2.3.2 Role of local government agencies

If local government agencies are excluded from the formative stages of project design and implementation, they may be reluctant to accept responsibility for maintenance. This problem resulted in the inability to consolidate innovative new shelter projects and recover project costs in Papua New Guinea (Payne, 1982b). The only solution to this problem is to ensure that local authorities are introduced to the underlying principles of innovative projects at the earliest stage in their development. Even then, it may be difficult for local authorities to undertake the tasks required of them, due to a lack of institutional capability, or cumbersome procedures. In Colombia, for example, administrative procedures concerning contract tendering require a minimum number of bids, below which tenders are not accepted and the whole process has to begin again, with a resulting delay and increase of costs. Given that large-scale contractors may not be too enthusiastic about undertaking projects for low-income groups in the first place, such a situation is not uncommon. To exacerbate this problem further, all contracts have to be approved by the Administrative Court, which functions independently of the district administration, but is considerably overloaded. This process alone can add 6-12-months to project preparation (Utria, 1990: 41). Similarly, in the Bolivar City project, it appears that inadequate attention was given to operational planning, or the implementation process. This necessitated changes to the project after implementation had commenced, resulting in further delays and increased costs (Utria, 1990: 48).

One reason for the limited capability of public agencies is the lack of adequately qualified and motivated professional staff. In the Zimbabwean projects, a shortage of land surveyors, together with inappropriately high standards slowed down site development and consequently raised project costs (Mutizwa-Mangiza, 1990: 46). Yet, the picture is not totally negative. In the MHP in Sri Lanka, the development of institutional mechanisms at the local authority level was an integral element in its success. These enabled NHDA to offer construction contracts to community groups rather than to private construction companies, thereby reducing administrative costs from 30 to 15 per cent (UNCHS, 1987:45), not to mention the other benefits of community involvement. It is not clear, however, if this includes the cost of technical assistance from project staff which placed considerable demands on staff resources. One major difficulty with the MHP is related to the financial terms, under which interest rates varied between 6 and 10 per cent in sites-and-services and other low-income projects. This represented a substantial subsidy, to which was added subsidies on land and land-development costs, the provision of basic infrastructure and community facilities. No mechanism for recovering the cost of land development and infrastructure was established under the MHP. The total cost of these elements has routinely been borne by the Government (Jayaratne, 1990: 43). The present value of the interest-rate subsidy alone in the rural programme is greater than the present value of the loan amount. Channels for obtaining housing loans are limited and not accessible to the poor because of collateral and deposit requirements.