsibilities Integrated approach

Integrated ApproachPROFESSIONAL

(Architect,Consultant,

Project Manager)

TRAININGSERVICE

PROVIDERS

CLIENT

FINANCIER

MENTOR

EMERGINGCONTRACTOR

CETA

A Partnership Towards Sustainable Contractor

Development

Thank You