Value Chain Assessment Annex 2. Construction Industry ... · EPCM Engineering ... The assessment process was based on the Rapid Value Chain Assessment ... key identified issues will

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APRIL 2014

This publication was produced for review by the United States Agency for International Development. It was prepared by RTI International

Value Chain Assessment Annex 2. Construction Industry Assessment Local Enterprise and Value Chain Enhancement (LEVE) Project

C o n s t r u c t i o n S e c t o r A s s e s s m e n t | 1

TABLE OF CONTENTS ABBREVIATIONS...................................................................................................... 2

1. INTRODUCTION ................................................................................................. 3

2. METHODOLOGY ................................................................................................ 3

3. CONSTRUCTION INDUSTRY PROFILE ............................................................ 5

3.1 Port-au-Prince and Cap-Haïtien .................................................................. 5

3.2 Industry Structure ........................................................................................ 6

3.3 Defining Value Chains & Subsectors ......................................................... 8

3.4 Stimulating Employment ........................................................................... 20

3.5 Developing the Workforce......................................................................... 25

4. VALUE CHAIN SELECTION ASSESSMENT ................................................... 26

4.1 Building Value Chains ............................................................................. 27

4.2 Infrastructure Value Chains .................................................................... 32

4.3 Value Chain Selection for Corridors ...................................................... 37

5. UPGRADING STRATEGIES ............................................................................. 40

5.1 Causal Model ........................................................................................... 40

5.2 Construction Sector Objective Statements ........................................... 43

5.3 Value Chain Upgrade Strategies ............................................................ 44

5.4 Corridor Upgrade Strategies .................................................................. 54

6. IMPLEMENTATION PLAN ............................................................................... 55

6.1 Organization ............................................................................................ 55

6.2 Timeline .................................................................................................... 56

REFERENCES ......................................................................................................... 59

APPENDIX 1 – INTERVIEW GUIDE ........................................................................ 61

APPENDIX 2 – CONTACT LIST .............................................................................. 62

APPENDIX 3 – BUILDING VALUE ADDED PROCESS ......................................... 64

APPENDIX 4 – INFRASTRUCTURE VALUE ADDED PROCESS .......................... 65

APPENDIX 5 – DETAILED CONSTRUCTION WORKFORCE DEMAND ............... 66

APPENDIX 6 – DETAILED VC ASSESSMENT MATRICES ................................... 69


ABBREVIATIONS AHEC Construction Enterprise Association of Haiti APRODBP Association of Building Block and Paving Producers ATH Haitian Tourist Association BEB Bureau of Building Evaluation CAD Computer-Assisted Design CH Cap-Haïtien CIAT Interministerial Committee for Regional Planning CINA National Cement Manufacturer CO Communication Officer DINEPA National Direction of Potable Water and Sanitation EPCM Engineering, Procurement, Construction, and Management GIS Geographic Information System GoH Government of Haiti HTG Haitian Gourde HVAC Heating, Ventilation, and Air Conditioning ICA International Construction Advisor IDB Inter-American Development Bank LEAD Leveraging Effective Application of Direct Investment for Haiti LEVE Local Enterprise Value Chain Enhancement MTPTC Ministry of Public Work, Transport and Communication MPCE Ministry of Planning and External Cooperation MSME Micro, Small, and Medium Enterprises MTPTC Ministry of Public Work, Transport, and Communication OCAT Organizational Capacity Assessment Tool MSMEs Micro, Small and Medium Enterprises PAP Port-au-Prince PNLH National Policy for Housing QA/QC quality assurance/quality control TVET Technical Vocational Education Training UCLBP Public Building and Housing Coordination Unit USAID United States Agency for International Development VCC Value Chain Coordinator VF Vorbe & Fils WB World Bank WDC Workforce Development Coordinator


1. INTRODUCTION The United States Agency for International Development’s (USAID’s) Local Enterprise and Value Chain Enhancement (LEVE) project is a carefully crafted blueprint to expand opportunities for Haiti’s micro, small, and medium enterprises (MSMEs) in key agribusiness, textile/apparel, and construction value chains, generating employment for Haitian men, women, youth, and vulnerable populations in priority corridors of Port-au-Prince, Saint-Marc, and Cap-Haïtien. There are four key objectives to LEVE. Objective 1—Enable MSMEs to Engage with Other Value Chain Actors to Mutually Create Value drives the growth and sustainable competitiveness of Haitian MSMEs by expanding the sales and investments of lead firms in targeted sectors, deepening supply and value chain relationships within the value chains, and fostering market opportunities for entrepreneurial MSMEs. Objective 2—Increase MSME Access to a Productive Labor Pool with Relevant Skills and Competencies focuses on productivity, addressing workforce-related constraints in key sectors and generating more and better employment opportunities, particularly for vulnerable populations. These substantive efforts are supported by Objective 3—Improve the Sustainability of Haitian Organizations Serving Target Sectors and Corridors, which builds capacity for sustainability, enabling a set of strong business service providers and workforce training institutions to support ongoing, self-propelled growth and upgrading at all levels of these industries. Objective 4—Identify and Improve Synergies among Existing USAID Activities will put emphasis on intra- and cross-donor project collaboration activities that provide leverage, reducing friction resulting from overlaps, accelerating start-up by using existing research and analysis, and amplifying impact by leveraging financial and other resources from complementary programs and initiatives. This report is solely concerned with the value chains in the construction sector. It includes an overview of the construction industry in Port-au-Prince and Cap-Haïtien and results of the value chain assessment and lays out an upgrading plan for several value chains. This work provides USAID LEVE with sound analytics of the construction sector in Cap-Haïtien and Port-au-Prince to prepare detailed implementation plans of value chain activities, which will start in May 2014. Sections 1 to 4 present the state of the construction sector and the selection of the value chains most appropriate for interventions based on a competitiveness framework developed for this purpose. Sections 5 and 6 propose the implementation plans to upgrade the selected value chains over the course of USAID LEVE. The program will be designed to meet the four project objectives, including the cross-cutting aspects of economic development, namely, the business enabling environment, business development services and other support services, access to financing, and formalization of MSMEs. 2. METHODOLOGY The LEVE team will follow research-backed methodologies for demand-driven workforce development linked with value chain upgrading in the construction industry in Port-au-Prince and Cap-Haïtien. The assessment process was based on the Rapid Value Chain Assessment Methodology, developed by Tetra Tech International Development, using various set of factors to evaluate the potential for upgrading a value chain. To obtain reliable primary sources of data, the team consulted with industry stakeholders, with the goal of identifying potential partnerships with anchor firms, workforce development leaders, agents of change/innovators, or expanding


and innovative MSMEs. The consultation process was participatory to ensure that consultants would appropriately integrate the views and concerns of the stakeholders, find common ground, and prepare a work plan that will remain ambitious while mitigating risks of change management. More than 35 interviews were conducted with the industry stakeholders in Port-au-Prince and Cap-Haïtien between March 12 and April 4 with the objective of:

Presenting LEVE’s objectives and explaining the value chain approach; Collecting information about their role in the value chain (supplier, contractor, promoter,

regulatory agency); Identifying their involvement in subsectors and value chains; Assessing competitive growth areas; Understanding the constraints and opportunities of the industry by subsector or value

chain; Identifying quality issues, earthquake awareness, foreign-occupied markets, workforce

development; Identifying potential solutions to address constraints; and Brainstorming areas of collaboration with LEVE.

To ensure that information was collected in a consistent manner, the LEVE construction team designed an interview guide to ask open-ended and fundamental questions (Appendix 1), and the list of contacts visited are listed in Appendix 2 Categories of construction sector stakeholders visited included the following.

Client or construction project promoters (3 private, 2 public) Services, e.g., real estate developer, banks, insurance companies (3 real estate

developers) Engineering design, study, and supervision firms (4) Lead contractors (3 large; 5 medium; 2 small) Subcontractors by trade, e.g., site preparation, masonry, electricity, plumbing, finishing

(2) Building material distributors and manufacturers (4 large) Technical training institutions (1) Associations (3) Government officials, e.g., laboratory, permitting, bid requirements (3)

At least two to three stakeholders from each of these categories were met to cross-reference information, and ongoing stakeholder consultations were conducted to explore in greater detail key identified issues will be conducted in workshops/seminar formats at the start of implementation. The team actively searched for anchor firms that will generate new opportunities for MSMEs. LEVE is looking for those opportunities that will stimulate Haitian entrepreneurs to address value chain constraints with for-profit solutions and build capacity in Haiti’s education and training institutions to provide the skills required by Haitian businesses. In the stakeholder


engagement process, we identified various key MSMEs, associations, or education institutions that either would benefit from direct or indirect capacity development support or could act as a service provider or change agent for the industry. This mutual support will have a direct effect in supporting the expansion and the professionalization of key actors of the value chains via increased business linkages, business opportunities, and ultimately, job creation. Finally, synergies between programs were assessed and areas of mutual collaboration were identified. 3. CONSTRUCTION INDUSTRY PROFILE

3.1 Port-au-Prince and Cap-Haïtien

Demand for construction projects is always high in developing countries due to rapid population growth and significant donor investment in infrastructure meant to attract foreign direct investment or national private sector initiatives. In this regard, Haiti is somewhat different; the recent earthquake had a “boom-bust” effect on the construction industry1. Due to insufficient national capacity to respond to the reconstruction needs, foreign firms addressed the supply gap in expertise and the necessary workforce. Surprisingly, four years after the earthquake, foreign firms still occupy key market segments such as buildings, roads, and bridges, where foreign expertise is not required. Although significantly more investment is required to undertake post-earthquake reconstruction, donor aid is now being reduced. With that reduction, large construction projects could have reached a plateau in Port-au-Prince, though the numbers of medium-size and small construction projects are still growing. In terms of infrastructure development, although the debt relief truly helped the Government of Haiti’s (GOH’s) to reduce the cost of debt, borrowing capacity is still limited and interest rates are high. This can refrain the undertaking of major public infrastructure development. Consequently, the construction industry cannot rely on public works as a major source of growth, except for projects such as road paving, schools, and hospitals, which traditionally grow at a steadier rate. In most developing countries, public work infrastructure is a key job creator for the construction industry sector. For Cap-Haïtien, the situation is somewhat different. The construction industry is significantly less developed there than in Port-au-Prince and most mid- to large-size projects are not performed by Cap-Haïtien firms. However, unlike in Port-au-Prince, sources of growth in Cap-Haïtien are clear and significant. There are over 700 new hotel rooms planned for construction in 2014, as the international airport nears completion, linking Cap-Haïtien to the USA and Canada. Resorts along Cormier Beach and in Cap-Haïtien are expanding to prepare for the additional tourists expected to visit the Citadel Laferrière and Sans-Souci Palace. The industrial park is also expecting new industrial tenants, which could stimulate more housing development for employees; however, entrepreneurs are still doubtful when this could happen and will wait until the Korean SAE-A Trading, the largest enterprise, and other smaller companies are clearer about their expansion plans.

1 A boom bust effect is known in large-scale projects, as the local effect of a large demand, that the local economy cannot take, and the ensuing vacuum once the project is more advanced and completed. This is typical of mining projects in underdeveloped economies. There is inflation and immigration for some years, followed by deflation and emigration.


Cap-Haïtien does not have a complete construction industry. Apart from distributors and manufacturers of building materials like M&M Construction and CEMEX, respectively, there are no engineering design firms and lead contractors to undertake projects larger than churches and schools. Most often, firms from Port-au-Prince or the Dominican Republic bring along key management staff, skilled labor and hire what unskilled labor they can locally. However, even among the unskilled local labor force, firms are challenged to find employees with sufficient construction experience and end up hiring from Port-au-Prince at higher costs (per diems and lodging).

3.2 Industry Structure

The construction industry is divided in two subsectors: buildings and infrastructure. These two subsectors do not generally have the same value addition process and expertise and are not occupied by the same organizations. Buildings from single-floor houses all the way to skyscrapers have similar construction steps, but the complexity increases with the number of floors or with the design itself. In addition to design complexity, there is also project management complexity in larger-scale projects. Thus, the more costly and complex the building, the larger the contractor that will execute the contract. As for the infrastructure subsector, each type of infrastructure calls for a different type of engineering expertise, and firms tend to be more specialized in that subsector.

For both subsectors, building materials and equipment will often come from the same suppliers, as all of those projects require concrete and rebar. On average, building materials can represent 50 to 70% of the total cost of a construction project, creating significant profit margin pressure on the contractor.2 Unfortunately, building material is not significantly cheaper in Haiti. The following building materials are produced (or finished) in Haiti:

Building blocks Cobblestone/sett Steel bars (cutting and assembling/welding) Cement (packaging) Quarrying (sand, aggregates)

The steel mill (Acierie d’Haïti) once operated by GB Group is no longer producing rebar. This is all imported and then cut and welded in Haiti. Moreover, cement production from CINA and Cemex is limited to packaging in Port-au-Prince, and in Cap-Haïtien, cement is imported already packaged from the Dominican Republic. These enterprises also attempt to increase their sales by providing concrete pre-mixed, which ensures greater quality results than manual production of concrete.

2 Construction and Civil Engineering : Approach and Data Requirements, Operational Guide, Draft version, International Comparison Program, 2011, http://siteresources.worldbank.org/ICPINT/Resources/270056-1255977254560/6483625-1314373178597/ICP-OG_Construction_Draft.pdf


Another key cost driver is heavy machinery (5 to 15% of the total cost of construction projects) ,3 which is imported via firms like Haytrac. Leasing is too expensive for longer term projects, but remains particularly popular for short-term use. After three months, leasing loses any advantage over purchasing. Haytrac is developing a lease-buy longer term contract, which is available in other Caribbean islands, but not yet in Haiti. The cost of the workforce usually makes up between 15 and 30% of the total costs of a project.4 Approximately 80% of the workforce is unskilled, while the remainder is semi-skilled (electrical; heating, ventilation, air conditioning [HVAC]; masonry; plumbing), skilled (civil engineering technicians), and very skilled (civil engineers), as well as procurement officers, cost controllers, and senior project directors. Typically, the masonry team stays permanently on the construction site, while other trades are periodically present at times when they are installing electrical, plumbing, and HVAC systems, etc. The industry is characterized by a mixed formal and informal system. Most senior and skilled jobs at the top of the pyramid are for formal, full-time employees of construction companies. However, for management at the construction site, companies traditionally use a foreman (called contremaître in Haiti) to manage the workforce and delivery of materials on site. The foreman supplies most of the workforce, especially masonry work and is responsible to lead, organize and pay most employees. The lead contractor remains accountable for the project, but delegates some of the human resources functions. This contremaître with his team can be viewed as an unregistered MSME, paying no taxes, effectively lowering short-term costs of labor for lead contractors. Other construction firms believe this traditional system is very costly in supervision, as the contremaîtres are not accountable for their work and do very little training of labor. In addition, the contremaître model of project management might reduce the level of specialization and thus quality. It remains unclear what proportion of companies use the informal model over the formal model. Lately, Haiti has seen the emergence of formal MSMEs specializing in the electrical, plumbing, and HVAC trades, as in most developing countries. In the formal model, the MSMEs are formally contracted by the lead contractor, instead of being informally hired by the Contremaître, acting as an intermediate, potentially reducing the direct professional fees the MSME can obtain from direct contracting with lead contractor. Informal models are still prevalent because Haitian construction firms face significant building material and equipment costs and have limited power to negotiate better prices. Thus, there is extensive negative pressure on labor costs and quality standards to maximize profits. Demand for the sector comes primarily from the housing market, which is relatively steady. The non-residential market is less steady, except for school and hospital construction, but represents higher returns. Thus, most firms are focused on these larger buildings. For most stakeholders, customers in the non-residential building market are more experienced and less emotionally attached to the design. They are thus more likely to trust the construction company regarding the overall management of the project. On the contrary, in residential building markets, customers are less experienced in construction projects and tend to frequently ask for various changes, as they are emotionally attached to the construction project. Public infrastructure has the most volatile demand and calls for high specialization levels, most of which cannot be addressed by

3 Ibid 4 Ibid


Haitian firms. Figure 3.1 illustrates the basic input and output drivers of the Haiti construction sector.

Supply on the other hand is characterized by the high proportion of costs in raw or manufactured material, rather than in equipment or workforce. Workforce remains a significant cost driver, though its proportion might not justify the very low wage in the industry (200 HTG/day). The cost of equipment is normally a relatively lower proportion of total costs than raw material and workforce, but that assumes a functioning equipment market, which is not the case in Haiti. Stakeholders voiced their concerns over very high costs of equipment, including the leasing market. There is an industry consensus that construction material and equipment costs should be brought down.

3.3 Defining Value Chains & Subsectors

The Haitian construction sector will be divided into two subsectors for the purposes of this assessment: building and infrastructure. The building subsector includes residential, commercial, and institutional building types. Stakeholders in the building subsector will vary depending upon the value of the building being constructed, the level of specialized work involved, and the demand. The infrastructure subsector includes roads and bridges, water and sanitation, and complex civil works. Again, the level of complexity increases as the level of expertise increases and demand decreases. Airports or hydropower dams are often undertaken by international foreign firms, which execute these projects all over the world.


Figure 3.1 – Industry Output and Input Drivers

Source: Author, based on literature and averages and adapted with Haitian stakeholders

BUILDING MATERIALS (50-70% of costs; 90%

imported) Concrete, conveyor systems (elevator,

escalator or Lifts), composites, thermal

protection, moisture protection, electrical

systems and equipment, surface finishing

(plaster, cement, ceramic, wallpaper, paint,

wood), fire suppression equipment, HVAC,

masonry material (mortar, grout, etc.), metals

(structural steel, rebar, metal fabrication,

decorative), doors and windows, plastics,

plumbing fixtures and equipment, security

systems, telecommunications equipment,

wood and carpentry (heavy timber, engineered

wood, paneling, ornamentals) Building material firms: Cemex, GBG, M&M,

Kaytech

WORKFORCE (20-30% of costs; mostly local workforce) Managers: 5%; Engineers/Scientists: 10%; Technicians:

10% Semi-skilled (masonry, electrical, plumbing, roofing,

etc.): 20%;

No Training: 65%: Workforce development institutions: Haïti Tech

(Trades), Haytrac (Machine Operators)

EQUIPMENT (5-15% of costs; all imported) Earth moving, road making, hauling, piling/diaphragm

walls, marine work, concreting, quarry, pneumatic, slip

form, lifting and handling, welding, facilities for shop,

fabrication and testing, for laying pipeline, for electric

installations, computers Equipment firms: Haytrac,

-

INDUSTRY OUTPUT INCOME DRIVERS

HOUSING (85% of the

demand; steady demand;

serious quality issues; highly

competitive) Single-family building unit, multi-family building unit;

social housing (public funding); large housing development

(private) Customers: varied and

decentralized customer base Builders: individual builders,

small to medium-size

construction firms

NON-RESIDENTIAL

(10% of the demand;

unsteady; quality

issues; less

competitive) Hospitals, schools,

hotels, restaurants,

offices Clients: varied and

decentralized Builders: Haïtian and

Dominican medium-

size firms

PUBLIC INFRASTRUCTURE (5% of the

demand; volatile; no articulated urban plan,

too low demand for developing country;

normally 60% of construction demand!;

higher expertise; lack of experience, except

roads/small bridges)

Roads, railways, bridges, tunnel, power lines,

pipelines, irrigation systems, sewer systems,

disposal plants, pumping stations, refineries,

chemical plants, waterways, ports, dams and

dikes Clients: GOH, WB, IDB, USAID Builders: large and medium-size Haitian firms

(frequent projects) and large and medium-

size foreign firms (infrequent)

INDUSTRY INPUT COST DRIVERS


3.3.1 Subsector 1: Building

In building either a small house or a large multi-story structure, the construction follows similar value chains. What differentiates the value chains from one another are the type of project promoter, the level of technical and management complexity of projects and the consistency of the demand, hereafter explained:

Project developers—An individual home owner brings different requirements than a real estate

developer, whether a private commercial developer, a public institution developer, or an industrial developer. The individual owner has a generally low understanding of the construction process, as a family might build 1 to 2 houses in a lifetime, whereas a real estate developer is a professional customer who knows exactly what to ask of a contractor when undertaking a construction project. Similarly, while commercial and institutional buildings are almost identical, commercial and institutional customers do not contract construction firms the same way. The former will contract professional firms based on personal contacts and previous experiences. The latter selects contractors and professionals based on a tender process that requires a significant investment from the bidders.

Technical and project management complexity—A one-floor house might have the least-complex construction process, while multi-story buildings are more complex. On one end of the spectrum, housing development is accessible to most of the sector stakeholders and remains the most open value chain of the building subsector, as it is informal and occupied by small and medium firms. On the other end of the spectrum, complex industrial buildings or large-scale building projects offer a more limited market, whereby only foreign or very large firms are capable of handling the project management and complexity of design. Industrial buildings require more specialized infrastructure construction capacity. In that view, larger and more specialized firms will tend to occupy complex value chains, whereas micro- or small firms tend to occupy more accessible markets like housing or smaller multi-story buildings.

Consistency of demand—Large, complex development projects are less numerous than individual housing, multiplex housing developments, or commercial and institutional buildings. The market with unsteady demand tends to be occupied by foreign firms, which have access to larger (exporting their services) and more specialized markets. This explains the predominance of firms from the Dominican Republic on larger projects in Haiti and the presence of firms from industrialized countries in highly specialized work.

Figure 3.2 maps out the value chains in the building subsector.5 On the top are the proposed value chains; on the left, the cycle of a building construction project; on the bottom, the input factors; and on the right, the supporting services. In the middle are the size and types of stakeholders. Value chains are presented in order of complexity, formality, and scarcity of expertise. Table 3.1 describes the key features of each value chain considered for assessment for the LEVE Project.

5 Adapted from Value Chain Tools for Market-Integrated Relief : Haiti’s Construction Sector., Guided Case Studies in Value Chain Development for Conflict-Affected Environments, microREPORT #93


Figure 3.2 – Value Chain Mapping Building Sector

Source: Inspired by CHF, 2008, and adapted to LEVE’s premises and markets


Table 3.1 – List of Value Chains in Building Subsector

Value Chains Key Characteristics

1. Individual Housing (VC1)

Promoted by individual owners with generally low know-how in construction

Design and construction by individual engineers and small firms Limited third-party supervision Limited government inspection Mostly informal businesses or do-it-yourself practices Low-income and middle-income households have a preference for

low total housing costs, affecting quality of housing Inexperienced customers who are emotionally attached to the design

and construction Small projects < $500,000 Limited lead firms, very scattered supplier base Steady growth, but very segmented market (very poor and very rich)

2. Multiplex and Multi-unit Housing Development (VC2)

Promoted by a professional real estate developer, often with a bachelor’s degree in administration or engineering

Design by an engineering firm, based on trust relationships Constructed by a mid-size firm (100 to 250 houses) Occasional third-party supervision firm, especially when financed by

donors Limited construction site inspection, but the developer is more

knowledgeable and can thus provide self-inspection and better supervision

Both informal and formal businesses Mid-size projects between $1,000,000 and $5,000,000 Potential lead firms: Sandbar Island (CH), Panexus (PAP), Miyamoto

(PAP), Cemex (PAP), Kaytech (PAP) High interest, could be high growth—this is not clear

3. Commercial Building (VC3)

Commercial purpose, but the developer might have limited previous experience

Includes hotels, restaurants, offices, stores, etc. Designed by an engineering company, tender processes at times, but

direct contracting more prevalent Constructed by a small- to large-size construction company,

depending on the size of the project and cash flow requirements The private developer rarely requests bank guarantees for cash

advances, but often reduces subsequent payments to account for cash advances

Occasional tender process and third-party supervision firm, but this practice is more frequent in large hotels and restaurants where international standards are expected by customers

Limited construction site inspection Both informal and formal businesses Small-size projects of about $300,000 to large-size projects of up to

$15,000,000 Potential lead firms: Tecina, GF Construction, La Générale

Construction, ARCO, ARCOTECH Slow growth, mostly depending on tourism


Value Chains Key Features

4. Institutional Building (VC4)

Developed for an institutional purpose Procurement officials are quite knowledgeable of what is being asked

for, e.g., schools, hospitals, community centers, government offices or facilities

Designed by an engineering company, which is chosen through a mostly formal bidding process

Constructed by a mid- to large-size construction company, which is chosen through a mostly formal bidding process

The public developer requests formal bank guarantees for cash advances, approximately 20% of the contract total amount.

Frequent third-party firms providing supervision, especially on larger projects

Limited construction site inspection More formal businesses, but could subcontract to informal businesses Foreign firms predominate in the market Small- to large-size projects, from $1,000,000 to $15,000,000 Potential lead firms: Estrella, Codelpa, Tecina, VF, La Générale,

GOM Steady growth but barrier to entry

5. Industrial Facilities and Large-Scale Building Projects (VC5)

Promoted by an industrial developer, SONAPI or a large contractor from donors or GOH with relatively less know-how, given the unsteady demand

Designed by an engineering company, which is chosen through a mostly formal bidding process

Constructed by a large-size construction company, which is chosen through a mostly formal bidding process

Public developer requests formal bank guarantees for cash advances, approximately 20% of contract total amount

Frequent third-party firms providing supervision, especially on larger projects

More formal businesses, but could subcontract to informal businesses Foreign firms predominate in the market Large-size projects >$25,000,000 Potential lead firms: foreign firms (Estrella, Miyamoto) Irregular growth

Source: Author, compilation from stakeholder consultation, March 2014

Despite differences in end markets, building construction generally entails similar development and construction steps. We have assembled a set of 14 steps that cover the construction process from development to sustainable management, as follows6.

1. Project developers identifies project; secure land title, land survey, and study funding scenarios

6 Building Construction Handbook, Seventh edition, R. Chudley and, R. Greeno, Elsevier, 2008


2. Project developer contracts a design engineering/architecture firm for project concept and, if acceptable to the promoter, detailed engineering plans

3. Project developer secures funding and insurance packages

4. Project developer obtains construction permit

5. Project developer with the assistance of the design firm select lead contractor and hire a third-party supervision firm (often the designer)

6. Lead contractor starts subcontracting process (staff mobilization) and procurement strategy.

7. Lead contractor or subcontractor starts demolition, earthwork, and site preparation.

8. Municipality or third party office inspects.

9. Lead contractor or subcontractor builds foundations.

10. Municipality or third party office inspects.

11. Lead contractor or subcontractor mounts rough framing, electrical systems, and plumbing.

12. Municipality or third party office inspects the construction.

13. Lead contractor or subcontractor issues the certification of occupancy if all inspections confirm compliance with building code.

14. Lead contractor ensures adequate project management.

It is important to underscore that the quality assurance/quality control (QA/QC) system for building construction in Haiti is minimal at best. In addition, there has been limited donor funding to improve the QA/QC system, even post-earthquake, forfeiting an opportunity to fundamentally shift the way the construction industry is managed. As a result, access to safer housing for lower income households has not been increased, and construction companies are not monitored in providing these households with safe and quality housing that complies with building codes.

The mayor’s office has the authority for inspections but does not have capacity to provide systematic inspections on each construction site. The Bureau of Building Evaluation (Bureau d’Évaluation des Bâtiments [BEB]), created in the aftermath of the earthquake under the Direction of Public Works at Ministry of Public Work, Transport, and Communication (Ministere des Travaux Publics, Communication, et Transportation [MTPCT]) has created protocols, and the Cabinet issued the building code in 2013. This Bureau did significant capacity building to evaluate the stock of housing and to inspect new housing and is designing protocols within the permitting cycles so that when the building permit is issued, the construction company is presented with an inspection plan.


Appendix 3 presents a summary matrix presenting the building value chains, the steps in the chains, and some detailed characteristics at each step of the chains.

3.3.2 Subsector 2: Infrastructure

The infrastructure subsector is less established than the building subsector. The key problem is the level of expertise required to address the variability in project types and demand. Apart from roads and bridges, where demand is steady, all other value chains within this subsector are costly, and government and donor hesitation to allocate significant funding to infrastructure tempers demand. Haitian firms have not developed as much as they could have in this area, and foreign firms are systematically performing better than Haitian firms, except in the road and bridge market, where VF construction and HL are large enough to comply with the bidding rules.

The differentiation factors are also slightly distinct from those in the building sector. What varies between one value chain and another, for instance, is not the project developer, which is most of the time the government or a public-private partnership. The fact that infrastructure projects are financed by public funds has a significant impact on the structure of the industry, which ends up subjected to a cumbersome and constraining bidding process that tends to favor experienced firms with the capacity to provide cash advance guarantees (typically 20% of the total amount of the project). And as with the building subsector, the same factors of complexity in project management and expertise along with the consistency of demand also apply in the infrastructure subsector.

The key differentiation factors in the infrastructure value chains follow.

Final end products—Final products are very different. Infrastructure generally includes transportation, energy, and water domains. Transport usually includes roads, bridges, overpasses, railways, and airports. Energy includes hydropower plants, transmission lines, oil & gas infrastructure, pipelines, and other power sources. Water includes irrigation, water canals, drainage and sanitation, and watershed management.

Technical and project management complexity—Roads are simpler projects than hydropower dams. Levels of expertise and complexity in management vary extensively between infrastructure projects. As a result, larger and more specialized firms will tend to occupy complex value chains, whereas small or medium firms tend to occupy more accessible markets like road and bridges.

Consistency of demand—Large complex infrastructure projects are less frequent than roads and bridges or irrigation projects. As a result, this market tends to be occupied by foreign firms that have access to a larger market to develop the level of specialization required, either from their home base (US or Brazil) or because they export their services all over the world (French for irrigation, Canada for hydropower, Japan for seismic design, etc.). This is one of the reasons the Dominican Republic dominates larger road projects and industrialized countries take on highly specialized work in Haiti.


Figure 3.3 illustrates the infrastructure subsector. On the top are the proposed value chains; on the left, the cycle of an infrastructure project; on the bottom, the input factors; and on the right, the supporting services. In the middle are the size and types of stakeholders. Value chains are presented in order of complexity, formality, and scarcity of expertise in Haiti. Table 3.2 describes the key features of each value chain considered for assessment for LEVE in the infrastructure subsector.


Figure 3.3 – Infrastructure Subsector Value Chain Mapping

Source: Author, from CHF, 2008, adapted to the LEVE project


Table 3.2 – List of Value Chains in Infrastructure Subsector

Value Chains Key Characteristics

1. Roads and Bridges (VC6)

Promoted by GoH and donors Design and construction by engineering firms specialized in

infrastructure, more foreign firms if more complex bridges Execution firms for paved roads are rather large Maintenance and repair market is smaller than it could be Frequent third-party supervision Government inspections are requested by executing firm Formal businesses for paved roads, informal and MSMEs for rural

roads Lead firms: CECOM/LGL (design & supervision), HL/VF/Estrella

for execution, MSMEs for rural roads Steady growth

2. Rural Watershed & Irrigation (VC7)

Promoted by GoH and donors Design and construction by engineering firms specializing in

irrigation Execution firms can be medium-size firms, as there is a level of

specialization Frequent third-party supervision Formal and informal and community labor Medium-size projects ($10 to $50 million) Lead firms: Foreign firms, CECOM/LGL (design & supervision),

HL/VF/Estrella for execution Irregular growth

3. Urban Water & Sanitation (VC8)

Promoted by GoH and donors Design and construction by engineering firms specializing in urban

infrastructure Execution firms are rather large, but foreign firms occupy the market

since there have not been major activities in this field since the end of the 1990s

Frequent third-party supervision Government inspection is requested by executing firm Mostly formal businesses Very large projects ($50 to $250 million) Lead firms: Foreign firms, CECOM/LGL (design & supervision),

HL/VF/Estrella for execution Uncertainty due to large investment


Value Chains Key Features

4. Large and Complex Infrastructure Projects (VC9)

Promoted by GoH Design and construction by engineering firms specializing in a

particular field Executing firms are large, but foreign firms occupy the market due to

required levels of specialization Full third-party supervision, often another foreign firm Formal businesses Few EPCM contracts in Haiti Very large size of projects ($50 to $300 million) Lead firms: Foreign firms Irregular growth

Source: Author, compiled from stakeholder consultations, March 2014

The infrastructure subsector is generally more hermetic than the building subsector because most infrastructure projects require a high level of expertise and demand is irregular, which makes it more hospitable to specialized or large foreign firms with more experience than Haitian firms, both in the planning and execution phases. In this subsector, the design and supervision firms have a more active role than in the building subsector. Design and supervision firms performing feasibility studies in the infrastructure subsector tend to be larger than those in the building subsector, given the various experts required to produce a feasibility study. In addition, Haitian design firms often developed partnerships with foreign firms, which helped them learn and participate.

The following steps represent the infrastructure development process, although there is significant variation in nature and scope for each of those steps.

1. Government agencies supply an integrated regional or urban plan with detailed infrastructure needs.

2. Government agency prepares tender documents, assesses bids, and selects an engineering firm.

3. Engineering firm provides scoping and prefeasibility studies with various scenarios for the government to align with their budget constraints.

4. Government assesses and makes the final decision to move proceed.

5. Engineering firm prepares feasibility study, detailed engineering plans, and (sometimes) tender documents.

6. Government develops tender documents, launches the bidding process for the lead construction firm, and selects the firm.

7. Lead contractor mobilizes staff (subcontracting) and building materials (procurement).

8. Lead contractor or subcontractor prepares the site, including major earthwork.

9. Lead contractor or subcontractor installs the various steps for each end product: (a) for road: put layers of gravel/stone/sand before paving; (b) for urban infrastructure: install networks of pipes, drains, etc.; (c) or generally install imported equipment like turbines, electric lines, etc.


10. Third party engineering supervision is present throughout the project to ensure that the quality of the design is respected.

11. Lead contractor ensures adequate project management.

A summary matrix presenting the value chains, the steps in the chains, and various characteristics can be found in Appendix 4.

3.4 Stimulating Employment

The construction industry is not a saturated market. Anyone can see there is still significant work to be done at all levels in Haiti. It is generally a competitive industry with many suppliers seeking to access opportunities and demand significantly constrained by the investment climate of Haiti. The construction sector should be supported in improving the supply (quality and ability to access public and larger markets) and stimulating the demand (promote innovations and improve planning and coordination). According to the industry stakeholders and consulted experts, there are eight most-effective ways to generate employment in the construction sector, as follow: 1. Alleviate barriers to entry in public markets. 2. Increase incentives to construct quality and earthquake resistant buildings and infrastructure

to better compete against foreign firms and, by doing so, create inspection-related jobs. 3. Stimulate demand in infrastructure, where numbers of jobs are proportionately lower than in

most developing countries. 4. Promote innovations for commercially driven real estate housing development. 5. Support innovators in their expansion plans to create employment in new business areas. 6. Improve strategies to reduce costs of materials and heavy equipment. 7. Encourage better alignment between supply and demand for MSMEs to enter key markets. 8. Develop the workforce to match the needs of the market to minimize hiring from abroad (see

Section 3.5).

3.4.1 Alleviate Barriers to Entry in Public Markets

Large Haitian firms or foreign firms generally dominate public markets, because MSMEs do not meet basic qualification requirements to enter the market. A key consequence is not only reduced mobility among firms hoping to graduate to larger public markets, but also a diminished competition level among qualifying firms, potentially increasing the profit margins by qualifying firms. Key barriers to entry for MSMEs are as follows. Level of expertise required in the (re)construction of complex work. This argument is valid

for complex civil engineering work like hydropower dams, airports, and industrial parks, which are rarely needed in a smaller country’s development. Most countries contract specialized firms that are likely to be from abroad for these types of projects. If the government determines that these civil works projects will reoccur soon or need repair and maintenance, there would be a strong argument for requiring know-how transfer to Haitian partners. For instance, if new small hydropower dams are to be built in the near future, the know-how transfer is important. In any case, maximizing know-how transfer in the parameters of a project is always a best practice for developing nations. The client should however be ready to spend additional time for training and quality control.


The perception that Haitian firms will not construct to building codes and earthquake resistant constructions. The building code was adopted in 2012 with great efforts from MTPTC and its constituents, the BEB and the National Laboratory (Laboratoire Nationale). Very few hard copies are in circulation, but it is available o-line. In recent months, MTPTC trained significant numbers of masonry foremen to increase the awareness of earthquake-resistant construction. Although the MTPTC is making serious efforts, the construction industry continues to operate as it did before the earthquake, profit seeking by applying downward pressure on labor and material costs. Because Haiti is a lower income economy, private sector clients are reluctant to pay for quality and safety in the short run, even if the maintenance and repair costs will be lower in the long run. There are rare exceptions of clients ready to invest in a supervising engineering firm to conduct quality control.

The inability of Haitian firms to provide guarantees for cash advances.7 Tenders for public works, though of high interest to entrepreneurs, are not readily accessible by MSMEs, often because of their size and complexity. Only 5 to 10 lead Haitian contractors out of 100 have the capability to respond to large public tenders. The key challenges for Haitian firms are the numbers of years of experience for project managers or lead engineers and the requirements to provide guarantees of cash assets for the equivalent amount of the cash advance planned in the contract. In developed economies, export agencies or insurance companies provide these guarantees to the commercial banks. For the Haitian construction sector, this infrastructure does not exist, and the industry stakeholders have been advocating for developing a guarantee fund that would be pooled for all users and provided by a Haitian bank or donor, but it has not yet implemented. In most countries, the building of a consortium is the best way to address cash flow management, since partner entrepreneurs can pool equipment, workforce, and cash assets on the project. Development banks have standardized procurement policies,8 and significant advocacy would be required to change these terms.

Paperwork or lack of experience in preparing bid documents. Many stakeholders admitted that bidding documents were a deterrent, as some did not build expertise in that regard and are reluctant to allocate resources to do so. Despite other constraints, this might be a problem of perception. Most construction firms have standard documents for bidding as well as set-up processes and just need to adapt these for this new request for proposals (RFP). The investment is thus not completely recurrent.

3.4.2 Increase Incentives for Quality and Earthquake-Resistant Buildings

As stressed in previous sections, the lack of incentives to design and construct quality and earthquake-resistant buildings is a serious problem. Despite the trauma households experienced in 2010, homebuilders still compromise on more water-based concrete and reduced use of rebar, since their clients do not have sufficient income to have their houses constructed to building

7 Stakeholders were especially concerned with advance payment guarantees, which consist of a deposit to the bank of between 20 to 30% of the total value of a contract to ensure that the client’s advance payment will be used for starting that contract and nothing else. A bid bond is less (3 to 5%) of the total amount and consists of paying the client, if the bidder won and cannot commence the work. A performance bond (or completion bond) is a contract providing protection to the client, if the contractor becomes insolvent or cannot complete the work. For instance, with the IDB or World Bank, it is possible to use an advance payment guarantee as an alternative to performance bonds, but both tools serve an equivalent purpose and present approximately the same burden for contractors. The bid bond is more systematic in most contracts. 8 Prequalification for Procurement of Works and User’s Guide, The Inter-American Development Bank, 2011


codes.9 The Haiti Economic Recovery and Roadmap (ERRM) prepared by the Presidential Commission on Competitiveness (GC) did set a priority on urban and housing development to break the vicious circle in construction, best illustrated in Figure 3.4. Figure 3.4 – The Construction Sector’s Vicious Cycle

Source: Haiti ERRM prepared by the Presidential GC, OTF Group, 2010 There are many early innovators who believe they can demonstrate that a safe house is also affordable. Stakeholders found that best incentives for customers, project developers, designers, and contractors to respect building codes in their respective activities are:

Increase the abilities of project developers to review plans to be technically capable of accepting or rejecting the proposed plan

Promote the role of design and supervision firms to look after the client’s interests in the event the client does not have the staff available to undertake supervision;

Increase accountability of lead engineers and architect designers to design to building codes with professional reprimands on failure to do so or a professional licensing system;

Develop a government-led inspection system (with potentially subcontracted third party inspection firms) at key steps of building construction to verify that the building conforms to building codes; and

Ensure team leaders are adequately trained to occupy the position they hold, perhaps through a national competency certification system.

9 A critical assessment of concrete and masonry structures for reconstruction after seismic events in developing countries, H. McWilliams, C.T. Griffin, Department of Architecture, Portland State University, Portland, Oregon, United States, 2012, Unpublished


These various systems take years to put in place, but the industry stakeholders are convinced a change is urgently needed to gain more public markets and also to ensure safety in the country with the next earthquake. LEVE should facilitate the elaboration of an action plan among key enablers with realistic short-term and mid-term objectives. Quality building will enhance the reputation of Haitian firms, helping them access additional markets and create jobs. In addition, inspection skills will be developed, and jobs will be created.

3.4.3 Stimulate Demand in Infrastructure

Surprisingly, Port-au-Prince’s reconstruction did not result in significant urban infrastructure development. The overall costs of urban infrastructure development in water and sanitation in Port-au-Prince are probably well above $1 billion. Even smaller sections, like the water basin of Tabarre and environs, cost more than $200 million, which is almost the entire IDB yearly budget for Haiti. The very high costs of urban infrastructure will require creativity not only in funding patterns, but also in the city’s priority system. If the overall reconstruction of urban infrastructure takes 10 to 15 years, it is essential that the first 5 years be focused on the most pressing aspects. Stakeholders believed that the best thing LEVE could do to create jobs was to stimulate the urban infrastructure demand and ensure a role in the construction for Haitian firms. There is also a vision (Pillar I from the Private Sector Forum10) to try to bring foreign direct investment in infrastructure projects, and this should be considered as another strategy to stimulate the demand.

3.4.4 Promote Commercially Viable Safe and Affordable Housing

Development

Since the earthquake, the housing value chain especially witnessed donor-supplied housing development projects for relief purposes, or government-led social housing projects. These projects were developed after a catastrophe and thus could not have been privately led housing developments. There is still a great need for social housing development projects, which should be promoted in line with the master plan from the Ministry of Planning and External Cooperation (Ministère de la Planification et de la Coopération Externe [MPCE]) for Port-au-Prince11 along with the National Policy for Housing (Politique Nationale du Logement et de l’Habitat [PNLH]) recently developed by the Public Building and Housing Coordination Unit (UCLBP).12 The Private Sector Forum also articulated significant necessary reforms in Pillar IV of the report13 to encourage private investment in housing. However, to truly address the shortage of housing in Port-au-Prince, it is also important that commercially viable solutions emerge to supply various segments of the market. Innovative manufacturers are developing housing for low- to middle-income households, while others are looking at retrofitting the current stock of housing by adding additional floors in a safe and affordable manner. This will call for creativity, and many developing nations can provide good practices to promote private sector provision of low-income housing. For instance, Cemex in Mexico has been a pioneer and could provide that expertise to

10 Vision and Roadmap for Haiti Prepared by the Private Sector Economic Forum Final Draft Version, March 23, 2010 11 Cité administrative de Port-au-Prince, Lignes directrices d’aménagement, Gouvernement de la République d’Haïti, Ministère de la Planification et de la Coopération Externe, Août 2012. 12Politique Nationale du Logement et de l’Habitat (PNLH), UCLBP, 2013 13 Ibid


Haiti.14. Market studies on housing markets in Haiti were performed in 2010 at USAID.15. LEVE could gather information and share it in a user-friendly format to various innovators in real estate development.

3.4.5 Support Expansion of Innovators

Entrepreneurship in Haiti is a real blessing, as many developing countries cannot boast of this comparative advantage. During the course of the assessment, at least 10 to 15 MSMEs had viable business ideas and capital. Some needed support in commercialization of their business ideas, and others needed governance support. With the help of LEVE’s small fund and the Organizational Capacity Assessment Tool (OCAT), MSMEs will be directly or indirectly supported to create job opportunities in Port-au-Prince and Cap-Haïtien.

3.4.6 Reduce Costs of Building Materials and Heavy Equipment

Haitian firms are importing most of their building materials, except for basic concrete components that are extracted in Haiti. In terms of heavy machinery, firms need to acquire from retailers in Haiti, or hold an expensive leasing agreement. If Haitian firms can reduce the costs of material and heavy machinery (almost 75% of construction costs), there will be a direct effect on additional employment and profit. Stakeholders expressed their disappointment toward unfavorable taxation or tariff schemes between importers and value addition manufacturers, which to them completely discourage the industry from doing value addition. Infant industry protective schemes existed (and still do) in the Dominican Republic, but not in Haiti. In addition, there is a bargaining power issue between small construction firms and large importers. There might be ways to realize economies of scales through association networks or cooperatives to increase economies of scale on building materials and heavy equipment.

3.4.7 Encourage Better Alignment between Supply and Demand for MSMEs

MSMEs are left out of most public markets, even where they actually have the technical and managerial capacities to operate. MSMEs are still challenged by informality, which can be a requirement to work with larger lead contractors, as taxations increase labor costs of formal firms. This informality is a barrier in itself, as the firm cannot publicly market its services and, at worst, cannot become a contractor for the public market. In the construction industry, the public market represents a higher proportion of the demand than other economic sectors because the GOH and donors sponsor many segments of its demand, such as schools, hospitals, public offices, roads and bridges, and all infrastructure projects. The private market is more open to MSMEs, but at times informality will prevent the MSME from truly making a name and obtaining new clients. MSMEs should be key suppliers of mid- to small-size schools, hospitals, unpaved and paved roads and bridges, maintenance and repair contracts, small to mid-size buildings and small to mid-size infrastructure works. Encouraging better conditions for MSME will increase the supply, potentially reduce costs, and consequently, stimulate the demand.

14 “A Value Chain Framework For Affordable Housing in Emerging Countries,” Bruce Ferguson, Global Urban Development, Volume 4 Issue 2, November 2008, and 14 Housing Demand in Port-au-Prince, FS Share, Chemonics International, USAID, 2011. 15 Housing for Haiti’s Middle ClassPost-Earthquake Diagnosis and Strategy Final Report 29 September 2010 September 2010, by Nathan Associates Inc. for review by USAID.


3.5 Developing the Workforce

3.5.1 Characteristics of a Project-Based Industry

The construction sector in most countries suffers from a chronic workforce development deficit because it is a project-based industry with a very short-term outlook on workforce development. Apart from the core team of engineers, technicians, and administrators who have full-time positions, the bulk of the workforce is subcontracted, and the lead contractors do not expect to provide training and supervision of the workforce. This reality is key to understand that training in the construction sector does not take place within firms, as is the case for sectors that are significantly less project-based, such as manufacturing or hotels and accommodation, or for industries that hire on a permanent basis. In this context, countries must find ways to increase workforce capabilities despite this project-based mentality through regulated requirements on engineers, technicians, and presence on a construction site.

Haiti also has two key problems with regard to workforce development. First, most construction companies are not specialized because the market is very competitive and small. If a company specializes in one market, it will succeed only if the company takes a good chunk of the market and if the market has steady demand. Otherwise, there will be too much down time and the company will not be able to grow. The small size of the market creates a culture of subsistence, like in agriculture. To minimize its business risk, the construction firm does many different types of work (housing, institutional buildings, and roads) and also different types of trades (masonry, electricity, plumbing, finishing, etc.). The constraint created by this lack of specialization is that the firms are not building experience in the same field, hence they are not increasing skills to the highest level possible. Second, these small, informal subcontractors are still used today, even by very large formal firms, in order to decrease costs of labor, primarily by avoiding the 30% profit taxes that would result from using a formal subcontractor. It is likely that this informal sector aggravates the skills shortage in the industry, as informal firms have significantly less control over project demand. They suffer from even more volatility than the lead construction firms and the formal subcontractors, which in turn, can market their services out in the open and get more business. This dependence and volatility makes investing in the workforce risky and unlikely.

Increasing skill in the construction industry is very important, as it acutely affects the safety of building and infrastructure construction in the country, which has just experienced the trauma of a devastating earthquake. As of now, there have been no efficient remedies to the low-cost low-quality building mentality, because Haitian customers are not ready to pay for quality and safety. One way to resolve this issue is a supply-driven mentality change to convince customers that the costs are not much higher if they think more long term.

By upgrading the workforce, numerous newcomers in the industry at all levels will have learned good practices and promote them. Customers and suppliers with new capable workforce can bring about this shift in mentality.

3.5.2 Industry Demand

The sector suffers from a skills deficit, especially in project management and in the semi- and specialized needs of the industry. Good indicators for understanding the skilled labor shortage


are the presence of foreigners occupying positions in the sector and several construction skill assessments found online regarding construction.16 The most serious issues expressed by the industry regarding their role in the value chains are as follows.

Estate development—There is currently no formal training in Haiti to develop multiplex and multi-unit housing development. It is relevant to have workforce developed in Haiti in these areas, since private investors from abroad react to risks and instabilities in a different way than private investors from Haiti.

Design and supervision—Engineers and architects are well trained in Haiti (even better than in the Dominican Republic according to many), but there is a shortage of well-trained Haitians in areas such as geographic information system (GIS) and computer-assisted design (CAD) drawings, as most Haitian schools still teach with drawing tables.

Production of input material—Most building materials are imported, but concrete, a significant input in any construction project, is mixed in Haiti. Quality of production is uneven, and there is a lack of standardization, which usually is symptomatic of a lack of supervision or lack of incentive to buy premixed concrete. Supervisors are most likely insufficiently trained or receive cost-cutting pressure to add more water than cement. Normally a technical degree in civil engineering is required for supervisory functions as a good grasp of the physical aspects of concrete and structure is essential.

Heavy machinery—The operation of machines is being done more and more by Haitians, primarily trained at the HayTrac training facilities, but there is still significant work to be done, especially in maintenance and repair of the machines, which require trained mechanics.

Execution—The industry complained of the poor project management skills of Haitian employees, particularly on construction sites. Usually, technical training does not include project management, as the private firm usually provides the project management. In Haiti, given the pressure on cost, no one is currently being trained in project management as construction site managers (typically a three-year degree as a technician in civil engineering) or foremen (typically one year of training in a special trade like masonry, electricity, plumbing).

The industry demand for skills is detailed in Appendix 5, but more details on the industry supply and the misalignment of both will be detailed in the workforce development report for the three sectors.

4. VALUE CHAIN SELECTION ASSESSMENT The process of value chain selection assessment is important for many international development projects seeking a particular focus on value chain upgrade approaches. The choice relies on important criteria of market opportunities, competitiveness, presence of lead firms, potential for 16 Rwanda Skills Survey 2012, Construction Sector Report, Rwandan Development Board and Human Resource and Skill Requirements in the Building, Construction and Real Estate Services, A Report, National Skill Development Corporation (NSDC), India, 2010.


linkages to MSMEs, enabling environment baseline conditions, and the like. This section provides a summary analysis at the subsector level, and detailed assessment matrices are provided in Appendix 6 for each value chain. A summary matrix is presented in Table 4.1 to provide an overview of the value chain selection process and support the following argumentation for selection of specific value chains. In lighter red are the value chains for which the crucial and important criteria are less convincing, whereas in darker red are the value chains for which crucial and important criteria are more convincing. There are also regional variations between Cap-Haïtien and Port-au-Prince summarized in last section.

4.1 Building Value Chains

There are three value chains (multiplex housing development, commercial buildings, and institutional buildings) that are more conducive to value chain upgrading because they meet crucial and important criteria, while the two other value chains (individual housing and industrial complex buildings) are not good candidates for upgrading because of their very challenging structure. The factors that justify that selection are as follows. Market opportunity (crucial) —Of all value chains, individual housing (VC1) has the largest volume and potentially the highest demand of all value chains, followed by the multiplex housing development (VC2) and the institutional building (VC4). The real estate housing development projects currently proposed on the market are innovative, and developers are enthusiastic about market opportunities for middle-income houses ($25,000 to $45,000) and low-income houses (brownfield17 $10,000). Nonetheless, significant financial obstacles must be overcome. The commercial building value chain (VC3) is very competitive yet it is currently stagnating due to high investment in tourism in the last two years. The occupancy rates at other hotels have dropped to 60% since the Best Western opened in 2013, which is symptomatic of a slowdown in the commercial buildings in Port-au-Prince, according to many stakeholders. However, in Cap-Haïtien, it’s the opposite: the commercial building sector (VC3) is more attractive than the institutional market, since the international airport will be completed soon and will attract customers from the US/Canada and elsewhere. The Northern Tourist Association has a clear plan and strong mobilization of its stakeholders.18 As for large complex facilities (VC5) in Cap-Haïtien and Port-au-Prince, demand for additional industrial complex construction is very uncertain. Elections this fall are also slowing down investment, according to some, but not significantly, according to others. Many believe business conditions are better now than ever in the last decades. Lead firms (crucial)—All value chains have lead firms, except individual housing (VC1), which is characterized by a highly unstructured value chain, with not even some association networks such as owners’ associations, tenants’ associations, real estate associations, or

17 Brownfield in construction jargon stands for repair, overhaul, and expansion of an already existing construction. In this case, low-income households could pay for a safety and expansion upgrade for approximately $10,000. Adding floors could contribute to the densification of Port-au-Prince and ensure earthquake-proof structures. 18 “Pour une Meilleure Exploitation des Opportunités Touristiques de la Région du Nord (Vision du Secteur Hôtelier)”, Comité de Direction Régional Nord de l’Association Touristique d’Haïti & ATH NORD, TechnoServe/HIFIVE


cooperative housing projects. Apart from social housing projects from UCLBP, that value chain has almost no handle to pull on in order to upgrade it. However, given the inter-linkages of firms with subsistence construction practices,19 upgrading other value chains should have spillover effects on the individual housing value chain. Indeed, the multiplex and large housing development value chains (VC2) could innovate in providing new housing stock and inspiring some individual engineers in the market to propose such houses to their clientele. New manufacturers recently arrived in Port-au-Prince (Kaytech, Veerhouse Voda, YCF, etc.) to seek buyers for their technical solutions, whether they are individual owners or real estate developers. The commercial (VC3) and institutional (VC4) value chains have many lead firms, but the former has more room for MSMEs than the latter, due to the latters’ requirements in the bidding process. Thus, lead firms in the commercial sector are actually smaller than in the institutional building value chain. In the institutional building market, larger firms are more active, as are even Dominican firms, due to the banking guarantee constraint (see Enabling environment, below). Foreign firms or the largest Haitian firms lead the last value chain, large complex buildings (VC5), and even more important constraints close this market to MSMEs. MSME participation (crucial) —The network of MSMEs in the building subsector is significant. The most open market with the most possibilities for MSMEs to expand is in the commercial building value chain (VC3), since there is no bidding process blocking access to market for MSMEs. In the individual housing market (VC1), there are micro- and small firms that could graduate to access the commercial building market. The other value chains (VC2, real estate housing projects; VC4, institutional buildings; and VC5, large complex buildings), although closed off to MSME as lead contractors, are nonetheless open to them as formal or informal subcontractors. MSMEs are found in specialized markets such as electrical systems, plumbing, HVAC, and finishing, because they do not require permanent presence on the construction site. MSMEs in those value chains have high potential for upgrade, since their clients have high incentives to see them strengthened.

19 As described in a previous section, subsistence construction refers to the organizational behavior to occupy all markets to ensure stable income and minimize risks of falling idle and, worst, out of business.


Subsectors Value

Chains

Crucial Important Useful

Ma

rket

Op

pty

Le

ad

Fir

ms

MS

ME

p

art

icip

ati

on

Co

mp

eti

tive

Po

ten

tial

Co

mp

ara

tive

Str

en

gth

s/

Weakn

esses

En

ab

lin

g

En

vir

on

men

t

Wo

rkfo

rce

Imp

act

yo

uth

/

Wo

men

Access t

o

Fin

an

ce

En

ga

gin

g w

ith

p

rov

iders

Co

llab

ora

tio

n

wit

h o

the

rs

Co

ntr

ibu

te t

o

form

alizati

on

Building

VC1 - Individual Houses

Steady growth

no High;

informal Low

Low barrier to entry; low regulation

Safety & quality issues

Land; building codes

Mostly qualified; Customer low-cost oriented

High for youth and

women

Mortgage solutions

Low High Low

VC2 - Multiplex & Large Housing Develop-ment

Early innova-

tion; growth

potential

Yes

High; mixed

formal & informal

Moderate

Solution to increase

quality stock of housing

Mortgage and other

financial instruments

Building codes;

inspection

Mostly qualified;

need better engineers, technicians

Moderate Mortgage solutions;

PPP High High High

VC3 - Commercial Building

Steady growth

yes

High; mixed

formal & informal

Moderate Established

industry; high demand

Highly competitive; low-bidder

Building codes;

inspection

Mostly qualified;


Moderate n/a High Low Med

VC4 - Institutional Building

Steady demand

yes

High; mixed

formal & informal

Moderate Established

industry; high demand

Highly competitive; low-bidder

Building codes;

inspection

Mostly qualified;


Moderate Guarantee

issues High Low High

VC5 - Large & Complex Buildings

Steady demand

Yes

High; mixed

formal & informal

Low Capable industry

Perception of low quality;

bank guarantees

Bidding conditions;

building codes

Not yet qualified;

better project management

Low Guarantee

issues Med Med High

Scoring Higher VC

Scoring Moderately VC

Scoring Low VC

Table 4.1 – Selection Assessment Overview Matrix


Competitiveness potential (crucial)—As of now, there are no Haitian enterprises exporting construction services to other countries. On the contrary, the large complex building value chain (VC5) and the institutional building value chain (VC4) represent markets occupied by foreign firms. In order to gain access to these two value chains, very influenced by public donors, Haitian firms must become more competitive in project management and quality control to change the perception of the low quality-cost ratio on the public market. To leverage their capacities, Haitian firms must find collaborative schemes to gather their financial assets and equipment capacity to overcome the conditions of tender processes. There is a space in those two value chains for competitiveness upgrading. The commercial building value chain (VC3) is also particularly competitive, since the tourism industry is clearly heading towards international construction standards, which has significant potential to pull up all other value chains. In the housing value chains (VC1 and VC2), there is, on the contrary, a clear cost pressure from low-income households, which tends to encourage a low-quality supply that does not meet the bare minimum of building codes. For housing, the space for upgrade lies in real estate development (VC2) since lead firms are in a position to propose innovative housing products to match low-cost customer preferences, but still meet building codes. Strengths, weaknesses, opportunities, and threats (SWOT) (important)—In terms of strengths, the building subsector altogether is a well-established sector in that linkages among firms are high, and it is a generally open market with easy entry and exit. Challenging mortgage conditions can represent a moderate barrier to entry for real estate housing development (VC2). The least open market is the public market value chains (VC4 and 5) due to cash flow requirements and the expected greater level of expertise in project management and international building codes. The level of informality is high, but the larger a project is, the more formal enterprises become, due to project management complexity and risk mitigation among shareholders of a company. Another strength is the general capacity to respond to construction needs by knowledgeable design and supervision firms. In addition, the tourism industry is a key quality driver, along with donors, to ensure buildings are earthquake resistant and meet building codes. Finally, Haiti, with much consultation and effort, published its building code in 2012.20 In terms of weaknesses, housing value chains (VC1, VC2) struggle with land conflict, insufficient mortgage instruments for low-income households, and an equivalently insufficient tenant and owner protection regulatory framework. Land is a serious issue for construction development altogether, as two or three households or landowners might hold deeds for the same plot or land area. These conflicts are overwhelming the tribunals, slowing down potential investments for new constructions. Land conflict is a particularly acute obstacle for the individual housing value chain (VC1) in popular neighborhoods. In addition, mortgage instruments are still unable to completely unlock the market for the low and middle income. Improved mortgage instruments would clearly provide incentives for real estate developers or for owners to develop better renting or lease-buy schemes. As for building quality, all privately funded buildings (VC1, VC2, and VC3) greatly suffer from a lack of third-party evaluation. Normally, the need for a loan and insurance package triggers the 20 http://uclbp.gouv.ht/download/cicps-2014-cnbh-fusion.pdf

http://uclbp.gouv.ht/download/cicps-2014-cnbh-fusion.pdf


need for an inspection report. However, many small buildings are not built with a loan and no insurance is sought. Occasionally, at customers’ will, there is a supervision firm, often the designer of the building. In public markets (large complex buildings, VC5, and institutional buildings, VC4), supervisory engineering services act as the third party, which mostly compensates for government inspection, but does not replace it. Enabling environment (important)—For all value chains, the slowly improving quality system has not yet succeeded in disabling the low-cost vicious circle that caused the loss of too many lives in 2010. There is also a lack of financial instruments for households to build safe and affordable houses along with underdeveloped tenants’ rights for quality housing. On the other end, owners, investors, or banks have limited incentives to supply additional stock of housing to rent or to sell, because of frequent payment defaults. The building construction subsector could truly help the low-income customer base, if some constraints were successfully lifted and innovators were able to change the market behavior. Rules of engaging in public markets for institutional and large complex buildings, VC5, and institutional buildings, VC4 are very challenging for MSMEs and were explained in section 3.4.1. There is a need to be creatively modifying these rules or provide MSMEs with adequate tools to enter that market. Workforce (important) —There is a severe skill deficit in all value chains, especially at skilled and semi-skilled levels, along with project management skills. At the contractor level, there are insufficient technicians in building construction or civil engineering (meant to be construction site managers) and insufficient qualified foremen in various trades, namely masonry, electrical, plumbing, HVAC, and finishing. At the design level, there is also a technical level problem with insufficient CAD specialists. In building materials, the industry needs additional good procurement managers who can handle more complexity. Upstream, it was observed that real estate developers come from abroad, stimulated by innovation in low-cost housing proposals. Haitian real estate developers are very rare, possibly because the middle-class, the typical target market for real estate developers, is too thin. Impact on youth, women, vulnerable populations (important)—Most industry leaders are aware that there is an important succession problem in Haiti, and youth must be integrated in small projects as apprentices. However, the construction industry has a short-term and project-based mentality and tends to keep experienced and highly skilled staff instead of developing promising semi-skilled, skilled, and highly skilled labor from the base. Some medium-size firms have been able to develop apprenticeship models like Arcotech to better integrate young men in the workforce. Others also try to involve women in building schools, hospitals and rural roads, especially in masonry work in rural areas (GOM International) and as heavy machinery operators on larger construction sites (Haytrac). However, these firms are a minority and their model could be inspiring for larger players. Potential to access to finance (important)—The housing value chains (V1, V2) and small commercial projects (VC3) seem to experience real issues with the banking system, which provides unsatisfying mortgage instruments that cannot stimulate small investments or attract low-income customers in demanding safe and affordable houses. High interest rates and short periods of reimbursement normally create monthly payments that are too high for low-income home owners.


Potential to engage with providers (useful)—Engaging with service providers in workforce development or specific technical assistance is high for all value chains, but especially in facilitating and stimulating innovations and quality in a rather conservative industry that has not yet responded to the earthquake threat, especially in Cap-Haïtien. Potential to collaborate with others (useful)—There are significant synergies with USAID’s Leveraging Effective Application of Direct Investment for Haiti (LEAD) project in supporting MSMEs and providing training. PADF collaborated with numerous construction companies during reconstruction just after the earthquake and these construction firms could be good candidates for retrofitting and inspection of the current stock of houses. For the overall quality upgrade, the key collaborations will be MTPTC’s BEB and the National Laboratory, currently supported by the World Bank and the Swiss Cooperation Agency. Potential to contribute to formalization (useful)—Consortium or partnership formation to gain access to public markets and overcome the cash flow constraints can indirectly favor formality, as various consortium members must know the actual financial situation of other firms. In addition, a full quality system requires more formality, a qualified workforce, and formal/accountable engineers and construction site managers. Specialized MSMEs could have incentive to formalize to access larger markets and provide quality, reliable work to lead contractors.

4.2 Infrastructure Value Chains

There are four infrastructure value chains (VC6, roads and bridges; VC7, rural watershed and irrigation; VC8, urban watershed and sanitation) that are more conducive to value chain upgrading, while the last value chain (VC9, complex civil works) has too weak a structure to be a good candidate for upgrading. Table 4.2 summarizes the selection process among value chains. The factors that justify that selection are as follows. Market opportunity (crucial) —Of all value chains, the roads and bridges value chain (VC6) has the largest volume and potentially the highest demand. Other value chains have a very ad hoc demand that truly depends on government and donors’ priority budget allocations. Infrastructure projects are also often very expensive projects, which, like anywhere, tend to be often postponed, despite being essential to economic development. Irrigation works and rural roads in developing countries, however, find easier financing, since they have direct high impact on rural poverty. The rural watershed and irrigation value chain (VC7) should have a steadier demand than urban infrastructure or large complex civil work. Unfortunately, according to stakeholders, the demand is far from steady, and it appears that the budget is too thin for more significant irrigation development. The urban water and sanitation value chain (VC8) entails very costly projects, estimated at more than $1 billion for Port-au-Prince, equivalent to five years’ budget of the IDB. For instance, $300 million is needed just for Tabarre neighborhood, which has no canals to evacuate rainwater to Rivière Grise and suffers from significant floods in rainy seasons. It is an essential problem inside Port au Prince, where most of the roads are paved without draining ditches or gutters. Port-au-Prince downtown and Piétionville had developed a


subsurface water management system at the end of the 1990s, but it was severely damaged by debris and mud from the earthquake.21

21 MTPTC, March 2014.


Table 4.2 Infrastructure Value Chain Assessment Summary Matrix


Lead firms (crucial)—All infrastructure value chains have lead firms, but they are not numerous, leaving little room for small and medium firms to enter the market. The overall infrastructure subsector market is characterized by cumbersome bidding processes, large projects, and advanced payment guarantee constraints. It is very hard for MSMEs to participate. Apart from rural road development, maintenance, and repairs, where MSMEs have been observed, the remainder of the market is occupied by very few large Haitian or Dominican firms. Parts of the infrastructure subsector has thus symptoms of non-competitiveness in that too few firms participate in the bidding process, which could result in higher prices for customers. Rural development is a more open market for MSMEs to get experience with civil engineering work, before preparing to enter into more complex work and acquire heavy equipment. MSME potential (crucial)—The web of MSMEs in the building subsector is moderate. It has the potential to grow within the roads and bridges value chain (VC6), as road projects do not need to be large contracts. There are mechanisms to give smaller sections of roads to MSMEs to encourage their larger participation. This effort is called in Canada and in some African countries “Chantier-école,” meaning the infrastructure is constructed with trainees and trainers in an effort to bequeath to the economy very valuable know-how. These approaches are very common with Aboriginal communities of Northern Canada and Australia to ensure the communities can design, construct, and maintain their own road networks.22 They are also more sustainable, as they build capacity within the community, and is also a quite common approach in youth development in international development.23 Rural watershed and irrigation (VC7) also has great potential for MSME participation, especially in ensuring community-based approaches in building and maintaining watershed and irrigation management system. However, MSMEs’ participation in large urban water and sanitation work (VC8) and complex civil work (VC9) would be low, since the required level of expertise is high, and foreign firms are most likely to occupy the market. Local partnerships should be promoted, since maintenance and repairs will fall under the mayor’s administration, and local firms should be trained to supply the maintenance and repair services. Competitiveness potential (crucial)—The infrastructure subsector has two key competitiveness issues, namely: sporadic market demand and too-large contracts. These two phenomena together work to leave the market to a happy few insiders. Given the high degree of specialization in infrastructure development, most firms must have access to a pool of experts, thus tend to be larger. The design and supervision firms maintain partnerships with foreign engineering firms in certain markets to have access to these experts on a need basis. This requires a certain size of firm to be capable to secure an international partner. In fact, design firms in the infrastructure subsector are very large compared to those in the building subsector, though there are not many of them. The same observation can be made with regard to the execution firms. Only three names could be easily named in that market, and they are the three largest companies in the

22 It is a poorly documented field and became common practice 15 years ago in Canada. The most recent experience is the extension of road 138 in Canada, which was done on a « chantier-école » concept, meaning the whole construction site is in training mode to promote local employment of Aboriginal residents, youth, and women, and thus avoid hiring people from the city with limited effect on the local economy. http://www.portailconstructo.com/actualites/prolongement_route_138_–_realisation_chantier_ecole 23 http://indaba-network.net/wp-content/uploads/2013/06/Chantier_ecole1.pdf

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overall construction industry. The question is: would these lead firms have sufficient incentive to subcontract and train MSMEs? In the more complex value chains (urban water and sanitation (VC8) and complex civil work (VC9)), the collaboration will come from foreign firms partnering with local firms in the design and execution of complex engineering works. However, rural roads from the roads and bridges value chain (V6) is a more competitive field and barriers to entry are significantly lower. SWOT (important)—In terms of strengths, the infrastructure subsector is uneven in that basic infrastructure markets do have an established industry (VC6 and 7), but other more complex and rare infrastructure projects (VC8 and 9) do not have a Haitian industry so to speak. For example, Haitian firms hold adequate expertise for roads and bridges (VC6) and rural irrigation and watersheds (VC7) and are better able to provide successful bids. However, successful firms are large, and the market is difficult to penetrate for SMEs. For complex infrastructure works (VC7 and 8), however, Haitian firms are hardly involved except at times in the design and supervision phase of the work. These projects are rare, and this is why foreign firms outcompete the Haitian firms that have limited credentials. The most important market weakness is the lack of collaboration among firms to win public bids over foreigners. There is resistance to building consortia or joint ventures to gather resources together either with competitors or with other upstream or downstream stakeholders of the value chains, e.g., the engineering procurement construction management (EPCM) format. In developing and developed economies, consortium practices are very common, especially in large projects and public markets, when bidding conditions are particularly hard to meet. No EPCM format was tried in Haiti, according to infrastructure stakeholders. EPCM contracts could be relevant to ensure that maintenance of infrastructure is more systematically done, in spite of a political change of priorities. Enabling environment (important)—The inadequate quality system is also persisting in the infrastructure subsector, but to a lesser extent, because most of the contracts plan for third-party supervision consultancy that somewhat compensates for municipal inspection. Supervision of work is typical in highly specialized markets, whereas markets with higher volume are usually handled with standardized procedures by the state. There are however two significant enabling environment constraints for MSMEs in the infrastructure subsector. First, there is an extensive use of costly heavy equipment in large infrastructure projects. Indeed, earthworks are significantly higher in infrastructure than in building, where land preparation has one purpose, to receive a structure. Earthworks in infrastructure are actually a part of the infrastructure in itself, with various canals, pipes, paving beds, etc. Owning equipment becomes the competitive advantage for contractor firms in the infrastructure subsector. Second, tender conditions to enter this subsector are challenging for MSMEs. Requesting numbers of years of experience in large contracts along with a 20% advanced payment guarantee constrains local firms. There is a need to explore solutions that would mimic a more municipally led local infrastructure planning, as seen in other economies. When municipalities manage their infrastructure, they tend to tender for smaller contracts, which favor local firms and MSMEs. Workforce (important) —Entering the job market for newly trained labor is difficult because the numbers of firms are limited and projects, though very large, are not frequent. This means


there are very few points of entry for the workforce. Nonetheless, a civil engineering degree and a technical diploma in civil engineering are sufficient to enter the market. To become more valuable to the infrastructure market, a certain degree of specialization is required. Typically a civil engineer will specialize in roads and bridges or building or hydropower dams. Specializing the workforce in the job market is important to improve quality and reduce cost. Impact on youth, women, vulnerable populations (important)—The infrastructure subsector is not a very conducive sector for women and youth employment, since required levels of expertise are higher. It also has less of a community component than the building of schools and hospitals. Normally, women and youth better enter the market in their own community because of the desire to encourage more vulnerable groups. In the city of Port-au-Prince, the community links are milder and including vulnerable groups in projects is not as natural as it can be in rural communities. Rural communities will tend to promote workforce development of all members of its community, whereas urban communities are more anonym and can have an exclusion effect. Rural roads and irrigation projects could be the entry point for women and youth, as they are more community-driven. Potential to access to finance (important)—Since the GoH and donors are clients and developers in this subsector, the access to financing here does not concern the developer but rather the MSME wanting to participate in the value chains. Conditions of tender do not favor MSMEs, and their capacity to prepare bidding document is low. There might be an opportunity for grouping in limited partnerships and cooperatives to share costs of the bidding process and in this way reduce individual transaction costs of each firm. Potential to engage with providers (useful)—There is a higher need for specialized service providers for training and facilitation in consortium and cooperative formation to gain access to larger markets and for training and facilitation in infrastructure development planning.. Potential to collaborate with others (useful)—There are significant synergies with USAID and IDB to take advantage of planned projects. In addition, there is a need to advocate for additional infrastructure work to be done in a step-by-step approach broken into smaller sections, a practice that will ensure that Haitian MSMEs can seize infrastructure opportunities as well. Potential to contribute to formalization (useful)—Consortium formation can indirectly favor formality as various consortium members must know the actual situation of other firms. This is the same for cooperatives, which need more formality from all joining members. Linkages with MSMEs as subcontractors should also be conducive to formality.

4.3 Value Chain Selection for Corridors

4.3.1 Port-au-Prince

LEVE will not have the same approach for Port-au-Prince and Cap-Haïtien, since markets greatly differ. For Port-au-Prince, increasing the stock of housing and stimulating demand for urban infrastructure were the priorities, according to stakeholders. There are innovators and groundwork being done to upgrade these value chains, but few projects have given these initiatives full attention. LEVE will consider participating in the following value chains in


collaboration with government coordinating agencies and in partnership with lead firms or early innovators.

Building Subsector VC2 Multiplex Housing Development—Due to a significant housing deficit in the largest city of Haiti, this value chain is very important, as individual houses have been low-cost driven and have serious safety issues. If market-driven commercially viable multiplex housing developments can be demonstrated at small-scale, it might stimulate other private investors to enter the market and increase the supply of housing.

Building Subsector VC3 Commercial Buildings—Commercial buildings still represent a source of growth, though large commercial buildings have experienced a slower growth than expected in recent months in Port-au-Prince. It is an important value chain to promote quality, especially in international hotels, restaurants, and stores, which are the key drivers of quality in that value chain.

Building Subsector VC4 Institutional Buildings—Institutional building will be a large source of growth in Port-au-Prince for the next five years. It is also a market where consortiums could work, since the total amount of contracts is accessible for mid-size firms in consortium.

Infrastructure Subsector VC6 Roads and Bridges—Roads and bridges are key to increasing access to markets in Port-au-Prince. This value chain has a steady demand, does not require high expertise, and could be accessible to more firms. The key issue is heavy equipment, but there is a rationale for facilitating better lease-buy programs in that market to facilitate the emergence of mid-size firms. MSMEs can increase their overall participation in this value chain, starting with work on rural roads. Maintenance and repair markets will also be targeted.

Infrastructure Subsector VC8 Urban Water and Sanitation—This market is underdeveloped because the task at hand is enormous. There is however an urgent need to understand and tackle the rainwater drainage system to avoid early deterioration of all recently built roads. Potable water and sanitation are obviously also important.

The value chain individual housing (VC1) is thus abandoned because of its general lack of structure. There are lesser gains to obtain in that chain, apart from championing quality-building systems with tourist associations and MTPTC. Large complex buildings (VC5) is a market occupied by foreign firms, and there are limited planned projects of this kind. The rural watershed and irrigation value chain (VC7) was also not much discussed by stakeholders, and there was a general lack of information on that value chain. Additional investigation will be required before excluding it from the program.

4.3.2 Cap-Haïtien

Cap-Haïtien has seen significant growth in the tourist industry as a result of the upcoming international airport completion. Cap-Haïtien also hopes that Caracol will fill its promises, but in the short- and mid-term, the market is totally driven by tourism. Also, Cap-Haïtien is at risk of a new earthquake, but the awareness level appears moderate to low. In terms of infrastructure development, Cap-Haïtien has recurring floods, since the water systems are not yet implemented in the second largest city of Haiti. The North region has begun planning, as CIAT has already


developed a regional plan for 2012 to 2030 that can serve as a basis for infrastructure planning.24 LEVE will encourage the following value chains in collaboration with coordinating agencies and associations.

Building Subsector VC3 Commercial Building—There are over 700 additional hotel rooms to be added to Cap-Haïtien’s current stock of rooms, according to the Northern Tourism Association. Most promoters want to ensure that local employment is created while international standards are still met. They propose to use their construction sites for workforce development to reach international standards, including earthquake-resistant structures. The school-construction model should be explored.

Infrastructure Subsector VC6 Roads and Bridges—Cap-Haïtien still has dirt roads to reach its various beaches. The roads and bridges value chain has steady demand, does not require high expertise and could be accessible to more Cap-Haïtien firms. The key issue is heavy equipment, and providing competitive lease-buy arrangements for emerging Cap-Haïtien firms is important for them to expand. Maintenance and repair markets will also be targeted.

Infrastructure Subsector VC7 Rural Irrigation and Watershed—Agribusiness and watershed management are essential to Cap-Haïtien, and adequate infrastructure is needed. There is a rationale to investigate how more jobs can be created in that regard with adequate rural infrastructure planning.

Infrastructure Subsector VC8 Urban Water and Sanitation—Cap-Haïtien is a very interesting city, still large but much safer than Port-au-Prince. Walking in the city on the waterfront promenade is possible. If tourism is to work in Cap-Haïtien, it is important that urban water and sanitation infrastructure be developed for tourists to truly enjoy the city and the beach life. In addition, major floods occur in this rather flat city surrounded by high mountains. LEVE could support flood reduction through infrastructure planning.

The value chain individual housing (V1) is abandoned for the same reasons as it was for Port-au-Prince. The multiplex housing development value chain (V2) is also left out for Cap-Haïtien, as Port-au-Prince shows greater capacity for upgrade. However, the upgrade strategies that will be implemented in Port-au-Prince should be a good way to learn about that market and assess if it can be emulated in Cap-Haïtien. Complex projects in building (V5) and infrastructure (V9) are both left out because the construction industry in Cap-Haïtien is not well established. Cap-Haïtien first needs to strengthen its workforce and MSMEs before targeting larger markets. To compete against the Dominican Republic and Port-au-Prince firms, Cap-Haïtiens might need to form consortiums to create employment.

24


5. UPGRADING STRATEGIES

5.1 Causal Model

Upgrading strategies for selected value chains are key to designing efficient activities for LEVE to achieve its overall goal to create employment, seize economic opportunities, and enhance value chains in a sustainable framework. LEVE will work on causality links and in the project setting where it is realistically most capable of strengthening these links or lifting key obstacles. Selected value chains will not only have specific upgrade strategies, but also common initiatives that will have a wider effect on all value chains. Figure 5.1 illustrates the causal model characterizing what stakeholders expressed during this assessment phase. This figure first summarizes concepts explained in previous chapters and, second, introduces key upgrade activities that will be detailed in following chapters.

Stakeholders were especially vocal about the following challenging issues, directly affecting the potential growth of the sector, which are related to Section 3.4: the eight ways to stimulate employment.

Barriers to entry in public markets Lack of incentives to construct quality and earthquake-resistant buildings and

infrastructure to better compete against foreign firms Low demand for infrastructure projects Needed commercially driven real estate housing development Lack of financing to support expansion of MSMEs Too high costs of materials and heavy equipment Low capacity of the workforce Misalignment of the demand and the supply, especially for MSMEs

These problems have significant effects on job creation on all value chains, but principally, they have the following primary effects.

Temper growth in stock of safe and affordable housing Increase individual transaction costs of infrastructure, as public economies of scale are

not realized, affecting cost of private investments Maintain domination of public markets by large and foreign firms Secure key management positions for foreigners, instead of Haitians Increase pressure on the workforce, as a result of exorbitant costs of material and

equipment Potential areas of entry for USAID LEVE to address these key issues and capitalize upon some current initiatives and opportunities are:

Foster technical, financial, and land innovations in the commercially driven real estate housing development value chain;

Support workforce development models and institutions to address the severe gaps in skills that are required in the industry;


Develop an upgrade pilot project25 in infrastructure development planning, management, and dialog in one commune;

Develop an upgrade pilot project in an integrated inspection system in one commune;

25 In this chapter, we will refer to upgrade pilot project to describe a project that LEVE will facilitate to test and demonstrate new business processes that could significantly help the construction sector in one geographic area or one subdomains. In other projects, they might be called demonstration projects. They are good practice in capacity development projects such as LEVE to (1) have a clear upgrade objective where the project believes to be capable of achieving results during its time of implementation ; (2) learn about institutional processes and identify the gaps comparing with other relevant developing or developed nations; (3) mobilize various stakeholders in the problem-solving taskforce to ensure sustainability of learnings ; (4) document results of pilot projects to disseminate to stakeholder to adapt for additional efforts in that same upgrade area.


Figure 5.1 Causes, Effects, and Potential Solutions Map


Provide business development services for MSMEs that want to access new markets and contract loans to support their expansion plans;

Facilitate various initiatives in accelerating the development in a complete inspection and quality-driven system;

Build capacity in consortium development, bidding document preparation, and innovation for SMEs to access public markets; and

Assess competitively building materials and mechanisms for construction companies to realize economies of scale.

5.2 Construction Sector Objective Statements

The construction value chain objectives are embedded in the overall LEVE project objectives and are described in Table 5.1. Each statement provides a three-year overall objective for LEVE in its respective value chains.. Table 5.1 – Objectives of LEVE and Construction Value Chains Main Objectives Construction Value Chain Objectives Objective 1 Enable MSMEs to Engage with Other Value Chain Actors to Mutually Create Value

Promote innovations in designing and implementing a demand-driven commercially viable, safe, and affordable housing solution for low- and middle-income

Develop capacity in consortium formation to access larger markets and share common costs in bidding processes

Promote urban infrastructure development and identify mechanisms of incremental implementation

Promote rural infrastructure development project identification and ensure synergies with agribusiness value chains

Support in the design and implementation of a construction quality system

Improve awareness raising in earthquake retrofitting methodology, certifications, and enforcement

Objective 2 Increase MSME Access to a Productive Labor Pool with Relevant Skills and Competencies

• Improve quality of workforce institutions in supplying experienced and technically sound personal

• Promote workforce development models from the industry, e.g., apprenticeships, skill cards

• Support with curriculum development in key trades and professions

Objective 3 Improve the Sustainability of Haitian Organizations Serving Target Sectors and Corridors

• Improve governance and provide funding to innovating and expanding construction MSMEs to help them reach new markets

• Support selected TVET institutions and universities to ensure sustainability of approaches in workforce development

Objective 4 Identify and Improve Synergies among Existing Projects and Activities

• Attach activities to current projects and access tools of other projects, e.g., PADF LEAD, ARD LOKAL, FINCA, and infrastructure donors (IDB, World Bank, USAID)


5.3 Value Chain Upgrade Strategies

Upgrade strategies are designed to lift obstacles and achieve better market efficiency in selected value chains and, by doing so, create more space for expansion, MSME development, and job creation. To ensure sustainable solutions, it will be important that Haitian organizations are themselves engaged in the upgrade strategies and that LEVE’s facilitators only play a distant catalyzing role in creating opportunities for stakeholders. Since there is significant resistance to change in any value chain development, the level of involvement and dialog with the industry is fundamental to the success of any value chain development projects. Because the construction industry is typically conservative, mobilization for change will require involvement of champion anchor firms and innovative MSMEs. Most upgrade strategies presented in the following sections are ideas and initiatives from the industry stakeholders themselves. They were improved or adapted to the project’s context and based on specialists’ experience; some were attempted in other countries. It is estimated that if the activities are successfully implemented and the business climate conditions remain stable, there could be between 2,000 and 3,300 jobs created over the next five years.

5.3.1 Multiplex and Large Housing Development VC2 Upgrade Strategy

(Port-au-Prince)

VC Upgrade Strategy – The multiplex and large housing development value chain needs an innovation push and dissemination platforms to stimulate market demand and to recognize efforts of manufacturers to provide technical solutions to the low-income and middle-income housing markets. There are significant challenges in terms of access to land and financing, especially in terms of rent collection or mortgage instruments. However, there are business opportunities in structuring this market around real estate development and the marketing of technical innovations. For LEVE, supporting this value chain also means job creation and increased quality of housing. It is a foreseeable result that upgrading houses built by real estate developers will have a spill-over effect on the individual housing value chains. The market appears ready to move from publicly sponsored social housing to P (PPP) development, as many private innovators and real estate developers are moving into this market. However, some believe key obstacles are not yet addressed to fully develop a privately led housing development. Objectives

Promote innovations in designing and implementing a demand-driven, commercially viable, and safe quality housing solution for low- and middle-income families

Improve awareness raising in quality and earthquake retrofitting methodology, costs, value of certifications, and enforcement

Beneficiaries—MSMEs (real estate companies, manufacturers), homeowners, tenants Enablers—Associations, banks, donors, UCLBP, LEVE


Expected Results Technical innovations to address low- and middle-income housing development are

disseminated to investors or households Financial instruments (mortgages, PPP schemes, lease-buy schemes) are improved and

disseminated to project promoters MSMEs with great value see proposals for expansion indirectly or directly supported Possible (quasi) market-driven safe and affordable housing is demonstrated Maximized linkages and networking among stakeholders in the value chain Association formation within housing development is promoted Main Activities A1. Workshop on Safe & Affordable Housing Development—This workshop will give an opportunity to manufacturers to showcase their technical solutions and to bankers to promote their financial instruments to a targeted audience (engineer/architect designers, donors, and private investors, government agencies). This event should also include an international specialist in safe and affordable housing tested in other countries after earthquakes, especially in countries where earthquakes are infrequent and household incomes very low. The workshop will be designed to maximize group discussions to design an action plan and will ensure sufficient space for free networking among investors, developers, and manufacturers. A2. Technical assistance in facilitating the development of financial instruments and upgrade pilot project —In continuation of the workshop, LEVE will facilitate the implementation of action plans regarding financial instruments and conduct additional interviews to make a global inventory of solutions. LEVE will develop improvement strategies for real estate developers to provide safe and affordable housings and design an upgrade pilot project with one or two developers to learn how to lift obstacles and attempt to have a fully privately funded housing development, or a PPP. A3. Facilitate a communication dialog among stakeholders—LEVE will create a dialog platform with representatives of key organizations to ensure the implementation of action plans designed in the innovation workshop (A1). LEVE can initiate and temporarily chair the dialog platform, until the institution becomes an associative platform to develop and promote the success of real estate projects in Haiti in tackling common problems. In addition, a Facebook group among stakeholders will help them connect in publishing new technical and financial innovations as LEVE collects them. A4. Facilitate the design & implementation of a targeted campaign—LEVE will initiate a campaign preceding and following the workshop to send signals to individual engineers and design firms who can truly influence the industry, through the very design of new approaches to quake-resistant buildings and building codes altogether, at a reasonable cost. A Facebook page of the events could document the campaign, along with the two national newspapers. Job Creation Estimates One upgrade pilot project supporting real estate developer (100 houses; 400 to 500 jobs in

Year 1)


Second demo project , MSME (20 houses; 50 to 100 jobs in Year 2) Total of 450 to 600 jobs

5.3.2 Commercial Buildings VC3 (Port-au-Prince and Cap-Haïtien)

VC Upgrade Strategy—The commercial building market is experiencing interesting growth in Cap-Haïtien, driven by the completion of the airport and a great business environment for tourism development. This growth and the regional goal to be capable of locally constructing to international standards are important hooks for LEVE to support the value chain in workforce development and in building quality systems. The commercial developers will play a key role in pushing the demand for international standards and will hire local construction firms trained and supervised to construct additional hotels to building codes and international standards. In Port-au-Prince, the growth is less driven by tourism but rather by reconstruction, retrofitting, and new construction. Objectives Cap-Haïtien Support technical vocational education training (TVET) or service providers in training-on-

the-job to locally build, to international standards, hotel projects, including (1) design to building codes; (2) execution to design; and, (3) good project management

Facilitate the design of Cap-Haïtien quality inspection systems, e.g., adequate local laboratories, building evaluation capacity, and mayoral office capacity.

Improve awareness raising in earthquake retrofitting methodology, value of certifications, and enforcement

Port-au-Prince Create workforce development quality-driven models that have proven commercially viable

in private building to understand how quality and commercial incentives can be best emulated across the industry

Beneficiaries—MSMEs (real estate developers, design and supervision firms, contractors and subcontractors), workforce, and tourists Enablers—Selected members of Haitian Tourist Association North (ATH-Nord), banks and insurance companies, mayor’s lead engineers, MTPCT (BEB, National Laboratory), and LEVE Expected Results Realistic building quality system designed to ensure third-party inspection in Cap-Haïtien Increased promotion of earthquake-resistant building certification On-the-job training provided as a pilot project to develop a training methodology for Cap-

Haïtien’s TVET that will be replicated as a privately led system Main Activities A1. Workforce development to international standards in Cap-Haïtien—A civil engineer with significant experience in hotel building should design an on-the-job training course in collaboration with local TVETs in a timely fashion to provide for the right training on


participating construction sites. Real estate developers should participate in allowing access to construction sites by TVET institutions, and the workforce or MSMEs will share the cost with TVETs. LEVE will indirectly support TVET in direct training of the trainer (TOT) activities. The service provider will then only be there to supervise trainers. A2. Technical assistance to facilitate the design of a better quality system in Cap-Haïtien and earthquake resistance certification—An expert in quality systems for building (same as for Port-au-Prince) should (1) gather information from ATH-Nord and selected anchor firms to understand quality incentives from hotels; (2) meet various quality enablers to characterize the quality process, current and future initiatives, current responsibilities for implementation, and gaps compared with other developing countries; and (3) assess the possibilities for quake certification for retrofitting Cap-Haïtien’s buildings (like Port-au-Prince’s). The result of this work will serve as a basis for LEVE to initiate discussions in a meeting aiming at designing an actual work plan to mobilize the industry and public sector in implementing a new vision for an integrated quality system for buildings in Cap-Haïtien A3. Meetings with anchor firms and other enablers and monitoring committee in Cap-Haïtien—The first meeting will open the dialog on building quality systems in Haiti to identify priority issues and potential solutions and to seriously address the lack of incentives to building quality and safe buildings. LEVE will act as a facilitator at this first meeting and will discuss with the stakeholders how the dialog platform will follow up on these important efforts to create a system and mitigate risks. Cap-Haïtien is on a higher earthquake alert than Port-au-Prince, so this activity is crucial there. This committee or taskforce could also benefit from LEVE support in awareness raising materials about building codes (produced by MTPCT). A4. Upgrade pilot project on quality-driven business model in Port-au-Prince—Some medium-size firms developed formal business models with MSME subcontracting instead of informal contremaîtres (traditional model), that have given these formal MSME a reputation for quality appreciated by private developers. It is important to understand organizational parameters, incentives, and targeted market segments and assess if these can be marketed and replicated. Job Creation Estimates Cap-Haïtien—Inspection MSMEs including retrofitting and earthquake-resistance

certification (50 to 100 new inspectors in 3 years)

Cap-Haïtien—Training professionals (15 new jobs) Port-au-Prince—Demo project for quality business model, replicated (3 to 5 new MSMEs, 25

jobs) Total of 90 to 140 jobs

5.3.3 Institutional Buildings VC4 (Port-au-Prince)

VC Upgrade Strategy—The institutional building value chain is the most receptive to change in quality control practices and consortium formation among firms. This value chain will also trigger direct effects on commercial building, which is a market occupied by mostly the same large firms, but where more MSMEs have been observed. There are significant challenges to


rapidly developing a realistic quality system that will improve the reputation of Haitian firms in handling large projects and producing quality buildings. Nevertheless, some stakeholders in the market are truly concerned with the incentives to produce low-quality construction that still prevail on some unchecked construction projects. Many stakeholders are ready to champion change in that regard to help (1) design to building code; (2) train lead engineers; (3) monitor and inspect construction sites; (4) grant power to revoke construction permits; and (5) grant power to revoke engineering licenses. Finally, conditions to access public markets are still a significant barrier to entry for MSMEs and grouping in partnerships or joint ventures or cooperatives could be a solution for some of them to access new markets and create employment. Objectives Support in the design and implementation of a construction quality system of Haitian firms

and government bodies Develop capacity to form associations and consortiums to access larger markets and share

common costs of bidding Improve awareness raising in methods to retrofit for earthquake resistance, value of

certifications, and enforcement Beneficiaries—MSMEs and large firms, institutional and commercial developers, donors Enablers—Selected anchor firms (Tecina, Miyamoto), Construction Enterprise Association of Haiti (AHEC), Professional Order of Engineers and Architects, banks and insurance companies, mayor’s lead engineers, MTPCT (BEB, National Laboratory) and LEVE Expected Results

Realistic building quality system designed to ensure third-party inspection Increased quality awareness at customer level and designed incentive mechanism MSMEs trained in consortium and partnership building and bidding strategies to win

institutional building projects Main Activities A1. Technical assistance to facilitate the design of a better quality system—An expert in quality systems for building should gather information from anchor firms and enablers to characterize the quality process, current and future initiatives, current responsibilities for implementation, and gaps compared with developing countries. The technical expert will map the quality system process in Haiti and compare it to other quality systems elsewhere in comparable countries. The result of this analysis will be the basis for LEVE to initiate discussions in a meeting to design an actual work plan to mobilize the industry and public sector in implementing a new vision for an integrated quality system for buildings in Haiti. Given the size of Port-au-Prince, it will be important to draft the design of an upgrade pilot project for one of the neighborhoods. A2. Meetings with anchor firms and other enablers and monitoring committee—The first meeting will open the dialog on the building quality system in Haiti to identify priority issues and potential solutions to address the lack of incentives to building high-quality and safe buildings. LEVE will act as a facilitator at this first meeting and discuss with the stakeholders


how to follow up on these important efforts to create a systematic system and mitigate earthquake risk. This committee or taskforce could also benefit from LEVE support in awareness raising regarding building codes. The group might also decide to focus on certain steps of the quality system or on the incentives of the customer base. A3. Seminar on consortiums, partnerships, and bidding processes—This seminar is intended for design and supervision engineering firms, construction lead firms, and subcontractors who wish to grow their business in larger and public markets. The primary goal is to increase capacity of large firms and MSMEs to join forces to gain access to public markets or large private markets. Two additional value chains will benefit from this seminar, namely large and complex industrial projects (VC5) from the building subsector and roads and bridges (V6) from infrastructure. It is meant for stakeholders with expertise in the field that could accomplish parts of or the entirety of these projects which are ordinarily given to larger or foreign firms that hold sufficient cash assets, heavy equipment, and years of experience. A4. Meetings with donors and GoH’s procurement for local employment programming—It is important to determine a course of action with donors and GoH to promote local employment and increase MSME participation in public markets. For institutional building, this could mean new instruments for advanced payment guarantees, local employment schemes, and requirements for Chantier-école and capacity building. For instance, Unibank provides a cash advance, but repays itself on each subsequent payment. Job Creation Estimates Inspection MSMEs including retrofitting and earthquake-resistance certification (100 to 200

new inspectors in 3 years) Consortium formation and improved quality should result in fewer jobs to foreign firms (250

to 500 new jobs in 3 years) Total of 350 to 700 jobs

5.3.4 Roads & Bridges VC6 (Port-au-Prince and Cap-Haïtien)

VC Upgrade Strategy—The roads and bridges value chain can be best upgraded by opening access to MSMEs to this significant market now occupied by the largest firms in the country and, even more so, take the market back from foreign firms. To access these markets, MSMEs will need to learn how to access public markets. Road developers should explore how to split contracts into smaller sections to enable increased competitiveness in this value chain. Unpaved rural roads have also proven to employ smaller firms since requirements are different and the need for equipment is more limited. In terms of quality building, the third-party supervision system is more frequent, but not systematic in all contracts, often leading to early deterioration of road conditions. Objectives Develop capacity in consortium formation to access larger markets Capacity building in preparing bidding documents and sharing costs with collaborative firms Facilitation with donors to design mechanisms to increase access by Haitian firms with

smaller section contracts (inclusive development best practices) Improve awareness raising and incentives to building quality roads and bridges


Beneficiaries—MSMEs, donors/MTPTC Enablers—Anchor firms (HL, VF construction, LGL, CECOM), AHEC, APROBP, Professional Order of Engineers and Architects, mayor’s lead engineers, MTPCT (BEB, National Laboratory), and LEVE Expected Results Realistic building quality system designed to ensure third-party inspection in a more

systematic fashion MSMEs trained in consortium and partnerships building and bidding strategies to win road

and bridges projects Access to markets by splitting contracts improved Main Activities A1. Technical assistance to facilitate the design of a better quality system—An expert in quality systems for roads and bridges should gather information from anchor firms and enablers to determine the quality process, current and future initiatives, and current responsibilities for implementation and to identify the gaps. There is also a need for quality guidelines to assess conditions with respect to decisions regarding paving (concrete, asphalt, cobblestone) or not. The results of this analysis will serve as a basis for LEVE to initiate deeper discussions in a meeting to design an actual work plan to mobilize the industry and public sector in implementing a new vision for an integrated quality system for roads and bridges in Haiti. The technical expert should also propose one rural road upgrade pilot project and one urban road upgrade pilot project in which the finding of new quality methodologies will be demonstrated. A2. Meetings with anchor firms and other enablers and monitoring committees—The first meeting will open the dialog on a building quality system in Haiti to identify priority issues and potential solutions to address the lack of incentives to building long-lasting roads and bridges. LEVE will act as a facilitator at this first meeting and discuss with the stakeholders how to follow up on these important efforts afterwards. A3. Meetings with donors and GoH procurement for local employment programming—It is important to determine a course of action with donors and GOH to promote local employment and increase MSME participation in public markets. For roads and bridges, this might mean breaking the contract into smaller sections and requiring a training development scheme during road construction, as in the. Chantier-école model. This should also be useful for other value chains (VC4, institutional buildings; VC5, complex buildings; and VC9, complex infrastructure). A4. MSME development in rural roads—Rural road projects from USAID are particularly conducive to MSME development, since a heavy equipment inventory and very high expertise are unnecessary. There is a strong community component to rural road development that can also encourage participation by youth and women. A5. Technical assistance and upgrade pilot project on maintenance and repair market enhancement—There is a rationale for giving an overall contract to a firm to design, execute,


and maintain a road (the EPCM model), because maintenance and repairs have low returns for firms compared to new construction. It could mean a higher quality road to avoid high maintenance costs. This should be studied in the Haitian context, attempting an EPCM format with a donor. Job Creation Estimates Increased supervisory work for design and supervision firms (100 to 200 new jobs) Consortium seminar, improved quality, and local employment preferential policies should

result in more jobs for Haitian firms (500 to 1000 new jobs over 3 years) Total of 600 to 1,200 jobs

5.3.5 Urban Water & Sanitation Infrastructure VC8 (Port-au-Prince and Cap-

Haïtien)

VC Upgrade Strategy—The urban water and sanitation infrastructure value chain upgrade strategy will focus on stimulating the demand, as Haiti has demonstrated reduced demand for public infrastructure, despite its obvious necessity. It is important to figure out how to unlock its full potential for growth, probably through better assignment of priorities and promotion of step-by-step approaches to reducing the overall budget, which is always overwhelming for donors and MTPTC. Objectives Support infrastructure planning and management at MTPTC and the commune level to

develop arguments for additional urban infrastructure development Demonstrate at smaller-scale (commune level) improved urban and infrastructure planning

and management, especially in water drainage Advocacy to donor community on the importance of water drainage for preserving the

integrity and preventing early deterioration of current infrastructure Beneficiaries—MSMEs (infrastructure design engineering firm and infrastructure contractors), Commune of Port-au-Prince and Commune of Cap-Haïtien Enablers—Anchor firms (LGL, CECOM, VF), AHEC, Professional Order of Engineers and Architects, mayor’s lead engineers, MTPCT (Urban Engineering Planning), CIAT, and LEVE Expected Results from LEVE Increased demand in urban water and sanitation infrastructure Improved management system to prioritize and obtain funding (at smaller scale) with

improved collaboration with other communes Main Activities for LEVE A1. Technical assistance to facilitate and review urban infrastructure planning and management—An experienced engineer in infrastructure planning, design, and supervision will act as facilitator and expert to determine the bottleneck in infrastructure development in Port-au-Prince and Cap-Haïtien. The technical expert will advise on the most pressing specific technical areas for LEVE to advocate for or facilitate. It is a matter of gathering current infrastructure plans and assessing with stakeholders the trade-offs between political willingness and the


technical requirements for the two largest cities of Haiti. This will result in an assessment study for LEVE to initiate discussions on job creation in urban infrastructure development with key infrastructure partners, e.g. MTPTC, USAID, IDB, and the World Bank. A2. Taskforce for urban water and sanitation planning—Based on key findings from the urban infrastructure expert and comments from MTPTC, USAID, IDB, and the World Bank, a dialog will be opened to investigate what clear actions can unlock infrastructure development for job creation. A3. Upgrade pilot project for urban planning and management—A commune should be selected, based on its strong leadership and willingness to change practices, that LEVE will support through technical assistance. LEVE will link commune needs with MTPTC plans to ensure that the priorities of the mayor and local communities are considered in the implementation of plans, for example, water drainage in Delmas. Job Creation Estimates Demo project should add drainage work in selected communes of Port-au-Prince

(250 to 500 jobs in 3 years)

5.3.6 Cross-Sector Activities

Some activities are not necessarily associated with a particular value chain and can affect various value chains or all of them. The following cross-cutting activities will also contribute to LEVE’s objectives. A1. Technical assistance with building material and heavy equipment cost reduction—Building materials and heavy equipment are a real burden for many MSMEs. Stakeholders were also quite discouraged by the absence of preferential tariffs for value addition in Haiti, partly explaining why most of the country lost its manufacturing capacity. There is a need to study possibilities to decrease those costs and create more value-added investments within Haiti. This will include assessing possibilities to increase bargaining power and studying relevant value addition in Haiti. It is important to learn what can be done to reduce costs of construction and remove the extreme pressure on the workforce (low pay, poor quality). Finally, there will be an effort to support small quarry operators to find ways to better access markets and operate more sustainably. A2. Association institutional development and networking support— LEVE will support institutional building among selected associations, such as the Professional Order of Engineer and Architect and AHEC in areas of (1) advocate to stimulate job creation; (2) increase access to public markets by Haitian firms; (3) promote the emergence of MSMEs in the construction industry; (4) develop quality systems; and (5) develop the workforce. A3. Construction MSME networking—Construction MSMEs (of fewer than 15 employees) should have the opportunity to network and get new business opportunities or attempt to partner together to increase their efficiency to break into more markets. LEVE recommends contributing to networking and capacity building events among MSMEs and potential clients, to increase business opportunities through 1 workshop, 1 training, and 1 trade fair.


A4. Construction Workforce Development Workshop—LEVE will initiate an industry-wide discussion on various approaches to learning on the job, formal training, and apprenticeship models in Haiti, resulting in an action plan for industry stakeholders. A5. Formal workforce development—LEVE will support curriculum development at TVET and university levels, in the following areas that industry stakeholders agreed upon.

Short- and long-term courses on building codes and earthquake structural engineering Short- and long-term courses on project management at all level of a construction project CAD drawing and GIS topography with new technology Short-term courses for foremen in masonry, electrical systems, plumbing, and HVAC to

ensure their work respects building codes and avoids the cost-cutting recipe for masonry at construction site (less rebar, more water).

Long-term earthquake structural engineering program Long-term mechanical engineering for heavy machinery repair and maintenance

A6. Apprenticeship workforce development and youth—LEVE will promote workforce development models initiated by two enterprises working under very formal agreements with employees, but providing adequate apprenticeship and management training to overall reduce their costs of supervision. These models will be studied and replicated in other firms with appropriate marketing platforms. A7. Construction industry board, competency certificates, and cards on construction sites—Some countries were able to overcome their poorly trained workforces through industry governing boards that are cosponsored by unions, government, and private firms.26 This allows all parties to develop a qualified workforce and offer basic social securities to employees. It is a cost-sharing scheme that benefits all. The organization also values experience, which formal schooling does not offer. In the context of Haiti, a technical specialist should assess what variation of that institution could be beneficial. This should be analyzed further by the technical expert in workforce development (construction) and design an upgrade pilot project if deemed appropriate for Haiti. A8. Women—LEVE identified two lead firms promoting women’s operation of heavy machinery and performance as masons. These two companies are very interested in sharing their experiences and helping break stereotypes that exclude women from the construction sector. LEVE will support an event to promote women in the construction industry. A9. OCAT and Grants—LEVE will directly support MSMEs with expansion issues. Five firms were pre-identified: (1) a small lead contractor in Cap-Haïtien; (2) a small specialized subcontractor in electricity; (3) a small specialized subcontractor in plumbing; (4) a medium-size building material firm; and (5) Some TVETs.

26 “Challenges of Construction Industries in Developing Countries: Lessons from Various Countries », G OFORI Department of

Building, National University of Singapore 4 Architecture Drive, SINGAPORE, unpublished.


Job Creation Estimates Workforce development activities should result in at least an additional 75 jobs in three years,

in taking positions that foreigners currently occupy in lead firms. Networking events should improve the supply and demand issues and create between 100 and

200 jobs OCAT and grants for MSMEs in construction should support their expansion, and could lead

to 100 new jobs in the next 3 years Total of between 275 and 375 jobs

5.4 Corridor Upgrade Strategies

5.4.1 Port-au-Prince

Change Management—The construction industry in Port-au-Prince is well established and is also said to be conservative in changing its practices. Most firms operate the same way they did before the earthquake, despite the quality issues that resulted in a high number of deaths. It is thus very important to design a robust change strategy to ensure that all initiatives of LEVE have a moderate to good environment for implementation. Change management is often overlooked, but opponents to change can be powerful and succeed in stopping an initiative that would not be an advantage to them. There are various models for change management, they should be studied and adapted to the project context. In short, and specific to LEVE, below are important aspects to consider for change management in the construction industry in Port-au-Prince.

Coordination by government—LEVE will need to work closely with government agencies in order to pass on ownership, especially in quality control systems and urban infrastructure planning.

Association dialogs—AHEC and Professional Order of Engineer and Architect are key associations with leverage, and LEVE will need to consult regularly with them. There is also a need for other dialog platforms that currently do not exist. LEVE and lead firms should design new dialog platforms to deepen collective action within the industry in a perspective of longer-term value chain upgrade.

Rely on innovators, entrepreneurial attitudes, and change agents—Some individuals are natural change management leaders with an inspirational attitude that can convince others to move forward with them. LEVE will identify these individuals and maintain strategic communications with them.

Create ownership—LEVE is a temporary project and any tasks performed by its staff and consultant will end. In the construction industry, some activities are very long term, but LEVE intends to be the catalyzer. However, LEVE should find activity owners as soon as it can to promote ownership early in the process, especially in key design activities at the beginning of a project. Ownership is highest if one is part of key decision-making processes.

Summary Upgrade Strategies—Port-au-Prince has an established industry with various upgrade needs that are technically quite feasible. The problem will be finding the right incentives for the industry and government to overcome some of these issues. LEVE should focus on incentives and change management in the following areas.

Access to public markets through consortiums or other forms of partnerships


Integrated quality systems Commercially viable, safe, and affordable housing development projects Infrastructure planning and management MSME development: consortium building, bidding documents, and rural roads Cost reduction in building material and heavy equipment Workforce development system, e.g., curriculum development, apprenticeships and on-

the-job training Support for growing MSMEs

5.4.2 Cap-Haïtien

Change Management—The construction industry in Cap-Haïtien is underdeveloped with limited resistance to change in practices. However, the level of awareness of quality demands and earthquake-resistant building is lower. The inspection of buildings, done after the earthquake in Port-au-Prince, did not occur in Cap-Haïtien, although the city is in a riskier situation. The change management strategy is different here. It will have to come from workforce development and the leading tourist industry. Tourists want to live in quality and earthquake-resistant buildings, and they are the agents of change. LEVE will work with TVET institutions/universities, the mayor’s office, tourism associations, and commercial developers to enact change. Summary Upgrade Strategies—Cap-Haïtien must decrease its dependence on Port-au-Prince and Dominican Republic construction expertise on medium- to large-size projects in order to create local jobs. In summary, the Cap-Haïtien upgrade strategy will focus on the following upgrade strategies.

Integrated quality systems, including a laboratory Infrastructure planning and management, especially roads and drainage Cost reduction in building material and heavy equipment Workforce development systems, e.g., curriculum development, on-the-job training on

upcoming construction sites, and formal education Support growing MSMEs

6. IMPLEMENTATION PLAN

6.1 Organization

Implementation of such projects requires qualified personal and service providers who have the ability to facilitate, organize, advocate, liaise, and manage activities previously assessed to be necessary for job creation and value chain enhancement. LEVE shall undertake the following. Project Director and Chief of Party (COP)—Project leaders will ensure liaison with clients and influential stakeholders, monitor synergies between value chains, and manage the overall success of LEVE. LEVE Construction Value Chains Coordinator—A national professional will be responsible for managing, monitoring, and supporting the implementation of value chain development activities within the timeline and budget.


LEVE Construction Workforce Development Coordinator—A national professional will be responsible for managing, monitoring, and supporting the implementation of workforce development activities within the timeline and budget. LEVE International Construction Industry Advisor —An international construction specialist will be responsible for conducting the construction industry assessment and designing the value chain upgrade program, as well as acting as a support resource on specific workshops, meetings, or reports. Specialized service providers (SPs)—National or international professionals will be responsible for supporting LEVE staff and anchor firms where specialized expertise is needed to facilitate the following.

Mechanisms to stimulate real estate development (Port-au-Prince)—SP1 (reference for budget)

Workforce development specialist in civil engineering and construction (Cap-Haïtien and Port-au-Prince)—SP2

Construction quality management system (Port-au-Prince)—SP3 Consortium/partnership and bidding cost-sharing (Port-au-Prince) —SP4 MSME development in rural road planning and implementation (Port-au-

Prince and Cap-Haïtien)—SP5 Urban infrastructure management (Cap-Haïtien and Port-au-Prince)—SP6 Cost reduction in building material and heavy equipment (Port-au-Prince)—

SP7 LEVE implementation monitoring committee for construction—The overall implementation committee will involve LEVE staff (chairing), anchor firms, government agencies, TVET institutions/universities, and service providers (only those with significant work to do on LEVE). This committee will monitor the implementation of the program on a monthly basis and identify key obstacles to overcome. The committee also serves to motivate and create ownership among anchor firms and public organizations to ensure LEVE’s objectives remain sustainable. Theme-based taskforces or committees for construction—In some cases, working groups will hold technical meetings and coordinate to overcome key obstacles. Such working groups should exist for each technical area of key service providers, namely: (1) quality systems; (2) consortia/partnerships and bidding cost-sharing; (3) real estate development; (4) urban infrastructure management; and, (5) tourism and international construction standards; and (6) cost reduction in building material and heavy equipment. Specialized service providers should chair these working groups. Working groups operate on consensus and avoid a hierarchical or specialist approach to the value chain upgrade. They will increase ownership and give a platform to change management aspects of LEVE.

6.2 Timeline

LEVE will implement the first activities in the next quarter to kick-off the project.


A first workshop will take place in 2014 to launch the construction sector activities. In parallel, the workforce development team will hold a workshop to reunite stakeholders to design an action plan for developing the construction workforce or to learn about other workforce development models (such as those promoting apprenticeships or women’s participation) in the construction sector. A seminar about forming consortia and partnerships in the construction sector will be organized for start of 2015. Other activities include the hiring of specialized SPs to facilitate the implementation of highly technical areas or administrative and coordination activities. Table 6.1 presents the timeline of each activity.


LEVE SP Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1. Multiplex & Large Housing Development Value Chain Program (Port-au-Prince)

A1. Workshop on innovations in safe & affordable housing development VCC

A2. Technical assistance to create demo projects for commercially viable housing solutions for the poor VCC SP1

A3. Facilitate a communication dialog among stakeholders, create working group VCC SP1

A4. Facilitate the design & implementation of a targeted campaign VCC

2. Commercial Building Value Chain Program (Cap-Haïtien and Port-au-Prince)

A1. Workforce development to international standards WDC SP2

A2. Technical assistance to facilitate the design of a better quality system and quake resistance

certification VCC SP3

A3. Meetings with anchor firms and other enablers and create working group VCC SP3

A4. Demo project on quality-driven business model in Port-au-Prince VCC SP3

3. Institutional Building Value Chain Program (Port-au-Prince)

A1. Technical assistance to facilitate the design of a better quality system VCC SP3

A2. Meetings with anchor firms and other enablers and create working group VCC SP3

A3. Seminar on consortiums, partnerships, and bidding processes VCC SP3

A4. Meetings with donors and GOH procurement for local employment programming VCC

4. Roads & Bridges (Port-au-Prince and Cap-Haïtien)

A1. Technical assistance to facilitate the design of a better quality system VCC SP3

A2. Meetings with anchor firms and other enablers to create working group VCC SP3

A3. Seminar on consortiums, partnerships, and bidding processes VCC SP4

A4. MSME development in rural roads VCC SP5

A5. Technical assistance and demo project on maintenance and repair market enhancement VCC SP5

5. Urban Water & Sanitation Infrastructure

A1. Technical assistance to facilitate and review urban infrastructure planning and management VCC SP6

A2. Taskforce for urban water and sanitation planning VCC SP6

A3. Demo project for urban planning and management VCC SP6

6.Cross Cutting Themes

A1. Technical assistance building material and heavy equipment cost reduction VCC SP7

A2. Association institutional development & networking support VCC

A3. Construction MSME networking VCC

A4. Workforce Development Workshop WDC SP2

A5. Support on formal workforce development WDC SP2

A6. Apprenticeship workforce development and youth WDC SP2

A7. Competency certificates and cards on construction sites WDC SP2

A7. Women in the workforce WDC

7. Grants & OCAT

A1. Support or matching grants for construction MSMEs (app. 10) CFO

A5. Organizational Capacity Assessment Tool (OCAT) for 6 organizations PAPU

8. Management

A1. Create Construction Monitoring Committee PD

A2. Creation of working groups SP

A3. International support on workshops, seminars, & workpackage design ICA

A4. Activities coordination VCC/WDC

A5. Communication and change management CO

A6. Materials & expenses for workshop/seminars VCC

VCC: Value Chain Coordinator WDC: Workforce Development Coordinator ICA: International Construction Advisor PAPY: Papyrus Consulting PD: Project Director SP: Service Providers

2014 2015 2016Category/Activities

Resources

Table 6.1 – Timeline LEVE Construction


REFERENCES Association touristique d’Haïti, supported by TechnoServe/HIFIVE, (2010). Pour une Meilleure Exploitation des Opportunités Touristiques de la Région du Nord (Vision du Secteur Hôtelier). Blum R., Gerstle T. and Angeles D., (2008) for CHF International. Value Chain tools for Market-Integrated Relief : Haiti’s Construction Sector, microREPORT #93. USAID. Chemonics International (2011). Housing Demand in Port-au-Prince, FS Share, USAID. Chudley R. & Greeno R. (2010). Building Construction Handbook, Routledge; eight edition. College officials agree to cut greenhouse gases. (2007, June 13). Albany Times Union, p. A4. Collier P. (2008). Haïti : From Natural Catastrophe to Economic Security, A Report for the Secretary-General of the United Nations Comité de Direction Régional Nord de l’Association Touristique d’Haïti, supported by Private Sector Economic Forum (2010). Vision and Roadmap for Haiti, Final Draft Version. Comité interministérial d’aménagement du territoire (CIAT) (2012). Plan d’aménagement du Nord / Nord-Est, République d’Haïti, Primature. Ferguson B. (2008). A Value Chain Framework For Affordable Housing in Emerging Countries”, Global Urban Development, Volume 4 Issue 2. Groupe de travail sur la compétitivité (GC) supported by OTF Group (2010). Haiti Economic Recovery & Raodmap (ERRM), Final Report, Presidential Commission on Competitiveness. International Standard Industrial Classification of All Economic Activities, Rev.4 (2008). Section F (Construction). United Nations Statistics Division. Joachim D. & Klarreich, K. (August 2, 2012) sponsored by Knight International Journalism. Trouble Enforcing Building Codes Leads to Dangers in Haïti, International Center for Journalist (ICFJ). Kenny C. (2007). Construction, Corruption, and Developing Countries, World Bank Policy Research Working Paper 4271. McWilliams H. & C.T. Griffin (2012). A critical assessment of concrete and masonry structures for reconstruction after seismic events in developing countries, Department of Architecture, Portland State University, Portland, Oregon, United States, Unpublished Ministère de la Planification et de la Coopération externe (2012). Cité administrative de Port-au-Prince: Lignes directrices d’aménagement, Gouvernement de la République d’Haïti.


Minist re des Travaux Publics, Transports et Communications (MTPTC) (2013). Code national du bâtiment, Biblioth que nationale d’Haïti. Nathan Associates Inc. (2010). Housing for Haiti’s Middle ClassPost-Earthquake Diagnosis and Strategy Final Report, USAID. National Skill Development Corporation (NSDC), (2010). HumanResource and Skill Requirements in the Building, Construction and Real Estate Services, A Report, India. Ofori G. (unknown). Challenges of Construction Industries in Developing Countries: Lessons from Various Countries, Department of Building, National University of Singapore, unpublished. Prolongement de la route 138 – Réalisation en chantier-école, Portail Constructo, January 2012. Indaba Network (2012). Créer un chantier école, Publications Indaba Network. Rissanen M. (2011). Construction and Civil Engineering : Approach and Data Requirements, Operational Guide, Draft version, International Comparaison Program (ICP), unpublished. Rwandan Developent Board (2012). Rwanda Skills Survey 2012, Construction Sector Report, Rwanda. Unité de Coordination du Logement et Bâtiment Publics (2013). Politique nationale du logement et de l’habitat (Pnlh).


APPENDIX 1 – INTERVIEW GUIDE

1. Presentation (2-3 minutes) a. USAID LEVE Project Description b. Background Julie Reid Forget : Engineer/Economist, ex-SNC-Lavalin, linking

local economies to large-scale engineering projects (Mine, Hydropower, Roads, Railways, Pipeline)

c. Objectives of the Meeting: Select VC/SS and Design an Upgrading Plan with Partners

2. Organization Profile (10 minutes) a. In What Sector are you active? What proportion (%)?

i. Sectors: housing, non-residential building (school, hospitals, offices, institutions, commercial), public infrastructure (roads, bridges, dams, dykes, water and sewage systems)

b. At what steps of the value chain are you involved? i. Steps in Value Chain: Project Promoter, Design Engineer & Supervision,

Primary Contractor, Subcontractors (which disciplines ? masonry, electricity, demolition & site prep, plumbing, structures, finishing, etc.), Material Manufacturers (block builders, steel structure, etc.), Local Quarries (sand, stones, etc.), Importers (cement, rebars, etc.)

c. What services/products do you provide to the Value Chain? i. Design review, Training, Inspection, Certification, etc.

3. How many Full-Time Equivalent Employee do you have? How many people under the supervision of all your contracts?

4. According to you, what are the growth trends in the industry? increasing, decreasing, moderate, status quo and what area is increasing ?

5. In a logic of poverty reduction, job increase and business linkages; what would be the best areas of intervention to upgrade the value chain?

6. What are the key obstacles to job creation? What are the most significant incentives? 7. Obstacle to a better quality-cost ratio? What would be incentive to increase quality and

gain more contracts (or tackle the perception of low quality by Haitian firms? 8. Do you believe the Building Code is respected? Why not? 9. Were you (and are you still) supported by other organizations 10. What are your views on USAID LEVE possible interventions? Where is it most needed? 11. Studies I should get? Websites I should consult? 12. People I should meet?


APPENDIX 2 – CONTACT LIST Contacts Companies Location

Guilaine Victor Miyamoto PaP

Daniel O'Neil Miyamoto PaP

Keith Miyamoto Miyamoto PaP

Charles Fombrun GF Construction PaP

Paul Charles Independent engineer (Building) PaP

Gisèla Nobbe Brun TECINA PaP

Gérald Emile Brun TECINA PaP

Gonzalo Rueda Castillo CEMEX PaP

Reynold & Patrick Bonnefil Haytrac PaP

Patrick Figaro Arcotech PaP

Georgia Nicolas GOM International PaP

Richard Buteau Karibe Hotel PaP

Gael Gaetjens Cormier Plage CH

Hervé Lerouge HL Construction PaP

Max Laroche M&M Construction CH

Maurice Laroche M&M Construction CH

Pierre Yves Gardière Peinture Caraibe CH

Jude Pierre PNG General Construction CH

Hébert Henriquez Fatima Group CH

Patrick Milford La Générale Construction PaP

Stanley Fardin Independent Engineer (Infrastructure) PaP

Abdou Fall ARCO PaP

Jean Crepsain CECOM PaP

Linda Gaillard GB Group PaP

Jean Marc Glaudon GB Group PaP

Bernard Chancy LGL PaP

Yves Francois YCF Group PaP

Harold Charles CEEPCO PaP & CH

Gilbert Hyppolite PANEXUS PaP


Associations met with

Contact Names Associations Location

Marie Louise Augustin Russo

(Panexus) ADIH (Association des Industries d'Haiti) PaP

Gilbert Hyppolite (Panexus) ADIH (Association des Industries d'Haiti) PaP

Daniel Fernandez (HT Beton) ADIH (Association des Industries d'Haiti) PaP

Georges Sassine (GB Group) ADIH (Association des Industries d'Haiti) PaP

Hervé Lerouge

AHEC (Association Haitienne des Entreprises de

Construction) PaP

Claudine Auguste Association des Producteurs de Blocs et Pavé PaP

Institutions met with

Contact Names Institutional Location

Terry Kramer USAID PaP

Chris Ward USAID PaP

Kevin Seiffall USAID PaP

Jean Marie Théodat

Université d'Etat à Limonade

Campus du Roi Christophe CH

Mr. Fanfan CIAT PaP

Michel Vallée IADB PaP

Alfred Piard MTPTC PaP

Clément (Kéké) Bélizaire UCLBP PaP

Régine Alexandre PADF (USAID LEAD) PaP

Nadia Cherrouk PADF (USAID LEAD) PaP

Djohn Vaval Laboratoire Nationale PaP

Charles Sheppard Architecture for Humanity PaP

Malaika Neri Build Change PaP

Manuella Daniel Entrepreneur du Monde PaP


APPENDIX 3 – BUILDING VALUE ADDED PROCESS

Step1 Step2 Step3 Step4 Step5 Step6 Step7 Step8 Step9 Step10 Step11 Step12 Step13 Step14

LandSurvey&

FundingStudy

Engineering

Design&

Supervision

Company

Finance&

Insurance

Package

Construction

PermitProcurement

Demolition&

Site

Preparation

Inspection1

(SitePrep):

Complianceto

BuildingCode

Foundations

Inspection2

(Foundation):

Complianceto

BuildingCode

Rough

Framingl

Plumbing,

Electricals

Inspection2

(Framing)&

Inspection3/4

(Plumbing/Ele

ctricals)

Interiorand

Exterior

Finishing

Inspection5

(Certificateof

Occupancy)

Project

Management

VC1:

Individual

Residential

Building

Individual

Promoter

Individual

Engineers

Butdoesnot

includethe

inspection

package

ViaRetailers Doityourself

Ifaloan,

laboratoire

nationale

certificate

Doityourself

Ifaloan,

laboratoire

nationale

certificate

Doityourself Doityourself

Light

management;

informal

business

VC2:Multiplex

&Housing

Development

Private,Real

Estateor

Public

Promoter

Engineering

Firm

Butdoesnot

includethe

inspection

package

Mixed

Retailers&

DirectImports

Specialized

subcontractors

(formal&

informal)

Ifaloan,

laboratoire

nationale

certificate

Specialized

subcontractors

(formal&

informal)

Ifaloan,

laboratoire

nationale

certificate

Specialized

subcontractors

(formal&

informal)

Specialized

subcontractors

(formal&

informal)

VC3:

Commercial

Private

Promoter

Individual

Engineers

(small);design

&supervision

firm(large)

Butdoesnot

includethe

inspection

package

Lead

Contractor

Specialized

subcontractors

(formal&

informal)

Ifaloan,

laboratoire

nationale

certificate

Specialized

subcontractors

(formal&

informal)

Ifaloan,

laboratoire

nationale

certificate

Specialized

subcontractors

(formal&

informal)

Specialized

subcontractors

(formal&

informal)

Onpromoter's

demand

(earthquake

proof)

VC4:

Institutional

Public

Promoter

Engineering

Firm

Butdoesnot

includethe

inspection

package

Lead

Contractor

Specialized

subcontractors

(formal&

informal)

OnLarge

Projects;

Supervisionby

Engineering

Firm

Specialized

subcontractors

(formal&

informal)

OnLarge

Projects;

Supervisionby

Engineering

Firm

Specialized

subcontractors

(formal&

informal)

OnLarge

Projects;

Supervisionby

Engineering

Firm

Specialized

subcontractors

(formal&

informal)

OnLarge

Projects;

Supervisionby

Engineering

Firm

VC5:Complex

Building

Projects;

Industrialor

largescale

Private,Real

Estateor

Public

Promoter

EPC:

Engineering,

Procurement

Construction

Butdoesnot

includethe

inspection

package

EPC:

Engineering,

Procurement

Construction

Subcontract

formallocal

partners

OnSpecialized

Projects;

Supervisionby

Engineering

Firm

Subcontract

formallocal

partners

OnSpecialized

Projects;

Supervisionby

Engineering

Firm

Subcontract

formallocal

partners

OnSpecialized

Projects;

Supervisionby

Engineering

Firm

Subcontract

formallocal

partners

OnSpecialized

Projects;

Supervisionby

Engineering

Firm

HighLevel

PM+including

CostControl

Legend

DoneinHaiti Somewhat

doneinHaiti

Notdonein

Haiti

Notdoneatall

Value

Chains/STEPS

Overall

Management

(Lead

Contractor)&

Construction

site

management:

Contremaître

(informalwith

isown

employee)or

full-time

employee/dail

ylaborer

(formall)


APPENDIX 4 – INFRASTRUCTURE VALUE ADDED PROCESS

Stakeholders

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Transport Planning &

Budgeting Engineering Design Procurement Earth Work

Inspection &

Supervision by

Design Engineer

Paving:

concrete;asphaltor

cobblestone

Roads & Bridges MTPTC

Nationale or Private

Foreign Lab

Stakeholders


Urban Engineering

Planning & Funding

Watershed

Management

Infrastructure

Design

Procurement Subsurface

preparation

Inspection via

Supervision

Engineering Firm

Install Network &

Equipment

Municipal Work:

Water & Sewerage

Systems

DINEPA, MTPTC

laboratoire

Nationale or Private

Foreign Lab

Stakeholders


Energy, Transport

Planning Engineering Design Procurement

Subsurface

preparation

Inspection via

Supervision

Engineering Firm

Install Network &

Equipment

Complex Engineering:

airports, ports, dams Public Promoter or PPP

EPC : Engineering,

Procurement

Construction

EPC :

Engineering,

Procurement

Construction

Subcontract

infrastructure local

partners

EPC : Engineering,

Procurement

Construction

Subcontract

infrastructure local

partners

Legend

Done in Haiti Somewhat done

in Haiti

Not done in Haiti Not done at all


APPENDIX 5 – DETAILED CONSTRUCTION WORKFORCE DEMAND

Positions Tasks Levels of Education Types of Training Step 1 - Estate Development Real Estate Developer - Land Survey

- Land Title - Seek Investors - Select Contractor

Bachelor in Administration Formal Business Training and Learn On the Job / Mentors

Public Tender Officer Bachelor in Civil Engineering Formal Business Training and Learn on the job the tender/bidding process

Land Owner Bachelor in Administration Formal Business Training but possible without, usually sons & daughters of land owners

Step 2 – Design & Supervision Architect - Building concept and

aesthetic Bachelor in Architecture Formal Degree

Engineer - Overall Design Bachelor in Civil Engineering, Master in Engineering (structural, environment, hydrology, etc)

Formal Degree with Specialties in last year or at master level; or specialties chosen on the job markets. Specialties in Buildings, Urban Work, Water and Sanitation, Roads. Environment

Technician CAD & GIS - Detailed Design Technical Degree in Civil Engineering or (less qualified) GIS/CAD special certificate

Formal Degree

Land Surveyors - Detailed Land Survey Technical Degree in Civil Engineering

Formal Degree

Step 3 – Building Materials Supervisor Quarrying - Supervising quarry

staff Ideally a degree in mining or geology t

Formal degree

Quarrying Employee - Extract stones, sand, gravel from quarry

No degree; learn work on-the-job, low skill

On-the-job

Supervisor Manufacturing - Manage machine operators, planning & implementing

Technical Degree in Mechanics or Industrial Engineering

Formal Degree

Step 3 – Building Materials (cont’d) Manufacturing Machine - operate building block Ideally a professional training in On-the-job


Positions Tasks Levels of Education Types of Training Operator machinery

- operate steel bar machinery

- operate stud machinery

- operate cement machinery

- operate concrete mixture machinery

mechanics; otherwise, usually trained by the employer or machine provider

Technician Mechanics - Overall Design Bachelor in Civil Engineering Formal Degree with Specialties in Buildings, Urban Work, Hydrology, Roads. Environment

Step 4 – Execution by Lead Contractor or Subcontractors Project Director Overall supervision and

cost control Master in Civil Engineering (or Bachelor) including Project Management courses and internships on construction sites (Also with MBAs)

In smaller projects, the Project Director does also contract management, procurement, and cost control

Contract Manager Edit, negotiate and manage contracts with subs

Bachelor in administration

Procurement Officer Manage the overall procurement timeline on construction site

Bachelor in administration

Cost controller Input All Bills and compare if aligned with budget

Bachelor in administration Only large projects have full-time cost controllers. It’s normal practice to have cost controllers and they normally do various projects

Project Engineer Responsibility and oversight over compliance to design

Bachelor or Master in Civil Engineering

On smaller project the project engineer is also the construction manager

Step 4 – Execution by Lead Contractor or Subcontractors Construction Site Manager Supervision of staff and

building materials in Engineer (large/complex projects) and Technical (mid-

Managing is learned on site, but also via instructors to teach good practices instead of


Positions Tasks Levels of Education Types of Training respect of design size and small) in civil

engineering and learn on the job (starts with small project and move up) with project management courses

ad hoc practices

Foremen Masonry Supervision of masonry staff

Professional degree in masonry and project management

Foremen Masonry are usually the famous informal « contremaîtres » (foremen) who manage all human resources.

Foremen Electricity Supervision of electricians

Professional degree in electricity and project management

Comes with his team ; apprenticeship system

Foremen HVAC Supervision of HVAC staff

Professional degree in HVAC and project management


Foremen Carpenter Supervision of Carpenters

Professional degree in Carpendry and project management


Foremen Plumbing Supervision of plumbers Professional degree in Plumbing and project management


Foremen Site Preparation/machinery

Supervision of machine operators

Professional degree in machine operations and project management

This is usually managed by the lead contractor; but could be a specialized firm (did not see any in Haiti)

Electricians Install or repair electricity network, outlets and fixtures

Professional certificate

Plumbers Install or repair plumbing network

Professional certificate

Bricklayer Lay bricks Professional certificate Carpenters Cut, Shape and Assemble

wood frames Professional certificate


APPENDIX 6 – DETAILED VC ASSESSMENT MATRICES Value Chain 1 – Individual Housing

FACTOR

(descending order of importance)

ASSESSMENT OF FACTOR

(1-2 sentence Summary of the assessment and supporting detail of 1

paragraph to 1 page per factor as appropriate)

MARKET OPPORTUNITY (Crucial)

What is the product? How sustainable is the

demand?

What is the size of the market?

Where is the market?

Does market access and success seem realistic, and

reasonably substantial?

Product: A one to two-story house

Port au Prince

Market size for low-income housing is enormous and could be as high as

300,000 units in greater Port-au-Prince, including former suburbs of

Delmas, Pétionville, Carrefour and the likes.

Market access is very difficult due to land title issues and capacity for

developers to collect rent

It is a do-it-yourself market, due to very low capacity to pay for house, land

and professionals.

Cap-Haïtien

Market access is easier, as there is less competition for land

However, same issues on rent collection apply to CH, as it depends on

capacity for government to regulate the housing market

EVIDENCE OF LEAD FIRMS (Crucial)

Who are the lead firms or early innovators?

Do they have strong or improvable market

knowledge and access?

Do they have the potential to source from MSMEs?

Are there other leaders – private or public sector –

who can support the Lead Firms and VC upgrading?

There are no lead firms in the individual housing market; however, we

observed an interest in real estate development, which is inexistent for

now. Apart from social housing from UCLBP, USAID, UNOPS and others,

there have not yet been a private offering in larger development projects as

can be observed in other developing countries. For now, it is a

decentralized market, relying on the individual home or landowners,

whether they are poor, middle-class or wealthier. Individual engineers

design and build with minimal staffing.

OPPORTUNITY FOR MSME PARTICIPATION (Crucial)

Are the Lead Firms willing to serve or engage the

eeds of the alue hai ’s market system?

n/a


ANTICIPATED JOB CREATION (Crucial)

What is the ability to create job opportunities and

generate quality job?

There is a potential for upgrading individual informal engineers to form

SMEs in joining with other individual engineers. The low collaboration

observed as of yet would not be conducive to such grouping. In addition,

returns are very low and the owner is very demanding. This is viewed as a

subsistence market, by lack of choice. It is the least preferred market, as

house owner are emotional, demanding and land issues can take time to

resolve, thus unreliable timeline to start the project. However, in the non-

housing market, incentives and the margins are higher to join. In

o lusio , this is a su siste e jo oppo tu it that can create jobs in

volume, but cannot much improve the value chains, since customers have a

too low-cost preference.

COMPETITIVE POTENTIAL (Crucial)

What is the ability of the upgraded VC to respond

reliably to market requirements with competitive

quality and cost?

Will the current competitive environment provide

spa e fo a upg aded VC?

There is no institution that can reach such a varied customer base. The

customer base is vastly constituted of poor households, generating least

profit. Then, there is the very rich households, but they are very few;

however, generating significantly higher profit. The former market is low-

cost, low-quality, whereas the latter is high-cost, high-quality. There is a

middle-income market currently targeted by developer that could have

some space for upgrade. However, in all cases, this is a very unstructured

industry due to (1) absence of lead firms; (2) absence of associations (real

estate de elope s, o e s’ asso iatio s, e te s’ asso iatio ; 3 li ited government coordination/awareness raising

COMPARATIVE STRENGTHS (Important)

What are the top 3 comparative strengths of the VC?

Can LEVE further strengthen these?

The three comparative strengths are:

Large Market Size

Steady Growth

Low Barrier to Entry

LEVE could enhance the communication/awareness platforms to market

low-cost innovations for safe and affordable housing solutions for low-

income & middle-income markets. An initiative by Miyamoto did increase

awareness of 10,000 households in what to look at when a house is

constructed to make sure it is safe.


COMPARATIVE WEAKNESSES (Important)

What are the top 3 comparative weaknesses in the

VC?

Can LEVE address these weaknesses?

Can they be addressed by another source?

The three comparative weaknesses are:

Significant land issues (double-titling, legal and criminal issues)

Very low quality of site preparation and reduced building material costs

(more water to the concrete and less rebars to reduce costs)

Unregulated housing market e.g. quality system and owners & tenants

rights and obligations

ENABLING ENVIRONMENT (Important)

What are the top 3 regulatory and legal constraints

that the VC must overcome to achieve an improved

level of competitiveness?

What options are available to address these

constraints?

Three regulatory & legal constraints:

Land title enforcement

Underdeveloped mortgage system

O e a d Te a t’s ights a d o ligatio s

WORKFORCE (Important)

What is the current supply of qualified workers for

the VC?

Will the upgraded VC require an improved

workforce?

What types of upgraded skills will be required?

What institutions are available that could transfer

the upgraded skills?

Individual housings are often do-it-yourself products and most owners have

not been trained to build a house. They also tend to negotiate cost over

quality. In addition, many houses are still not built for earthquakes. This

audience is very expensive to reach, as it is almost 80% of the population.

They can only be reached via awareness raising campaigns that can provide

technical solutions for them to change their approach.

ANTICIPATED IMPACT ON WOMEN, YOUTH, OVC

(Important)

What is the potential to integrate these groups

through jobs, MSMEs, and entrepreneurship?

Women are often less mobile at home, due to the children and could be the

guardian of affordable and safe solutions. Young construction specialists

often need to start at housing level, before to be hired on larger

construction site. These groups should be involved at community level to

ensure safe solutions are promoted in popular neighborhoods.


POTENTIAL TO ACCESS FINANCE (Important)

What are the current sources of financing in the VC?

Will the VC upgrading require additional outside

financing?

Are current institutions able to provide financing?

Most owners do not qualify to borrow at the bank, but they will do it via

micro-financing institutions. For low-income and middle-income

households to build safe and affordable houses or to foster real estate

development, there is a great need to develop financing mechanism (lease-

buy or longer-term mortgage products). Until this is done, social housing

will remain the only option and the State is unable to respond to the size of

the market unless they massively invest on social housing.

POTENTIAL TO ENGAGE SERVICE PROVIDERS

(Useful)

Does the current VC use service providers?

Where do they come from?

Are new services required to upgrade the VC?

Can they be successfully developed locally?

The current VC does not use service providers and service to housing is

actually inexistent. Only few recent real estate developers are emerging,

but have not yet designed and implemented market-driven commercially

viable housing solutions. Financing, rent collection and land issues are

major obstacles.

POTENTIAL TO COLLABORATE WITH OTHER

PROJECTS (Useful)

Which other project-like activities are currently

implementing in the VC?

Which project-like activities could LEVE leverage to

upgrade the VC?

The e a e u e tl o p oje ts add essi g the i di idual house a ket, but rather address large numbers of houses as social housing project.

Housing development projects have been done at USAID for the last 4 years

but it took a midway between a relief housing project and a permanent

one. It is significantly subsidized and mostly social housing projects.

POTENTIAL TO CONTRIBUTE TO FORMALIZATION

OF SMES

(Useful)

What is the ability of an upgraded VC to contribute

to the formalization of the SMEs?

The customer base for individual housing is most likely not ready to pay for

formality (30% increased cost du to taxation rates). There is no incentive for

formalization in that market, except for wealthy or foreign households who

are more incline to value quality work and formality in their selection of

lead engineer. That would be a slight minority of the customer base.


Value Chain 2 – Multiplex and Large-Scale Development Housing

FACTOR







demand?





Product: A multi-story house (15 to 50 apartments) or a multi-unit housing

development (100 houses)

Port au Prince

Market size these projects is moderate, mostly because there is very few

precedent of market-based development projects. It is emerging, but

many companies seem positive about this market and are entering it now.

Market access is moderate as a certain degree of know-how is required to

be a developer: land titling, finance/partners mobilization, contracting,

sell-to-plan, mortgage solution and rent collection

Cap-Haïtien

Due to Ca a ol’s de elop e t, the e is high pote tial fo this ulti-story

or multi-unit bungalow development for middle-income or low-income

newcomers to Caracol village or Cap Haitien or beaches around.

Market access and success are realistic as this is the new growth area, as

the individuals appear unable to respond to safety and land parameters.

More structured organization can address these issues in greenfield (new

house) and also brownfield (upgrading).








There are five firms with real estate developer ambitions: Panexus ($25,000

housing project in PPP); Kaytech ($45,000 housing project in PPP),

Miyamoto ($10,000 housing project, brownfield upgrading current houses

or add a story), Gatjens (leasing Bungalows in CH) and Jacques Labrosse

(start-up, USAID LEAD). The real estate promoters will subcontract to a

mid-size construction firm, which in turn will subcontract to smaller

specialized firms (electricity, plumbing, etc.). There is high potential for

linkages. Banks and Donors will need to be involved to improve small and

long mortgage mechanisms.




eeds of the alue hai ’s a ket s ste ?

In this case, the real estate developer has full control over its project and

can ask for value chain upgrade activities. These three aforementioned lead

firms are all interested in quality, affordable and safe housing projects and

are willing to engage in VC upgrade and share learning to others.




The multi-unit housing or multiplex products have high job creation

potential, as it palliates to the lack of organization of the individual housing

markets. It can realize economies of scale and better negotiate financing

and land constraints due to its size and the higher capacity and incentive of

the real estate developer to design and implement a quality project (to

keep its reputation and gets new land access).




quality and cost?



There are interested firms and motivated by selling a technical solutions

(pre-fabricated house or steal structure). They are themselves creating the

value chains as we speak in linking the various actors: finance, insurance,

land owners, customer base. There is still large space for upgrade,

especially in innovation dissemination to actually stimulate the market and

interest for their technical solutions.





Large Market Size (could be at least 30% of the total house demand)

Steady Growth

Moderate Barrier to Entry

LEVE can assist in disseminating innovation solutions and liaise with

banks/insurance/donor community to move from social housing to

commercially viable housing with professional real estate developers.



VC?




Significant land issues (double-titling, legal and criminal issues)

Low understanding of the crucial role of a real estate developer, as the

intermediate between landowners and customers.

LEVE can facilitate the mortgage system and PPP with real estate

developers and liaise with PADF LEAD who worked on individual mortgage

system. LEVE can especially provide a platform to market their efforts in

real estate development.







constraints?


Land title enforcement

Underdeveloped financing system for real estate development systems



the VC?


workforce?




Multiplex and multi-story apartment buildings can benefit from qualified

Haitian firms. However, if the developer asks for low-cost and do not

request for a supervision firm, there is a chance that the informal

subcontracting to contremaître will have incentive to cut on material and

workforce costs to generate more profit. This lowers the demand for

qualified workforce on the job market and thus few find it relevant to invest

for formal training. The industry stakeholders are unanimous in requesting

better foremen (lack technical training and project management training)

and better masonry to ensure the quality of concrete/usage of rebars on

site is earthquake proof.


(Important)



Women have been quite successful in machinery operation for instance and

the youth in joining as apprentices. The lead firms have shown interest to

have trained workforce on their upcoming construction projects.




financing?


Access to finance for real estate developer should be easier, as they have

previous credentials. However, their business model relies on effective and

insured payments from the future owners or leasers. Various promoters to

reduce the short-term burden on the households are exploring a lease-

acquisition scheme among other mechanisms. LEVE could assist in

contracting technical assistance from another developing country with

similar popular neighborhood issue)



(Useful)





The current VC has mostly technical solution providers to affordable and

safe housing, rather than real estate developer. Panexus and Labrosse are

more in-line with the real estate developer profile. All promoters are for

now foreigners. Technical assistance would be needed to assess customer

preference along with financial mechanism to make these projects feasible.


PROJECTS (Useful)




upgrade the VC?

The e a e u e tl o p oje ts add essi g the o e iall -viable

housi g de elop e t solutio . This ould e a i po ta t o t i utio to Haiti’s e o o ies and compensate for insufficient (and at time not meeting

customer preferences) social housing solutions.

POTENTIAL TO CONTRIBUTE TO FORMALIZATION OF

SMES

(Useful)



Real estate housing development could significantly contribute to the

formalization of housing development in Haiti, as the promoter is financially

sound and its key competitive advantage is safe affordable housing with

standard quality level. This is the actual reason it has always been

successful worldwide.


Value Chain 3 – Commercial Buildings

FACTOR







demand?





Product: Commercial buildings of all sizes, but mostly hotels, restaurants,

but can also include banks and other private promoters. What

distinguishes commercial from institution is not so much the kind of

product (office buildings would be similar), but rather the way the contracts

are awarded. In commercial buildings, the bidding process is much less

constraining, as the private promoter will take more risk with its

construction contractor. Trust and common business interest is what

guarantees their cash flow management. Institutional building (next value

chain) has formal tender process with conditions that exclude much of the

construction firms.

Port au Prince

Market size: commercial buildings have reached a plateau in Port-au-

Prince as tourism is not increasing and occupancy rate in hotels have

sig ifi a tl de eased ith Best Weste ’s a i al,, as the sto k of commercial housings has reached a plateau.

Cap-Haïtien

There is still a good potential for commercial buildings. The problem in

Port-au-Prince is that Port au P i e’s o st u tio o pa ies alo g ith DR construction companies now construct most of these buildings.

Barrier to entry is moderate, as any firms need to build its credibility, name

and ensure a strong personal network to obtain contracts. This VC is more

interesting for CH thant for PAP. However, larger is the project, larger are

the needs for equipment capacity, which is more limited with small firms.









There are many lead firms in commercial buildings as this is the market that

most construction firms occupied in the last 4 years. Innovators are

Miyamoto (foreign), Arcotech (Haitian), Tecina & VF. However, there is little

product differentiation, except for earthquake structural expertise and

better quality product. In both cases, customers requesting for such quality

are international hotels or banks. Other commercial institutions might still

hesitate to build to higher quality standards. A market is really obtained by

personal contacts and reputation.




This market is occupied by mid-size to large firms and they tend to

subcontract significantly. However there are two ways of subcontracting:

formal and informal. The informal way prevents the MSME to actually grow

and be more complete in the types of services offered. The MSME is

actually an informal HR subcontractor without other responsibilities. The

formal market does contract MSMEs formally, especially in areas of

construction that are more specialized: electricity, plumbing and Heat and

Ventilation Air Conditioning (HVAC). There are a couple of lead mid-size

firms who work formally who can enhance these linkages.

There is also an equipment issue for larger projects for SMEs. There might

be an opportunity for better leasing conditions at Haytrac or partnering

among SMEs to increase their technical and financial capacity.




There is potential for job creation especially in CH, but nonetheless PAP still

has some opportunities. Workforce development and governance

improvement (OCAT) will be necessary to assist these MSMEs to expand.




quality and cost?



There is space for upgrading in the formal segment, whereas the informal

segment is truly challenging since these entrepreneurs do not want to be

known and will not likely be interested to workforce development and

enhanced building materials, due to a low-cost expectations the customers

have from them.






Established Industry

It has a clear quality driver: tourism

Moderate barrier to entry for MSMEs

LEVE should program SME development support (business development

service) in that particular market to act as subcontractors to anchor firms.



VC?




Small commercial buildings suffer from the same low-cost issue than small

houses and more difficult to intervene in that too large market

Informal subcontracting system is a key obstacle to change

No organizations for SMEs in construction; AHEC is mostly mid-size to

large-size firms

LEVE could facilitate via specific-construction business development

services and facilitate associative network for small firms in construction

and encourage partnerships or cooperatives.






constraints?


Absence of quality system on small to medium commercial buildings;

E e la ge p oje ts do ’t al a s ha e supe isio fi s to control for

quality, as it adds to overall costs




the VC?


workforce?




The informal subcontracting is suffering from skill deficit and has a

significant consequence on quality and need for supervision by the lead

contractor. Supervision costs probably outweigh the saving from

informality (-30%, tax level). The formal sector is also suffering from skills

deficit but to a lesser degree because foremen are SME managers with

responsibility over the quality of work. It costs less in supervision and the

SME has advantages to invest in its workforce because they themselves

want to reduce their supervisory costs. Workforce needs are the same for

the whole industry but it appears that the informal sector suffers from

middle-management issue while the formal sector seems to fare better in

technical supervision, but their subcontractors have cash flow management

issues. Cap Haïtien has numerous commercial buildings coming up and

they care for local workforce. LEVE should support on-the-job training from

professional schools on these upcoming construction sites.


(Important)



Women have been quite successful in machinery operation for instance and

the youth in joining as apprentices. The lead firms have shown interest to

train workforce on their upcoming construction projects.




financing?


The financing of medium and large commercial buildings for tourism has

been facilitated via a successful tourism ministry in facilitating investment.

It has enabled the investment climate for tourism projects. However,

smaller projects are most likely suffering from lack of financing, which limits

their potential growth. A SME development bank is not in place in Haiti.

Advocacy for such a fund should be done (e.g. Rwanda Business

Development Fund (BDF) to unleash SME potential).



(Useful)





Service providers in SME development to help with leadership, governance

and expansion planning.


PROJECTS (Useful)




upgrade the VC?

The e a e u e tl o p oje ts add essi g the ualit s ste i o st u tio . This ould e a i po ta t o t i utio to Haiti’s

construction sector and this value chain is potentially the most conducive to

quality and international standards.


SMES

(Useful)



Because it is actually very difficult to support the informal sector, as they do

not want to be known, supporting the formal sector and the quality system

will indirectly promote formality.


Value Chain 4 – Institutional Building

FACTOR







demand?





Product: Building for an institution and gaining the market requires to

qualify and prepare for bidding process

Port au Prince

Market size is still large in Port-au-Prince because many government

buildings are still not reconstructed due to security issues downtown

Barriers to entry are moderate to high as the bidding process is quite an

investment for SMEs

Cap Haïtien

We have not heard of any institutional projects apart from the airport,

whose contracts were already awarded but the project is slowed down.








The lead firms in that market are larger (Tecina, VF, Générale Construction)

since they need office staff to prepare bidding document and provide bank

guaranties, which imply some cash assets. The lead firms are in this market

not likely to create linkages to SME to access that market, but rather create

linkages via subcontracting informally or formally. However, there is little

room for graduation from a Microfirm to a small one; from small to

medium or from medium to large, as the large ones occupy the market.

LEVE can support capacity building in joint venture, consortiums or

partnership for SMEs to be able to bid on those projects or for SMEs to

become specialized and larger subcontractors. There is a fair deal of

instability in the market because of too many small firms and

subcontractors. Supporting graduation from micro to small and from small

to medium would stabilize and professionalize the market to maintain and

create jobs.





There is a willingness to partner to gain market, but experiences are too

few for firms to truly understand the full potential of consortiums. MSMEs

will be able to enter the market in partnering with other firms, otherwise,

they stay subcontractors with lower control over the profit margins, thus

jobs.

There is also an equipment issue for larger projects for SMEs. There might

be an opportunity for better leasing conditions at Haytrac or partnering

among SMEs to increase their technical and financial capacity.




In Port-au-Prince the institutional building market is still occupied by

foreigners, mostly Dominican republic firms. Their abilities to prepare

bidding documents, availability of cash assets and higher quality work

significantly favor Dominican Republic firms. Haitian firms must partner to

enter this market and rightfully claim the quality jobs to Haitians. DR firms

do tend to hire the unskilled only and keep the key technical and

management positions.




quality and cost?



Donors often finance institutional buildings, which adds on quality

requirements. There is most of the time a supervising company (third-

party) to the lead contractor to validate the practices on site. There is a

space to upgrade the Value Chain in understanding obstacles to consortium

building, a common practice in the construction industry.





Quality driven market, due to international donor funding

Growing market

Ownership by GoH, NGO or donors who all have incentive to create jobs to

Haitian

LEVE can use this market for demo projects in quality system upgrading.




VC?




Low capacity and willingness of SMEs to engage in consortiums even with

foreigners

Bidding process is a large investment and a know-how

LEVE could provide capacity building in partnerships to gain access to a

market.






constraints?


Legal enforcement of consortium or partnership agreements by

commercial courts

Limited Quality System



the VC?


workforce?




Same as previous VC.


(Important)



Same as previous VC.




financing?


Cash asset of 20% of total amount as bank guarantee is a very difficult

constraint to face by small firms. An investigation should be conducted to

assess what instruments are available in other development countries to

overcome that cash assets constraint on local firms.



(Useful)





International consortium experts in construction should provide a seminar

for Haitian firms to present incentives, types of consortiums, identification

process in function of the type of construction project, advantages and

disadvantages, success stories, best practices.


PROJECTS (Useful)




upgrade the VC?

There are currently no projects addressing the barrier to entry on that

market, namely the cash asset or the experience required to bid on a

project.


SMES

(Useful)



Building a consortium requires formalizing the company, since the partners

need to know whom they partner with and if the partner is trustworthy and

has sound finance. The activity of consortium could stimulate the formality.


Value Chain 5 – Industrial Facilities and Large-scale Building > $15,000,000

FACTOR







demand?





Product: An industrial complex or a very large building whether it is

commercial or institutional

Port au Prince

Moderate market size, high returns, but low frequency and unstable

demand

Cap-Haïtien

Small market size, high returns, very low frequency and unstable demand








The foreign firms (Estrella, SNC-Lavalin/LGL, AECOM) occupy this market, as

they are the only one to qualify for experience and cash asset for

guarantees on such large projects. Tecina, the largest, cannot take above

$25,000,000 contract. However, again, local firms should formally engage

in partnership to gain access to the market and the expertise. This is a

harder market to obtain and LGL with SNC-Lavalin was probably the most

relevant partnership for this type of contract, namely a long-term

partnership with LGL coordinating the contract with access to the expertise

to win the bid and deploy specialized resources as need be. CECOM also

holds partnership in some markets. These are supervision firms and not

execution firms. It would be relevant to study the incentive to partner with

international in execution contracts.



needs of the value hai ’s a ket s ste ?

There is an equipment issue for larger projects even for large firms like

Tecina. There might be an opportunity for better leasing conditions at

Haytrac or partnering among large Haitian firms or a foreign-national

partnership to increase their technical and financial capacity to respond to

such projects.





Job creation in Haiti in complex projects requires Haitian firms to partner

with foreigners and customers requiring such partnership. If the customer

does not require a partnership with an Haitian firms, firms have little

incentive to train and transfer know-how to Haitian firms, especially the

Dominicans which are in an export strategy with Haiti, which create jobs in

their own market.




quality and cost?



There is limited space for upgrading, since customers do not require local

content or locally owned joint venture on their projects. Without clear

incentives from the market in partnering, the foreign firms will not tend to

maximize their effort in training Haitians, as this is costly.

LEVE can create a space in (1) capacity building in consortium practices; (2)

advocacy to customers (IDB especially) to ask for local content in their

bidding documents.





High returns

High complexity, candidate for know-how transfer

Significant upgrading if Haitian firms can partner and get the market



VC?




Ad hoc infrequent demand

Foreigners most often occupy this market in developing countries

Customers (GoH, IDB) do not have local preferential clauses

Low capacity of Haitian Firms






constraints?


Legal enforcement of consortium or partnership agreements by

commercial courts

Bank guarantees




the VC?


workforce?




Same as previous VC


(Important)



Same as previous VC




financing?


Requirements for bank guarantee are very high on Haitian firms who would

like financial instruments to help them provide this cash asset guarantee,

like a loan. However, this requirement is typical all over the world, to

protect the usage of the cash advance for the actual project instead of

being allocated elsewhere to pay previous debts. What could be done,

however, is that many firms put cash assets together to create such fund,

on a project-basis. LEVE could facilitate such a fund process with Haitian

banks.


(Useful)





Same as previous VC – learn how to partner/consortiums



PROJECTS (Useful)




upgrade the VC?

AHEC developed a law project and gave it to GoH to create a Guarantee

Fund to support construction firms to access larger markets. However, this

is a difficult position for the government. The customer cannot ask for cash

asset and provide the same cash asset. LEVE should facilitate with AHEC

to see how to build their own fund on a project-basis with subcontracting

schemes (each subcontractor to provide some cash assets on its own

subcontract).


SMES

(Useful)



Very conducive to formalization, as each consortium members need to

have an open book attitude.


Value Chain 6 – Roads & Bridges

FACTOR






What is the product? How sustainable is the demand?





Product: Roads and Bridges

Port au Prince

Large Market, Steady Demand, Moderate Skill Level

Barrier to entry: size of contracts from IDB or WB.

Need for drainage & canalization inside the city and should be done in tandem

with road paving, as digging afterwards is costly.

Cap-Haïtien

Moderate market, Steady Demand, Moderate Still Level

Barrier to entry: size of contract and lack of expertise in Cap-Haïtien

Downtown CH can qualify for cobblestone, would add to its charm



Do they have strong or improvable market knowledge

and access?


Are there other leaders – private or public sector – who

can support the Lead Firms and VC upgrading?

Lead firms are VF Construction (all project), HL (paving mostly), Tecina and

Estrella. Large firms dominate the market when contracts are large. Otherwise,

for repair, maintenance and small road sections, small local firms can do the

work. There are three different techniques of paving, asphalt, concrete or

cobblestone. Asphalt and concrete need significant heavy equipment, which

explains why it is dominated by large firms. However, cobblestone is a more

manual technique and is more job conducive. It is recommended for lower

traffic volume on rural roads for instance or some low-traffic part of a city.

There is significant lobbying in function of what is most advantageous for some

firms. Cement importers favor concrete whereas building block producers

advocate for cobblestone. Building a road is not as broken down by trade

specialties like a building, thus less conducive to linkages with MSMEs.



Are the Lead Firms willing to serve or engage the needs

of the alue hai ’s a ket s ste ?

However, there is one opportunity, much used in Aboriginal economic

development best practices. To promote the hiring of Aboriginals in Canada

and Australia, most projects are broken in small parts to ensure some local

firms can access the market under the supervision of a qualified firm. This way,

investment goes into local pockets instead of non-residents. During interviews,

VF Construction would have done such an initiative in Cap-Haïtien, given the

lack of capacity there. Important to investigate with VF is they have replicated

that model.




Job creation among MSMEs could be high if advocacy for breaking contracts in

smaller sections of roads is successful. This would also have a significant

workforce development effect on many firms.

In addition, the non-systematic inspection process in road and bridges has an

important cost effect for the GoH. If paving is done on a poorly prepared road

site (earthwork, leveling, layers of gravels & sand), the road will deteriorate

very fast, especially during rainy season where subsurface water can truly

dismantle the poorly prepared road bed. Inspection process would also be a

job creator.




quality and cost?



Roads a d idges a e e t e el i po ta t to a ou t ’s development as it

opens market opportunities for each individual. Upgrading the quality of those

roads will reduce its overall maintenance and repair costs, freeing development

money for other urgent matters. The space for LEVE is the advocacy role in

paving with quality standards and to break contracts in smaller sections to

increase local employment and MSME capacity.





Large Market Size

Steady Growth

Low barrier to entry in terms of expertise but higher barrier in terms of

equipment capacity and size of contract



What are the top 3 comparative weaknesses in the VC?




Customer base prefers large contracts (MTPTC, IADB, WB, USAID)

No middle ground between the small SME repair & maintenance and the large

firm managing large contracts


What are the top 3 regulatory and legal constraints that

the VC must overcome to achieve an improved level of

competitiveness?


constraints?


No systematic quality control system of site preparation before paving is

applied on the road

Significant lobbying from cement producer to pave with concrete (Cement-

based), from asphalt producer to pave with asphalt, and from building blocks

producer to pave with cobblestone.


What is the current supply of qualified workers for the

VC?

Will the upgraded VC require an improved workforce?


What institutions are available that could transfer the

upgraded skills?

The workforce lacks skills especially in supervision of work and heavy machine

operating. Workforce upgrading can be done with an anchor firm that would

break its contracts is smaller lots to train the MSMEs in the process and have a

better workforce for building and repairing roads. However, large Haitian firms

have little incentive to reduce their competitive edge. It would be better that

the customer request for such workforce development procedures.


(Important)

What is the potential to integrate these groups through

jobs, MSMEs, and entrepreneurship?

Women have proven quite successful in operating heavy machinery and should

then be favored on construction sites selected by LEVE.




financing?


Same as in large building projects, the ability to partner among firms can

resolve the financial constraints of cash assets as bank guarantees. In addition,

if IADB can favor local employment rules by breaking the road project in smaller

sections.


POTENTIAL TO ENGAGE SERVICE PROVIDERS (Useful)





VF construction would have had such an experience and could be disseminating

to the industry its experience and increase awareness of customers (USAID,

IDB, World Bank). Otherwise, Hydro Quebec or BC Hydro have developed

world-recognized local job maximization schemes with Aboriginals to legitimate

its development in Northern Canada. They could explain to procurement

offi es est p a ti es i ho the eak su h o t a t he it’s ti e to te de . POTENTIAL TO COLLABORATE WITH OTHER PROJECTS

(Useful)




upgrade the VC?

USAID has a rural road project and it would be important that it is paved. Dirt

road in Haiti is hardly a cost-effective solution since re-levelling occurs

regularly. Investigate with USAID the roads & bridges projects they have in

portfolio and see how to attach workforce development to these projects.


SMES

(Useful)

What is the ability of an upgraded VC to contribute to

the formalization of the SMEs?

Consortium building has a direct effect on formalization and is also the main

obstacle for firm to even want to enter a consortium.


Value Chain 7 – Infrastructure for Water Management

FACTOR











Products: water provision, drainage, sewers, treatment and canals

Port au Prince

Pétionville and Downtown neighborhoods have an old but existing water

management system, but Delmas, Tabarre and Carrefour need significant

development in that regard (to be validated with DINEPA)

Cap-Haïtien

Cap-Haïtien has heavy floods in November 2012 and does not have canals of

water evacuation as well. It would be a priority market there as well. The

topography is flat and easier, but evacuation is less gravity-based.

It will be a more difficult market as it does not exist much. However it is of

crucial importance, since it drives the costs of maintenance up in destroying

most of the substructure of roads.




and access?




Lead firms would be LGL, CECOM and international engineering firms with

qualification in water drainage systems. However, the problem might rather be

one of political willingness to add draining to the costing structure of road

building in Port au Prince or Cap-Haïtien. The lead organization would rather

be DINEPA and MTPCT while the engineering firms could be service providers.




MSMEs could participate in the same format as for roads and bridges; however

drainage systems require significant level of expertise and experience, which

will require foreign firms. However, LEVE could advocate for local partnerships

in the setting up of a tender document with USAID.




This is a major job creator and unlocking the drainage market could be a

significant contribution.





quality and cost?



This value chain is to be built almost from scratch, which gives potentially too

much space. On the other hand, it is probably because it is so fundamental and

costly that this essential infrastructure is postponed.





Large Market Size

Moderate Barrier to Entry (learning curve is quick, no great level of complexity)

Essential services to reduce road repair and maintenance costs

LEVE can assist in unlocking the financial structure behind the contracting or

the planning. Technical assistance should be provided.






Government-driven sector and lack of interest of Donors

Low capacity at municipal level

Low capacity of coordination between arrondissement




competitiveness?


constraints?


Complexity of responsibility-sharing between of MTPCT, DINEPA, CIAT (urban

pla i g a d Ma o ’s Office



VC?




upgraded skills?

There is no qualified staff in that sector that barely exists, except for LGL and

CECOM which were both slightly active in water management projects. MTPCT

and DINEPA have significant experience and could be supported in developing a

concrete demo plan for water drainage in Delmas for instance. It can create

jobs by availing donor money to drainage for a demo project.



(Important)



Since it would be new market, it will be difficult to include women and youth at

this stage.




financing?


Stimulate interest of donors in water drainage to protect the road network

from too early deterioration.






Technical advisory services will be necessary here and a group of Haitian firms

with foreign firms could assist DINEPA/MTPTC in developing a small demo

project for LEVE

POTENTIAL TO COLLABORATE WITH OTHER PROJECTS

(Useful)




upgrade the VC?

IDB has the infrastructure portfolio, while world bank is into housing and

infrastructure. It will be important to understand the reasons of their

disinterest for drainage and water canals.


SMES

(Useful)



Engaging on those projects will require formality due to the bidding process of

public markes.


Value Chain 8 – Complex Civil Engineering Work

FACTOR











Products: airports, hydropower dams, etc.

Port au Prince

Small Market Occupied by foreigners

Limited future development as dams and airports are being completed

Only urban infrastructure projects and road construction could increase the

demand

High barrier to entry due to complexity and infrequent demand

Cap-Haïtien

Limited market occupied by foreigners

Limited future development as port and airports are completed

Only urban infrastructure projects and road construction could increase the

demand

High barrier to entry due to complexity and infrequent demand




and access?




Lead firms are foreign firms, although GB Group is actually procuring for

airports, which is a significant form of partnership.




MSME already participate in the sector, but they participate in the unskilled

segment.





The market is not currently conducive to job creation unless IDB and World

bank announce another massive investment in hydropower development or

other complex civil work.




quality and cost?



There is limited space for upgrading since foreigners control the market.

However, engineering design and supervision firms who hold long-term

partnerships with foreigners could try to enter the execution market in these

complex areas. LEVE could support a demo project in that regard.





High level expertise to gain

Some steps of the value chains are totally accessible to Haitian firms






High barrier to entry




competitiveness?


constraints?


No local workforce development clauses



VC?




upgraded skills?

Workforce is not qualified in these projects, due to the level of complexity.

However, it is necessary to develop workforce especially at engineer-level.

Engineers need additional seminars to understand these projects and advise

ministries or private companies in the very management of these infrastructure

projects. Training in that regard will be important.



(Important)



n/a




financing?


n/a






Service providers in this case should be infrastructure design and supervision

firms to build capacity in managing these new infrastructure projects at

government or non-government level.

POTENTIAL TO COLLABORATE WITH OTHER PROJECTS

(Useful)




upgrade the VC?

There are currently no projects addressing the complex engineering works.


SMES

(Useful)



Collaboration with foreigners is conducive to formality.

Documents

Value Chain Assessment Annex 2. Construction Industry ... · EPCM Engineering ... The assessment process was based on the Rapid Value Chain Assessment ... key identified issues will