Local Procurement Is Key to Rebuilding the Private Sector in Haiti

This is a joint post with Julie Walz.In a recent blog post, we discussed the phenomenon of Haiti as a “Republic of NGOs” where the government and the private sector were crowded out by large international organizations that provided most services.  Just as international donors have sidestepped the Haitian government, reconstruction contracts have also bypassed Haitian firms in favor of Beltway contractors.   The Center for Economic and Policy Research analyzed the 1,490 contracts (worth $194.5 million) awarded between January 2010 and April 2011.  Only 23 contracts--for a total of $4.8 million or 2.5 percent of the total—were awarded to Haitian companies.  In comparison, contractors based in the Washington DC area received $76 million – almost 40 percent of the total.A new report released by Peace Dividend Trust (PDT) identifies key constraints as well as practical recommendations for rebuilding the local private sector through local procurement.  PDT conducted two surveys in Port-au-Prince – of 303 Haitian construction firms, and of 33 procurement officers and project managers in international organizations.   Its findings include the following:

• Most local businesses report delays in getting paid.  Most international organizations do not make advance payments, which affects the ability of credit-constrained companies to do business.
• Small firms are winning fewer contracts from international organizations. Procurement officers report difficulty finding these smaller companies and small firms are more likely to find international organizations difficult to work with.
• Most procurement officers think the local market cannot deliver high-quality technical work without supervision and guidance, yet most local businesses are confident that they can deliver whatever is expected of them.
• While procurement officers say they are willing to respond to questions about their procurement processes, most Haitian firms report that they have little or no contact with international organizations either before or after contracts are awarded.

The report goes on to make the following recommendations:

• Donors and NGOs should prioritize prompt payment to contractors and offer advance payments to ease the credit crunch faced by local firms
• Unbundle large contracts to make it easier for smaller firms to compete.
• Facilitate local bidding by producing all documents in French
• Extend tender submission deadlines in order to increase the quality and quantity of local bids

Finally, Haitian businesses can also make greater efforts to win contracts.  They can:

• Offer more detailed information in bids on past performance, goods to be provided, personnel requirements and financial planning capacity
• Better justify their pricing strategy
• Partner with other businesses to reduce overhead and better provide contract-specific goods and services
• Monitor market trends and stock up on materials that are in demand
• Proactively seek feedback when they don’t win a contract in order to strengthen future bids.

Haiti is an aid-dominated economy that faces real challenges in rebuilding its own government and private sector.  PDT’s recommendations for increasing local procurement represent a step in the right direction.