Cost effective infrastructure construction is a major concern in low income countries. Infrastructure is lacking: only 30% of roads in the average low-income country are paved, and only 3% in Tanzania. Evidence suggests that low income countries are further getting poor value for money in road construction and maintenance: road costs are positively correlated with corruption and weak governance, and poor maintenance leads to significant unnecessary reconstruction (Collier et al, 2014). The World Bank estimates $150 billion per year is lost due to the poor delivery of public services (World Bank, 2004). Gaining a better understanding of why road costs are higher in low-income countries (and what can be done) may contribute significantly to alleviating the infrastructure deficit.
We are working with the Tanzania Roads Fund Board (TRFB) to conduct evaluations on the impact of two widely recommended best practices in infrastructure contracting on road cost and quality. The first best practice is competition between contractors. We are taking advantage of two natural experiments: (i) a change in law that exogenously affected the ability of foreign contractors to bid on road projects; and (ii) exogenous changes in the price of cement, a major cost driver of road construction. By exploiting these experiments, we can examine whether more competition between contractors increases value for money in road construction in Tanzania. This is a particularly interesting question in sub-Saharan Africa, where there is often limited competition for public contracts due to a lack of qualified bidders.
The second best practice is audits of private contractors. The TRFB has been conducting random audits of contractor performance since 2000, with a key policy change in 2010 that affected the consequences poor performance being uncovered. The audits were performed on randomly selected roads from each local government area, and covered road planning, procurement, construction processes and road quality. The fact that randomisation has already been used gives us a low cost method of answering this question, as long as the randomisation meets the standard set of balance criteria.
We are assembling and digitising Tanzanian road construction records into a database that incorporates actual and estimated road unit costs, local geography, access to markets, bidding behaviour and contractor characteristics, as well as data from road audits and quality inspections. We will begin our analysis with a descriptive analysis of these data in the spirit of Collier et al (2014), and then move on to the examination of the natural experiments and road audits. Analysing the determinants of road construction cost and quality will both assist the TRFB in improving value for money and will inform other infrastructure contracting programs, especially in sub-Saharan Africa.
A major concern of the Tanzania Roads Fund is that unit costs for roads in Tanzania have more than doubled over the last ten years. The Tanzania Roads Fund therefore recognises an urgent need to improve their understanding of how to slow the acceleration of costs and maximise the economic benefits of its investments. Via our collaboration with the TRFB, we are establishing links with other government actors including the Ministry of Works, TANROADS, the National Construction Council as well as the Public Procurement Regulatory Authority. Results will be disseminated to all local governments through their interactions with the TRFB. In addition to undertaking demand driven research based on the latest empirical methods available, this work is the first step in building a relationship with the Tanzania Roads Fund Board, as well as various other stakeholders who will be involved in the project, both to pave the way for future research and to build their research capacity.