 Business Information : Public Works
PUBLIC WORKS
► Overview
The launch in 1990 of an extensive reconstruction campaign required equally extensive financing and supervisory work. The Government instructed the Council of Development and Reconstruction (CDR) to adopt a national reconstruction strategy and prepare a National Emergency Recovery Program. The program focused on short-term rehabilitation of basic economic and social infrastructure.
Three years later the CDR developed a broader, long-term investment plan. As the initial programs have neared fulfillment, this, in turn, has been superseded by a new five-year development plan based on the new government’s priorities. These included: meeting urgent social needs, equitable regional development, supporting productive sectors, and completing ongoing projects. By the end of 2001, work was ongoing or had been completed on $5.8 billion worth of public works projects.
► public works tenders
Syndicate of Public Works Contractors
The syndicate is an umbrella organization for companies and individuals in construction. It has 2,250 members. While membership is voluntary, only syndicate members are allowed to bid for public projects. The organization lobbies for the passage of regulations and encourages actions that promote the interests of its members. Annual dues vary depending on the size, capabilities, and experience of the applicant company
Tenders Administration
The states entrusts the Tenders Administration, a central body within the Central Inspection Board, with the task of public procurement. In addition, the Ministry of Public Works conducts procurement operations under a 1942 decree. The legal framework governing such matters lags behind the times and therefore nearly all major public procurement is conducted either by the Council for Development and Reconstruction or via the Cabinet.
Ministry Classification
The Ministries of Public Works, Energy and Water Resources, and Health also classify contractors according to specialization, financial resources, experience, and areas of activity. This is done as part of the general qualification process when selecting candidates to work on public projects.
Management Support Consultancy-Public Works
One of six programs in the European Union-sponsored Investment Planning Program (IPP) for Lebanon is the Management Support Consultancy - Public Works (MSC-PW). The total costs of the IPP amounts to 30 million euros, shared by the government (5 million euros) and the European Commission (25 million euros). The IPP’s mission is to support the planning and implementation of public infrastructure investments.
Road and transport planning
The primary IPP task is the development of procedures to rationalize and streamline the planning and programming of both the road network and an overall transport policy.
Road maintenance management
Second on the list is a Highway Management System (HMS), including sustainable administrative and organizational arrangements.
Financing for Road Rehabilitation Program (RRP)
Determining what should be built is one job; financing it is another. Third on the list of tasks is the formulation by the Road Rehabilitation Program (RRP) of a specific schedule for highway projects, including those funded by donors and private investors.
Management information system
A Management Information System to be established as part of the MSC-PW assignment will comprise three kinds of road works: preservation, improvement, and development.
Training and technology transfer
Seminars will be arranged for all engineers and technicians on the application of the new equipment, IT systems, and procedures introduced during the IPP project.
Restoring the Roads Department, CDR & Council for Major Projects
Upgrading the capabilities of the various organizations is seen through:
• More effective planning, budgeting, programming, design and construction of road rehabilitation projects
• More appropriate programming and implementation of maintenance works; and
• Environmental impact assessments.
Pre-qualification at CDR
In common with various ministries, the CDR also pre-qualifies and classifies bidders for public works contracts. This limits the number of tenders and helps to ensure equal competition. Invitations to pre-qualify are published in the local and international press. Requirement details are listed in a book of conditions available at the CDR for a $1,000 non-refundable fee.
► bid tenders
Invitations to tender are generally listed in the Official Gazette, several local publications (including Ad Diyar, An Nahar, and As Safir) and in selected international press.
The announcement
• Informs bidders who is ordering the project
• Specifies the nature of the project
• Informs bidders where they can pick up a tender booklet
• States closing date for tenders
• Announces date and location of first bidding session.
The notice is usually published at least two weeks before the closing date. It is published five days before the closing date if the tender is being re-offered.
Terms of tender
The terms are available in a booklet issued by the authority in charge of the project. Some are issued free of charge. Others cost between LL150,000 ($100) and LL1 million ($660).
Presenting a bid
Sealed bids are submitted to the requesting authority.
The documents requested are placed in one envelope and the bid in another. Both envelopes are placed in a third envelope and given to the requesting authority.
Bidding sessions
All bidding parties are invited to attend the first public session where bids are opened. The CDR pre-qualifies candidates at the first bidding session. The technical envelopes are opened and only those that meet the qualification criteria are allowed to progress into the next stage of price consideration. The bids themselves are opened in the second round and the winner announced.
Restricted tender
Short-lists are established for some projects. This restricted invitation to tender may include up to 20 bidders. This procedure is used for projects that require a high degree of expertise or which involve considerable financing.
Request for proposals
Request for proposals are done if no acceptable prices are proffered during the bidding process. The method may also be used in ‘rush’ jobs where work is too technical to be presented in a general tender.
Consensus agreement
If the offering administration reaches a consensus, it can directly award the project to a contractor or joint venture, regardless of the cost of the work.
Foreign participation
In contrast to many countries in the Middle East, foreigners, even if they do not have a local agent or partner, can bid on public projects. Many of the Council for Reconstruction and Development’s contracts, especially those financed by foreign investors, were awarded to international companies.
► the contract
A verbal contract between the contractor/consultant and the project owner in the presence of witnesses is as binding as a written contract. However, the parties traditionally issue a written contract.
Payment arrangements
The contractor issues
• A performance bond to the ordering authority. The bond is equal to 10 percent of the estimated project cost. At this stage, the CDR advances a 10 percent down payment to the contractor. Ministries do not issue down payments
• A performance invoice for work done during a stated period of time. The invoice is sent to the supervising body for approval before it is forwarded to the supervising ministry. Once all paperwork is approved, the Ministry of Finance issues payment.
► investment authorities
IDAL, the Investment Development Authority of Lebanon, is the sole public agency responsible for promoting investments in Lebanon, identifying and marketing opportunities, guiding international companies to establish prime business positions, and assisting investors in accessing untapped economic potential.
Council for Development and Reconstruction (CDR)
The Council for Development and Reconstruction is a government agency responsible for seeking international funding and formulating and monitoring the implementation of public investment projects. The CDR is the manager and authorized signatory of project finance facilities. It is involved in all the stages of the project.
► internal funding
Private investments
The private sector plays an active role in the reconstruction process. Major projects implemented using private investment include:
• Construction of two combined power plants at Beddawi & Zahrani
• Reconstruction of downtown Beirut (Solidere)
• Development of Beirut’s Southern Suburbs (Elissar still at planning stage)
• Land reclamation and development between Antelias and Dbayeh in the North (Linord still at planning stage)
Build-Operate-Transfer (BOT)
Some projects have been awarded on a Build-Operate-Transfer (BOT) basis.
BOT contracts are where private companies are commissioned to build and operate a project and, after a specified time, transfer the facility to the government.
► external funding
Volume
The total amount of external finance available, including projects not yet started, is around $4.5 billion. More than 90 percent of the new financing obtained in 2001 was also foreign funded. $4,421 million in secured foreign funding in the form of grants, and soft and commercial loans had been obtained by the end of 2001.
Funding process
The CDR Programs and Finance Divisions are responsible for securing funds from foreign donors. Once funding is secured and the financing contract signed, the contract is sent to Parliament for approval. Grants are an exception. They do not require Parliamentary approval because they do not commit Lebanese resources.
Development Cooperation Analysis System (DCAS)
DCAS stores information about all externally financed development activities.
This system, started in 1991, provides a database for use in local aid cooperation activities. DCAS was developed by the UNDP and is updated throughout the year.
Investment guarantee agencies
Investment guarantee agencies encourage the flow of private foreign investment by mitigating risks associated with a project. Services include export credit insurance and buyers credit guarantee, as well as investment guarantee.
Foreign investment
There are no reliable statistics available on Foreign Direct Investment (FDI). It is estimated that construction and real estate account for the largest part of foreign investment. According to UNCTAD's annual report, foreign direct investment reached $230 million in 1998, compared to $150 million in 1997 and $64 million in 1996. IDAL estimates that foreign direct investment, excluding investments in real estate, exceeded $400 million in 1999. The UNDP 2000 World Report estimates FDI in Lebanon at $250 million.
► terms of funding
Each funding source has different criteria on how a project is to be evaluated and implemented. The CDR coordinates these requirements and those issued by the local authority. The funding agencies also monitor the projects they finance.
Restrictive financing
Foreign assistance comes from grants, soft loans and commercial loans. Soft loans may have up to a five-year grace period, long payment duration (up to 25 years), and interest rates below market levels.
Commercial loans often are medium-term (duration seven to eight years) loans with a grace period of perhaps up to only one-year.
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