This briefing note has two aims:
- To show policy-makers that expanding the local content of infrastructure projects is an achievable objective with real long-term benefits
- To provide practical guidance to assist governments to achieve this through actions at various stages of the procurement cycle. The immediate benefits and development outcomes of the successful implementation of a local content policy.
- The immediate benefits are more employment in the construction and supply industries, opportunities for local consultants, increased work for local contractors and market openings for suppliers of materials and components. The contributions to development outcomes are inclusive growth, poverty alleviation and more sustainable infrastructure services.
The following Actions are recommended at each stage of the procurement cycle.
They may be summarised as follows:
1. Initial planning
The decisions taken at the project identification and initial planning stage of a project can have the biggest impact on the
achievement of local content objectives. Essential steps are:
- consulting with local users and affected communities
- developing an operation and maintenance strategy for each new project
- evaluating alternative solutions and designs for the opportunities presented to build local capacity
2. Detailed design
Detailed designs should, where appropriate, specify technologies and methods of work that are within the capability of local contractors.
Standardising designs allows local contractors to build their skills and increase their efficiency, while specifying locally produced materials, components and equipment can generate employment and business opportunities in the
supply industries. Designing for labour-based approaches can create additional employment opportunities, often at lower
cost and saving on foreign exchange.
3. Appointment of consultants
The important role that consultants can play in promoting local content through design and specification suggests the need for careful evaluation of their track record and their proposals in these areas prior to appointment. Clients should set
out their requirements clearly in the terms of reference or scope of works and consultants’ technical submissions should contain suggestions for the promotion of local content on the project and a written plan for the transfer of technology to
local consultants and building of skills.
4. Procurement strategy
It is important to consider the most appropriate procurement strategy to deliver the objectives of the project.
Clients can do much to ease the financial constraints facing local contractors by waiving the requirement for bonds, introducing a prompt payment regime, or separating the procurement of materials and labour. Involving communities in
procurement may benefit local enterprises, generate ownership and increase the chance of the facility being maintained.
5. Appointment of contractor
Prequalification and local registers can be used to ensure that local contractors with the right experience are awarded work,
while serial contracts can ensure continuous work for promising contractors. Unbundling contracts into different sized packages can both increase the number of submissions from the local contracting community and allow contractors to grow. Clients’ procuring entities should also take advantage of the opportunities within existing guidelines to ‘set aside’ contracts for local firms.
6. Contract agreement
Contracts should be appropriate to the size, nature and location of the project and available in local languages. They may require that unskilled labour be locally sourced.
While any of the recommendations presented above may be adopted on any individual projects, together they constitute the elements of a national policy for promoting local content in public infrastructure procurement.
They could be turned into a series of guidelines for public sector clients to consider.
Some of the more experienced and innovative clients may be willing to take the lead in piloting the guidelines on a range of projects. Monitoring and evaluation of the pilots will reveal what works and provide more information on the trade-offs. Revised guidelines could then be disseminated throughout the public sector.
As a relatively easy first step, government might consider actions to assist local enterprises with access to capital at reasonable rates of interest. Donors, for their part, should recognise that building local capacity is a valid objective and support countries that are seriously trying to do this.
7. Handover, operation and maintenance
The contractor who built the facility should be contracted to provide guidance to the team responsible for operation
and maintenance (O&M) for a specified period of time. If O&M is contracted out, the measures suggested above apply equally to the appointment of the O&M contractor.
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