How Building Health Facilities Boosts Local Livelihoods in Papua New Guinea

There is a pressing need for investments in PNG’s health infrastructures, which are largely based on outdated designs that do not respect their environments and are based on functional layouts that do not support patient safety. Facilities are decaying and fall short of national health standards.^[1] The Government of PNG plans to address this through a district hospital financing program. However, attracting contractors to work in remote settings, often on small health facilities, is a challenge for project management teams.

Tenders for public works in PNG are subject to either national or provincial level oversight, depending on the tender size. Those worth K10 million (about $2.35 million) or less are within the purview of Provincial Procurement Committees rather than the National Procurement Commission. Relatively, projects that are smaller in size and of closer proximity to the actual project site are subject to provincial procurement processes that are faster and easier to navigate than national procurement. However, the typical cost for the construction of a 40-bed district health center is around K60 million to K65 million ($14.1 million to $15.3 million). For 22-bed health centers, the cost can be K30 million ($7 million) or more. This can mean that rural health facilities that are larger than a community health post could face delays, as they are held up at the national procurement level, behind larger projects such as national roads.

A proven solution that has been adopted by the government of Papua New Guinea (PNG) is to break larger projects into structured logical construction stages. These stages reflect the technical sequencing of works and contracts for individual stages that typically do not exceed K10 million (about $2.35 million). This structure opens the door for smaller, PNG-based businesses to bid, because they are able to meet the financial liquidity, business turnover, and performance bond requirements of the tender. Often, they can also offer more competitive pricing. A successful bid for one stage of the work does not automatically guarantee the contractor’s success in bidding for the next stage. This creates a strong incentive to perform well at every stage. This way, project costs and timelines are managed through disciplined contract administration.

When PNG-based construction companies are engaged, they typically bring employment and skills transfer to the communities where they work. The work ranges from basic site clearance to skilled trades, including construction, plastering, and painting. A construction company typically has between 100 and 250 workers involved in each project and hires up to 80% of them locally. The company’s own local staff trains and supervises the workers, thereby facilitating skills transfer over the 2.5 years to 3 years that it takes to complete a project. Building local capacity also supports facility maintenance and equipment servicing. Thus, upon completion, the community has skilled people to maintain the infrastructure. Further, where projects have been financed by international partners, the contractor is obliged to adopt and train local workforce in safeguards, safety, and environmental standards.

To get paid, workers are encouraged to open an individual bank account, so the project brings them into the formal economy. This is especially important for women, who are hired as laborers and artisans, because it improves their financial independence and equips them with marketable skills for future work.

Tendering in this way builds relationships at the provincial government and community levels. This is important because, upon completion, the management and ownership of the facilities will also be handed over to the Provincial Health Authority. The project increases local ownership because officials, for example, from the local governor's office, building inspectorate, and local staff from the provincial administration, get involved. Bringing employment to the local people helps establish a relationship with the community and increases their sense of ownership of the health facility. This can also help when negotiating with customary owners of land to make it available for a health facility.

The staged approach has enabled multiple contracts to move forward to build rural health facilities at the same time and manage them simultaneously as they cycle through the various stages. Although more labor-intensive for project management teams, as they have to process up to six tenders for one facility, each tender is smaller and easier to manage than a single large full-facility contract.

Local workers gain experience using internationally recognized standards and safety protocols, significantly improving their ability to operate in a high-compliance environment. Several workers have transitioned into acting foreman or team leaders, demonstrating clear career progression. In some cases, where their home life allows, they will remain with the company and take on lead roles in other provinces, transferring these skills PNG-wide.

Women have been hired in a variety of roles, including traffic control, quality testing, administration, environmental monitoring, and community liaison; and some skilled trades, including welding, carpentry, and electrical work, thereby increasing their economic independence. Beyond being recruited as laborers, women also benefit from construction by setting up local shops next to the site and engaging in the cash economy.

The staged approach is not without its trade-offs. For the contractors, while staged tendering allows for more frequent adjustments for exchange rate changes, which affects some materials costs, they have to manage the uncertainty on whether they will successfully tender for the next stage. However, the results speak for themselves: in an environment where it is common for infrastructure projects to stall, sometimes indefinitely, there are now health centers and hospitals where there were none, with construction completed within budget and meeting high standards.

It is possible to create a triple win. Local health facility construction shows that it is possible to build quality health facilities, generate support for PNG-based businesses, and promote local communities’ economic growth and individual empowerment.

Local job creation starts further upstream. To truly support the creation of jobs at the local level, the project needs to be structured in such a way that local employers can successfully tender.

Using local labor is a best buy. It helps contain costs and also brings local employment, with opportunities for skills development, including female empowerment.

Standards can remain high. High standards of efficiency, integrity and value for money on high quality construction projects can be achieved, even when local construction firms are involved.

^[1] Asian Development Bank. 2019. Line of Sight: How Improved Information, Transparency, and Accountability Would Promote the Adequate Resourcing of Health Facilities Across Papua New Guinea.