Prime contractors need to collaborate more within infrastructure development, says Mike Hobbs

By - World Healthcare Journal

Prime contractors need to collaborate more within infrastructure development, says Mike Hobbs


Developing healthcare facilities in Africa is a collaboration between the Ministry of Health, Ministry of Finance and Prime Contractor, says consultant Mike Hobbs.


The demand for new healthcare facilities in many nations in Africa is indisputable. Less clear are the success factors for securing the financing to enable the construction of much-needed health posts, clinics and hospitals. Unequivocal prioritisation of schemes by a Ministry of Finance builds early confidence for stakeholders and funders that the scheme will proceed.


A Ministry of Health will, of course, make a strong case that development of health facilities is a national priority. The reality is that health schemes compete alongside investment in infrastructure for transport; water and sanitation; housing; education; energy; agriculture; defence and security. All contribute to economic development as well as the health and security of the country. Clear prioritisation of schemes is even more important for sustainable debt countries.


Linking to the nation’s infrastructure priorities


From the outset, healthcare prime contractors should be prepared to provide capacity and expertise to support Ministries of Health in taking a strategic ambition and converting it, through concept stage, into a viable project. In some jurisdictions this may form part of a competitive tendering process, while in others it may be a single source award.


In both circumstances, maintaining a transparent process that is compliant with local procurement procedures should be high on the agenda of both the procuring authority and the developer. Retrospectively demonstrating compliance is time consuming and can be compromised by a lack of accurate record keeping.


This leads to concerns regarding the efficacy of the process and adversely impacts on securing financing. Throughout the development of a scheme consideration should be given to the impact and sustainability of the new facility. Financing will be more readily secured if it can be demonstrated that the scheme does not have a detrimental impact on the environment, on local communities and on those who will build the new facility.


These factors are covered by the Equator Principles, which provide a comprehensive check list for risk assessing a development’s impact. For areas of potential risk appropriate management plans should be developed.


Treating this as a joint process between Ministry of Health and contractor to produce appropriate management plans can make it a value adding process rather than a bureaucratic paperchase. The successful financing of the scheme will also be enhanced by evidencing benefits against sustainable lending and impact financing objectives.


It goes without saying that the scheme needs to form part of the nation’s health strategy. At a general level this is normally easily accomplished. More challenging is making the direct link between the prioritisation of a specific scheme and a nation’s health strategy. Sustainability and beneficial health impact are dependent on the availability of clinical teams to staff the new facility. The worldwide clinical staffing shortage is accentuated in developing countries, where they are competing for qualified staff with developed countries.


A national workforce development strategy consistent with the national health strategy is highly beneficial. Again being able to translate a national strategy into the staffing plan for a specific facility is more difficult. Regardless of the difficulty, producing this plan will enhance confidence in securing financing. The more specialist a facility the greater the risk of securing the necessary specialist clinical staff, particularly for facilities outside major cities.


Consideration should also be given to on-going professional development and validation through to residential accommodation for the hospital staff.



Creating financial confidence in a scheme


Financial sustainability of a scheme obviously needs to consider the risk of debt default for the financing of the facility. However, the quantum of this will be modest compared to the costs of staffing and operating the new facility. Providing confidence that these operational costs are included in the Ministry of Finance’s medium term financial planning is an important factor.


Where possible, this should have more substance than a statement from the Ministry of Health or Finance that the costs have been taken into account. Assessing the local economic benefit during construction and operations also adds to the confidence that a scheme is sustainable. It is a given that the technical design and construction of new facilities needs to meet appropriate standards and the requirements of the Ministry of Health.


From a financing perspective, an independent Value for Money study is the primary technical assessment. The study should be undertaken by a reputable international organisation with a duty of care to the Ministries of Health and Finance. The study can be undertaken as soon as there is a formally agreed scope, price and contract terms in place.


It is important that the study clearly identifies the various elements of the scheme and benchmarks them on a like for like basis. The benchmark costs for a construction project differ significantly to the costs for a turnkey project. Turnkey projects themselves cover a wide range of scopes with differing cost profiles. It should also be remembered that a Value for Money study is a test of reasonableness and does not produce an absolute finding.


Financing can be accessed from a combination of sources from multilaterals, to export credit agencies, to corporate financing. Regardless of the source of finance, an ability to evidence the sustainability and beneficial impact of a scheme will be a critical success factor. Achieving this requires a collaboration from an early stage between Ministries of Health and Finance and the prime contractor. To this end, the prime contractor needs to think beyond bricks and mortar.


Mike Hobbs is a consultant for Prime Performance Partners, and International Correspondent for World Healthcare Journal


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