Use of Country Systems

1
Use of Country Systems

• Consultations on the Draft Methodology for Use of
  Country Procurement Systems

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Presentation Outline

• Part I - Why Use Country Systems
• Part II - Procurement Methodology
• Part III - Consultation Process
• Part IV - Handling of Past Issues

3
Why Is the Bank Interested in Use of Country
Systems

• Part I - Background

4
Why Are We Interested in Use of Country Systems?

• Scale up development impact
• Increase country ownership
• Facilitate harmonization
• Simplify and reduce costs
• Links to
• Paris Declaration
• MIC Agenda
• GAC Agenda (principle 6)

5
Where Do We Stand?

• Environment and social safeguards pilot projects
  approved 03/05, 12 ongoing pilots
• Financial management country systems are the
  default choice under existing policy, but many
  Project Implementation Units (PIUs) still created
  outside regular financial system. Country
  systems used 60 of time in eligible countries
• Procurement use of National Competitive Bidding
  under country systems common. Earlier proposal
  to expand use of country procurement systems
  withdrawn to update and reflect comments from
  consultation process.

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Lessons from Safeguards Pilot and Financial
Management

• Limited take up
• Costs of upfront preparation are prohibitive
• Need for clear management signals, especially
  related to GAC
• Project-by-project approach very limited in
  impact (12 projects in portfolio of 1600)

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New Proposal 1 Country Pilots

• To accelerate progress we propose to supplement
  project-by-project approach
• New Country Pilots with at least 8 countries in
  the first year (candidates to be proposed by
  Regions)
• Assessment in each case of procurement,
  safeguards, financial management that can meet
  the Bank standards
• Identification of policy reforms and capacity
  building measures to address any gaps
• After approval via OPCS, reports on proposed
  Pilots would be sent to Board for information
  plus progress report after one year

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New Proposal 2 Procurement Project Pilots

• In addition to country pilots, propose pilots in
  procurement at the sector/project level for ICB
  and Selection of Consultants
• Assessment based on policy framework and
  performance equivalent to Bank policies
• Use of Country Procurement Assessment Reviews
  (CPARs) new OECD/DAC Assessment Methodology, and
  performance indicators
• Provision for re-imposition of Bank procedures if
  new system abused
• Emphasis that this is not a reduction of Bank
  standards, but recognition that many countries
  have achieved equivalence

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Part II - A Multi-Phased Process Key
Elements of Draft Detailed Methodology for
Procurement Country Systems Piloting Program
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Phase I - Country Selection Process for Pilots in
Safeguards, Financial Management and Procurement

• Suggested Procurement Related Criteria
• CPAR and other relevant diagnostics
• PFM System Information (e.g. PEFA or CFAA,
  Integrated Fiduciary and/or PER)
• Existing/planned OECD/DAC assessment
• Expressed interest of country
• Country Director and country team support

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Phase II Procurement Assessment, Analysis and
Capacity Development at Country Level

• CPAR provides information on the system including
  action plan for any on-going reforms and
  indication of country commitment
• OECD/DAC benchmarking tool provides for scoring
  of 54 sub-indicators on 0-3 scale with a score of
  3 representing best practice
• 30 of the 54 sub-indicators in the OECD/DAC tool
  have been identified as critical and require
  achieving the highest score of 3 for 22 of the
  sub-indicators or a score of 2 with an agreed
  action plan for 8 of the sub-indicators.
• Remaining 24 sub-indicators require achieving a
  score of 2

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Phase II - Capacity Development

• If country assessments indicate failure to
  achieve stated standards, focus will be on
  addressing issues through increased capacity
  development, country will not be a pilot for
  procurement.
• If issues in system can be addressed in the short
  term, country will remain a candidate country
  while capacity develop undertaken. Country will
  move to next level once noted issues have be
  corrected.

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Phase II - Equivalence Assessment

• Ensures that equivalence to the principles and
  policies defined by the Bank is achieved and
  maintained
• Each key policy of the Banks Guidelines
  addressed through the assessment process which
  verifies the countrys policies, procedures and
  practices
• A special agreement with the country to address
  any outstanding issues will be made part of the
  Loan Agreement for the pilot projects.

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Phase II - Selection of Consultants

• All consulting requirements above threshold1 to
  follow Bank Guidelines
• All consulting requirements below threshold to
  use country methods agreed with the Bank
• Country may request an equivalence assessment for
  increased reliance on use of country system for
  consultancy assignments above the stated
  thresholds.
• 1. Threshold set on basis of country by country
  thresholds established for shortlists comprised
  of national firms only

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Phase III Sector/Project Selection, Assessment
and Implementation

• General criteria
• Based on projected lending program in CAS
• Focused projects, preferably not multiple
  programs in a sector, but including SWAps
• Not complex, preferably with a single
  implementing agency
• No projects with a PIU to be considered.
• Procurement policy requires a capacity assessment
  of the responsible implementing agency for the
  sector/project.

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Phase III Project/Sector Assessment

• Procurement performance data collected from
  Implementing Agency to be assessed and will set
  baseline for monitoring
• Advertisement of opportunities
• Time allowed for bid preparation
• Time for bid evaluation and award
• Use of less competitive methods
• Time to resolve complaints
• Award based on stated criteria
• Payment process

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Phase III Project/Sector Assessment

• Capacity Assessment of Implementing Agency will
  use enhanced risk assessment tools to identify
  risk related factors
• Risk mitigation measures agreed and made part of
  project requirements

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Phase III Sector/Project Implementation

• Loan Agreement will be specially constructed to
  cover key Bank requirements and provide Bank with
  normal remedies (misprocurement) and ability to
  rescind pilot status
• Procurement plans to be published, updated and
  carefully monitored
• Complex and high value procurement to be
  identified and procurement notices published
  using UNDB in addition to other publication sites
  which will be identified for each pilot country
• Annual independent third party procurement audits
  to be required
• Performance data to be monitored throughout
  implementation

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Bank Role and Responsibilities

• Procurement Sector Board to be involved in the
  piloting process by providing oversight, staff
  development, support for resolution of issues and
  reporting on results
• Operations Procurement Review Committee (OPRC)
  will review and vet the phases of the assessment
  process
• Regional procurement staff will retain normal
  supervision responsibilities focused on post
  review, performance monitoring, and capacity
  development

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Some Additional Key Bank Responsibilities

• Monitoring of Performance Indicators
• Monitoring of Complaints reported to Bank
• Monitoring of Payments
• Management of remedies and key additional
  provisions in Loan Agreement
• Reporting on Progress
• Monitoring of Disclosure

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Country Systems

• Part III
• Overview of the Consultation Strategy

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Consultation Objectives

• Improve the quality of the new methodology for
  piloting the use of country systems in
  procurement
• Tap the knowledge of a diverse range of
  stakeholders
• Listen to issues raised and address them to the
  maximum extent in new methodology
• Focus on future actions

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Types of Consultation

• I. A global electronic consultation with the
  document posted on the web and comments collected
  from email
• WEB package will contain
• The process
• Explanation of the process
• Basic QA
• Issues raised in the past and how new methodology
  addresses them
• Summary of comments received and Banks response
  will be posted and regularly updated

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Types of Consultation

• A multi country consultation with meetings held
  in both Part I and Part II Countries
• Private Sector
• Government
• Other Stakeholders

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Scheduled Consultations

• September2007
• Copenhagen, Denmark
• Rome Milan, Italy
• Paris, France
• Berlin, Germany
• Amsterdam, Netherlands
• London, UK
• JV for Procurement Mtg.

• October 2007
• Japan
• Korea
• India
• To Be Scheduled
• Senegal
• Kenya
• Others

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Implementation Timeline

• Technical presentation to the Board in September
  2007
• Publish draft methodology on website in September
  2007 following internal consultations
• Consultations with external stakeholders
  September November, 2007
• Finalization of the Methodology in November 2007
• Board approval in December 2007
• Selection of Pilot Countries early 2008

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Key Discussion Issues

• The following are a few key issues for
  discussion
• The World Bank has proposed a detailed
  methodology for a procurement country system
  piloting program in 8 -  10 countries.  What
  remaining questions need to be addressed or
  clarified about this program?
• The OECD/DAC benchmarking index provides for
  scoring of 54 sub-indicators on a 0-3 scale with
  a score of 3 representing best practice.  30 of
  54 sub-indicators in the OECD/DAC tool have been
  identified as critical and require achieving the
  highest score of 3 for 22 of the sub-indicators
  or a score of 2 with an agreed action plan for 8
  of the sub-indicators.  Is this achievement level
  appropriate and if not, why?

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Key Discussion Issues

1. Under this proposal, not all procurement would be
   included in these pilots. Should the Bank include
   complex, high value procurement such as those
   e.g. highway construction, power generation
   equipment, information technology now cleared by
   the Operations Procurement Review Committee
   (OPRC) in the use of pilot country procurement
   systems?
2. Is the proposed handling of the Selection of
   Consultants in the pilots satisfactory? If not,
   how can this be strengthened?

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Key Discussion Issues

1. Are the proposed performance based measures
   sufficient to address transparency, access to
   information and governance and anticorruption
   issues (GAC) that have been raised with regard to
   the pilots of country systems in procurement?
2. Do you have other suggestions that will
   strengthen the World Bank Group's efforts to help
   countries improve their procurement systems and
   help us learn from these pilots?

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Handling of Past Issues

• Part IV
• How Current Methodology Addresses Issues Raised
  with regard to Previous Paper

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ISSUES RAISED IN PREVIOUS PAPER HOW CURRENT METHODOLOGY ADDRESSES THESE ISSUES
The 3 Tiered approach (Baseline Indicators, Performance Indicators and Equivalence) is an incomplete measurement OECD/DAC/WB BLI for measuring quality and compliance of a system not fully developed and tested at the time Performance and Equivalence measurements have been improved Results of CPPR and other PFM diagnostics will be considered Assessment will be carried out at three levels Country/Sector/Project
The standards have been set too low. There is a small number of mandatory requirements or critical sub-indicators (39) which do not cover essential elements such as conflict of interest, dispute resolution, etc. No. of critical sub-indicators have been increased to 55 and all have to reach the maximum score of 3 and others at least a 2 using the OECD/DAC BLI (Version 4) Provisions for Special Agreement as part of the Loan Agreement subject to Application of Bank Remedies
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Handling of Issues
ISSUES RAISED IN PREVIOUS PAPER HOW CURRENT METHODOLOGY ADDRESSES THESE ISSUES
Use of Banks Standard Bidding documents should be a requirement for ICB Bidding documents for major, complex and high value procurement (as identified in procurement plans) subject to OPRC prior reviews may use Banks SBD and will be reviewed against Banks Guidelines
Performance of the system is not an eliminating criterion and its measurement too subjective Procurement is a specialized area and judgment of qualified specialists is necessary Countries and/or projects with poor performance track records will not be part of the pilot program
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Handling of Issues
ISSUES RAISED IN PREVIOUS PAPER HOW CURRENT METHODOLOGY ADDRESSES THESE ISSUES
Indices for measuring equivalence related to the selection of consultants are not sufficient The new methodology recommends the use of Banks guidelines for contracts equivalent or greater than established threshold. For contracts of less value, agreed national procedures may be used
The Bank is relinquishing its fiduciary responsibility The Bank will continue supervision missions and retain its right to review procurement decisions, audit all processes and declare misprocurement when needed The fraud and corruption provisions in the Guidelines will be maintained The Bank will continue to follow up on handling of complaints The Bank will require 3rd Party Audits
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Handling of Issues
ISSUES RAISED IN PREVIOUS PAPER HOW CURRENT METHODOLOGY ADDRESSES THESE ISSUES
Once a country is chosen for the pilot program, ongoing performance will no longer be a concern to the Bank The performance of the country will be monitored during implementation to ensure that progress, quality and standards are maintained The Loan Agreement will define remedies in case of non performance and obligations to be respected
It is better to use one set of procurement guidelines instead of many country systems Using Country Systems strengthen borrowers capacity and increase transparency and contribute to the achievement of the objectives of the Paris Declaration on Aid Effectiveness Our objective is not to facilitate bidding for a few international bidders