1. Use of Country Systems: Consultations on the Draft Methodology for Use of Country Procurement Systems
Elective Session
2nd Africa Region Education Capacity Development Workshop
“Country Leadership and Implementation for Results in the EFA FTI Partnership”
Tunis, Tunisia
December 5, 2007
V.S. Krishnakumar

2. 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 Earlier proposal to expand use of country procurement systems withdrawn to update and reflect comments from consultation process.

6. 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)

7. 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 through the Bank policy vice-presidency, reports on proposed Pilots would be sent to the Board for information plus progress report after one year

8. 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 substantially achieved equivalence

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

10. Phase I - Country Selection Process for Pilots in Safeguards, Financial Management and Procurement
Suggested Procurement Related Criteria
CPAR and status of related reforms and capacity development, 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

11. Phase II – Procurement Assessment, Analysis and Capacity Development at Country Level
CPAR, including updates and/or action plans and on-going reforms, as well as NCB side-letters, provide information on the system 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
E-procurement: fully functioning and accessible website

12. 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.

13. Phase II - Equivalence Assessment
Ensures that “equivalence” to the principles (economy and efficiency, eligibility/access, development of local industry, and transparency) 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
A special agreement with the country to address any outstanding issues will be made part of the Legal Agreement for the pilot projects.
Issue of large, complex and innovative/non standardized processes

14. 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

15. 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.

16. 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

17. Phase III – Project/Sector Assessment
Capacity Assessment of Implementing Agency will use enhanced dynamic risk assessment and management tool to identify risk related factors (web-based application)
Risk mitigation measures agreed and made part of project requirements, to be tracked during project implementation

18. Phase III – Sector/Project Implementation
Legal Agreement will be specially constructed to cover key Bank requirements and provide Bank with normal remedies (misprocurement) and ability to rescind pilot status
Detailed 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 and adapted post-review procedures to be used throughout implementation

19. 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

20. 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

21. Part III Overview of the Consultation Strategy
Country Systems
Part III
Overview of the Consultation Strategy

22. 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

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

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

25. Scheduled Consultations
September2007
Copenhagen, Denmark
Rome & Milan, Italy
Paris, France
Berlin, Germany
Amsterdam, Netherlands
London, UK
OECD/DAC Procurement Joint Venture
CICA
FIDIC
October 2007
US/Canada
Japan, Korea
India
To Be Scheduled:
Regional meetings

26. 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

27. 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/DACX toll 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?

28. Key Discussion Issues
Under this proposal, not all procurements would be included in these pilots. Should the Bank include complex. high value procurement issues such as those now cleared by the Operations Procurement Review Committee (OPRC) [e.g. S&I, sophisticated equipment, information technology, PPP and concessions] 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?

29. Key Discussion Issues
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?
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?

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

31. 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

32. 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

33. 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 3rd Party Audits

34. 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