An appraisal of procurement challenges facing emerging contractors in public sector projects in South Africa

Abstract

Poor participation and performance of emerging contractors in public sector construction projects is currently an issue of major concern in South Africa (SA), as economic development relies mainly on the sustainability of small businesses. While the South African government has endeavoured to make provisions for the advancement of the emerging contractors through the regulatory framework and Section 217(i) of the constitution, earlier studies have revealed that the emerging contractors continue to face several procurement challenges. These procurement challenges have adversely impacted the growth and development of small contractors. Unfortunately, the available provisions in the constitution and the regulatory framework have not been able to adequately solve the problem. This has led to a high rate of small business failures in South Africa. These procurement challenges include late payments, poor contract management, poor cash flow management, the complexity of regulations, too much competition, political interference, and a lack of skills in pricing techniques, to mention a few. This study aimed to appraise the procurement challenges facing emerging contractors in public sector projects in South Africa with a view to developing strategies to mitigate the challenges experienced. The study focused on CIDB-registered construction companies in Gauteng province under CIDB levels 4 and 5 registered as general building and civil engineering classified contractors. The study adhered to a quantitative explanatory approach. A survey questionnaire comprising structured questions relating to the study’s objectives was drawn up and distributed to the participants. The data is presented using the tables while the analysis of the data was achieved through using the appropriate descriptive and inferential statistics to measure characteristics of the study population and to make inferences about the population from data set respectively. The study found that late payments, political interference, poorly managed cash flows, too much competition, and a lack of understanding of pricing techniques were the top five critical challenges facing the emerging contractors in the South African construction industry. Further investigation on the impacts of the identified challenges facing the emerging contractors in South Africa revealed that project cost and time overruns, lack of access to public sector contractors, loss of profits, blacklisting by creditors, liquidation, and abandoned projects negatively impact the success of the emerging contractors in South Africa. The study further identified potential measures to overcome the identified procurement challenges. These measures include: reviewing procurement policies for contractor development with emphasis on business and management skills development programmes; access to finance be made easily accessible; contractors be trained to separate business operations from family operations, including proper cash flow management; skills development training specifically for small contractors; joint venture partnerships for emerging contractors to curb financial and administrative burdens and skills transfer; implementing early payment arrangements with the organs of state and ensuring timely payments from clients; breaking down bids into smaller projects; the provision of more and detailed information for bids during the tender stage; the relaxation of unnecessary bureaucratic procedures; the provision of tax holidays; and after care and follow-up training to be provided to ensure that the small contractors remain in business. Based on these findings, impacts, and mitigation measures, the study recommends revising government policies regarding the payment of emerging contractors to address the challenge of late payments, thus prioritising timely payments for all emerging contractors and, where possible, establishing early payment arrangements; the training of emerging contractors and skills development be prioritised; and entry-level training for CIDB Level/Grade 1 contractors be implemented to upskill those emerging contractors.