World Bank procurement reform: From one-size-fits-all to country-specific

As the World Bank undertakes the most significant overhaul of its procurement policy in decades, the Washington, D.C.-based institution has reignited a debate over how far it should go in relying on client countries’ own procurement systems for bank-financed projects. In the works for over a year, a basic outline of the reform plans, was approved by the finance institution’s board last month. Implementation is set for 2015, and further elaboration of the policies — as well as additional consultation with industry groups and NGOs — are slated for next year. The strategy document makes it clear that the World Bank wants to move toward a more country- and context-specific model, and away from the one-size-fits-all approach that characterizes much of bank-funded procurement. But how far the the institution will go in relying on national procurement systems is unclear as the bank has yet to elaborate the criteria and standards it will be using to approve those systems for bank-financed procurement. The plans have already stoked fears among some sectors that believe the bank will rely too much on borrowing countries’ policies and institutions, which may be too weak to uphold standards to ensure, for instance, that fair bidding processes are fair and anti-corruption measures are adequate. Christopher Browne, World Bank chief procurement officer, tried to assuage those concerns, suggesting the institution would tread carefully and keep appropriate levels of oversight over bank-funded contracts. “I think there’s this misperception out there that this change means the bank is just going to throw away the guidelines, throw away its oversight and everything else, and basically just push everything to countries, and that’s far from the case,” Browne said in an exclusive interview with Devex. “In some situations we may be providing much more support than we do now.” Assurances Currently, borrowing countries must follow the bank’s own set of guidelines when acquiring goods and services using World Bank loans. Within two years, however, the institution wants to accept other well-regarded procurement standards, and make its own procurement policies more flexible. According to Browne, the new policy will empower the bank to use national procurement systems that work well, the most obvious cases being countries like Croatia and Poland, which use European Union procurement guidelines and are frustrated by the bank’s additional set of requirements. Other countries with procurement policies that meet the bank’s standards would be similarly empowered. He added that the bank’s guidelines will remain as a default for countries with weak procurement systems and for projects under international competitive bidding. While efforts to move toward country procurement systems for bank-funded projects have moved in fits and starts in the past, they have gained momentum in recent years. International aid agreements like the Paris Declaration and the Busan Partnership have also promoted the the notion that country-led procurement and country ownership leads to more effective aid delivery. And as international standards and practices for government procurement have evolved, a number of borrowing countries have adopted procurement practices that would meet bank standards. But the companies that bid on bank-funded contracts — especially U.S. and European firms — view with skepticism the idea of moving toward using more national procurement systems. In their opinion, World Bank procurement guidelines may seem cumbersome for countries, but bidders see the rules as a reassurance that the process will be fair — and even more importantly, that they can appeal to the bank if it’s not. “The vendors prefer the bank’s guidelines both because they are familiar, and because they are viewed as the gold standard by many people,” said Dan Gordon, associate dean of government procurement law at George Washington University and a member of the World Bank’s international advisory group on procurement. Too early? A number of trade groups representing U.S. and European firms have urged the World Bank to reconsider the move toward using national systems. “We think it’s putting the cart before the horse,” noted Bill Reinsch, president of the National Foreign Trade Council, an industry group based in Washington, D.C. “If these countries don’t already have transparent, efficient procedures — and in particular if you haven’t dealt with corruption issues — you’re just asking for trouble.” The bank’s use of country procurement systems might create “a sense of insecurity amongst bidders about the reliability and the practical implementation of rules and regulations,” according to European International Contractors, a group representing construction companies. The Federation of German Industry, another trade group, urged caution on changing the policy, calling on the bank to wait for forthcoming evaluations of its pilot program on country-led procurement before moving ahead with larger plans to use country systems. Gordon explained that making sure there are adequate dispute resolution and complaint procedures for business would be one of the thorniest issues involved in a move toward more country-led procurement, as businesses will want to be assured that they won’t be left to deal with national legal systems that might be biased against them. “It’s a tough issue,” he said, but added the bank had done a good job of listening to concerns so far. Flexibility Despite the uncertainty inherent in such a sweeping reform, continuing to rely on the same guidelines developed nearly 40 years ago for every project, simply doesn’t make sense, said Browne, emphasizing the need for flexibility, given the diversity of projects the World Bank funds: from small-scale women’s empowerment projects, for example, to giant infrastructure projects, from Bosnia to Burkina Faso and 166 countries in between. The institution plans to update its current guidelines, which are operational policy and therefore require the approval of the board of directors for any change or waiver. According to the strategy document, the new guidelines will be divided into three parts: - New operational policy. - Set of “bank procedures” to provide guidance on how to comply with that policy. - “Toolkit” for public procurement, including standard bidding documents and training materials for the bank’s clients. Different elements of the new guidelines will be used depending on the scale and risk of a project, as well as the country context. Lessons learned The bank’s previous foray into country-led procurement, a pilot program that began in 2008, was also controversial, and met with vocal opposition from industry groups as well as the U.S. government. That effort was also unsuccessful, according to the bank’s own evaluation, as none of the projects involved were eventually approved under the pilot’s timeline. Unlike the pilot, which set unrealistic expectations for across-the-board reforms, Browne said new efforts will be more focused on providing hands-on support to specific agencies that implement projects, some at the state or provincial level, within countries that do not have universally robust procurement policies. The specifics of how the World Bank procurement team will support those agencies — and the projects that will be procured — will be included in each country’s partnership framework, the bank’s development plan for individual countries. What will that analysis look like? What criteria will the bank use? How will it support staff to fulfil the new mandate, especially considering that the institution wants to implement significant operational budget cuts starting next year? All these questions will need to be answered in in the forthcoming implementation plan. This is why the nuts and bolts of the policy will likely prove more contentious than the broad strategy the bank has outlined so far, and the World Bank’s next round of consultations in early 2014 will provide the next venue in the battle. However, for Browne the nuance of the policy is the key: “Some people see this as a huge change. But I think it’s an evolution as opposed to a revolution.” Read more: - World Bank to cut sector directors in staff realignment - World Bank appoints executives to lead global practices - For the World Bank, it’s time to take risks - What to expect from Jim Kim’s ‘global practices’ plan Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.