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<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong><br />

<strong>in</strong> Emerg<strong>in</strong>g <strong>Market</strong> Countries<br />

MAY 2007<br />

This publication was produced for review by the United States Agency for International Development.<br />

It was prepared by Development Alternatives, Inc. under contract No. GEG-I-06-04-00001-00.


<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong><br />

<strong>Procurement</strong> <strong>in</strong> Emerg<strong>in</strong>g<br />

<strong>Market</strong> Countries<br />

BY JOSE LUIS C. SYQUIA<br />

The authors’ views expressed <strong>in</strong> this publication do not necessarily reflect the views of the United<br />

States Agency for International Development or the United States Government.<br />

Fiscal Reform and Economic Governance Project


<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

TABLE OF CONTENTS<br />

LIST OF TABLES ...............................................................................................................................II<br />

ACKNOWLEDGEMENTS .............................................................................................................. III<br />

LIST OF ACRONYMS ..................................................................................................................... IV<br />

EXECUTIVE SUMMARY .................................................................................................................V<br />

1 INTRODUCTION .......................................................................................................................1<br />

2 APPROACHING PUBLIC PROCUREMENT POLICY REFORMS IN THE<br />

CONTEXT OF DEVELOPING COUNTRIES ........................................................................1<br />

3 STEP ONE: ASSESS THE NATIONAL PUBLIC PROCUREMENT<br />

SYSTEM AND PRACTICES, DEVELOP THE STRATEGY AND PLAN<br />

THE APPROACH .......................................................................................................................2<br />

3.1 USING THE BASELINE INDICATORS SYSTEM (BIS) TO ASSESS NATIONAL PUBLIC<br />

PROCUREMENT SYSTEMS ........................................................................................................ 2<br />

3.2 DEVELOP A STRATEGY ........................................................................................................... 5<br />

4 STEP TWO: DEVELOP OR IMPROVE THE LEGAL FRAMEWORK.............................5<br />

4.1 IDENTIFY CHAMPIONS AND BUILD SUPPORT ......................................................................... 5<br />

4.2 DRAFTING THE REFORM MEASURES ...................................................................................... 6<br />

4.3 GUIDELINES FOR A GOOD OMNIBUS PROCUREMENT LAW .................................................... 7<br />

4.4 RESOURCES TO ASSIST WITH LEGAL DRAFTING .................................................................... 8<br />

4.5 E-PROCUREMENT.................................................................................................................... 9<br />

The notion of “electronic” means and the use of electronic communications <strong>in</strong><br />

the procurement process .............................................................................................10<br />

S<strong>in</strong>gle or Multiple <strong>Portal</strong>s and Private Sector-Provided <strong>Portal</strong>s.........................................11<br />

On-l<strong>in</strong>e Registry Requirement ..............................................................................................12<br />

The Use of Dynamic Bidd<strong>in</strong>g or “Reverse Auction”............................................................12<br />

5 STEP THREE: DEVELOP THE OVERSIGHT AND INSTITUTIONAL<br />

FRAMEWORK .........................................................................................................................13<br />

6 STEP FOUR: CAPACITY BUILDING ..................................................................................14<br />

6.1 DEVELOPING A PROCUREMENT TRAINING PROGRAM.......................................................... 15<br />

6.2 THE TRAINERS...................................................................................................................... 16<br />

6.3 THE PROFESSIONALIZATION PROGRAM ............................................................................... 17<br />

Improv<strong>in</strong>g Human Capital....................................................................................................17<br />

Improv<strong>in</strong>g Information Capital ............................................................................................18<br />

Creat<strong>in</strong>g a Climate for Positive Action ................................................................................18<br />

7 STEP FIVE: ASSESS THE IMPACT OF REFORMS AT BOTH THE<br />

CENTRAL AND LOCAL LEVELS ........................................................................................19<br />

8 CONCLUDING REMARKS ....................................................................................................24<br />

NOTES.................................................................................................................................................25<br />

Fiscal Reform and Economic Governance Project


<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

List of tables<br />

Table 1. L<strong>in</strong>k<strong>in</strong>g the BIS and APPI ...................................................................................................... 21<br />

Table 2: <strong>Procurement</strong> Reform Rat<strong>in</strong>g System ...................................................................................... 23<br />

Table 3. Illustrative <strong>Procurement</strong> Reform Timeframe.......................................................................... 24<br />

Fiscal Reform and Economic Governance Project<br />

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<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

Acknowledgements<br />

On April 9 t ,2007, USAID/EGAT and the Fiscal Reform and Economic Governance Project hosted a<br />

sem<strong>in</strong>ar <strong>in</strong> Wash<strong>in</strong>gton, DC where the author presented this study’s prelim<strong>in</strong>ary f<strong>in</strong>d<strong>in</strong>gs, followed by<br />

remarks from two dist<strong>in</strong>guished experts on procurement reform, Peter P. Pease and João Veiga Malta.<br />

The author would like to extend special thanks to Mr. Pease and Mr. Veiga-Malta, both of whom<br />

provided useful comments that helped <strong>in</strong> the f<strong>in</strong>alization of this paper. Thanks also go to those <strong>in</strong><br />

attendance on April 9 th who offered helpful comments and suggestions. Of course, none of them is to<br />

blame for any errors that may rema<strong>in</strong>.<br />

Steve Rozner and Mark Gallagher made f<strong>in</strong>al edits and formatt<strong>in</strong>g to the paper.<br />

Fiscal Reform and Economic Governance Project<br />

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<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

List of Acronyms<br />

APPI<br />

BIS<br />

CPI<br />

DAC<br />

DBM<br />

ERA<br />

GPPB<br />

IBRD<br />

IDA<br />

OECD<br />

PDR<br />

PhilGEPRS<br />

PrMO<br />

UNCITRAL<br />

WTO<br />

WTO GPA<br />

Agency <strong>Procurement</strong> Performance Indicators<br />

Basel<strong>in</strong>e Indicators System<br />

Compliance/Performance Indicators<br />

Development Assistance Committee of the OECD<br />

Department of Budget Management (Philipp<strong>in</strong>es)<br />

Electronic Reverse Auction<br />

Government <strong>Procurement</strong> Policy Board (Philipp<strong>in</strong>es)<br />

International Bank for Reconstruction and Development (World Bank)<br />

International Development Agency (World Bank)<br />

Organization of Economic Cooperation and Development<br />

People’s Democratic Republic (Laos)<br />

Philipp<strong>in</strong>e Government’s E-<strong>Procurement</strong> System<br />

<strong>Procurement</strong> Monitor<strong>in</strong>g Office (Lao PDR)<br />

United Nations Commission on International Trade Law<br />

World Trade Organization<br />

WTO’s Agreement on Government <strong>Procurement</strong><br />

Fiscal Reform and Economic Governance Project<br />

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Executive Summary<br />

Corruption <strong>in</strong> public procurement is just one of the many forms of corrupt practices that may occur <strong>in</strong><br />

the public sector. However, it is one of the most critical barriers to development, because it creates<br />

leakages <strong>in</strong> a government’s f<strong>in</strong>ancial and budgetary systems that directly lessen the impact of much<br />

needed health, education, <strong>in</strong>frastructure and other <strong>in</strong>vestment programs and projects. In addition to<br />

reduc<strong>in</strong>g the effectiveness of public services and dilut<strong>in</strong>g the benefits of growth, the natural<br />

uncerta<strong>in</strong>ty that is fostered by a state’s perceived lack of moral fiber can also negatively impact the<br />

<strong>in</strong>vestment climate.<br />

This study looks at the procurement reform process as compris<strong>in</strong>g five basic steps:<br />

Step 1: Assess<strong>in</strong>g the national public procurement system and practices, develop<strong>in</strong>g the strategy<br />

and plann<strong>in</strong>g the approach;<br />

Step 2: Develop<strong>in</strong>g or improv<strong>in</strong>g the legal framework;<br />

Step 3: Develop<strong>in</strong>g the oversight and <strong>in</strong>stitutional framework;<br />

Step 4: Build<strong>in</strong>g capacity; and<br />

Step 5: Assess<strong>in</strong>g the impact of reforms at both the central and local levels.<br />

These steps are roughly sequential but not strictly consecutive, and they are designed to ensure a<br />

proper fit between <strong>in</strong>ternational best practices and the develop<strong>in</strong>g country context. This entire process<br />

may take from four to six years to complete, and should be viewed not so much as a one-time event,<br />

but rather as a cont<strong>in</strong>uous cycle: Each step feeds <strong>in</strong>to the next, and as each cycle ends with an impact<br />

assessment, the results of that assessment similarly feed <strong>in</strong>to the next national public procurement<br />

assessment, identify<strong>in</strong>g gaps that have not been addressed, and <strong>in</strong>form<strong>in</strong>g a new strategy and approach<br />

to guide the next round of reforms.<br />

Step 1 <strong>in</strong>volves a macro-level assessment of the quality of a country’s procurement policies and<br />

<strong>in</strong>stitutional capacity through the Basel<strong>in</strong>e Indicators System (BIS), a framework that was <strong>in</strong>troduced<br />

by the <strong>Procurement</strong> Roundtable, a jo<strong>in</strong>t <strong>in</strong>itiative of the World Bank and the Organization for<br />

Economic Co-operation and Development’s Development Assistance Committee (OECD-DAC). The<br />

BIS evaluates a country’s legislative and regulatory framework, its <strong>in</strong>stitutional framework and<br />

management capacity, procurement operations and market practices, and the <strong>in</strong>tegrity of its public<br />

procurement system. In this way, the core elements of a well-function<strong>in</strong>g public procurement system<br />

are identified and then utilized as the measur<strong>in</strong>g stick to determ<strong>in</strong>e how well a country’s procurement<br />

framework <strong>in</strong>tegrates these elements, or how close it comes to established <strong>in</strong>ternational pr<strong>in</strong>ciples and<br />

practices. It should be noted that the overall objective of the assessment is formative <strong>in</strong> that it aims to<br />

improve the procurement policies, systems and practices of the government. Furthermore, the BIS<br />

should be regarded more as a self-assessment tool through which a government is able to rate itself <strong>in</strong><br />

light of <strong>in</strong>ternational standards and “good practices” and then determ<strong>in</strong>e the appropriate strategy to<br />

improve its procurement system and outcomes. The assessment is not a fiduciary tool through which<br />

external stakeholders—such as multilateral <strong>in</strong>stitutions or donors—can assess and draw conclusions<br />

about a country’s procurement system. This self-assessment approach <strong>in</strong>creases the likelihood that<br />

government will take ownership of the procurement reform and <strong>in</strong>creases the responsiveness of the<br />

reform agenda to the country’s social, political, cultural and economic context.<br />

After identify<strong>in</strong>g the gaps and weaknesses <strong>in</strong> a country’s public procurement system <strong>in</strong> Step 1, the<br />

next logical step (Step 2) is to draft the legal framework to address these problems. Depend<strong>in</strong>g on the<br />

political structure of the country and the state of the exist<strong>in</strong>g legal framework for public procurement,<br />

this activity may range from the issuance of executive orders or implement<strong>in</strong>g rules and regulations to<br />

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the actual legislation of an omnibus procurement reform law. For purposes of broader coverage, this<br />

paper focuses on the latter scenario. This is especially relevant when public procurement reform is<br />

<strong>in</strong>troduced under the auspices of a broader anti-corruption program, given the fact that <strong>in</strong>formal<br />

<strong>in</strong>stitutions are often strong when formal <strong>in</strong>stitutions are weak. However, it should be kept <strong>in</strong> m<strong>in</strong>d<br />

that a full-blown effort to advocate and enact an omnibus procurement reform law is generally a longterm<br />

process and could take years. Therefore, there may be a need for short-term measures to address<br />

more press<strong>in</strong>g procurement challenges while the law is be<strong>in</strong>g developed.<br />

Even <strong>in</strong> countries with highly centralized government and decision-mak<strong>in</strong>g processes, extensive<br />

efforts must go <strong>in</strong>to legitimiz<strong>in</strong>g policy reforms and secur<strong>in</strong>g broad-based support for policy or<br />

systemic reform. Policy champions at the highest levels of government need to be identified—key<br />

decision makers with sufficient credibility, political resources and the will<strong>in</strong>gness to risk political<br />

capital <strong>in</strong> support of the reforms. At the same time, garner<strong>in</strong>g support from a wider array of<br />

constituents both with<strong>in</strong> and outside the government is critical to ensur<strong>in</strong>g that the reforms are truly<br />

embraced and implemented. Clearly, then, legislat<strong>in</strong>g an omnibus public procurement law requires<br />

advocacy efforts that reach out to various groups and <strong>in</strong>dividuals throughout government, the private<br />

sector and civil society.<br />

In draft<strong>in</strong>g the legal framework, there is no “one-size-fits-all” model law that can be applied to every<br />

situation. In fact, reform<strong>in</strong>g public procurement should not beg<strong>in</strong> with draft<strong>in</strong>g the law, but rather with<br />

an analysis of the problems <strong>in</strong> the current legal framework that give rise to corruption and<br />

<strong>in</strong>efficiency. Generally speak<strong>in</strong>g, however, the legal framework for public procurement should<br />

provide for the follow<strong>in</strong>g:<br />

1. open and competitive bidd<strong>in</strong>g;<br />

2. mandatory publication of tenders and awards;<br />

3. clear and simple procedures for the various types of procurements;<br />

4. the m<strong>in</strong>imum content of tender documents;<br />

5. mechanisms and procedures for <strong>in</strong>dependent review and appeal of procurement decisions;<br />

6. an <strong>in</strong>dependent oversight body to monitor and regulate compliance with procurement laws;<br />

7. an <strong>in</strong>tegrated <strong>in</strong>formation system that gives buyers and sellers easy access to procurement<br />

plans, notices and awards, and procurement rules and regulations, at no or m<strong>in</strong>imum cost;<br />

8. clear procedures for manag<strong>in</strong>g and monitor<strong>in</strong>g awarded contracts, to ensure that contracts are<br />

performed strictly accord<strong>in</strong>g to specifications;<br />

9. development of a human resource strategy to ensure permanent tra<strong>in</strong><strong>in</strong>g and capacity build<strong>in</strong>g<br />

programs are <strong>in</strong> place; and<br />

10. penalties and crim<strong>in</strong>al sanctions for misconduct.<br />

Step 3 focuses on creat<strong>in</strong>g a central body that is impartial, transparent and effective. This body has to<br />

have moral ascendancy over the entire bureaucracy; otherwise, it may only be regarded as a<br />

superficial body that churns out policy with neither the field <strong>in</strong>formation to support its issuances nor<br />

the power and credibility to enforce it. The term “body” is used, because the powers and<br />

responsibilities that it carries obviously cannot be placed <strong>in</strong> the hands of a s<strong>in</strong>gle <strong>in</strong>dividual, but rather<br />

upon a group of persons represent<strong>in</strong>g both the public and private sectors, act<strong>in</strong>g by consensus. This<br />

would ensure that issues and matters are properly discussed and debated before they are transformed<br />

<strong>in</strong>to policies. It has to be an <strong>in</strong>ter-agency body with effective private sector representation so that both<br />

sides of the procurement contract are adequately represented <strong>in</strong> policy development, and undue<br />

external and political <strong>in</strong>fluences are avoided. Needless to say, if the oversight body takes the form of a<br />

board and is appropriately composed of high-rank<strong>in</strong>g government officers, these officers should not<br />

be expected to perform technical work. As such, there would also be a need for an office that would<br />

function as the secretariat and adm<strong>in</strong>istrative group of the oversight body that would be tasked to<br />

undertake the much needed research and technical work.<br />

Even if substantial efforts are undertaken dur<strong>in</strong>g the <strong>in</strong>itial advocacy stage to sell the reforms to, and<br />

consult with, both top-level and mid-level champions, if no equivalent amount of effort is taken to<br />

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<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

communicate these to the implementers <strong>in</strong> the field and tra<strong>in</strong> them on the new procedures, the overall<br />

effort may fail. For this reason, capacity build<strong>in</strong>g should not only be seen as tra<strong>in</strong><strong>in</strong>g, but also as a<br />

communication tool. In the latter sense, capacity build<strong>in</strong>g should push the advocacy efforts<br />

undertaken <strong>in</strong> Step 2 further, so that knowledge and ownership of the reforms are further cascaded<br />

from the central government and its l<strong>in</strong>e agencies, down to the various local government offices and<br />

agencies. Consider<strong>in</strong>g that the procurement practitioners <strong>in</strong> a procur<strong>in</strong>g agency are really the enablers<br />

of the procurement reforms, the overall impact of these reforms depends upon the level of<br />

professionalism present with<strong>in</strong> the respective agency. As such, capacity build<strong>in</strong>g should eventually<br />

lead to a fuller professionalization program for procurement officials <strong>in</strong> government, cover<strong>in</strong>g three<br />

major areas, namely:<br />

1. Human capital (skills development through short certificate courses);<br />

2. Information capital (e.g., accessible and comprehensive <strong>in</strong>formation systems); and<br />

3. A climate for positive action (which basically covers employee motivation and satisfaction).<br />

After evaluat<strong>in</strong>g the country’s procurement environment, develop<strong>in</strong>g a strategy to push for reforms,<br />

establish<strong>in</strong>g the legal and <strong>in</strong>stitutional frameworks, and then tra<strong>in</strong><strong>in</strong>g the enablers <strong>in</strong> the l<strong>in</strong>e agencies<br />

and local offices, the next step (Step 5) is to assess how effectively the strategy has been undertaken,<br />

how much of the reform agenda was actually implemented <strong>in</strong> the field, and the overall impact of the<br />

procurement reforms <strong>in</strong> the country. As the BIS is predom<strong>in</strong>antly based on macro <strong>in</strong>dicators, it is not<br />

<strong>in</strong>tended to measure performance and must be coupled with other management tools, like a<br />

performance measurement framework, to guide actions on what and where changes need to be made<br />

<strong>in</strong> a particular agency. Determ<strong>in</strong>ations as to whether better performance outcomes are achieved as a<br />

result of policy reforms need to be based on, among other th<strong>in</strong>gs, collection and analysis of actual<br />

performance data. Therefore, the Agency <strong>Procurement</strong> Performance Indicators (APPI), more recently<br />

referred to as the Compliance/Performance Indicators (CPI) by the OECD-DAC, complements the<br />

BIS, provid<strong>in</strong>g an effective tool for monitor<strong>in</strong>g and evaluat<strong>in</strong>g implementation at the agency or micro<br />

level. This tool would have to be l<strong>in</strong>ked to the elements of the national procurement system <strong>in</strong> order<br />

to demonstrate how such a system is actually cascaded down to the agency and local levels. To create<br />

such a l<strong>in</strong>kage between the national procurement system and the agency-level procurement system,<br />

one should consider take <strong>in</strong>to account:<br />

1. Whether the subject agency has a strategy for achiev<strong>in</strong>g an effective procurement program,<br />

and whether this strategy is <strong>in</strong> l<strong>in</strong>e with the national procurement reform policy;<br />

2. Whether the organizational structure and employee capacity of the subject agency supports a<br />

strategy that is <strong>in</strong> l<strong>in</strong>e with the national procurement reform policy;<br />

3. Whether the <strong>in</strong>ternal procurement processes of the subject agency support a strategy that is <strong>in</strong><br />

l<strong>in</strong>e with the national procurement reform policy and is <strong>in</strong> accord with its organizational<br />

setup; and<br />

4. Whether the subject agency is able to undertake its procurement <strong>in</strong> a transparent and<br />

accountable manner, supported by sufficient records and documentation.<br />

Based on the above f<strong>in</strong>d<strong>in</strong>gs, policy makers may then make further changes or ref<strong>in</strong>ements to the<br />

strategy for improv<strong>in</strong>g the public procurement regime, or use those f<strong>in</strong>d<strong>in</strong>gs to develop a new strategy<br />

to address unresolved needs, gaps and emerg<strong>in</strong>g issues.<br />

Fiscal Reform and Economic Governance Project<br />

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1 Introduction<br />

It is now widely accepted that corruption <strong>in</strong> public procurement systems impedes the ability of both<br />

government and foreign aid <strong>in</strong>stitutions to achieve susta<strong>in</strong>able development <strong>in</strong> a country. It is also<br />

generally recognized that corruption breeds <strong>in</strong> an environment characterized by poor governance and<br />

weak rule of law. In the Philipp<strong>in</strong>es, for example, the World Bank observed that poor long-term<br />

economic performance reflects flaws <strong>in</strong> public sector governance, and that these fail<strong>in</strong>gs are rooted <strong>in</strong><br />

weaknesses <strong>in</strong> the structure of public adm<strong>in</strong>istration and <strong>in</strong> features of the broader political economy<br />

with<strong>in</strong> which such structures function. i<br />

Corruption <strong>in</strong> public procurement is particularly debilitat<strong>in</strong>g because it creates leakages <strong>in</strong> a<br />

government’s f<strong>in</strong>ancial and budget systems that lessen the impact of much needed spend<strong>in</strong>g on health,<br />

education, <strong>in</strong>frastructure, agriculture and other programs. In addition to reduc<strong>in</strong>g the effectiveness of<br />

public service delivery, it may also negatively impact the <strong>in</strong>vestment climate. Grand scale corruption<br />

is often associated with major government projects and programs, because corrupt actors frequently<br />

transfer large f<strong>in</strong>ancial benefits to private firms through procurement contracts and the award of<br />

concessions. Furthermore, a share is always allotted to the corrupt official, so that <strong>in</strong> total, these cases<br />

have a stagger<strong>in</strong>g impact on the government’s budget and, <strong>in</strong> turn, the country’s growth prospects. ii<br />

A 1998 study on Philipp<strong>in</strong>e projects funded from congressional <strong>in</strong>itiatives provides a clear picture of<br />

the leakages created by corruption <strong>in</strong> public procurement, how the pie is divided up among the<br />

numerous actors, and how much rema<strong>in</strong>s for the benefit of society. iii For public works projects, the<br />

study estimated that, on average, 12 to 20 percent of the budgeted funds went to lawmakers, one to<br />

two percent went to Department of Budget and Management (DBM) personnel responsible for<br />

releas<strong>in</strong>g the funds, 10 percent went to the head of the implement<strong>in</strong>g agency. In addition, seven<br />

percent went to the mayor, and three percent went to the local community leader—leav<strong>in</strong>g roughly 63<br />

percent for project implementation. iv For procurement of medical supplies and educational materials,<br />

40 to 50 percent of budgeted funds went to lawmakers, one to two percent went to DBM personnel,<br />

and 10 percent went to the head of the implement<strong>in</strong>g agency—leav<strong>in</strong>g between 40 and 50 percent for<br />

the supplier. v<br />

Indeed, even conservative estimates <strong>in</strong> the Philipp<strong>in</strong>es suggest that as much as 20 percent of<br />

government funds budgeted for procurement is lost to corrupt practices. vi The situation <strong>in</strong> Vietnam is<br />

similar: last year, the State Audit<strong>in</strong>g Agency reported that the Vietnamese Government wasted VND<br />

4.5 trillion (US$281 million), nearly one percent of GDP <strong>in</strong> 2005, on <strong>in</strong>appropriate spend<strong>in</strong>g decisions<br />

and misconduct at various stages <strong>in</strong> the procurement cycle. vii<br />

While there are various other reasons to reform public procurement systems <strong>in</strong> develop<strong>in</strong>g countries<br />

(e.g., open<strong>in</strong>g domestic procurement to <strong>in</strong>ternational competition), approach<strong>in</strong>g procurement reform<br />

as an anti-corruption measure has not only proven to be practical, but also quite effective, because it<br />

forces policy makers to focus on <strong>in</strong>ternal issues, and not merely upon external pressures.<br />

2 Approach<strong>in</strong>g public procurement policy reforms <strong>in</strong> the context of develop<strong>in</strong>g countries<br />

Although develop<strong>in</strong>g countries have much to ga<strong>in</strong> from global approaches and “best practices”<br />

pr<strong>in</strong>ciples, experience has cont<strong>in</strong>uously shown that if policy or systemic reforms are to ga<strong>in</strong> any real<br />

foothold <strong>in</strong> a country beyond laws that exist only on paper, external and <strong>in</strong>ternal work<strong>in</strong>g<br />

environments must be given serious consideration. <strong>Public</strong> procurement reform is no exception to this<br />

rule. While the basic pr<strong>in</strong>ciples of transparency, competition, accountability, equity, efficiency,<br />

economy and effectiveness still hold <strong>in</strong> any country—develop<strong>in</strong>g or otherwise—the real challenge is<br />

<strong>in</strong> adapt<strong>in</strong>g these pr<strong>in</strong>ciples to local circumstances. Throughout the reform process, careful attention<br />

must be paid to the concerns of central decision makers, the demands on implement<strong>in</strong>g agencies,<br />

political uncerta<strong>in</strong>ties, changes <strong>in</strong> the focus and policies of government, and the concerns of the<br />

private sector, civil society, and the general public.<br />

Fiscal Reform and Economic Governance Project


<strong>Reform<strong>in</strong>g</strong> <strong>Public</strong> <strong>Procurement</strong> -- Syquia<br />

Foreign aid <strong>in</strong>stitutions that encourage legislative and <strong>in</strong>stitutional changes <strong>in</strong> develop<strong>in</strong>g countries<br />

may face obstacles <strong>in</strong> ga<strong>in</strong><strong>in</strong>g the confidence of the central government, and even greater difficulty <strong>in</strong><br />

garner<strong>in</strong>g support from local governments and their constituents. Or, they may encounter<br />

governments that readily pass reform laws and regulations, but then fail to implement them because<br />

there was never true local ownership of the reforms.<br />

In approach<strong>in</strong>g reform of public procurement policies, systems and practices, avoid<strong>in</strong>g these<br />

situations requires careful plann<strong>in</strong>g, sound advice and constant attention to the needs and <strong>in</strong>terests of<br />

various stakeholders at the national and local level, and of the private sector and civil society.<br />

This study looks at the procurement reform process as compris<strong>in</strong>g five basic steps:<br />

Step 1: Assess<strong>in</strong>g the national public procurement system and practices, develop<strong>in</strong>g the strategy<br />

and plann<strong>in</strong>g the approach<br />

Step 2: Develop<strong>in</strong>g or improv<strong>in</strong>g the legal framework<br />

Step 3: Develop<strong>in</strong>g the oversight and <strong>in</strong>stitutional framework<br />

Step 4: Conduct<strong>in</strong>g capacity build<strong>in</strong>g programs<br />

Step 5: Assess<strong>in</strong>g the impact of reforms at both the central and local levels<br />

These steps are roughly sequential but not strictly consecutive, and they are designed to ensure a<br />

proper fit between <strong>in</strong>ternational best practices and the develop<strong>in</strong>g country context. The entire process<br />

may take from four to six years to complete, and should be viewed not so much as a one-time event,<br />

but rather as a cont<strong>in</strong>uous cycle: Each step feeds <strong>in</strong>to the next, and as each cycle ends with an impact<br />

assessment, the results of that assessment similarly feed <strong>in</strong>to the next national public procurement<br />

assessment, identify<strong>in</strong>g gaps that have not been addressed, and <strong>in</strong>form<strong>in</strong>g a new strategy and approach<br />

to guide the next round of reforms.<br />

The follow<strong>in</strong>g sections are based on real case examples from the Philipp<strong>in</strong>es, Lao DPR, Vietnam and<br />

Ghana, as well as on a wide review of literature and <strong>in</strong>ternational documentation. These sections<br />

describe this procurement reform cycle <strong>in</strong> detail and provide <strong>in</strong>sight <strong>in</strong>to how these steps have been or<br />

could be implemented. The conclud<strong>in</strong>g section br<strong>in</strong>gs together the five-step process, discuss<strong>in</strong>g its<br />

implementation and timeframes.<br />

3 Step One: Assess the national public procurement system and practices, develop the<br />

strategy and plan the approach<br />

3.1 Us<strong>in</strong>g the Basel<strong>in</strong>e Indicators System (BIS) to assess national public procurement systems<br />

The Round Table on Strengthen<strong>in</strong>g <strong>Procurement</strong> Capacities <strong>in</strong> Develop<strong>in</strong>g Countries, a jo<strong>in</strong>t <strong>in</strong>itiative<br />

of the World Bank and of the Organization for Economic Co-operation and Development’s<br />

Development Assistance Group (OECD-DAC), recently <strong>in</strong>troduced the Basel<strong>in</strong>e Indicators System<br />

(BIS). The BIS measures the quality of a country’s procurement policies, systems and <strong>in</strong>stitutional<br />

capacity based on several core <strong>in</strong>dicators. viii In December 2004, representatives from develop<strong>in</strong>g<br />

countries, multilateral and bilateral development <strong>in</strong>stitutions and other participants <strong>in</strong> the Round Table<br />

signed the “Johannesburg Declaration,” which committed participants to adopt the BIS as the agreed<br />

<strong>in</strong>ternational standards for assessment of national procurement systems.<br />

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The BIS helps identify when an element of the national public procurement system meets or exceeds<br />

the basel<strong>in</strong>e and where it needs improvement or modification <strong>in</strong> order to meet the basel<strong>in</strong>e. It is<br />

<strong>in</strong>tended to help managers identify where to make changes <strong>in</strong> order to achieve better performance<br />

outcomes, and identify potential risk areas <strong>in</strong>herent <strong>in</strong> the exist<strong>in</strong>g system by identify<strong>in</strong>g variances<br />

from the basel<strong>in</strong>e. On July 17, 2006, OECD-DAC issued a User’s Guide (Version 4) for the BIS, now<br />

commonly known as the “BLI,” or “Basel<strong>in</strong>e Indicators”.<br />

The BIS divides the key areas of a national public procurement system thematically <strong>in</strong>to four “Pillars”<br />

compris<strong>in</strong>g twelve “Indicators.” Each Indicator, <strong>in</strong> turn, consists of several basel<strong>in</strong>es, or “Sub-<br />

Indicators,” that are considered desirable or “good practice” <strong>in</strong> public procurement. The BIS<br />

assessment, thus, takes the form of a checklist, organized as follows:<br />

Pillar I – Legislative and Regulatory Framework<br />

Indicator 1 –<br />

Indicator 2 –<br />

The public procurement legislative and regulatory framework achieves the<br />

agreed standards and complies with applicable obligations<br />

Existence of Implement<strong>in</strong>g Regulations and Documentation<br />

Pillar II – The Institutional Framework and Management Capacity<br />

Indicator 3 –<br />

Indicator 4 –<br />

Indicator 5 –<br />

<strong>Public</strong> <strong>Procurement</strong> legislative and regulatory framework achieves the agreed<br />

standards and complies with applicable obligations<br />

The country has a functional normative/regulatory body<br />

The country has <strong>in</strong>stitutional development capacity<br />

Pillar III – The <strong>Procurement</strong> Operations and <strong>Market</strong> Practices<br />

Indicator 6 –<br />

Indicator 7 –<br />

Indicator 8 –<br />

The country’s procurement operations and practices are efficient<br />

Functionality of the public procurement market<br />

Existence of contract adm<strong>in</strong>istration and dispute resolution provisions<br />

Pillar IV – The Integrity of the <strong>Public</strong> <strong>Procurement</strong> System<br />

Indicator 9 – The country has effective control and audit systems<br />

Indicator 10 – Efficiency of appeals mechanism<br />

Indicator 11 – Degree of access to <strong>in</strong>formation<br />

Indicator 12 – The country has ethics and anti-corruption measures <strong>in</strong> place<br />

The BIS Indicators are premised on the assumption that a good and effective procurement system has<br />

the follow<strong>in</strong>g components:<br />

1. A high-level, omnibus law that establishes the legal foundations for a transparent,<br />

competitive, efficient, economical, equitable, accountable and effective public<br />

procurement system, applicable to all public procur<strong>in</strong>g agencies, and which provides<br />

a s<strong>in</strong>gle official channel for all forms of procurement, whether for goods, services,<br />

civil works or consult<strong>in</strong>g services.<br />

2. Implement<strong>in</strong>g rules and regulations that provide clear guidance and <strong>in</strong>structions on<br />

implement<strong>in</strong>g the omnibus law.<br />

3. A generic procurement manual that serves as a guide for public officials engaged <strong>in</strong><br />

procurement operations, and a set of standard bidd<strong>in</strong>g and contract documents that<br />

provides formats for ready application.<br />

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4. Sufficient <strong>in</strong>tegration between the procurement system and the f<strong>in</strong>ancial management<br />

system so that economy and discipl<strong>in</strong>e is fostered, from plann<strong>in</strong>g and budget<br />

preparation, to procurement and treasury operations for payments – normally<br />

characterized by annual and project procurement plans, supported by reliable cost<br />

data and timetables.<br />

5. A high-level normative/regulatory body that is responsible for cont<strong>in</strong>uous policy<br />

formulation that monitors and evaluates the effectiveness of the reforms, and is<br />

supported by a technical group or office that is capable of undertak<strong>in</strong>g grounded<br />

research that, <strong>in</strong> turn, provides the <strong>in</strong>puts for the policies to be generated by the body.<br />

Although the OECD-DAC User’s Guide states that what matters most is not the<br />

existence of a body itself, but the existence of the functions with<strong>in</strong> the public sector,<br />

this paper emphasizes the need for a high-level body (preferably an <strong>in</strong>ter-agency<br />

board), because this would ensure a strong <strong>in</strong>stitutionalized champion to push reforms<br />

along and follow through <strong>in</strong> a consistent manner. (See Step 3)<br />

6. An <strong>in</strong>formation system through which statistics and data on procurement are readily<br />

available for monitor<strong>in</strong>g and evaluat<strong>in</strong>g performance and outcomes. For such a<br />

system to exist and function effectively, there has to be a strong l<strong>in</strong>k between the<br />

national normative/regulatory body and the procur<strong>in</strong>g agencies, so that data are<br />

rout<strong>in</strong>ely collected, filed, analyzed and fed back <strong>in</strong>to the system. This, <strong>in</strong> turn,<br />

requires a certa<strong>in</strong> level of transparency, reliable data, and effective data/records<br />

management with<strong>in</strong> each of the procur<strong>in</strong>g entities.<br />

7. A professionalization program that ensures three th<strong>in</strong>gs: (i) that government<br />

procurement officers and staff are adequately and cont<strong>in</strong>uously tra<strong>in</strong>ed on<br />

procurement matters; (ii) that they have ready access to relevant <strong>in</strong>formation, such as<br />

current prices and the latest applicable technical specifications, at least for regularly<br />

procured goods and services; and (iii) that a positive environment <strong>in</strong> government<br />

exists for the cont<strong>in</strong>uous development of motivated procurement officers and staff.<br />

8. A partnership between the public and private sector, where<strong>in</strong> the government is the<br />

buyer and the private sector is the supplier, and there is cont<strong>in</strong>uous dialogue between<br />

these parties so that the private sector can voice its concerns when faced with<br />

government practices that underm<strong>in</strong>e fair competition, and so that private sector<br />

<strong>in</strong>stitutions are well prepared and have easy access to the public procurement market.<br />

9. Strong policies and practices for contract adm<strong>in</strong>istration and dispute resolution,<br />

<strong>in</strong>clud<strong>in</strong>g <strong>in</strong>spection and acceptance procedures, quality control procedures, capacity<br />

to review and issue contract amendments <strong>in</strong> a timely manner, and an efficient and fair<br />

process for resolv<strong>in</strong>g disputes that arise dur<strong>in</strong>g the performance of the contract.<br />

10. Effective <strong>in</strong>ternal and external controls. Procur<strong>in</strong>g entities should have <strong>in</strong>ternal<br />

control and management procedures that provide the checks and balances necessary<br />

to ensure procurement transactions are conducted effectively and efficiently. The<br />

procur<strong>in</strong>g entity’s <strong>in</strong>ternal audit function can complement the work of external<br />

auditors so that audits look both at the <strong>in</strong>dividual procurement transactions, as well as<br />

the measures needed to ensure effective <strong>in</strong>ternal control.<br />

11. Strong ethics and anti-corruption measures that address issues of corruption, fraud,<br />

conflicts of <strong>in</strong>terest and unethical behavior, so that all actors with<strong>in</strong> the system are<br />

held accountable for their actions and, when appropriate, penalized accord<strong>in</strong>gly.<br />

These measures should apply to all stakeholders <strong>in</strong> the system.<br />

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12. An e-procurement system that complements the reform process by enhanc<strong>in</strong>g<br />

transparency, accountability, data management and efficiency of the public<br />

procurement process.<br />

Through the BIS, the core elements of a well-function<strong>in</strong>g public procurement system are identified<br />

and then utilized as the measur<strong>in</strong>g stick to determ<strong>in</strong>e how well a country meets these elements. The<br />

BIS captures a snapshot of the current state of a country’s procurement system, serves as the basis for<br />

dialogue between the government and its development partners. The BIS should be conducted not<br />

only at the m<strong>in</strong>isterial level, but also with the technical staff of key procur<strong>in</strong>g agencies, local<br />

governments or offices, the private sector and, to the extent possible, with civil society. All of these<br />

actors will be critical stakeholders <strong>in</strong> Step 2 below.<br />

3.2 Develop a Strategy<br />

Based on the BIS assessment, the government can then identify priorities and establish a strategy for<br />

improvement or broader procurement reform. The BIS is not, however, <strong>in</strong>tended to be used as a<br />

fiduciary tool by external stakeholders—such as a donor <strong>in</strong>stitutions—to draw conclusions about a<br />

country’s procurement system, or to evaluate the impact of donor assistance programs. This<br />

dist<strong>in</strong>ction is important: The BIS assessment, whether done <strong>in</strong>dependently by the government or with<br />

assistance from aid <strong>in</strong>stitutions, should be driven by local stakeholders and should engage those<br />

<strong>in</strong>volved <strong>in</strong> the actual implementation of the projects or programs be<strong>in</strong>g evaluated. Us<strong>in</strong>g the BIS as a<br />

self-assessment tool helps ensure ownership on the part of the government and other local<br />

stakeholders.<br />

If the BIS is be<strong>in</strong>g applied for the first time <strong>in</strong> a country, its implementers need to be aware of exist<strong>in</strong>g<br />

procurement reform strategies and activities. If the BIS has been used previously <strong>in</strong> the country, a<br />

subsequent application would evaluate how well the country has performed aga<strong>in</strong>st the objectives set<br />

follow<strong>in</strong>g the previous assessment, and then establish new targets or priorities to fill any gaps and<br />

advance the reforms. For example, if a government has been focus<strong>in</strong>g on enact<strong>in</strong>g an omnibus<br />

procurement reform law for the last three years, and has succeeded <strong>in</strong> do<strong>in</strong>g so only recently, a BIS<br />

assessment would help shift the reform focus from advocacy and legislation to rollout of the reforms<br />

and capacity build<strong>in</strong>g.<br />

4 Step Two: Develop or improve the legal framework<br />

After analyz<strong>in</strong>g the gaps and weaknesses <strong>in</strong> a country’s public procurement system, the next step is to<br />

draft or improve the legal framework to address these problems. Depend<strong>in</strong>g on the political structure<br />

of the country and the state of the exist<strong>in</strong>g legal framework for public procurement, this activity may<br />

range from the issuance of executive orders or implement<strong>in</strong>g rules and regulations to the actual<br />

legislation of an omnibus procurement reform law. For purposes of broader coverage, this paper will<br />

focus on the latter scenario. This is especially relevant when public procurement reform is <strong>in</strong>troduced<br />

under the auspices of a broader anti-corruption program, given the fact that <strong>in</strong>formal <strong>in</strong>stitutions are<br />

often strong when formal <strong>in</strong>stitutions are weak. However, it should be kept <strong>in</strong> m<strong>in</strong>d that a full-blown<br />

effort to advocate and enact an omnibus procurement reform law is generally a long-term process and<br />

could take years. Therefore, there may be a need for short-term measures to address more press<strong>in</strong>g<br />

procurement challenges while the law is be<strong>in</strong>g developed.<br />

4.1 Identify Champions and Build Support<br />

Even <strong>in</strong> countries with highly centralized government and decision-mak<strong>in</strong>g processes, extensive<br />

efforts must go <strong>in</strong>to legitimiz<strong>in</strong>g policy reforms and secur<strong>in</strong>g broad-based support for policy or<br />

systemic reform. Policy champions at the highest levels of government need to be identified—key<br />

decision makers with sufficient credibility, political resources and the will<strong>in</strong>gness to risk political<br />

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capital <strong>in</strong> support of the reforms. At the same time, garner<strong>in</strong>g support from a wider array of<br />

constituents both with<strong>in</strong> and outside the government is critical to ensur<strong>in</strong>g that the reforms are truly<br />

embraced and implemented. Clearly, then, legislat<strong>in</strong>g an omnibus public procurement law requires<br />

advocacy efforts that reach out to various groups and <strong>in</strong>dividuals throughout government, the private<br />

sector and civil society.<br />

Furthermore, while politicians and external <strong>in</strong>terest groups may play a lead role <strong>in</strong> <strong>in</strong>itiat<strong>in</strong>g change,<br />

those most actively <strong>in</strong>volved <strong>in</strong> the formulation of the policy changes tend to be technocrats who<br />

generally operate under a different decisional calculus than that of either the political or the<br />

adm<strong>in</strong>istrative leadership. Identify<strong>in</strong>g and work<strong>in</strong>g with these technocrats is critical to effective<br />

implementation of the reforms, because: they are usually not elected but are members of a civil<br />

service ; they tend to rema<strong>in</strong> <strong>in</strong> their respective agencies long after politically appo<strong>in</strong>ted or elected<br />

leaders move on; and they may be more concerned with technical solutions and maximiz<strong>in</strong>g outputs<br />

than with political trade-offs. This means that policy advocates have to seek out champions<br />

horizontally by cutt<strong>in</strong>g across various sectors of society, and vertically by work<strong>in</strong>g with politicians<br />

and technocrats at both central and local levels of government. Br<strong>in</strong>kerhoff and Crosby (2002)<br />

provide ample guidance for consult<strong>in</strong>g with stakeholders and build<strong>in</strong>g support for important policy<br />

and <strong>in</strong>stitutional reforms. ix<br />

Whichever participation mechanisms are used, the policy reformers should be guided by the f<strong>in</strong>d<strong>in</strong>gs,<br />

recommendations and strategy of the BIS assessment. While any gather<strong>in</strong>g of various stakeholder and<br />

<strong>in</strong>terest groups has the potential of galvaniz<strong>in</strong>g new ideas and approaches, it can easily turn <strong>in</strong>to an<br />

amalgamation of fragmented and conflict<strong>in</strong>g recommendations and <strong>in</strong>itiatives if these are not limited<br />

to key discussion areas and guided by a common objective. This is the purpose of the BIS assessment<br />

exercise, as it provides hard evidence of the weaknesses and gaps that need to be addressed, and a set<br />

of recommendations based on these f<strong>in</strong>d<strong>in</strong>gs.<br />

4.2 Draft<strong>in</strong>g the Reform Measures<br />

The person or group tasked with draft<strong>in</strong>g the reform measures has the difficult task of consider<strong>in</strong>g the<br />

ideas gathered from all the workshops, consultations and technical discussions and—guided by the<br />

orig<strong>in</strong>al strategy, action plan and <strong>in</strong>ternational best practices—develop<strong>in</strong>g the appropriate provisions<br />

that would serve as the legal framework for the reforms.<br />

In develop<strong>in</strong>g the legal framework, there is no “one-size-fits-all,” model law that can be applied to<br />

every situation. (This approach would run counter to the idea of consultative and ownership-build<strong>in</strong>g<br />

efforts discussed above.) In fact, reform<strong>in</strong>g public procurement should not beg<strong>in</strong> with draft<strong>in</strong>g the<br />

law, but rather with an analysis of the problems <strong>in</strong> the current legal framework that give rise to<br />

corruption and <strong>in</strong>efficiency. In address<strong>in</strong>g these problems, there are both procedural issues and<br />

human capital issues.<br />

The human capital issues are discussed <strong>in</strong> depth under Step 4 (“Capacity Build<strong>in</strong>g”).<br />

Address<strong>in</strong>g the procedural issues requires changes <strong>in</strong> procurement laws, rules, regulations and<br />

processes that reduce operational <strong>in</strong>efficiencies and lessen opportunities for corruption. For example,<br />

East Asian countries such as the Philipp<strong>in</strong>es, Vietnam and Lao PDR have had common loopholes <strong>in</strong><br />

procurement procedures that were subject to abuse and which are addressed through recent legislative<br />

enactments. These <strong>in</strong>cluded:<br />

1. Overlapp<strong>in</strong>g regulations and multiple laws govern<strong>in</strong>g public procurement and<br />

contract performance, result<strong>in</strong>g <strong>in</strong> confusion <strong>in</strong> the application of these laws;<br />

2. Excessive discretion or lack of formalities either <strong>in</strong> the selection of the w<strong>in</strong>n<strong>in</strong>g<br />

bidder or the choice of procurement method;<br />

3. The allowance of unnecessary delays;<br />

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4. Inadequate competition, creat<strong>in</strong>g opportunities for collusion;<br />

5. Lack of transparency; and<br />

6. Inadequate procurement audit and control.<br />

In Vietnam, the decision to develop a new omnibus procurement law was seen as an important step<br />

toward elim<strong>in</strong>at<strong>in</strong>g this legal confusion. x The justification for reform<strong>in</strong>g the legal framework was<br />

similar <strong>in</strong> the Philipp<strong>in</strong>es. xi<br />

4.3 Guidel<strong>in</strong>es for a Good Omnibus <strong>Procurement</strong> Law<br />

An omnibus public procurement law should be enacted by the highest law-mak<strong>in</strong>g body of the State,<br />

such as its National Assembly or Congress, and should be supported by implement<strong>in</strong>g regulations<br />

issued at the appropriate level. Some of the more important elements of an omnibus law are that it:<br />

1. Provides for open, competitive bidd<strong>in</strong>g as the preferred mode of procurement;<br />

2. Requires publication of bid opportunities and awards <strong>in</strong> media that are easily and<br />

nationally accessible;<br />

3. Provides appropriate procedures for special types of procurements and situations,<br />

such as highly specialized or technical projects;<br />

4. Provides for the m<strong>in</strong>imum content of the tender documents, requires that the content<br />

be relevant and sufficient for bidders to be able to respond to the requirement, and<br />

requires the development of standard bidd<strong>in</strong>g documents and a procurement manual;<br />

5. Provides participants with the right to have decisions <strong>in</strong> a procurement process<br />

reviewed, has provisions to respond to a request for review at the procur<strong>in</strong>g entity<br />

level, with adm<strong>in</strong>istrative review by another body <strong>in</strong>dependent from the procur<strong>in</strong>g<br />

entity that has the authority to grant remedies, <strong>in</strong>clud<strong>in</strong>g the right for judicial review;<br />

6. Institutes a regular plann<strong>in</strong>g exercise that starts with the preparation of multiyear<br />

plans for government agencies, from which annual operat<strong>in</strong>g plans are derived,<br />

followed by annual procurement plans and estimation of the associated expenditures,<br />

and culm<strong>in</strong>ates <strong>in</strong> the annual budget formulation;<br />

7. Establishes a normative, regulatory or oversight body at an adequate level <strong>in</strong><br />

government and secures it <strong>in</strong> terms of f<strong>in</strong>anc<strong>in</strong>g, or at least provides functions that are<br />

clearly assigned to various units with<strong>in</strong> the government, without gaps or overlaps;<br />

8. Establishes an <strong>in</strong>tegrated <strong>in</strong>formation system that provides, at a m<strong>in</strong>imum, up-to-date<br />

<strong>in</strong>formation on procurement plans, specific advertisements or notices of procurement<br />

opportunities, publication of contract awards, and rules/regulations on procurement,<br />

and is easily accessible to all <strong>in</strong>terested parties at no or m<strong>in</strong>imum cost – supported by<br />

a requirement for agencies to create sufficient records management systems;<br />

9. Provides for public monitor<strong>in</strong>g of the procurement process and the implementation of<br />

awarded contracts, guarantee<strong>in</strong>g that these contracts are awarded pursuant to the<br />

provisions of the law, and that they are performed strictly accord<strong>in</strong>g to specifications;<br />

10. Requires the development of a tra<strong>in</strong><strong>in</strong>g and capacity build<strong>in</strong>g strategy that provides<br />

substantive permanent tra<strong>in</strong><strong>in</strong>g programs for the needs of the procurement system;<br />

11. Has clearly def<strong>in</strong>ed procedures for contract adm<strong>in</strong>istration responsibilities, <strong>in</strong>clud<strong>in</strong>g<br />

<strong>in</strong>spection and acceptance procedures, quality control procedures, and procedures for<br />

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review<strong>in</strong>g and issu<strong>in</strong>g contract amendments <strong>in</strong> a timely manner, and provides for<br />

dispute settlement; and<br />

12. Has measures that promote <strong>in</strong>tegrity and accountability with<strong>in</strong> the procurement<br />

system, such as blacklist<strong>in</strong>g, adm<strong>in</strong>istrative penalties, and even crim<strong>in</strong>al sanctions.<br />

4.4 Resources to Assist with Legal Draft<strong>in</strong>g<br />

Drafters are encouraged to make reference to several documents, all publicly available, that provide<br />

guidance on <strong>in</strong>ternational best practices <strong>in</strong> public procurement law. These documents <strong>in</strong>clude:<br />

1. The United Nations Commission on International Trade Law (UNCITRAL) Model<br />

Law on <strong>Procurement</strong> of Goods, Construction and Services (the “UNCITRAL Model<br />

Law on <strong>Procurement</strong>”), adopted by the UNCITRAL at its twenty-sixth session <strong>in</strong><br />

Vienna, July 5 to 23, 1993;<br />

2. The World Trade Organization (WTO) Agreement on Government <strong>Procurement</strong> (the<br />

“WTO GPA”), which is a multilateral agreement that took effect on January 1, 1996;<br />

and<br />

3. The World Bank Guidel<strong>in</strong>es on <strong>Procurement</strong> under IBRD Loans and IDA Credits<br />

(May 2004) and on Selection and Employment of Consultants by World Bank<br />

Borrowers (May 2004) (the “World Bank <strong>Procurement</strong> Guidel<strong>in</strong>es”).<br />

Together, these provide for the follow<strong>in</strong>g general pr<strong>in</strong>ciples of public procurement that may be<br />

<strong>in</strong>corporated <strong>in</strong> draft<strong>in</strong>g a country’s omnibus procurement law:<br />

1. Transparency <strong>in</strong> the procurement process and <strong>in</strong> the implementation of procurement<br />

contracts;<br />

2. Competitiveness by extend<strong>in</strong>g equal opportunity to enable private contract<strong>in</strong>g parties<br />

who are eligible and qualified to participate <strong>in</strong> public bidd<strong>in</strong>g, complemented by a fair<br />

and equitable treatment of all suppliers and contractors;<br />

3. A maximization of economy and efficiency <strong>in</strong> public procurement, supported by a<br />

streaml<strong>in</strong>ed procurement process that will uniformly apply to all government<br />

procurement;<br />

4. Adaptability to advances <strong>in</strong> modern technology <strong>in</strong> order to ensure an effective and<br />

efficient method; and<br />

5. Mechanisms for ensur<strong>in</strong>g <strong>in</strong>tegrity and accountability with<strong>in</strong> the public procurement<br />

system, thus foster<strong>in</strong>g public confidence <strong>in</strong> the system.<br />

The UNCITRAL Model Law on <strong>Procurement</strong> <strong>in</strong> particular has <strong>in</strong>fluenced legislation <strong>in</strong> a large<br />

number of jurisdictions, and its use has contributed to <strong>in</strong>creas<strong>in</strong>g harmonization of procurement rules<br />

and procedures worldwide. However, these documents all have their shortcom<strong>in</strong>gs as well.<br />

The UNCITRAL law, for example, focuses narrowly on review procedures, and does not address<br />

contract performance and implementation issues, such as contract adm<strong>in</strong>istration, resolution of<br />

performance disputes or contract term<strong>in</strong>ation. xii<br />

The World Bank <strong>Procurement</strong> Guidel<strong>in</strong>es provide excellent guidance on public bidd<strong>in</strong>g and<br />

evaluation procedures, alternative methods of procurement, and <strong>in</strong>ternational best practices <strong>in</strong> public<br />

and private procurement. However, these are still crafted <strong>in</strong> light of World Bank’s own <strong>in</strong>stitutional<br />

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and operational policies for the use of its loans and for supervis<strong>in</strong>g the execution of projects it helps to<br />

f<strong>in</strong>ance. They provide no special focus on such matters as:<br />

1. A national regulatory and oversight body;<br />

2. Institutional frameworks and budget l<strong>in</strong>kages;<br />

3. <strong>Procurement</strong> organizational structures with<strong>in</strong> implement<strong>in</strong>g agencies;<br />

4. Adm<strong>in</strong>istrative and/or judicial review by the State;<br />

5. Adm<strong>in</strong>istrative, civil and/or crim<strong>in</strong>al sanctions; and<br />

6. A professionalization program.<br />

The WTO GPA’sstructure is similar to an <strong>in</strong>ternational treaty that aims to establish an agreed<br />

framework of rights and obligations among its parties with respect to their national laws, regulations,<br />

procedures and practices <strong>in</strong> the area of government procurement. However, it is also basically a trade<br />

<strong>in</strong>strument that aims to promote fair competition <strong>in</strong> domestic procurement and prevent undue<br />

protection of domestic products or suppliers or discrim<strong>in</strong>ation aga<strong>in</strong>st foreign products or suppliers.<br />

In addition to consult<strong>in</strong>g the above documents, it is advisable for drafters to review the omnibus laws<br />

of other countries, such as Ghana’s <strong>Public</strong> <strong>Procurement</strong> Act (2003) and Lao PDR’s Decree of the<br />

Prime M<strong>in</strong>ister on Government <strong>Procurement</strong> of Goods, Construction, Ma<strong>in</strong>tenance and Service<br />

(2004).<br />

4.5 E-procurement<br />

Electronic procurement (e-procurement) is becom<strong>in</strong>g <strong>in</strong>creas<strong>in</strong>gly relevant <strong>in</strong> the design of public<br />

procurement reforms. In Ghana, for example, the <strong>Public</strong> <strong>Procurement</strong> Board has a website that<br />

features a compilation of procurement regulations and commentaries (<strong>in</strong>clud<strong>in</strong>g the new public<br />

procurement law), frequently asked questions, and a tender board list<strong>in</strong>g all government tenders,<br />

offers and awards. The Philipp<strong>in</strong>e Government’s E-<strong>Procurement</strong> System (PhilGEPS), meanwhile,<br />

features an <strong>in</strong>ternet-based public tender board, a database of registered suppliers, and an electronic<br />

catalogue for purchase of common use goods and supplies.<br />

The Multilateral Development Banks’ Electronic Government <strong>Procurement</strong> <strong>Portal</strong> at http://www.mdbegp.org/ui/english/pages/toolKit_std.aspx<br />

provides several documents <strong>in</strong>tended to help governments<br />

develop the <strong>in</strong>stitutional foundations for e-government procurement (e-GP), diagnose the exist<strong>in</strong>g<br />

procurement environment, articulate a strategic plan, select the right standards, and develop a<br />

roadmap for the implementation of e-GP.<br />

UNCITRAL recently observed that two ma<strong>in</strong> technological developments <strong>in</strong> the last ten years have<br />

changed the manner <strong>in</strong> which procurement is conducted. First, the use of electronic means of<br />

communication has become widespread. Second, many governments have begun to manage certa<strong>in</strong><br />

parts of the procurement process electronically. xiii For this reason, at its 37th session <strong>in</strong> 2004,<br />

UNCITRAL tasked the Work<strong>in</strong>g Group on the revision of its Model Law on <strong>Procurement</strong> with<br />

consider<strong>in</strong>g issues aris<strong>in</strong>g from the <strong>in</strong>creas<strong>in</strong>g use of electronic communications and technologies <strong>in</strong><br />

public procurement, <strong>in</strong>clud<strong>in</strong>g the use of <strong>in</strong>ternet-based procurement methods. xiv At that session, the<br />

Work<strong>in</strong>g Group noted that the use of e-procurement offered many potential benefits, <strong>in</strong>clud<strong>in</strong>g<br />

improved value for money and enhanced transparency <strong>in</strong> the procurement process, and that these were<br />

consistent with the ma<strong>in</strong> aims and objectives of the Model Law. The Work<strong>in</strong>g Group further<br />

identified key pr<strong>in</strong>ciples that should form part of the basis for accommodat<strong>in</strong>g the use of electronic<br />

communications and technologies <strong>in</strong> the Model Law on <strong>Procurement</strong>. These <strong>in</strong>clude the follow<strong>in</strong>g:<br />

1. The model law should encourage the use of electronic communications and<br />

technologies <strong>in</strong> public procurement;<br />

2. It should make appropriate provisions for that purpose <strong>in</strong> a technologically neutral<br />

manner; and<br />

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3. Any advice to be provided should cover all means of communication and offer<br />

guidance on the controls that are needed for their use.<br />

Introduc<strong>in</strong>g e-procurement <strong>in</strong> government should not be a goal <strong>in</strong> itself, but should be seen as a tool to<br />

achieve the objective of efficient and effective procurement. E-procurement should be seen as part of<br />

a larger reform package that addresses the legal and <strong>in</strong>stitutional framework, as well as the processes<br />

and procedures that will reduce operational <strong>in</strong>efficiencies and lessen opportunities for corruption <strong>in</strong><br />

public procurement.<br />

The follow<strong>in</strong>g sections address some of the critical issues that may have to be faced when develop<strong>in</strong>g<br />

an e-procurement program. The discussion relies heavily on the experience of the Philipp<strong>in</strong>es<br />

PhilGEPS project and the work of the UNCITRAL Work<strong>in</strong>g Group on <strong>Procurement</strong>.<br />

The notion of “electronic” means and the use of electronic communications <strong>in</strong> the procurement<br />

process<br />

In view of the procedural nature of public procurement, laws, rules, regulations and bidd<strong>in</strong>g<br />

<strong>in</strong>structions should <strong>in</strong>dicate clearly the manner <strong>in</strong> which documents are to be submitted and the form<br />

that they should take. To avoid confusion or uncerta<strong>in</strong>ty, the legal framework should <strong>in</strong>clude<br />

def<strong>in</strong>itions and explanations of certa<strong>in</strong> terms that are l<strong>in</strong>ked to advances <strong>in</strong> technology. For example,<br />

the UNCITRAL Secretariat has noted the importance of clearly def<strong>in</strong><strong>in</strong>g the word “electronic” <strong>in</strong><br />

connection with the form of communications provided <strong>in</strong> the law. The term commonly refers to any<br />

<strong>in</strong>formation that is not conta<strong>in</strong>ed <strong>in</strong> a tangible medium, such as electrical impulses, but may not<br />

necessarily cover such recent “electronic” techniques as data imag<strong>in</strong>g, which relies on optical storage.<br />

UNCITRAL, therefore, recommended the use of a general def<strong>in</strong>ition of “electronic,” which could be<br />

used to qualify both the medium used to store the <strong>in</strong>formation (for <strong>in</strong>stance, “electronic document”)<br />

and the means for transmitt<strong>in</strong>g the <strong>in</strong>formation (for <strong>in</strong>stance, “publication by electronic means”).<br />

With respect to the use of electronic communications <strong>in</strong> the procurement process, the UNCITRAL<br />

Work<strong>in</strong>g Group on <strong>Procurement</strong> noted that the ma<strong>in</strong> policy issues <strong>in</strong>cluded the follow<strong>in</strong>g:<br />

1. Whether the law should permit or require procur<strong>in</strong>g entities to use electronic<br />

communications by consent with suppliers or authorize either party to require<br />

electronic communications; and<br />

2. Whether those rules should attach conditions to the use of electronic means to<br />

safeguard the objectives of the procurement law, so as to prevent the electronic means<br />

chosen from operat<strong>in</strong>g as a barrier to access, to secure confidentiality, to ensure<br />

authenticity and security of transactions and the <strong>in</strong>tegrity of data. xv<br />

Accord<strong>in</strong>g to the UNCITRAL Work<strong>in</strong>g Group, as regards the extent to which electronic<br />

communications (<strong>in</strong>clud<strong>in</strong>g the electronic submission of tenders) could be required or made<br />

mandatory, it is more desirable to approach the issue <strong>in</strong> a flexible manner. On the other hand, as<br />

regards the procur<strong>in</strong>g entity’s right to require electronic communications, it was generally felt that it<br />

would be unwise to craft a rule that contemplated that possibility for all cases and circumstances.<br />

After all, impos<strong>in</strong>g such a requirement might <strong>in</strong>advertently prevent suppliers with limited or no<br />

<strong>in</strong>ternet connectivity from participat<strong>in</strong>g <strong>in</strong> public tenders. This consideration is particularly relevant <strong>in</strong><br />

the case of develop<strong>in</strong>g countries, where connectivity rates are generally not very high. For <strong>in</strong>stance,<br />

the 2003 CPAR for the Philipp<strong>in</strong>es made the follow<strong>in</strong>g observations with respect to the e-procurement<br />

program:<br />

While the system has great potential for improv<strong>in</strong>g the transparency and<br />

efficiency of procurement, the [Government of the Philipp<strong>in</strong>es] had noted the<br />

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implementation challenges early and is tak<strong>in</strong>g steps to address them. For<br />

example, even with high <strong>in</strong>terest and support for the [E-<strong>Procurement</strong> System], its<br />

<strong>in</strong>itial implementation was relatively slow. The reasons were numerous –<br />

agencies did not have the same resources or capacity for support<strong>in</strong>g the EPS,<br />

only about 25 percent of agencies tra<strong>in</strong>ed <strong>in</strong> the EPS were ready for <strong>in</strong>ternet<br />

access, only about 8 percent of Filip<strong>in</strong>os were us<strong>in</strong>g the Internet <strong>in</strong> 1999, there<br />

was resistance to change from employees who thought the EPS would lead to a<br />

loss of jobs… xvi<br />

The UNCITRAL Work<strong>in</strong>g Group also observed that <strong>in</strong> practice there might be situations <strong>in</strong> which<br />

electronic communications did not function properly, for <strong>in</strong>stance, because of limitations <strong>in</strong> the<br />

capacity of the systems used, such as <strong>in</strong>sufficient bandwidth for the transmission of large electronic<br />

files, technical failure or other external circumstances such as a power cut or a natural disaster. The<br />

Work<strong>in</strong>g Group concluded, therefore, that the mandatory use of electronic communications should not<br />

be imposed as a general requirement. xvii<br />

S<strong>in</strong>gle or Multiple <strong>Portal</strong>s and Private Sector-Provided <strong>Portal</strong>s<br />

In the Philipp<strong>in</strong>es, an issue arose regard<strong>in</strong>g the authority of the various agencies of government to<br />

develop their own e-bidd<strong>in</strong>g systems or outsource on-l<strong>in</strong>e bidd<strong>in</strong>g to commercial e-procurement<br />

service providers. In short, although private sector participation <strong>in</strong> the development of a government<br />

e-procurement system has never been a matter of debate, the government had to resolve one basic<br />

issue: Whether or not it should have a s<strong>in</strong>gle and centralized electronic portal for all its procurement<br />

activities.<br />

While this issue rema<strong>in</strong>ed unresolved, several commercial providers took the opportunity to offer<br />

their facilities to the various agencies of government, some even offer<strong>in</strong>g their portals free of charge<br />

(shift<strong>in</strong>g the charges <strong>in</strong>stead on to the suppliers <strong>in</strong> the form of registration fees). While some<br />

considered this healthy competition, several concerns were raised with the prospect of a multiple<br />

portal system. For <strong>in</strong>stance, multiple portals or exchanges could result <strong>in</strong> higher costs to bidders and<br />

ultimately the government. They could also make monitor<strong>in</strong>g of government procurements by NGOs<br />

and others more complicated and costly.<br />

To avoid some of these problems the Philipp<strong>in</strong>es’ procurement regulations stipulated that there would<br />

be a s<strong>in</strong>gle portal that would serve as the primary source of <strong>in</strong>formation on all government<br />

procurement.” The DBM’s <strong>Procurement</strong> Service had already been operat<strong>in</strong>g a centralized<br />

procurement system for the government’s common-use supplies (ballpo<strong>in</strong>t pens, pencils, paper, etc.)<br />

s<strong>in</strong>ce 1978. Therefore, the implement<strong>in</strong>g rules provided that, to take advantage of the significant built<strong>in</strong><br />

efficiencies of the PhilGEPS and the volume discounts <strong>in</strong>herent <strong>in</strong> bulk purchas<strong>in</strong>g, all procur<strong>in</strong>g<br />

entities would be required to use the PhilGEPS for the procurement of common-use supplies <strong>in</strong><br />

accordance with the rules and procedures to be established by the oversight and policy mak<strong>in</strong>g body,<br />

the Government <strong>Procurement</strong> Policy Board (GPPB). xviii With regard to the procurement of noncommon<br />

use items, <strong>in</strong>frastructure projects and consult<strong>in</strong>g services, the implement<strong>in</strong>g rules further<br />

provided that procur<strong>in</strong>g agencies would be permitted to contract with service providers through<br />

competitive bidd<strong>in</strong>g to undertake their electronic procurement—provided, among others, that their<br />

systems:<br />

1. Are l<strong>in</strong>ked to the PhilGEPS;<br />

2. Allow parallel manual submission of bids to the procur<strong>in</strong>g entity;<br />

3. Ensure that the bidd<strong>in</strong>g or tender<strong>in</strong>g committee has complete control of the bidd<strong>in</strong>g<br />

process, and that the committee’s sole authority over open bids is strictly observed;<br />

4. Are virus-protected and provide sufficient security that is at least equivalent to that<br />

provided by the PhilGEPS, such as firewalls and encryption devices;<br />

5. Allow electronic signatures and other current electronic authentication devices;<br />

6. Have sufficient redundant back-up facilities; and<br />

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7. Provide l<strong>in</strong>kage to the procur<strong>in</strong>g entity’s f<strong>in</strong>ancial management <strong>in</strong>formation system,<br />

logistics management systems, and other <strong>in</strong>ternal <strong>in</strong>formation systems that may<br />

<strong>in</strong>teract with the procurement process; and<br />

8. If provid<strong>in</strong>g electronic payment facilities, comply with all laws, rules and regulations<br />

issued by the government.<br />

A noteworthy concern with allow<strong>in</strong>g government agencies to contract with commercial e-procurement<br />

service providers is the fact that the procurement process <strong>in</strong> the private sector is based on a different<br />

set of rules and pr<strong>in</strong>ciples from that of the public sector, and the optimal IT design for private sector<br />

procurement may not be optimal for government procurement. Private sector e-procurement systems,<br />

therefore, have to be carefully adapted to suit government procurement rules and procedures.<br />

On-l<strong>in</strong>e Registry Requirement<br />

Supplier registration is an important aspect of any e-procurement system to protect the system from<br />

unauthorized access or tamper<strong>in</strong>g. A suppliers’ registry allows an agency to:<br />

1. Build a database of suppliers authorized to access government procurement<br />

opportunities;<br />

2. Build a list of “blacklisted” suppliers;<br />

3. Track supplier activity and performance;<br />

4. Develop a rat<strong>in</strong>g system; and<br />

5. Publish an electronic catalogue and price list.<br />

One issue with the on-l<strong>in</strong>e registry featured <strong>in</strong> all e-procurement facilities reviewed by the Philipp<strong>in</strong>e<br />

government, <strong>in</strong>clud<strong>in</strong>g the PhilGEPS itself, was compliance with the legal requirement of “open”<br />

bidd<strong>in</strong>g for government procurement. A system cannot claim to be fully “open” to all suppliers or<br />

contractors if it limits participation to only those <strong>in</strong>cluded <strong>in</strong> its list of registered suppliers. The<br />

pr<strong>in</strong>ciple of openness is underm<strong>in</strong>ed even more if suppliers are required to pay registration fees.<br />

To address this, the PhilGEPS system was set up with m<strong>in</strong>imal registration requirements and access<br />

offered free of charge to suppliers.<br />

The Use of Dynamic Bidd<strong>in</strong>g or “Reverse Auction”<br />

UNCITRAL def<strong>in</strong>es electronic reverse auction (ERA) as an on-l<strong>in</strong>e, real-time dynamic auction<br />

between a buy<strong>in</strong>g organization and a number of suppliers who compete aga<strong>in</strong>st each other to w<strong>in</strong> the<br />

contract by submitt<strong>in</strong>g successively lower priced bids dur<strong>in</strong>g a scheduled time period. xix ERAs are<br />

used <strong>in</strong> both public and private procurement. However, with the exception of the European Union<br />

(EU) directives, dated March 31, 2004, there are limited <strong>in</strong>ternational guidel<strong>in</strong>es on ERAs. At the<br />

national level, moreover, only a few countries are regulat<strong>in</strong>g the use of ERAs <strong>in</strong> public procurement,<br />

<strong>in</strong>clud<strong>in</strong>g: Australia, Brazil, Canada, France, S<strong>in</strong>gapore, Thailand, the United K<strong>in</strong>gdom, and the<br />

United States.<br />

ERAs may be used either as a stand-alone method of procurement or as an optional phase <strong>in</strong> other<br />

methods of procurement. Moreover, depend<strong>in</strong>g on which evaluation criteria are assessed and when,<br />

there are different ways of conduct<strong>in</strong>g ERAs. Generally though, if properly used, the potential<br />

benefits of ERAs, accord<strong>in</strong>g to UNCITRAL, <strong>in</strong>clude:<br />

1. Improved value for money, as suppliers are pressured to offer their lowest possible<br />

prices;<br />

2. Efficient allocation of resources, as it speeds up the tender<strong>in</strong>g process and reduces<br />

transaction costs through the use of electronic technologies;<br />

3. Transparency <strong>in</strong> the process of award<strong>in</strong>g contracts, <strong>in</strong> that <strong>in</strong>formation on other<br />

tenders is available and the outcome of the procedure is visible to participants;<br />

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4. They can make governmental systems more accessible and user-friendly, and allow<br />

governments to keep up with changes <strong>in</strong> technology, bus<strong>in</strong>ess practices and market<br />

prices;<br />

5. Government bidd<strong>in</strong>g markets are opened to suppliers who had not enjoyed access to<br />

them previously; and<br />

6. The potential of hav<strong>in</strong>g a positive effect on competition, <strong>in</strong> particular by dismantl<strong>in</strong>g<br />

the preferential purchas<strong>in</strong>g patterns <strong>in</strong> some countries.<br />

However, UNCITRAL also reported the follow<strong>in</strong>g issues and concerns with ERAs:<br />

1. They do not guarantee the lowest responsible and responsive price and cont<strong>in</strong>ued<br />

sav<strong>in</strong>gs <strong>in</strong> subsequent ERAs as, unlike <strong>in</strong> traditional sealed bids where competitors<br />

have only one opportunity to bid, each bidder recognizes that it will have the option<br />

to provide successive bids and therefore has little <strong>in</strong>centive to offer its best price and<br />

subsequently may never offer its best price;<br />

2. There may be hidden costs that negate any sav<strong>in</strong>gs realized from the auction process;<br />

3. They may encourage imprudent bidd<strong>in</strong>g and thus create a higher risk of abnormally<br />

low bids;<br />

4. They do not adequately handle non-price factors, such as quality of performance and<br />

buyer-supplier relationships;<br />

5. ERAs are more vulnerable than traditional bidd<strong>in</strong>g processes to collusive behavior by<br />

bidders, especially <strong>in</strong> projects characterized by a small number of bidders, or <strong>in</strong><br />

repeated bidd<strong>in</strong>g <strong>in</strong> which the same group of bidders participate;<br />

6. ERAs may have negative effects on the market, <strong>in</strong>clud<strong>in</strong>g an anti-competitive and a<br />

negative impact on technical <strong>in</strong>novations and <strong>in</strong>novative practices; and<br />

7. Some analysts question the legality of such a technique <strong>in</strong> light of the conflict of its<br />

<strong>in</strong>herent features with traditional procurement pr<strong>in</strong>ciples and practices, such as rules<br />

forbidd<strong>in</strong>g the disclosure of <strong>in</strong>formation on other bids.<br />

ERAs are reportedly more successful for goods and services that can be clearly specified, whose nonprice<br />

criteria can be quantified, and for which a competitive market exists. When quality is more<br />

important than price, and when supplier relationships are critical, ERAs may not be as suitable.<br />

F<strong>in</strong>ally, the government has to ensure that complex technology, operat<strong>in</strong>g capabilities, legal and<br />

regulatory <strong>in</strong>frastructure, and systems that allow the submission and open<strong>in</strong>g of bids electronically are<br />

<strong>in</strong> place, and that there is security, reliability and accessibility throughout the process.<br />

5 Step Three: Develop the oversight and <strong>in</strong>stitutional framework<br />

Aside from the need to strengthen the legal and policy framework for government procurement, it is<br />

necessary to develop and establish an <strong>in</strong>dependent body that provides policy guidance and leadership<br />

on matters related to public procurement. This must be a central body that operates impartially and<br />

transparently, and it must have clear authority over government-wide procurement; otherwise, it may<br />

only be regarded as a superficial body that churns out policy with neither the field <strong>in</strong>formation to<br />

support its issuances nor the power to enforce them. Furthermore, it should be an <strong>in</strong>ter-agency body<br />

with effective private sector representation, so that both sides of a procurement contract are<br />

adequately represented <strong>in</strong> policy development, and undue external and political <strong>in</strong>fluences are<br />

avoided. Such a body would be responsible for, <strong>in</strong>ter alia:<br />

1. Formulat<strong>in</strong>g procurement policy, rules and procedures;<br />

2. Ensur<strong>in</strong>g that these issuances are dissem<strong>in</strong>ated to and understood by implement<strong>in</strong>g<br />

agencies;<br />

3. Monitor<strong>in</strong>g and evaluat<strong>in</strong>g compliance;<br />

4. Provid<strong>in</strong>g tools to achieve efficiency, accountability and economy; and<br />

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5. Build<strong>in</strong>g capacity and <strong>in</strong>creas<strong>in</strong>g the level of professionalism <strong>in</strong> the procurement<br />

function.”<br />

The oversight body should be established with a sufficient level of authority with<strong>in</strong> the government<br />

bureaucracy, so that it is able to exercise effective authority over procur<strong>in</strong>g entities and tender<strong>in</strong>g<br />

committees with respect to decision-mak<strong>in</strong>g, adm<strong>in</strong>istrative review and, if needed, regulatory<br />

functions.<br />

Care should be taken, however, not to overburden this body with responsibilities beyond its core<br />

purpose or the capacity of its staff resources. For <strong>in</strong>stance, it is important to ma<strong>in</strong>ta<strong>in</strong> the dist<strong>in</strong>ction<br />

between policy and operational matters <strong>in</strong> def<strong>in</strong><strong>in</strong>g the functions of the oversight body. Lao PDR’s<br />

oversight body, the <strong>Procurement</strong> Monitor<strong>in</strong>g Office (PrMO), encountered this very problem follow<strong>in</strong>g<br />

its establishment <strong>in</strong> 2004. The government’s new procurement decree, its implement<strong>in</strong>g rules and the<br />

PrMO’s found<strong>in</strong>g charter detail the body’s responsibilities. Accord<strong>in</strong>gly, the PrMO is not only<br />

responsible for regulation and policy formulation, but also for operational matters such as review and<br />

approval of tender modifications and bid evaluations. As a policy mak<strong>in</strong>g body, attach<strong>in</strong>g additional<br />

operational responsibilities to the PrMO exposes the oversight body to potential conflicts.<br />

Operational issues may also end up tak<strong>in</strong>g much of the oversight agency’s time and resources away<br />

from its primary goal of policy development. xx<br />

Certa<strong>in</strong>ly, an effective procurement system requires an active oversight body to ensure that all<br />

procur<strong>in</strong>g entities properly implement the law and all aspects of the country’s procurement reform<br />

program. However, if the oversight body takes the form of a board and is appropriately composed of<br />

high-rank<strong>in</strong>g government officers, these officers should not be expected to perform technical work.<br />

As such, there would be a need for an office that would not only function as the secretariat and<br />

adm<strong>in</strong>istrative corps of the oversight body, but would also provide it with much needed research and<br />

technical capacity. In the Philipp<strong>in</strong>es, for example, the Government <strong>Procurement</strong> Policy Board<br />

(GPPB) relies heavily on the legwork of its Technical Support Office (TSO), which performs the<br />

follow<strong>in</strong>g functions:<br />

1. Research-based procurement policy recommendations and rule-draft<strong>in</strong>g;<br />

2. Evaluates the effectiveness of the government procurement system and procurement<br />

reform program, and conducts studies to improve and develop the system, coverage<br />

and procedures;<br />

3. Monitors and ensures compliance by procur<strong>in</strong>g entities with all procurement laws,<br />

rules and regulations, and assists agencies <strong>in</strong> their procurement activities;<br />

4. Professionalizes government procurement practitioners through the development and<br />

implementation of regular nationwide procurement tra<strong>in</strong><strong>in</strong>g programs and the<br />

establishment of a procurement course and certificate program;<br />

5. Develops and updates the generic procurement manuals and standard bidd<strong>in</strong>g<br />

documents;<br />

6. Monitors the implementation and effectiveness of the PhilGEPS e-procurement<br />

system; and<br />

7. Adm<strong>in</strong>istrative and secretariat work.<br />

6 Step Four: Capacity Build<strong>in</strong>g<br />

Even if substantial efforts are undertaken dur<strong>in</strong>g the <strong>in</strong>itial advocacy stage to sell the reforms to, and<br />

consult with, both top-level and mid-level champions, if no equivalent amount of effort is taken to<br />

communicate these to the implementers <strong>in</strong> the field and tra<strong>in</strong> them on the new procedures, the overall<br />

effort may fail. As the implementers of any procurement policy or process, the procurement<br />

practitioners <strong>in</strong> each of the procur<strong>in</strong>g agencies and local government units are really the “enablers” of<br />

the reforms. Therefore, a well-function<strong>in</strong>g procurement system depends on how well these “enablers”<br />

understand and apply the law.<br />

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Capacity build<strong>in</strong>g is not only tra<strong>in</strong><strong>in</strong>g, but also is a communication tool. In the latter sense, capacity<br />

build<strong>in</strong>g should push the advocacy efforts undertaken <strong>in</strong> Step 2 further, so that knowledge and<br />

ownership of the reforms are cascaded from the central government, down to the various local<br />

government offices. In some countries, so much effort is spent sell<strong>in</strong>g the reforms to national level<br />

<strong>in</strong>stitutions, that the local government units are not sufficiently consulted <strong>in</strong> the process. Involv<strong>in</strong>g all<br />

stakeholders <strong>in</strong> articulat<strong>in</strong>g the reform strategy is critical, because a lack of support from one<br />

stakeholder group can easily underm<strong>in</strong>e the entire reform program. The capacity build<strong>in</strong>g process<br />

provides an opportunity to solidify the support of all these stakeholders.<br />

First and foremost, capacity build<strong>in</strong>g <strong>in</strong>volves tra<strong>in</strong><strong>in</strong>g programs that are <strong>in</strong>tended to broaden<br />

knowledge of the new law and its procedures, and thus <strong>in</strong>crease its application. If the tra<strong>in</strong><strong>in</strong>g<br />

programs can be properly adapted to suit the situation of the prov<strong>in</strong>ces and localities, these tra<strong>in</strong><strong>in</strong>gs<br />

may also be effective communication tools to demonstrate the position of local governments as<br />

important stakeholders <strong>in</strong> the entire reform process.<br />

In the larger scheme of the reforms, an ideal capacity build<strong>in</strong>g program should first take the form of<br />

short tra<strong>in</strong><strong>in</strong>g programs, lead<strong>in</strong>g up to a full-blown professionalization program for procurement<br />

officials <strong>in</strong> government. There are a few reasons for this:<br />

1. A short tra<strong>in</strong><strong>in</strong>g program can be developed immediately and be used to rapidly<br />

educate procur<strong>in</strong>g agencies and key private sector associations on the new<br />

procedures;<br />

2. A full-fledged professionalization program would <strong>in</strong>volve substantive certificate<br />

courses composed of <strong>in</strong>-depth modules on procurement and related topics, which take<br />

more time to develop and implement than do short courses; and<br />

3. A short tra<strong>in</strong><strong>in</strong>g program will fill the void and, <strong>in</strong> a limited way, address the<br />

immediate demand for knowledge about the new procedures while the<br />

professionalization program is be<strong>in</strong>g developed.<br />

Although a professionalization program is recommended as a longer term measure for creat<strong>in</strong>g a<br />

permanent cadre of procurement professionals, it may not necessarily be as effective as shorter<br />

tra<strong>in</strong><strong>in</strong>g courses <strong>in</strong> terms of spread<strong>in</strong>g <strong>in</strong>formation about the law and <strong>in</strong> gather<strong>in</strong>g support from the<br />

local communities and regional offices, especially dur<strong>in</strong>g the early stages of the reform. As an <strong>in</strong>terim<br />

measure, the government may f<strong>in</strong>d it more effective to implement a regional procurement tra<strong>in</strong><strong>in</strong>g<br />

program and an <strong>in</strong>formation campaign on the new procurement law, rules and regulations, for both<br />

national and local government agencies.<br />

6.1 Develop<strong>in</strong>g a <strong>Procurement</strong> Tra<strong>in</strong><strong>in</strong>g Program<br />

The objectives of a regional procurement tra<strong>in</strong><strong>in</strong>g program are to:<br />

1. Provide an <strong>in</strong>itial step towards the full professionalization of government<br />

procurement;<br />

2. Tra<strong>in</strong> procurement officials on the new procedures;<br />

3. Ensure compliance with the new procurement law; and<br />

4. Introduce e-procurement, if this is part of the reform program.<br />

The target audience for this program <strong>in</strong>cludes members of the tender<strong>in</strong>g or bids and awards<br />

committees <strong>in</strong> the l<strong>in</strong>e agencies, the tender<strong>in</strong>g committee secretariat, members of technical work<strong>in</strong>g<br />

groups for the tender<strong>in</strong>g committees (if any), supply and budget officers of the l<strong>in</strong>e agencies, and<br />

project management officers. Special attention should also be given to the heads of the procur<strong>in</strong>g<br />

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agencies, as well as <strong>in</strong>ternal auditors and the state auditors, to ensure that both the procurement<br />

practitioners and those <strong>in</strong> the management and control aspects of the system speak the same language.<br />

The regional procurement tra<strong>in</strong><strong>in</strong>g program should be managed or overseen by the national oversight<br />

body (see Step 3). The oversight body will see to it that all regions are revisited periodically to ensure<br />

skill retention, and to give new agency staff the opportunity to attend subsequent tra<strong>in</strong><strong>in</strong>g programs.<br />

For these reasons, it is important to keep the regional tra<strong>in</strong><strong>in</strong>g programs short and manageable – not<br />

more than three days each if possible. If there is a new procurement law, the tra<strong>in</strong><strong>in</strong>g program should<br />

<strong>in</strong>clude a focus on the provisions of this new law, primarily on the follow<strong>in</strong>g major topics:<br />

1. General Provisions;<br />

2. <strong>Procurement</strong> of Goods;<br />

3. <strong>Procurement</strong> of Infrastructure Projects;<br />

4. <strong>Procurement</strong> of Consult<strong>in</strong>g Services; and<br />

5. The benefits and operational aspects of e-procurement, if this has been established as<br />

part of the reforms.<br />

S<strong>in</strong>ce a primary outcome of the regional tra<strong>in</strong><strong>in</strong>g program may be to push policy reforms to the<br />

prov<strong>in</strong>ces and cascade these to the local governments, it may be useful to tap the Human Resources or<br />

Personnel divisions of the participat<strong>in</strong>g agencies to <strong>in</strong>stitute <strong>in</strong>ternal tra<strong>in</strong><strong>in</strong>g and skills development<br />

programs to supplement the regional tra<strong>in</strong><strong>in</strong>g program.<br />

6.2 The Tra<strong>in</strong>ers<br />

In the early stages of the capacity build<strong>in</strong>g process, it will be necessary to create a team of dedicated<br />

and technically competent procurement tra<strong>in</strong>ers who can be counted on to run the <strong>in</strong>itial tra<strong>in</strong><strong>in</strong>g<br />

programs for key procur<strong>in</strong>g entities. Over time, additional tra<strong>in</strong>ers should be tra<strong>in</strong>ed through a<br />

comprehensive “Tra<strong>in</strong><strong>in</strong>g of Tra<strong>in</strong>ers” program, so that these additional tra<strong>in</strong>ers can be fielded to<br />

educate the broader stakeholder population.<br />

In select<strong>in</strong>g the tra<strong>in</strong>ers, emphasis should not only be given to whether an <strong>in</strong>dividual possesses<br />

technical knowledge on procurement, but also to whether s/he is a good communicator, s<strong>in</strong>ce, <strong>in</strong><br />

effect, it will be his/her responsibility to sell the law and the reforms to the audience. While a<br />

technical expert with an operational background may know the rigors of public procurement, s/he may<br />

not have the ability to manage audience participation and consider an issue with a broad policy<br />

perspective. Tra<strong>in</strong>ers should, therefore, possess the mentality of strategic managers, rather than<br />

traditional managers. The latter are <strong>in</strong>ternally focused, prioritize technicalities and adm<strong>in</strong>istrative<br />

requirements over substance, are overly concerned with day-to-day bureaucratic rout<strong>in</strong>es, and may<br />

generally suffer from tunnel vision. The former are outwardly focused, able to adapt to external<br />

environments, even when circumstances are unpredictable and processes nonl<strong>in</strong>ear, and are able to<br />

step out of the box to see the broader implications of an issue. Strategic managers do not f<strong>in</strong>d it<br />

difficult to accept other po<strong>in</strong>ts of view and tend to see opportunities for improvements <strong>in</strong> what may<br />

otherwise be seen as mistakes. In procurement reform, it is much harder to build support and promote<br />

implementation once l<strong>in</strong>es are drawn.<br />

On the other hand, even if the tra<strong>in</strong>er has the characteristics of a strategic manager, s/he would f<strong>in</strong>d it<br />

extremely difficult to <strong>in</strong>struct and sell the reforms if s/he does not appreciate the technical realities and<br />

difficulties surround<strong>in</strong>g procurement operations. As such, <strong>in</strong> the same way that a technical expert<br />

would not necessarily be a good tra<strong>in</strong>er for a capacity build<strong>in</strong>g program that doubles as a<br />

communication tool, an experienced teacher or manager would also not be an effective communicator<br />

to an audience composed of seasoned field officers and implementers. Therefore, it is important to<br />

identify both characteristics from the beg<strong>in</strong>n<strong>in</strong>g, as a failure to consider these could easily lead to the<br />

failure of the entire capacity build<strong>in</strong>g phase of the procurement reform program.<br />

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The regional tra<strong>in</strong><strong>in</strong>g programs would also have to be regularly monitored and evaluated, to determ<strong>in</strong>e<br />

the effectiveness of both the tra<strong>in</strong><strong>in</strong>gs conducted and the tra<strong>in</strong>ers themselves.<br />

6.3 The Professionalization Program<br />

Professionalism with<strong>in</strong> any procur<strong>in</strong>g agency is fostered by strengthen<strong>in</strong>g human capital, <strong>in</strong>formation<br />

capital, and br<strong>in</strong>g<strong>in</strong>g about a climate for positive action.<br />

Improv<strong>in</strong>g Human Capital<br />

Human capital refers to employee skill levels, and this is <strong>in</strong>fluenced by formal education and tra<strong>in</strong><strong>in</strong>g.<br />

In the field of procurement, specific duties and technical competencies are attached to each job<br />

function. Therefore, the professionalization program would <strong>in</strong>volve a certificate course that caters to<br />

the needs of each function, e.g., top-management concerns, bidd<strong>in</strong>g and contract<strong>in</strong>g procedures,<br />

contract adm<strong>in</strong>istration and monitor<strong>in</strong>g concerns, budget concerns, <strong>in</strong>ternal audit and control<br />

concerns. It is also important to <strong>in</strong>clude the private sector and external auditors, to ensure that all the<br />

stakeholders have the same understand<strong>in</strong>g and <strong>in</strong>terpretation of the law, and regular tra<strong>in</strong><strong>in</strong>g needs<br />

assessments for all stakeholders. The frequency, scope and content of the certificate course would<br />

have to be based upon, and may subsequently have to be ref<strong>in</strong>ed or revised depend<strong>in</strong>g on, the results<br />

of the tra<strong>in</strong><strong>in</strong>g needs assessments. These assessments may be conducted <strong>in</strong> l<strong>in</strong>e with the Agency<br />

<strong>Procurement</strong> Performance Indicators exercise, which is discussed below (Step 5)<br />

Armed with a needs assessment, once the government ga<strong>in</strong>s sufficient experience <strong>in</strong> its regional<br />

procurement tra<strong>in</strong><strong>in</strong>g program, it can then take steps to develop this <strong>in</strong>to a certificate program. All<br />

public procurement officers would need a certificate issued by a credible <strong>in</strong>stitution certify<strong>in</strong>g that<br />

s/he has successfully completed a government accredited procurement course before be<strong>in</strong>g authorized<br />

to perform public sector procurement. This certificate course would cover more subjects than the<br />

regional procurement tra<strong>in</strong><strong>in</strong>g program, and would thus take longer – with a course timeframe rang<strong>in</strong>g<br />

from two to four weeks. Although the primary targeted participants for the certificate course would<br />

be mid-level public procurement officers and staff, the course can also be expanded to cover the top<br />

management and executives of an agency so that they are aware of the reforms, as well as the private<br />

sector. With respect to the latter, it should be noted that the success of every procurement transaction<br />

depends not only on the competence and expertise of the procurement staff <strong>in</strong>volved, but also on the<br />

confidence of the bidders to participate <strong>in</strong> the activity and their knowledge of the rules. Obviously,<br />

the certificate requirement would only apply to the mid-level procurement officers and staff <strong>in</strong><br />

government.<br />

As the program is <strong>in</strong>tended to address various types of audiences, three custom-tailored programs may<br />

be developed:<br />

1. The first is a short (one week or less) course to familiarize top management and executives <strong>in</strong><br />

national and local <strong>in</strong> <strong>in</strong>stitutions with the general pr<strong>in</strong>ciples of project and procurement<br />

management and operations, the new procurement law and subsequent updates. The course<br />

should focus more on the salient features of the law, and on the critical elements of<br />

procurement decision mak<strong>in</strong>g, such as project plann<strong>in</strong>g and budget<strong>in</strong>g, and on monitor<strong>in</strong>g and<br />

evaluat<strong>in</strong>g procurement performance.<br />

2. The second is a longer course for mid-level officers engaged <strong>in</strong> procurement operations and<br />

related tasks—such as members of bidd<strong>in</strong>g committees, the staff of procur<strong>in</strong>g units, buyers,<br />

eng<strong>in</strong>eers, <strong>in</strong>ternal auditors, accountants and budget officers, as well as external auditors—<br />

cover<strong>in</strong>g the pr<strong>in</strong>ciples of project and procurement operations and management, <strong>in</strong>clud<strong>in</strong>g the<br />

methods of procurement, the basic elements of sound technical specifications, bid open<strong>in</strong>g<br />

and evaluation, contract adm<strong>in</strong>istration, the hir<strong>in</strong>g of consultants, and anti-corruption, among<br />

others.<br />

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3. The third is a short (one week or less) orientation course for the private sector on the new law,<br />

<strong>in</strong>clud<strong>in</strong>g the elements of develop<strong>in</strong>g a sound bid and aspects of effective project<br />

implementation and contract management, from the perspective of a supplier or contractor. If<br />

an e-procurement system has been developed <strong>in</strong> the country, a module that expla<strong>in</strong>s the<br />

general features and operational aspects of such a system would be helpful for all three groups<br />

of participants, especially for the procurement staff of the agencies and for the private sector.<br />

With respect to the latter, the module will focus on how to access and use the system.<br />

In addition to the regular PowerPo<strong>in</strong>t presentations and exercises, the certificate course should also<br />

<strong>in</strong>volve presentation of a generic procurement operations manual, with case studies. The operations<br />

manual should also <strong>in</strong>clude standard bidd<strong>in</strong>g and contract<strong>in</strong>g documents.<br />

The general manual would provide a more detailed explanation on how to perform and comply with<br />

the provisions of the procurement law and its implement<strong>in</strong>g rules and regulations, while the standard<br />

documents would make it easier for procurement officers and staff to perform their work by provid<strong>in</strong>g<br />

bidd<strong>in</strong>g and contract formats.<br />

The primary objective of the certificate course is to provide <strong>in</strong>-depth and advanced tra<strong>in</strong><strong>in</strong>g on public<br />

procurement, as opposed to a mere orientation on the new law. Given the academic rigor of the<br />

curriculum, and the importance placed on certification, certificates should be issued by a credible and<br />

established body. The implementers of this course, therefore, would ideally be accredited domestic<br />

academic <strong>in</strong>stitutions, with regular monitor<strong>in</strong>g by the government oversight body. Over time, these<br />

academic <strong>in</strong>stitutions will develop their own cadre of professors who specialize <strong>in</strong> teach<strong>in</strong>g<br />

procurement operations and management, which may then lead to the creation of degree programs for<br />

public procurement and project management—well beyond the scope of the certificate course<br />

contemplated <strong>in</strong> this paper, but a positive step toward the goal of professionaliz<strong>in</strong>g public<br />

procurement.<br />

Improv<strong>in</strong>g Information Capital<br />

It is necessary to equip procurement officers and staff with updated <strong>in</strong>formation and to ma<strong>in</strong>ta<strong>in</strong> a<br />

positive work<strong>in</strong>g environment Information capital refers to the development of <strong>in</strong>formation systems,<br />

such as an onl<strong>in</strong>e price reference lists, so that the management and procurement staff <strong>in</strong> procur<strong>in</strong>g<br />

agencies are able to arrive at sound decisions on specifications, acceptable quality and cost estimates,<br />

supported by real and current data. More than just utiliz<strong>in</strong>g the latest <strong>in</strong>formation technology, this<br />

<strong>in</strong>volves access to relevant <strong>in</strong>formation, such as <strong>in</strong>formation about products, pric<strong>in</strong>g, unit costs,<br />

technical specifications of goods and equipment that are regularly procured by an agency, suppliers,<br />

contractors, blacklisted firms, and the like.<br />

Creat<strong>in</strong>g a Climate for Positive Action<br />

A “climate for positive action” basically refers to the conditions <strong>in</strong> place to motivate employees and<br />

reward good performance. Performance <strong>in</strong>centives, or at least employee recognition awards, may be<br />

useful tools for motivat<strong>in</strong>g procurement staff. Incentives may take the form of additional allowances<br />

for procurement staff who perform procurement functions <strong>in</strong> addition to their regular workload, or<br />

cash <strong>in</strong>centives for those who are able to complete a procurement <strong>in</strong> an efficient and effective manner,<br />

result<strong>in</strong>g <strong>in</strong> substantial sav<strong>in</strong>gs for the agency.<br />

Establish<strong>in</strong>g a legal assistance program for procurement staff may also prove effective <strong>in</strong> attract<strong>in</strong>g<br />

and reta<strong>in</strong><strong>in</strong>g employees. Lawsuits are often brought aga<strong>in</strong>st procurement officers, whether with legal<br />

basis or simply as a means to <strong>in</strong>timidate. Whatever the purpose, this risk tends to drive well-qualified<br />

and competent <strong>in</strong>dividuals away from the procurement function. A legal assistance program may be<br />

developed for procurement officers and staff who are the subject of unsubstantiated lawsuits.<br />

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Another way of foster<strong>in</strong>g climate for positive action is to create a higher pay scale for procurement<br />

practitioners (provided that the certificate program is <strong>in</strong> place) or to provide a clear career path for<br />

those <strong>in</strong> the field of procurement. These may be useful <strong>in</strong> jurisdictions where procurement is regarded<br />

as a purely rout<strong>in</strong>e and mundane task, or even as a “dead-end” assignment.<br />

7 Step Five: Assess the impact of reforms at both the central and local levels<br />

After evaluat<strong>in</strong>g the country’s procurement environment, develop<strong>in</strong>g a strategy for reform,<br />

establish<strong>in</strong>g the legal and <strong>in</strong>stitutional frameworks, and then tra<strong>in</strong><strong>in</strong>g the enablers <strong>in</strong> the procur<strong>in</strong>g<br />

entities, the next step is to assess how effectively the strategy has been undertaken, how much of the<br />

reform agenda was actually implemented <strong>in</strong> the field, and the overall impact of the procurement<br />

reforms.<br />

The BIS focuses predom<strong>in</strong>antly on macro <strong>in</strong>dicators and is not <strong>in</strong>tended to measure agency-level<br />

performance. The BIS assessment, therefore, must be coupled with other management tools, like a<br />

performance measurement framework, to guide actions on what and where changes need to be made<br />

<strong>in</strong> a particular agency. Determ<strong>in</strong>ations as to whether better performance outcomes are achieved as a<br />

result of policy reforms need to be based on collection and analysis of actual performance data. The<br />

Agency <strong>Procurement</strong> Performance Indicators (APPI), more recently referred to as the<br />

Compliance/Performance Indicators (CPI) by the OECD-DAC, complements the BIS, provid<strong>in</strong>g an<br />

effective tool for monitor<strong>in</strong>g and evaluat<strong>in</strong>g implementation at the agency level.<br />

To effectively l<strong>in</strong>k the agency level performance to the goals and objectives of the national<br />

procurement system, the assessment should consider the follow<strong>in</strong>g:<br />

1. Whether the subject agency has a strategy for achiev<strong>in</strong>g an effective procurement<br />

program, and whether this strategy is <strong>in</strong> l<strong>in</strong>e with the national procurement reform<br />

policy.<br />

2. Whether the organizational structure and employee capacity of the subject agency<br />

supports a strategy that is <strong>in</strong> l<strong>in</strong>e with the national procurement reform policy.<br />

3. Whether the <strong>in</strong>ternal procurement processes of the subject agency support a strategy<br />

that is <strong>in</strong> l<strong>in</strong>e with the national procurement reform policy and is <strong>in</strong> accord with its<br />

organizational setup.<br />

4. Whether the subject agency is able to undertake its procurement <strong>in</strong> an effective and<br />

accountable manner, supported by sufficient records and documentation.<br />

The follow<strong>in</strong>g major criteria are suggested for the APPI assessment:<br />

1. Strategy<br />

2. Data Collection and Monitor<strong>in</strong>g System<br />

3. Agency Professionalization Measures<br />

4. Organizational Structure<br />

5. Agency <strong>Procurement</strong> Process<br />

6. Effectiveness<br />

7. Accountability Measures<br />

These major criteria would then have to be broken down <strong>in</strong>to several Indicators. To be mean<strong>in</strong>gful,<br />

both the major criteria and the Indicators should be structured to tell a complete story of how<br />

procurement is undertaken with<strong>in</strong> the subject agency and how the outcomes—desirable or not—are<br />

achieved. The assessment is <strong>in</strong>tended to show whether an agency has actually developed a strategy to<br />

implement procurement reforms, and whether this strategy is effectively be<strong>in</strong>g pursued to meet its<br />

objectives. At the very least, the assessment should show how well an agency’s procurement system<br />

applies the pr<strong>in</strong>ciples and practices of the national procurement system, regardless of whether it has<br />

an agency-level strategy.<br />

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The illustration below (Figure 1) shows the “cause and effect” l<strong>in</strong>kage among the major criteria <strong>in</strong> a<br />

roughly sequential manner. Effectiveness is located at the top to stress that the ultimate objective of<br />

any procurement reform program is that agencies are able to acquire the best value for money. To<br />

atta<strong>in</strong> this, the process has to beg<strong>in</strong> with the development of an appropriate records management and<br />

data collection system, because a successful operation is one that proceeds <strong>in</strong> an <strong>in</strong>formed manner.<br />

Without <strong>in</strong>formation, no judgment can be made regard<strong>in</strong>g the <strong>in</strong>puts, outputs and outcomes of an<br />

agency’s system and operations.<br />

Accountability measures immediately follow data collection and monitor<strong>in</strong>g, because the quality of<br />

data gathered and <strong>in</strong>formation generated directly affects the quality and reliability of the evidence and<br />

other <strong>in</strong>dications of fraud or wrongdo<strong>in</strong>g, and it allows one to identify areas of vulnerability with<strong>in</strong> the<br />

system that require attention. It may be that these vulnerabilities exist by reason of an organizational<br />

structure that lends itself to non-transparent or collusive behavior, e.g., there are no <strong>in</strong>ternal audit units<br />

or decision-mak<strong>in</strong>g is highly centralized, so that the basic structure of an agency may have to be<br />

addressed even before consider<strong>in</strong>g implement<strong>in</strong>g a professionalization program with<strong>in</strong> the agency.<br />

Indeed, a professionalization program can only work if it operates <strong>in</strong> a properly structured<br />

environment, where each <strong>in</strong>dividual and office performs tasks that appropriately feed <strong>in</strong>to the work of<br />

another <strong>in</strong>dividual and/or office—all with<strong>in</strong> an atmosphere where each <strong>in</strong>dividual is held accountable<br />

for his/her responsibilities.<br />

The next step is to consider the state of the agency’s human capital, i.e. the procurement officers and<br />

staff. As mentioned above, these personnel are the enablers of any procurement reform program,<br />

because they are ultimately the ones responsible for implement<strong>in</strong>g the law <strong>in</strong> their respective agencies.<br />

As such, <strong>in</strong>ternal procurement processes can function properly only when these enablers amply<br />

perform their tasks <strong>in</strong> a proper work<strong>in</strong>g environment. In turn, when the procurement process<br />

<strong>in</strong>corporates the reform measures and reflects the pr<strong>in</strong>ciples of transparency, efficiency and economy,<br />

the agency should be able to procure goods and services effectively, i.e. with the desired quality and<br />

at the most reasonable cost. If, after the entire cycle, certa<strong>in</strong> gaps and weaknesses still exist, these<br />

should be identified through the agency’s data collection and monitor<strong>in</strong>g system so that the<br />

appropriate adjustments can be made, whether <strong>in</strong> the accountability measures, the organizational<br />

structure, the human capital element or <strong>in</strong> the manner <strong>in</strong> which the process is implemented.<br />

F<strong>in</strong>ally, strategy is located <strong>in</strong> the middle of the cycle, because it provides the approach for<br />

implementation of the reforms with<strong>in</strong> the agency, and it identifies the efforts that need to be<br />

prioritized dur<strong>in</strong>g the current cycle, as well as those that may have to wait until the next cycle.<br />

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Figure 1. The APPI “Cycle”<br />

Effective<br />

<strong>Procurement</strong><br />

Internal<br />

<strong>Procurement</strong><br />

Process<br />

Data Collection<br />

and Monitor<strong>in</strong>g<br />

STRATEGY<br />

Internal<br />

Professionalization<br />

Measures<br />

Accountability<br />

Measures<br />

Organizational<br />

Structure<br />

The major criteria for the APPI are l<strong>in</strong>ked to the BIS through the latter’s four “Pillars,” described<br />

earlier under Step 1:<br />

Pillar I – The Legislative and Regulatory Framework<br />

Pillar II – The Institutional Framework and Management Capacity<br />

Pillar III – The <strong>Procurement</strong> Operations and <strong>Market</strong> Practices<br />

Pillar IV – The Integrity of the <strong>Public</strong> <strong>Procurement</strong> System<br />

As the APPI is developed with<strong>in</strong> the context of the BIS Pillars, an APPI assessment can gauge how<br />

closely an agency’s procurement performance follows and is <strong>in</strong>tegrated with the national procurement<br />

system. The table below shows the four BIS Pillars and its Indicators, the APPI Major Criteria that<br />

correspond to each, and an explanation for their l<strong>in</strong>kage.<br />

Table 1, below, l<strong>in</strong>ks the BIS pillars and <strong>in</strong>dicators with the APPI major criteria. This can serve as a<br />

handy tool <strong>in</strong> conduct<strong>in</strong>g the Step 5 impact assessment process.<br />

Table 1. L<strong>in</strong>k<strong>in</strong>g the BIS and APPI<br />

BIS Pillars and Indicators APPI Major Criteria Explanation<br />

Pillar I - The Legislative and<br />

Regulatory Framework<br />

Ind. 1 – <strong>Procurement</strong><br />

legislative and regulatory<br />

framework achieves the<br />

agreed standards and<br />

complies with applicable<br />

obligations<br />

Ind. 2 – Existence of<br />

• Strategy This will show whether the subject agency has<br />

developed a strategy that is l<strong>in</strong>ked with the national<br />

policy expressed <strong>in</strong> the legal and regulatory<br />

framework, and whether the <strong>in</strong>itiatives it adopts<br />

under that strategy are aligned with the national<br />

policy.<br />

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BIS Pillars and Indicators APPI Major Criteria Explanation<br />

Implement<strong>in</strong>g Rules and<br />

Regulations<br />

Pillar II – The Institutional<br />

Framework and Management<br />

Capacity<br />

Ind. 3 – The public<br />

procurement system is<br />

ma<strong>in</strong>streamed and well<br />

<strong>in</strong>tegrated <strong>in</strong>to the public<br />

sector governance system<br />

Ind. 4 – The country has a<br />

functional normative/<br />

regulatory framework<br />

Ind. 5 – The country has<br />

<strong>in</strong>stitutional development<br />

capacity<br />

Pillar III - The <strong>Procurement</strong><br />

Operations and <strong>Market</strong><br />

Practices<br />

Ind. 6 – The country’s<br />

procurement operations and<br />

practices are efficient<br />

Ind. 7 – Functionality of the<br />

public procurement market<br />

Ind. 8 – Existence of contract<br />

adm<strong>in</strong>istration and dispute<br />

resolution provisions<br />

• Data Collection and<br />

Monitor<strong>in</strong>g System<br />

• Agency<br />

Professionalization<br />

Measures<br />

• Organizational<br />

Structure<br />

• Agency <strong>Procurement</strong><br />

Process<br />

• Effectiveness<br />

This will show whether the country’s<br />

oversight/regulatory body is able to effectively<br />

monitor public procurement – both <strong>in</strong> terms of<br />

support<strong>in</strong>g the implementation of the law and <strong>in</strong><br />

support of its crucial role <strong>in</strong> policy development – by<br />

determ<strong>in</strong><strong>in</strong>g the amount of data that is available and<br />

the level of accessibility and cooperation at the<br />

agency level. This will also support any f<strong>in</strong>d<strong>in</strong>gs on<br />

whether the country has systems and procedures for<br />

collect<strong>in</strong>g and monitor<strong>in</strong>g national procurement<br />

<strong>in</strong>formation and statistics.<br />

Furthermore, this will show whether the subject<br />

agency gives importance to employee skills,<br />

dedication and proper alignment of its staff to achieve<br />

the objectives laid out <strong>in</strong> its strategy and the national<br />

policy, and whether any capacity build<strong>in</strong>g <strong>in</strong>itiative is<br />

l<strong>in</strong>ked to the national development capacity program.<br />

This will also show the degree of professionalism and<br />

knowledge of those responsible for perform<strong>in</strong>g<br />

procurement activities at the agency level, so that<br />

specialized procurement jobs have def<strong>in</strong>ed skills and<br />

knowledge profiles, cont<strong>in</strong>uous efforts are undertaken<br />

to improve the quality of outputs, and constant<br />

monitor<strong>in</strong>g is undertaken to track efficiency <strong>in</strong> the<br />

performance of standardized duties.<br />

This will show whether the organizational structure<br />

and the <strong>in</strong>ternal procurement processes of the subject<br />

agency are adequate to apply the rules and procedures<br />

embodied <strong>in</strong> the national procurement reform<br />

program, and whether these result <strong>in</strong> genu<strong>in</strong>e<br />

competition and cost-effective procurement.<br />

Pillar IV - The Integrity of<br />

the <strong>Public</strong> <strong>Procurement</strong><br />

System<br />

Ind. 9 – The country has<br />

effective control and audit<br />

systems<br />

Ind. 10 – The country has an<br />

efficient appeals mechanism<br />

• Accountability<br />

Measures<br />

This will show whether the subject agency adopts<br />

accountability measures that <strong>in</strong>clude an <strong>in</strong>ternal audit<br />

and control system, a protest and appeals mechanism,<br />

and open access to <strong>in</strong>formation; and whether<br />

procurement activities are regularly monitored by the<br />

state audit<strong>in</strong>g agency.<br />

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BIS Pillars and Indicators APPI Major Criteria Explanation<br />

Ind. 11 – The public has<br />

broad access to <strong>in</strong>formation<br />

Ind. 12 – The country has<br />

ethics and anti-corruption<br />

measures <strong>in</strong> place<br />

Evaluation is an <strong>in</strong>strument for learn<strong>in</strong>g. The <strong>in</strong>formation it generates, if used effectively, can greatly<br />

enhance the operation of an organization. xxi Evaluation is also a primary mechanism for ensur<strong>in</strong>g<br />

accountability, provid<strong>in</strong>g a basis for correct<strong>in</strong>g operational problems and <strong>in</strong>form<strong>in</strong>g sound<br />

management decision mak<strong>in</strong>g. xxii In this light, the purpose of the APPI is to identify and describe the<br />

strengths and weaknesses of the agency with respect to its personnel’s understand<strong>in</strong>g of and<br />

compliance with the current public procurement legal framework. It is also <strong>in</strong>tended to identify<br />

general and specific procurement practices that may affect the manner <strong>in</strong> which the basic pr<strong>in</strong>ciples of<br />

a sound procurement system are observed, namely transparency, competition, accountability,<br />

efficiency, equity, economy and effectiveness.<br />

Through the APPI, the procurement environment of an agency is presented by outl<strong>in</strong><strong>in</strong>g gaps <strong>in</strong><br />

critical areas of procurement processes and practices, <strong>in</strong>clud<strong>in</strong>g organizational matters. As such, it<br />

may be said that, as with the BIS, the ultimate purpose of the APPI is formative. General and specific<br />

recommendations may be made to the head of the subject agency to assist it <strong>in</strong> improv<strong>in</strong>g its<br />

evaluation rat<strong>in</strong>gs vis-à-vis the national procurement agenda and the BIS evaluation. These agency<br />

rat<strong>in</strong>gs would have to be given with<strong>in</strong> the parameters of an assessment of the general level of<br />

assistance or <strong>in</strong>tervention required for the subject agency.<br />

The APPI must <strong>in</strong>clude a rat<strong>in</strong>g sheet to compute the scores given by the subject agency for each<br />

Major Criterion, and also to determ<strong>in</strong>e its overall score, to provide an <strong>in</strong>dicator of the level of<br />

assistance or <strong>in</strong>tervention required to remedy identified problems. For example, if an agency gets a<br />

very low rat<strong>in</strong>g of 20% <strong>in</strong> the assessment, this may be an <strong>in</strong>dication that the agency needs substantial<br />

assistance, to ensure that its <strong>in</strong>ternal regulations are consistent with the national procurement law. It<br />

will likely also need <strong>in</strong>-depth capacity build<strong>in</strong>g and monitor<strong>in</strong>g activities, to ensure that once its<br />

<strong>in</strong>ternal policies are sufficiently established it would be able to translate these <strong>in</strong>to actual practice that<br />

leads to improved outcomes. Conversely, a high rat<strong>in</strong>g of 90% may <strong>in</strong>dicate that the subject agency<br />

merely requires monitor<strong>in</strong>g activities to ensure that positive performance is susta<strong>in</strong>ed.<br />

The rat<strong>in</strong>g system shown below can also be used to grade an agency’s performance aga<strong>in</strong>st each major<br />

criterion. Us<strong>in</strong>g such a rat<strong>in</strong>g system, the assessor may then make recommendations on priority<br />

<strong>in</strong>terventions, grouped <strong>in</strong>to short, medium and longer-term actions.<br />

Table 2: <strong>Procurement</strong> Reform Rat<strong>in</strong>g System<br />

0 – 19% of<br />

Major Criteria<br />

20 – 69% of<br />

Major Criteria<br />

70 – 89% of<br />

Major Criteria<br />

90 – 100% of<br />

Major Criteria<br />

NA PA SA FA<br />

Where:<br />

NA = Not Achieved (Less than 20% rat<strong>in</strong>g on the Indicators)<br />

PA = Partially Achieved (At least 20% but less than 70% rat<strong>in</strong>g on the Indicators)<br />

SA = Substantially achieved (At least 70% but less than 90% rat<strong>in</strong>g on the Indicators)<br />

FA = Fully Achieved (90% to 100% rat<strong>in</strong>g on the Indicators)<br />

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8 Conclud<strong>in</strong>g Remarks<br />

The APPI should be carried out <strong>in</strong> selected key l<strong>in</strong>e agencies—particularly those that are most heavily<br />

<strong>in</strong>volved <strong>in</strong> procurement and that represent key sectors of the government, such as health, education<br />

and <strong>in</strong>frastructure—and, where applicable, at least one local government and one state-owned<br />

enterprise. In fact, dur<strong>in</strong>g the early stages of procurement reform, the APPI may have to be pilot<br />

tested <strong>in</strong> these key agencies, <strong>in</strong> preparation for a full implementation <strong>in</strong> the com<strong>in</strong>g years.<br />

Armed with the BIS assessment and the APPI for the aforementioned key l<strong>in</strong>e agencies, the national<br />

policy makers can then capture a broad picture of the follow<strong>in</strong>g:<br />

1. Progress <strong>in</strong> the implementation of the strategy that was developed through the BIS<br />

assessment, as well as difficulties encountered;<br />

2. How much of the national public procurement reform program has been rolled out to the l<strong>in</strong>e<br />

agencies, local government offices and other parts of the public sector;<br />

3. The impact of the reforms; and<br />

4. The strengths, weaknesses, opportunities and threats present <strong>in</strong> the public procurement<br />

system.<br />

Based on the above f<strong>in</strong>d<strong>in</strong>gs, policy makers can proceed with appropriate measures to improve the<br />

public procurement regime, and/or develop a new strategy to address unresolved needs, gaps and<br />

emerg<strong>in</strong>g issues. For example, if the BIS reveals that the legal and <strong>in</strong>stitutional frameworks are now<br />

strong, but the APPI shows that transparency and accountability <strong>in</strong> key l<strong>in</strong>e agencies rema<strong>in</strong> weak,<br />

then the next round of reforms may focus on creation of <strong>in</strong>ternal audit units and the development of<br />

records management systems with<strong>in</strong> those agencies.<br />

While technical assistance may be required <strong>in</strong> the <strong>in</strong>itial pilot phases of the BIS and the APPI, it will<br />

ultimately be the responsibility of the central oversight body to use these tools, so that all future<br />

policy decisions and recommendations are sufficiently grounded <strong>in</strong> field data and substantiated<br />

<strong>in</strong>formation. As such, the central oversight body must learn to use these tools as part of its standard<br />

operat<strong>in</strong>g procedures, so that it has the necessary capacity to use them without further external<br />

technical assistance.<br />

On a f<strong>in</strong>al note, it may not be advisable to put a time frame on each of the steps <strong>in</strong> the process of<br />

reform<strong>in</strong>g public procurement policies, systems and practices, because the length of time and the<br />

depth of <strong>in</strong>tervention may vary greatly from country to country and depend on a variety of factors.<br />

However, based on experience, the follow<strong>in</strong>g periods may be <strong>in</strong>dicative, but should not be controll<strong>in</strong>g:<br />

Table 3. Illustrative <strong>Procurement</strong> Reform Timeframe<br />

Step<br />

Step 1: Assess the national public procurement system and<br />

practices, develop the strategy and plan the approach<br />

Step 2: Develop or improve the legal framework<br />

Step 3: Develop the regulatory and <strong>in</strong>stitutional framework<br />

Step 4: Conduct capacity build<strong>in</strong>g programs<br />

Step 5: Assess the impact of reforms at both the central and local<br />

levels<br />

Period<br />

2 – 3 months<br />

2 – 3 years<br />

1 – 2 years<br />

1 year, and cont<strong>in</strong>uous<br />

thereafter<br />

1 month per agency<br />

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Notes<br />

i The World Bank Group, Philipp<strong>in</strong>es: From Short-term Growth to Susta<strong>in</strong>ed Development, p. 11 (2005).<br />

ii Susan Rose-Ackerman, Corruption and Government: Causes, Consequences and Reform, p. 27 (Cambridge<br />

University Press 1999).<br />

iii The <strong>in</strong>itiatives <strong>in</strong>cluded, <strong>in</strong>ter alia: the Countrywide Development Fund, Congressional Initiative Allocations,<br />

the <strong>Public</strong> Works Fund and the School Build<strong>in</strong>g Fund—otherwise known as “pork barrel” projects—<br />

iv Sheila S. Coronel, Ed., Pork and Other Perks: Corruption and Governance <strong>in</strong> the Philipp<strong>in</strong>es, pp. 38-43 (PCIJ<br />

1998).<br />

v See id.<br />

vi Jose Luis C. Syquia, The Legislative History of Republic Act No. 9184, and the Policies and Pr<strong>in</strong>ciples Beh<strong>in</strong>d<br />

<strong>Procurement</strong> Reform <strong>in</strong> the Philipp<strong>in</strong>es, 11 THE LAWYERS REVIEW 5 (November 30, 2003), cit<strong>in</strong>g the<br />

Sponsorship Speech delivered by Senator Edgardo J. Angara for the <strong>Procurement</strong> Reform Bill, entitled<br />

“Build<strong>in</strong>g Honest Roads to Progress” (October 24, 2002).<br />

vii See Vietnam F<strong>in</strong>ancial Times, Shock<strong>in</strong>g Losses: Interview with Mr. Mai V<strong>in</strong>h, Deputy Director of the State<br />

Budget Audit Department II, at 17 (September – October 2006).<br />

viii The World Bank (Operations and Country Services), Increas<strong>in</strong>g the Use of Country Systems <strong>in</strong> <strong>Procurement</strong>,<br />

p. 5 (March 2005).<br />

ix See Derick W. Br<strong>in</strong>kerhoff and Benjam<strong>in</strong> L. Crosby, Manag<strong>in</strong>g Policy Reform: Concepts and Tools for<br />

Decision-Makers In Develop<strong>in</strong>g and Transition<strong>in</strong>g Countries, at 25 (Kumarian Press, Inc. 2002).<br />

x The World Bank’s 2002 Country <strong>Procurement</strong> Assessment Report (CPAR) for Vietnam praised the move to<br />

prepare and enact a new <strong>Procurement</strong> Ord<strong>in</strong>ance to replace a piecemeal and scattered legal framework for public<br />

procurement. See World Bank Vietnam, Vietnam Transform<strong>in</strong>g <strong>Public</strong> <strong>Procurement</strong>: Country <strong>Procurement</strong><br />

Assessment Report, p. 9 (October 2002).<br />

xi The World Bank’s 2003 CPAR for the Philipp<strong>in</strong>es identified an urgent need to review and revise the country’s<br />

procurement laws and regulations to elim<strong>in</strong>ate problems crated by a fragmented and outdated legal framework.<br />

See World Bank Office Manila, Philipp<strong>in</strong>es: Country <strong>Procurement</strong> Assessment Report, p. 10 (March 2003).<br />

xii See UNCITRAL, Guide to Enactment of UNCITRAL Model Law on <strong>Procurement</strong> of Goods, Construction and<br />

Services .<br />

xiii See UNCITRAL, 38th Session, Report of Work<strong>in</strong>g Group I (<strong>Procurement</strong>) on the work of its sixth session, p.<br />

5 (Vienna, August 30 – September 3, 2004).<br />

xiv See UNCITRAL Work<strong>in</strong>g Group I (<strong>Procurement</strong>), Seventh Session, Note by the Secretariat: Possible<br />

revisions to the UNCITRAL Model LAW on <strong>Procurement</strong> of Good, Construction and Services – issues aris<strong>in</strong>g<br />

form the use of electronic communications <strong>in</strong> public procurement, p. 2 (New York: April 4-8, 2005).<br />

xv UNCITRAL, Thirty-eighth Session, Report of Work<strong>in</strong>g Group I (<strong>Procurement</strong>) on the work of its sixth<br />

session, p. 8 (Vienna: July 4-222, 2005).<br />

xvi The World Bank Office Manila, supra note xi, at 23.<br />

xvii UNCITRAL, supra note xv, at 9.<br />

xviii R.A. 9184, IRR, Sec. 8.1.2.<br />

xix UNCITRAL Work<strong>in</strong>g Group I (<strong>Procurement</strong>), Note by the Secretariat: Possible revisions to the UNCITRAL<br />

Model Law on <strong>Procurement</strong> of Goods, Construction and Services – issues aris<strong>in</strong>g from the use of electronic<br />

communications <strong>in</strong> public procurement, Comparative study of practical experience with the use of electronic<br />

(reverse) auctions <strong>in</strong> public procurement, p. 3 (New York: April 4-8, 2005).<br />

xx For a contrast<strong>in</strong>g case to the PrMO of Lao PDR, see Appendix 1 for a case study on Ghana’s <strong>Public</strong><br />

<strong>Procurement</strong> Board.<br />

xxi Joseph J. Norton, International F<strong>in</strong>ancial Institutions and the Movement toward Greater Accountability and<br />

Transparency: The Case of Legal Reform Programmes and the Problem of Evaluation, 35 THE INTERNATIONAL<br />

LAWYER 1443, 1447 (2001), cit<strong>in</strong>g Michael Patton, Practical Evaluation, 33-37 (1982).<br />

xxii Id, at 1448.<br />

Fiscal Reform and Economic Governance Project 25

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