Small contractors in construction sector and the 20% ‘set aside’

The news that the construction sector remains closed – at least for the time being – to small businesses through the mechanism of the 20% ‘set aside’ provided for under the 2004 Small Business Act is, at the very least, disappointing, this newspaper’s appreciation of the importance of adherence to procedures, which is what it seems is blocking the access up until now, notwithstanding.

The biggest disappointment, of course, is that for the time being – and we must hope that the period will be brief – small contractors in the construction sector must continue to compete for state contracts on the same playing field as their bigger counterparts. We know enough about the construction sector to be aware that once those tender administration criteria that have to do with capability to deliver jobs to specification kick in, the smaller contractors will almost always come out second best…hands down.

When account is taken of the fact that by far the most lucrative contracts available to private contractors through the mechanism of the state tendering system are located in the construction sector, then it becomes clear that even those relatively modest contracts in the construction sector (contracts valued up to up to $30 million) which are the low-hanging fruit that the small operators would have been waiting for, are for the moment at least, unreachable.

Chairman of the Public Procurement Commission (PPC) Carol Corbin has made public, the circumstance that continues to deny small contractors access to the construction sector up until this time, though in a sense, that is beside the point. We take for granted that rules are rules and they must be observed. The important point here reposes in the fact that seemingly, there has been some measure of sloth in putting the pieces together in this matter and this point is being made, not as an exercise in finger-pointing, but in order to draw attention to the fact that what is intended as a mechanism to generate a significant increase in employment levels still remains to be properly activated, despite official promises that it would have been fully up and running by the January this year.

In fairness to Dr Lowell Porter, the Head of the Small Business Bureau, he did say to this newspaper late last year that he was under no illusions that the initiative would necessarily have benefitted from a smooth start. In fact, he specifically made the point that even after small businesses have full access to the 20% provision in the Act there were likely to be difficulties arising out of many small businesses falling short of criteria for access on account of lack of compliance with conditionalities associated with GRA and NIS compliances. We have determined that that is now definitely the case as far as we know, the level of delinquency in the private sector in terms of discharging their obligations to these two agencies being well-known.

One imagines too, that some small businesses seeking access to the prerogative of the 20% ‘set aside’ provision would not necessarily be familiar with the procedures and protocols associated with the state tender process and will therefore have to familiarise themselves with these before they venture into the actual tendering process. This, in many instances, will take time.

Specifically in relation to the construction sector, tender procedures also embody fairly demanding criteria that have to do with capability to deliver a job and it will take some time for many of the small contractors to meet those criteria. Contextually, one should make the point that where tenders are awarded to contracts that manifestly do not meet the criteria, which in effect, amounts to a misallocation of state resources, those functionaries responsible should be required to face the consequences.

The desired response to the activation of the 20% ‘set aside’ ought to be for the lending institutions to ‘read the tea leaves’ and position the small businesses in the various sectors of the economy to increase their ability to improve their competitiveness.

This newspaper recalls that the General Contractors Association of Guyana (GCAG) was one of the first local organisations to seek clarification on the conditions attached to being ‘signed up,’ so to speak, for the 20% ‘set aside’ concession. We recall that that the Head of the Small Business Bureau readily agreed to meet with GCAG but we do not know if that took place. Here it might be useful, now that the way is clear for the provision to ‘kick in,’ albeit, only to a limited extent up to this time, for the state agency responsibility for monitoring its implementation to roll out a public information campaign. Here, it should not be forgotten that the state institutions in the various administrative Regions which themselves have responsibility for the tender process in the Regions must also be familiarised. Perhaps the most important point arising out of all this is that clarity associated with the procedures can go a long way towards avoiding a misunderstanding/misinterpretation of the rules, which is one assured avenue towards irregularities.

But perhaps the most important initiative that remains to be undertaken has to do with the need to move on, and quickly, with the requisite amendment of the Small Business Act to allow small businesses procurement access in the construction sector. If it is well-managed it has the potential to be an important game-changer as far as employment creation is concerned. The operative phrase here is ‘due haste’.  


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