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Future Development

World Bank procurement reform: Some notes for the Board

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After an extensive worldwide effort to engage stakeholders, World Bank management has now issued its final draft of its reforms for approval by its Board. For many of us who have participated in this effort and understand the differing agendas of various stakeholders, the result is indeed, as stated in the paper, “a once in a generation systematic reform and culture change.” The resultant framework, policy, procedures, and guidelines offer great potential to make public procurement a more effective strategic instrument for achieving quality outcomes while guarding against fiduciary risks by offering a more robust approach and menu of procurement options, consistent with global best practice.

As we all know well, however, adopting a policy change of such magnitude is the easier (though not easy) part of the task. Ensuring effective and consistent implementation and adaptation is the critical challenge facing the Bank and its borrowers. In that regard, we offer five points for the Bank and its Board regarding implementation:

  1. Managing expectations. The greatest danger to the reform is overly inflated expectations, both inside and outside the World Bank. Substantive changes take time, and presuming the reforms can be implemented in too short a time frame endangers the effectiveness of the process. A reform of such magnitude, both in terms of technical and cultural application, will require many years to reach fruition. Countries that expect to apply country systems, staff who expect to apply different approaches and board members who expect process efficiencies all overnight will be greatly disappointed. The most relevant parallel is the reform of environmental and social safeguards in the 1990s that took many years to take full effect with major changes in staffing, procedures, and practices. Related to these expectations is the issue of risk aversion. Initial application of the reforms requires an open mind about risk-taking in order to pursue the potential opportunities. The board should give management the space it needs to enact this policy, and should be tolerant in terms of risk and timeline.
  2. Developing human resources. The detailed implementation plan provided by management recognizes the critical issue of training bank staff as well as borrowing country staff. With only 10 percent of bank procurement staff considered to be “best in class” relative to comparator organizations—a relatively poor percentage for a normative and advisory institution—the plan’s targets for the next few years seem very optimistic. Similarly, the focus on raising country capacity, including that of civil society organizations, while commendable, requires some very serious rethinking as to what type of programs or approaches would be necessary given past experience. Does the bank have the capacity to provide such training and at what scale? As this goes beyond the traditional focus of bank procurement functions and is now a major pillar of the reform, the board should take a particular interest in monitoring and supporting such efforts.
  3. Providing the funding. This reform clearly requires more from the bank and its staff, and meeting these new demands will come with a significant price tag. A real test of the bank’s commitment to the reform is whether it will truly fund the capacity building element. Will it put its money behind its policy? The management paper assumes substantial savings from efficiencies generated in review processes, but experience casts significant doubt on these expectations. The paper refers to the difficulty of doing such reform during the period of budget constraints within the bank. It does seem that management is being cautious in raising the budget issue beyond a certain point. In particular, it is apparent that the bank does not intend to provide much of its own budget for capacity building in countries. Instead it offers the mobilization of a multidonor trust fund, the traditional answer to all budgetary sins. Indeed, most of the other multilaterals are also talking about such trust funds. The board should ensure that institutional funding is sufficient to meet the goals of the reform, and should consider facilitating specific bilateral partnerships to fund procurement reform at the country level.
  4. Addressing the whole procurement cycle. One of the key objectives for many of us responding to the reform proposals was to broaden the focus of bank policy beyond just the bid and award stage of the procurement cycle. While the reforms incorporate important elements in the upstream design of procurement as well as the alternative approaches to bid and award, the downstream stage of contract management gets relatively light treatment. Contract management represents the most under-monitored yet crucial stage of project performance. It is an area of high risk as things go wrong or corruption and fraud intervenes without oversight, reporting, or accountability. International procurement experts are also divided as to whether this stage is part of the procurement experts’ responsibility. To change bank practice requires a profound culture shift and a greater integration of technical and procurement staff missing from the policy’s documents. The board should encourage management to address such gaps.
  5. Measuring the impact of the reform. The performance measures of World Bank procurement have heavily focused on process indicators and indicators of what happens during bid and award. Thus, there is a focus on number of bidders, time between steps of decision-making, and other indices of efficiency. Additionally, there are measures such as number of staff trained and other “input” related metrics. Conspicuously absent are measures on effectiveness, meaning the effect of the procurement reform on project outcomes has not been systematically tracked. This would require looking at projects after closing and determining to what extent procurement contributed to or jeopardized the quality of results. Were the IT specifications appropriate? Was the cost of the road built reasonable? Did the pharmaceuticals make it to the local dispensary? Further, one would want to know which stage of procurement could be faulted. Was it the design stage and choice of approach, the bid and award phase, or the contract implementation phase? The review by the Independent Evaluation Group (IEG) ignored this type of analysis. While one would not expect such an analysis to be executed for each project, it should be conducted for a good sample by sector. The board should instruct the IEG to develop an approach for such an analysis and to use this to inform the review of the reforms’ impacts in terms of project results and outcomes.

There is a huge role for non-World Bank stakeholders in this process as well; it is great to hear that management will review the existing “Bank’s Guidance for Staff on Handling Procurement Information” in fiscal year 2016, so as to provide guidance to staff on options to be considered for making key procurement documents openly and freely electronically available, in accordance with the bank’s Access to Information Policy. To the extent this involves more open data, access to contracts themselves, and linkages with downstream measures of project outcomes, it will allow civil society to help monitor contract delivery as well as outside analysts to evaluate the impact of procurement choices on development outcomes. Given what will remain limited World Bank capacity to both monitor processes and measure impact, the bank should welcome outside help.

The work is just beginning, and the implications for public procurement in developing countries will go well beyond World Bank-financed investments.

Authors

D

Daniel F. Runde

Director, Project on Prosperity and Development, Center for Strategic and International Studies

This blog was first launched in September 2013 by the World Bank in an effort to hold governments more accountable to poor people and offer solutions to the most prominent development challenges. Continuing this goal, Future Development was re-launched in January 2015 at brookings.edu.

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