The role of the private sector in enhancing infrastructure transparency
Within a national economy, private companies bid for and deliver publicly-funded infrastructure projects. Responsible companies take pride in delivering high quality projects, on time and with cost-effective use of public funds. Where companies do not behave responsibly, there is a need to maintain fair competition for all.
Why is CoST beneficial to the private sector?
CoST aligns strongly with the aims of the private sector – it promotes fair competition for contracts and encourages more effective project management by procuring entities. For instance, interactive dashboards on Ukraine’s open data portal offers the private sector highly useful commercial insight including who is winning contracts, time and cost overruns and variations in infrastructure investment regionally.
CoST also limits the opportunity for corruption, which damages both the reputation and efficiency of the sector.
Potential benefits of CoST to the private sector:
• Better procurement creates a ‘level playing field’ and improves private sector confidence
• Better project management by procuring entities enhances overall project quality and the likelihood of projects delivered on time and within budget
• Better financial management can increase access to private capital and more favourable lending terms
• Reduced levels of corruption reopens markets which had previously been considered off-limits by responsible companies
• Greater transparency and accountability reduces reputational risk from association with projects where corruption has taken place
Strengthening business integrity in Uganda
Working as part of the UK Government’s Business Integrity Initiative (BII), CoST Uganda’s programme Promoting fair business practices in Uganda led to key reforms with the potential for lasting impact on competition, contract price and quality in public procurement. These include an increase in private sector understanding of – and participation in – the infrastructure procurement process. This has increased competition, with the number of bids per tender for infrastructure projects increasing from 1.6 in 2019 to 12.5 in 2020. There have also been Improvements in local content provisions, with reservation schemes (which ‘reserve’ contracts for national and resident firms) reviewed to include more sectors for local providers
Private sector benefits at the international level
CoST is also hugely beneficial to private actors at the international level. For instance, responsible international infrastructure companies seek fair and transparent access to contracts and good management, and will seek work where these conditions are most closely met.
Greater accountability and reduced corruption will encourage international and local construction companies to compete for work. This can have advantages for the national economy and governments because it:
• Enhances the country’s market credibility
• Is a positive factor for inward investment
• Encourages access to credit and loans on more favourable terms.
CoST was delighted to report that its approach was officially endorsed by the global engineering body FIDIC on International Anti-Corruption Day 2019. This encouraged the 102 Member Associations of FIDIC to examine how CoST can catalyse improved practices. With support such as this, the conditions for effective infrastructure investment can be realised.
Involving the private sector through multi-stakeholder working
The private sector plays a key role within CoST national programmes, notably through participation in multi-stakeholder groups (MSGs) which guide CoST implementation. In every national programme, MSG representatives include those from private companies and professional associations from across the infrastructure sector.
These members bring in managerial knowledge of the sector and they can help to translate the complexities of infrastructure projects to other members of the group. Their involvement also gives further credibility to the MSG as the group increases its engagement with other private sector actors and with government. They can protect the infrastructure sector against any false accusations of wrongdoing and demonstrates a united approach in the call for greater transparency.
Building private sector skills and knowledge
CoST works with influential actors from the private sector to build their capacity on the CoST approach, with a focus on increasing and improving data disclosure. In addition to this, CoST works with influential construction sector bodies to raise awareness on the value of CoST across the private sector. For instance, in a series of webinars held in collaboration with the Afghanistan Builders’ Association throughout 2020, CoST Afghanistan engaged over 460 members of the construction industry on best practice in bidding for public contracts. Read more about this training in Afghanistan.
More details on the role of the private sector as part of CoST’s multi-stakeholder approach an be found in the Guidance Note: Establishing a CoST Multi-Stakeholder Group (also available in Spanish).