Procurement Challenges in ECA: E-Procurement

PROCUREMENT CHALLENGES IN EUROPE AND CENTRAL ASIA CLIENT COUNTRIES OF THE WORLD BANK 8th Regional Public Procurement Forum Tirana, Albania - May 22-25, 2012 Devesh C. Mishra , Regional Procurement Manager, ECA Part 1 of Presentation Knut Leipold, Senior Procurement Specialist, ECA Part 2 of Presentation 1 Procurement Challenges in ECA Part 1 of Presentation Why year 2011 was significant for procurement reform? Progress and challenges in public procurement reform Lessons from recent public procurement assessments Procurement reform in Albania Procurement issues in the Bank portfolio Important issues in e-Procurement Suggestions and way ahead Part 2 of Presentation E- Procurement challenges in ECA 2

Procurement Challenges in ECA Why year 2011 was significant for Procurement Reform? UNCITRAL MODEL LAW enacted from July 1, 2011 EU published a new draft paper in Dec 2011 Government Procurement Agreement revised in December 2011 Fourth High-Level Forum on Aid Effectiveness in Busan, Korea in November 2011 World Bank finalized new Guidelines on Procurement /Consultants effective January 2011 And, Albania introduced use of e-Procurement in Bank funded operation as a pilot in 2011 3 Procurement Challenges in ECA

Progress and challenges in public procurement reform Several countries introduced electronic means in the procurement system Several countries enacted new laws consistent with EC Directives Increased transparency in several countries which are Banks client countries 4 Procurement Challenges in ECA Progress and challenges in public procurement reform Pace of reform in EU Client Countries/South East Europe/Central Asia and other parts of ECA What happened to pilot on Use of Country System? Changing portfolio needs in EU client countries: How to help the client to help reform process? Procurement Capacity and Institution building in Central Asia Use of national procedures in EC client countries in Bank- financed operations. A belief that use of e-procurement will resolve transparency and integrity issues 5 Procurement Challenges in ECA Lessons from recent public procurement assessments Procurement assessment/reviews being done by the Bank based on needs and in consultation with other donors Few examples of recent engagement : Moldova/Kosovo/ Central Asia (Tajikistan and Kyrgyzstan, both in progress)/ Ukraine

6 Procurement Challenges in ECA Lessons from recent public procurement assessments Country I: In a decentralized set-up approval of contract by Public Procurement Agency is required. Potential conflict of responsibilities as PPA is also responsible for handling complaints. The process consumes most of the PPAs limited staff time and resources. Is central approval function a good use of PPA resources in a decentralized set-up? How to avoid conflict of interest situation? Several deficiencies in the law. Could this be handled through secondary legislations, guidance notes, standard bidding documents? OECD-DAC Benchmarking: Both self assessment and donor assessment E- Government procurement readiness assessment: Improving e-procurement through Institutional Development Grant 7 Procurement Challenges in ECA Lessons from recent public procurement assessments Country II: Government recognizes corruption as an issue with several high profile cases under investigation in the area procurement ( and implementation ) of civil works, transport, energy, health and land administration sectors Progress through establishment of a Procurement Code of Ethics, launch of an Internet website carrying full details of procurement Further work needed; (a)debarment process;(b)institute due diligence on bid reviews and scale up compliance review; and (c ) build capacity to prosecute high-profile fraud and corruption cases successfully 8

Procurement Challenges in ECA Lessons from recent public procurement assessments Country III 2001: Public procurement Law enacted based on open and transparent system 2004: Through amendments situation reversed 2008 to 2010: New PPL substantially in line with good practices and with input from donors Example of close collaboration between the government and donor Further work required on third party monitoring to improve transparency and integrity 9 Procurement Challenges in ECA Procurement Reform in Albania OECD-DAC-World Bank Baseline indicator carried out in 2006 by the World Bank . A paper entitled Strengthening Country Procurement Systems: Results and Opportunities in 4th High Level Forum in Busan listed Albania as one of the countries as good examples on procurement capacity development and referred to a 2010 procurement assessment( MAPS) that showed 8% improvement on Pillar I ( was already high) compared to 2006 BLI study by the World Bank Legislative Framework

4.0 Improvement of 81% On Pillar II, 25% on Pillar III 2.0 Improvement of 79% on Pillar IV( Transparency and Integrity) Integrity & Transparency 0.0 Positive Developments in transparency and integrity Institutional & Mngmt Capacity [Country Score] Maximum 10 Proc Operations & Markets Procurement Challenges in ECA Procurement Reform in Albania 2006 Country Fiduciary Assessment recommended:(a) improved access to information by introducing e-procurement; (b)publish all procurement notices and award results on PPA website; (c)public access to procurement information and social audit by interested stakeholders;(d)provide

specialized judges for procurement dispute and timely redress of complaint; (e) amend PPL to define fraudulent and corrupt practices; (f) closely monitor attempts to misuse PPA including cases of collusion; and (g) put a list of debarred companies on PPA website Progress achieved in above areas. Busan papers listed evidence of: (a) national ownership;(b) an approach where procurement integrated into wider government reform; and (c) adopting capacity development as a long term process and commitment. 11 Procurement Challenges in ECA Procurement issues in the Bank portfolio ( at project design and award stage) Project preparedness and role of procurement in project design Small vs large contracts: what could attract more qualified contractors and increase competition. Eligibility of Government- owned enterprises or institutions in Borrowers countries to participate Cases of misprocurement ( also due to collusive practices)

Conflict of Interest issues related to close relatives of staff of implementing agencies Issue of national debarment system and sanction system in the World Bank: debarment by appropriate judicial authority of the Borrower country 12 Procurement Challenges in ECA Procurement issues in the Bank portfolio( at implementation stage) New risk-based, integrated approach, merging procurement, financial management and disbursement teams into a larger and aligned team supported by civil engineers was developed. Effective supervision and implementation support needed Survey of national contractors, suppliers and consultants working in specific sectors to understand the underlying reasons for low participation in the bidding process( example Romania) Cases of abnormally bid prices and contract failures ( examples in ECA countries) Few instances of facilities constructed and not put to effective use. Service delivery and implementation is the key. 13 Procurement Challenges in ECA Important issues in e-Procurement Overestimation of the role of technology in e-Procurement resulting in wrong expectations and implementation approaches

Lack of resources and slow implementation of E-Procurement despite its strong potential for strengthening public procurement governance and efficiency Differences between EU Procurement Directives and World Bank Procurement Guidelines also in the area of eProcurement (in particular with regard to the use of electronic reverse auctions) 14 Procurement Challenges in ECA Suggestions and way ahead Solution to fundamental procurement reforms mostly lies outside the procurement. Give me a place to stand and a lever long enough and I will move the world Archimedes, 220 BC How to move the world of procurement reform and bring positive changes and impact ? 15 Procurement Challenges in ECA Suggestions and way ahead ( examples) Issues Solution Competition Budget Laws Capacity and Institution Building Civil Service Reform Complaint Handling

Judicial System Corruption Reform at political level 16 Procurement Challenges in ECA Suggestions and way ahead E- procurement: Not a technological solution: it is change in mind set at the highest levels in the government Engagement: In a constantly changing political environment, engage in dialogue and knowledge exchange with a hope that this will influence policy makers and make a positive impact in increasing transparency and integrity in public procurement and better use of public resources. (End of Part I) 17 E-Procurement Challenges in ECA (Part II) ECA Initiative Example Albania Challenges 18 ECA Initiative Country

Russia Belarus Website ns/index.html Moldova Ukraine FrontOffice/menu/uk/ e-T ... E-Tendering Advertizing Transactions

e-T e-RA e-C e-Q X X X X X X X X X Ru Ru Ru Ru Ru Ru Comments e-RA mandatory for agreed list of procured items by law PPL close to Russian PPL due to customs treaty between Russia, Belarus

and Kazakhstan. Based on the new PPL, e-RAs have to be used for certain goods, works and services, listed in a specific Order of the Ru Ru, En Council of Ministers # 1923 dated December 31, 2010. The list includes equipment, machinery, office devices, computers, transport, Ru construction works. Currently, there are only two entities accredited to conduct auctions: "National Center of Marketing and Pricing" ( and "Belarus universal Commodity Exchange" ( In accordance with the PPL, the advertizing of public procurement opportunities and contract awards is provided in the paper-based Public Procurement Bulletin on weekly basis. The website provides a link to the Public Procurement Bulletin in PDF format. X Advertizing mandatory by Law, access to the web-site upon registration Uk, is free of charge, 3 languages of interface, limited information in other Ru, En than Ukrainian language; draft amendment to the PPL on eprocurement in preparation X e-RA E-Reverse Auctions Lang. e-C ... E-Catalogues e-Q ... E-Quotations

19 ECA Initiative Country Website Advertizing Transactions e-T* X X Georgia X X Albania ault.aspx X X ot/intro.html X Armenia Azerbaijan Macedonia e-RA e-C e-Q X X Lang. Ar, En, Ru Comments

* under implementation Az, Eng PPL without e-Procurement, SPA submitted proposal to MoF for eProcurement implementation Ge, En Mandatory by law, e-T as initial phase prior to e-RA for all contracts Al, En Mandatory by law Mk, En e-auctions mandatory for all procurement since January 1, 2012 X Bos, Hr, Serb, En Information to be updated X X X

X Bosnia http://www.javnenabavke.go Kosovo lt.aspx?LID=2 X Al, Serb, En Advertizing mandatory by law Serbia lt.aspx X Serb, En More e-procurement functionality is under construction

X Cr, En Montenegro e-T ... E-Tendering e-RA E-Reverse Auctions e-C ... E-Catalogues e-Q ... E-Quotations 20 ECA Initiative Country Website Transactions Advertizing e-T e-RA Bulgaria X X X Romania X X X Croatia X X* Poland X X Turkey ault.aspx X X e-Q Lang. Bul X X Ro, En Advertizing mandatory by law X* X*

Hr, En * under preparation; En language for advertizing only X Pl, En Pl Pl Pl X* TR * Quotation is applied in the procurement of goods in a number of hospitals only Ru, Kazakh Phased implementation:: 1st phase is call for price offers (Request for Quotations); 2nd is Competitive Bidding, and 3rd phase is e-Reverse Auction; Competitive E-Bidding started the roll-out across all government procuring entities ; The E-Reverse Auction is planned by the end of 2012 E-procurement including e-reverse auction are included in the PPL in 2011. The Government is working on the procedures and methodology and keen to move e-procurement forward X

X Kyrgyz Rep. X KG, Ru Tajikistan X Tajik, Ru, En Uzbekistan X e-RA E-Reverse Auctions Comments X Kazakhstan

e-T ... E-Tendering X X e-C X Advertizing mandatory by law; e-T is optional by law Information to be updated after PEFA assessment e-C ... E-Catalogues e-Q ... E-Quotations 21 Pilot Example Albania NCB, Works (bridge), cost estimate USD 340,000 Standard Tender Documentation Legal validity of electronic document

Reference to validity of scanned documents Bid securing declaration No ceiling price International participation not restricted PIU user training and creating user account 14 tenders submitted 4 EOs participated in public opening BER template including copies from e-GP system

30% less than cost estimate 22 Challenges & Opportunities Governance & Efficiency but manage your expectations Procurement Innovation but manage the balance C Country Systems but manage the transition Slow Adoption manage incentives C Isolated Agenda manage reform

C IT Driven manage program 23 E-Procurement Challenges in ECA Government Leadership Change Management Program Management 24 E-Procurement Challenges in ECA E-Procurement E-Procurement If E-Procurement was just a SW application, Bill Gates would have included it as Microsoft standard. 25 THANK YOU! Q&A 26

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