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

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

Why Is the Bank Interested in Use of Country Systems Part I - Background

Why Are We Interested in Use of Country Systems? Scale up development impact Scale up development impact Increase country ownership Increase country ownership Facilitate harmonization Facilitate harmonization Simplify and reduce costs Simplify and reduce costs Links to: Paris Declaration Paris Declaration MIC Agenda MIC Agenda GAC Agenda (principle #6) GAC Agenda (principle #6)

Where Do We Stand? Environment and social safeguards: pilot projects approved 03/05, 12 ongoing pilots 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 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 Earlier proposal to expand use of country procurement systems withdrawn to update and reflect comments from consultation process. 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 Earlier proposal to expand use of country procurement systems withdrawn to update and reflect comments from consultation process.

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

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;) 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 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 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 After approval via OPCS, reports on proposed Pilots would be sent to Board for information plus progress report after one year

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 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 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 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

Part II - A Multi-Phased Process Key Elements of Draft “Detailed Methodology for Procurement Country Systems Piloting Program” Part II - A Multi-Phased Process Key Elements of Draft “Detailed Methodology for Procurement Country Systems Piloting Program”

Phase I - Country Selection Process for Pilots in Safeguards, Financial Management and Procurement Suggested Procurement Related Criteria 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

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 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 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. 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 Remaining 24 sub-indicators require achieving a score of 2

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 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. 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.

Phase II - Equivalence Assessment Ensures that “equivalence” to the principles and policies defined by the Bank is achieved and maintained Ensures that “equivalence” to the principles and policies defined by the Bank is achieved and maintained Each key policy of the Bank’s Guidelines addressed through the assessment process which verifies the country’s policies, procedures and practices Each key policy of the Bank’s Guidelines addressed through the assessment process which verifies the country’s 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. A special agreement with the country to address any outstanding issues will be made part of the Loan Agreement for the pilot projects.

Phase II - Selection of Consultants All consulting requirements above threshold 1 to follow Bank Guidelines All consulting requirements above threshold 1 to follow Bank Guidelines All consulting requirements below threshold to use country methods agreed with the Bank 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. 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

Phase III – Sector/Project Selection, Assessment and Implementation General criteria: 1. Based on projected lending program in CAS 2. Focused projects, preferably not multiple programs in a sector, but including SWAps 3. Not complex, preferably with a single implementing agency 4. No projects with a PIU to be considered. Procurement policy requires a capacity assessment of the responsible implementing agency for the sector/project.

Phase III –Project/Sector Assessment Procurement performance data collected from Implementing Agency to be assessed and will set baseline for monitoring: 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

Phase III – Project/Sector Assessment Capacity Assessment of Implementing Agency will use enhanced risk assessment tools to identify risk related factors 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 Risk mitigation measures agreed and made part of project requirements

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 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 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 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 Annual independent third party procurement audits to be required Performance data to be monitored throughout implementation Performance data to be monitored throughout implementation

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 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 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 Regional procurement staff – will retain normal supervision responsibilities focused on post review, performance monitoring, and capacity development

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

Country Systems Part III Overview of the Consultation Strategy

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

Types of Consultation I. A global electronic consultation with the document posted on the web and comments collected from WEB package will contain: 1. The process 2. Explanation of the process 3. Basic Q&A 4. Issues raised in the past and how new methodology addresses them 5. Summary of comments received and Bank’s response will be posted and regularly updated

Types of Consultation II. A multi country consultation with meetings held in both Part I and Part II Countries –Private Sector –Government –Other Stakeholders

Scheduled Consultations September2007 September2007 Copenhagen, Denmark Rome & Milan, Italy Paris, France Berlin, Germany Amsterdam, Netherlands London, UK JV for Procurement Mtg. October 2007 October 2007 –Japan –Korea –India To Be Scheduled: Senegal Kenya Others

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

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 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? Key Discussion Issues

3. 3. 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? Is the proposed handling of the Selection of Consultants in the pilots satisfactory? If not, how can this be strengthened?

Key Discussion Issues 5. 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? 6. 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?

Handling of Past Issues Part IV How Current Methodology Addresses Issues Raised with regard to Previous Paper

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

Handling of Issues ISSUES RAISED IN PREVIOUS PAPER HOW CURRENT METHODOLOGY ADDRESSES THESE ISSUES Use of Bank’s 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 Bank’s SBD and will be reviewed against Bank’s 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

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 Bank’s 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 3 rd Party Audits

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