Public funding causes inefficiency

By Andrew Chang 張行道  / 

Thu, Feb 20, 2014 - Page 8

President Ma Ying-jeou (馬英九) has said that he will devote all of his efforts to boosting economic development this year and that developing infrastructure is one way of doing so. Last year, Ma complained on Facebook about the slow pace of public construction projects.

Slow progress and failure to stay within budget show that the government’s money is not going where it should. When public works contractors do not receive money, material and equipment, procurement is delayed. This means that materials and equipment suppliers are left waiting for business, and employee salaries stagnate. It is little wonder that the supply chain’s efficiency is sacrificed.

By comparison, in just one year, Taiwan Semiconductor Manufacturing Co (TSMC) built a fabrication plant that cost more than US$10 billion, commenced mass production and received a lot of orders with all parties involved earning money.

This was possible because as soon as senior management ordered that the factory be built, those in charge of implementation turned to skilled private contractors they had worked with in the past, paid them well and stressed the importance of completing the project on schedule. Throughout this entire process, no time was spent on unnecessary administrative document reviews and the contractors were allowed to bring their skills and experience into play. Any problems were solved through communication on site, and it was rarely necessary to contact superiors for instructions. Everybody involved was clear about when the project had to be completed, and with a common goal in mind, the plan worked.

There are cases in which public projects are completed on schedule, one example being the underground railroad construction in Taipei more than two decades ago.

When problems arose, former Taiwan Railways Administration director-general Tung Ping (董萍), who was then head of the project, resolved to fix any problems as soon as they were discovered. That did not mean things were not done according to procedure; rather, it involved the ability to make judgements and solve problems on the spot because there were too many gray areas inherent in the project.

Tung’s view was that he had promised to finish the project within six years and that he would do everything in his power to deliver on that promise. He was not afraid of offending anyone and he did not take advantage of the contractors.

A comparison with how public works projects are carried out nowadays shows that government organizations stick their noses in way too much. Once a project is decided on and has its budget allotted, construction companies are seemingly chosen in a fair process, but in reality, they are chosen based on who can do the work for the lowest price. Throughout this process, a lot of time is spent on superfluous regulations and duties like reviews and filling out forms, and the contractors are treated like enemies and often blamed for a perceived lack of experience and ability.

When setbacks are encountered — such as design changes — those in charge of a project first look at their administrative responsibility and ask their superiors for their opinions, instead of making informed decisions by themselves. To make matters worse, completion dates are not taken very seriously.

TSMC’s management did not stick its nose into what was going on too much. It allowed its contractors to use their experience and professional judgement. Those in charge of building Taipei’s underground railway also made decisions when the time and situation called for them to do so. Thus, the first step in speeding up the pace of public projects is to remove any administrative regulations that do not facilitate the project at hand.

When contractors are not tied down by these restrictions and do not need to wait for decisions to be made, projects can be completed more quickly. If about half of the dozen or so management regulations on public works were scrapped, project efficiency could increase by 15 percent. If those overseeing these projects could make decisions by themselves, efficiency could be further increased by 15 percent.

Economic development does not necessarily mean spending lots of money. Performing daily tasks effectively and meeting goals are very helpful for any economy.

Andrew Chang is a professor at National Cheng Kung University’s Department of Civil Engineering.

Translated by Drew Cameron