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Reforming Public Procurement -- Syquia 4. They can make governmental systems more accessible and user-friendly, and allow governments to keep up with changes in technology, business practices and market prices; 5. Government bidding markets are opened to suppliers who had not enjoyed access to them previously; and 6. The potential of having a positive effect on competition, in particular by dismantling the preferential purchasing patterns in some countries. However, UNCITRAL also reported the following issues and concerns with ERAs: 1. They do not guarantee the lowest responsible and responsive price and continued savings in subsequent ERAs as, unlike in traditional sealed bids where competitors have only one opportunity to bid, each bidder recognizes that it will have the option to provide successive bids and therefore has little incentive to offer its best price and subsequently may never offer its best price; 2. There may be hidden costs that negate any savings realized from the auction process; 3. They may encourage imprudent bidding and thus create a higher risk of abnormally low bids; 4. They do not adequately handle non-price factors, such as quality of performance and buyer-supplier relationships; 5. ERAs are more vulnerable than traditional bidding processes to collusive behavior by bidders, especially in projects characterized by a small number of bidders, or in repeated bidding in which the same group of bidders participate; 6. ERAs may have negative effects on the market, including an anti-competitive and a negative impact on technical innovations and innovative practices; and 7. Some analysts question the legality of such a technique in light of the conflict of its inherent features with traditional procurement principles and practices, such as rules forbidding the disclosure of information on other bids. ERAs are reportedly more successful for goods and services that can be clearly specified, whose nonprice criteria can be quantified, and for which a competitive market exists. When quality is more important than price, and when supplier relationships are critical, ERAs may not be as suitable. Finally, the government has to ensure that complex technology, operating capabilities, legal and regulatory infrastructure, and systems that allow the submission and opening of bids electronically are in place, and that there is security, reliability and accessibility throughout the process. 5 Step Three: Develop the oversight and institutional framework Aside from the need to strengthen the legal and policy framework for government procurement, it is necessary to develop and establish an independent body that provides policy guidance and leadership on matters related to public procurement. This must be a central body that operates impartially and transparently, and it must have clear authority over government-wide procurement; otherwise, it may only be regarded as a superficial body that churns out policy with neither the field information to support its issuances nor the power to enforce them. Furthermore, it should be an inter-agency body with effective private sector representation, so that both sides of a procurement contract are adequately represented in policy development, and undue external and political influences are avoided. Such a body would be responsible for, inter alia: 1. Formulating procurement policy, rules and procedures; 2. Ensuring that these issuances are disseminated to and understood by implementing agencies; 3. Monitoring and evaluating compliance; 4. Providing tools to achieve efficiency, accountability and economy; and Fiscal Reform and Economic Governance Project 13
Reforming Public Procurement -- Syquia 5. Building capacity and increasing the level of professionalism in the procurement function.” The oversight body should be established with a sufficient level of authority within the government bureaucracy, so that it is able to exercise effective authority over procuring entities and tendering committees with respect to decision-making, administrative review and, if needed, regulatory functions. Care should be taken, however, not to overburden this body with responsibilities beyond its core purpose or the capacity of its staff resources. For instance, it is important to maintain the distinction between policy and operational matters in defining the functions of the oversight body. Lao PDR’s oversight body, the Procurement Monitoring Office (PrMO), encountered this very problem following its establishment in 2004. The government’s new procurement decree, its implementing rules and the PrMO’s founding charter detail the body’s responsibilities. Accordingly, the PrMO is not only responsible for regulation and policy formulation, but also for operational matters such as review and approval of tender modifications and bid evaluations. As a policy making body, attaching additional operational responsibilities to the PrMO exposes the oversight body to potential conflicts. Operational issues may also end up taking much of the oversight agency’s time and resources away from its primary goal of policy development. xx Certainly, an effective procurement system requires an active oversight body to ensure that all procuring entities properly implement the law and all aspects of the country’s procurement reform program. However, if the oversight body takes the form of a board and is appropriately composed of high-ranking government officers, these officers should not be expected to perform technical work. As such, there would be a need for an office that would not only function as the secretariat and administrative corps of the oversight body, but would also provide it with much needed research and technical capacity. In the Philippines, for example, the Government Procurement Policy Board (GPPB) relies heavily on the legwork of its Technical Support Office (TSO), which performs the following functions: 1. Research-based procurement policy recommendations and rule-drafting; 2. Evaluates the effectiveness of the government procurement system and procurement reform program, and conducts studies to improve and develop the system, coverage and procedures; 3. Monitors and ensures compliance by procuring entities with all procurement laws, rules and regulations, and assists agencies in their procurement activities; 4. Professionalizes government procurement practitioners through the development and implementation of regular nationwide procurement training programs and the establishment of a procurement course and certificate program; 5. Develops and updates the generic procurement manuals and standard bidding documents; 6. Monitors the implementation and effectiveness of the PhilGEPS e-procurement system; and 7. Administrative and secretariat work. 6 Step Four: Capacity Building Even if substantial efforts are undertaken during the initial advocacy stage to sell the reforms to, and consult with, both top-level and mid-level champions, if no equivalent amount of effort is taken to communicate these to the implementers in the field and train them on the new procedures, the overall effort may fail. As the implementers of any procurement policy or process, the procurement practitioners in each of the procuring agencies and local government units are really the “enablers” of the reforms. Therefore, a well-functioning procurement system depends on how well these “enablers” understand and apply the law. Fiscal Reform and Economic Governance Project 14
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