OPPORTUNITIES WITH CHALLANGES?
Devotra was founded in 1994 whose activities are mainly focused on engineering projects in developing countries and upcoming markets. The company offers turn-key services for any kind of education improvement project from primary up to higher education, with a major specialization in Technical Vocational Education and Training (TVET). What started originally as mainly supply of equipment only, has evolved to a turn-keys service offering their customers tailor made solutions from project identification or formulation up to project implementation. These services include; consultancy, supply of state of the art training equipment, infrastructure improvement, innovative learning methods and teacher training. Based on the company’s professional experience and worldwide network, the solutions provided, can meet all stakeholders requirements. The company has its office and warehouse facilities in the Netherlands, where they organise can full order handling and provide door to door logistic services. A network of professional local partners ensure successful installation and commissioning of the supplied equipment, training and after sales.
Many of the projects that Devotra participates in are funded by international donors such as; World Bank, African Development Bank, Asian Development Bank, Inter-American Development Bank, European Union, United Nations, etc. Since 1995 Devotra has implemented education improvement projects funded by international donors in quite a number of countries across the globe including; Egypt, Ethiopia, Eritrea, Ghana, Haiti, Ivory Coast, Iraq, Jordan, Kenya, Liberia, Nigeria, Sierra Leone, Sudan, Uganda, Yemen, Zambia, Zimbabwe, etc.
The actual activities of Devotra started around 1985 when current management explored the possibilities of getting involved in World Bank funded education projects through international competitive bidding (ICB). At that time the international communication was more or less limited to telephone or telex and the telefax was just being introduced. The international donors where closely involved in the development and implementation of the projects and expertise was hired; for example thought international consultants or specialized UN agencies to assist the beneficiaries with the development and implementation of the projects – in particular the procurement of equipment. The direct involvement of a international donor project team and the presence of international experts made it quite attractive to participate in these type of projects. Payment was always guaranteed and according international business standards. Common payment terms include; 10% Advance Payment, 80% at shipment against Letter of Credit and 10% Final Payment. In addition, there was a joint effort of all stakeholders involved to successfully implement the project within the set timeframe. During those years (until approximately 1995) mainly the specialized European of USA based companies controlled this attractive niche market, as there was limited or no competition yet from East and South East Asia or local companies in the beneficiary countries.
As from 2000 this attractive niche market significantly changed due to a number of events:
- The introduction of internet starting from 1993 facilitated international communication and opened the door for local companies in developing countries to get worldwide access to the international market. This allowed them to get involved in international trading directly.
- Trading companies from India and China entered the market and started competing very much on price only and not on quality.
- The policy of international donors changed regarding their direct involvement during the implementation of the projects and in particular the procurement. From the perspective of capacity building, the beneficiary countries were now responsible for the full implementation of the project. This has resulted in quite some challenges for the beneficiaries, as staff often did not have the capacity and experience in the field of international procurement and planning to manage ICB for big value and complex projects.
- The role of the international donors became more focussed on monitoring the projects and were only involved (if properly informed) if serious problems occurred during implementation
- Also, there was the perception that international donors provided guidelines in which price was a main criterion for evaluation of tenders and that a ‘lowest bid according to specifications’ determined the successful bidder. This has put quality second place and opened the door for low-cost bidders from; East and South East Asia and local companies.
- Fortunately, as from 2016 this policy changed when the World Bank included the notion of Abnormally Low Bids in their Standard Bidding Documents. This resulted in the tendency to look for Best Value for Money and not only looking at the price.
- One of the most crucial changes is that the payment terms became less attractive and that many beneficiary countries do not want to open a letter of credit. Often, they prefer to pay upon shipment of the goods or when the goods arrive at the final destination in their country.
- The lack of international experience of the project teams of the beneficiary countries, resulted in quite a number of cases in payment challenges for the suppliers and delays in the implementation of the whole project. Eventually leading to less interest of European and American qualified bidders to participate in locally managed ICB.
Although this specific market has many challenges and the projects became more complex and more risk full, Devotra believes that it can still be an attractive market, considering that the company:
- has recently finalized two high value World Bank funded projects in Uganda for the Ministry of Education and Sports which were implemented during 2020-2022
- started the implementation of an African Development Bank funded project for the Ministry of Education in Eritrea which will be implemented during the calendar year of 2023
- together with Italian partners are in the final stage of negotiating a contract for a World Bank funded project with the Ministry of Education in Rwanda to be implemented during 2023 – 2024
The increased challenges and risks of these specific type of projects require a more proactive approach from the company before participating in a tender funded by an international donor, such as:
- Gathering information about the project team of the international donor responsible for the project and verifying whether the loan or grant is still operational and until when. Contact the project team leader as early as possible, in advance of serious problems that might arise
- Contact the Netherlands Embassy in the specific country, inform them about the intentions to bid on a tender and try to obtain information about the specific Ministry. And inform the Netherlands Embassy about the final decision to bid and that the actual bid was submitted.
- Update the Netherlands Embassy once a contract is signed and visit them personally when visiting the country
- Build partnership with the beneficiaries and try to assist them where possible to implement the project and to create a win-win situation for all stakeholders involved
- Engage the Netherlands Embassy and Private Sector Officer International Financial Institutions / Multilateral Development Banks in Washington in an early stage, in case any problems arise during implementation.
Recently the company experienced some problems with the implementation of two World Bank funded projects in Uganda. The projects were successfully implemented up to the stage of installation, commissioning and training. However, to reach the point of final acceptance and final payment was a big challenge. The company requested support from the World Bank project team, however in the first instance this did not result in the assistance requested. It was only after intervention by the Netherlands Embassy and Private Sector Officer International Financial Institutions / Multilateral Development Banks in Washington that the World Bank project team actively started to communicate with the stakeholders involved. Due to their intervention, although delayed, the final payment has been received for one of the projects and the remaining payment for the second project is to be expected during the coming weeks.
Despite the challenges, the opportunities in the market for education improvement projects (in particular TVET projects) funded by international donors will certainly remain interesting for high quality suppliers. Whereas, in the coming 15 years the need for these projects will remain, and consequently many projects are already approved for funding, while new projects are forecasted.