ADB reforms procurement process to ‘work smarter’

To adapt to the changing development landscape, the Asian Development Bank recently embarked on a reform of its procurement process — a move that is expected to allow the multilateral institution to “work smarter,” and not just harder. Sean O’Sullivan, director general of ADB’s operations services and financial management department, told Devex the reforms aim to achieve three main objectives: reduce the length of the procurement process, increase administrative efficiency and improve project delivery — all while maintaining oversight responsibility. “One of the key things [in the reforms] is we want the right people to do the [projects]. Second is we really want to reduce the time it takes to do the procurement,” the ADB official said. “It’s not that we’re necessarily slow, but we can actually do things quite quickly.” On average, it takes about a year to award contracts for major projects and about the same length of time to acquire the services of consultants. The goal, O’Sullivan explained, is to cut that down by half to achieve results faster and make development more real-time. Instituted in August following a midterm review of the regional bank’s grand development footprint called Strategy 2020, procurement reform is one of many changes ADB is implementing to provide better development outcomes for the region — something that is necessary, experts suggest, if the regional bank wants to stay relevant in Asia-Pacific’s changing environment. Some of these changes include plans to merge two of ADB’s funding facilities to grow its resources as well as instituting an independent public-private partnerships office to actively support President Takehiko Nakao’s push for greater private sector participation and cofinancing schemes. Unlike the sweeping procurement reform at the World Bank, O’Sullivan clarified that there will be no radical changes to ADB’s procurement policy as only the process of implementation will be affected. “We’re trying to change the way we do business,” the ADB official stressed. “In this reform, we’re not doing anything [within the framework of the procurement policy] but we’re trying to make it work better. … The next thing is the administrative efficiency to make sure we work smarter.” Greater flexibility So what are these reforms and what changes will it constitute? Central to the planned changes is President Nakao’s approval of the 10-point action plan, which, according to O’Sullivan, will serve as a yardstick for the success (or failure) of the procurement reform. Included in the 10-point action plan is an emphasis on greater flexibility with ADB’s procurement process and with how member governments take responsibility for the projects in their own countries, especially in the bidding process. While there are no specific criteria in place yet, O’Sullivan explained there is room for more national competitive bidding processes, which means local contractors and national governments would be able to use their own systems as long as these comply with international standards. At present, most tenders go through international competitive bidding. “We’ll allow you to have more flexibility in your procurement. We’ll use your systems if we can see your procurement [capabilities] and arrangements are good, so more NCB instead of ICB,” he said. “Countries are usually more familiar with their own procedures and when we do ICB that may not always be so. It will save time.” This flexibility, according to ADB, will also result in faster and more efficient processes. NCBs usually only take about 166 days to complete, while ICBs run a hundred days longer, on average. “The implication is that … we will be able to deliver a project at least a year earlier,” the bank said in an official document. In fact, O’Sullivan doesn’t anticipate any negative impact from the reforms, dispelling notions that the changes may discriminate other contractors that may want to bid for a project. “We’re trying to get to this point where, in a project … we’re getting sufficient competition and interest, and making sure that all ADB members have the opportunity to be involved,” O’Sullivan explained. “They’re going to find us more nimble and quick, instead of waiting ages for the procurement decision to come quicker. We’re not affecting the stakeholders in a negative way.” Risk-based approach One other element of the reform is the implementation of a risk-based approach in approving, monitoring and evaluating development programs. The emphasis is on recognizing member countries’ capacity to facilitate their own procurement processes. “We’re recognizing that some of our clients are more sophisticated, [so] why not let them do it,” O’Sullivan said. “For very capable agencies, we may go so far with accepting their approach to procurement, believing that it is in line with international best practice.” For this approach to work, the bank needs to have basic knowledge of a country’s existing procurement process, institutional capacity to implement certain policies, and procurement frameworks and rules, which need to adhere to international standards. Countries with very good procurement systems and policies are considered low risk, while those with bad or poorly managed procurement systems are considered high risk. These assessments will determine the kind of fiduciary oversight the bank will conduct throughout the procurement process. “When we’re dealing with an agency we consider low risk, we’re not going to look at [the process] every step of the way. We’re going to look some of it after. At a certain point in the procurement process, the agency has to send us a report,” O’Sullivan said. “Only once we see integrity violation do we call them out. I think that’s clever on our side and it shows the capability on the other.” The bank official clarified, however, that the individual oversight will only apply to projects exceeding $5 million. Only 20 percent of projects under $5 million — selected at random — will be reviewed. “This way, we still do our fiduciary role. But those high-risk countries, we’re going to have more stringent review right down to the lower level,” he said, adding that, usually, experts from the bank will be sent to these missions to conduct further review. In addition, a procurement review system will be established, which, among other things, will have a central database. “We want a system [through the PRS] that tracks this [whole] procurement process,” O’Sullivan said. “With this, we can also see the timeline much closely and see if we are on schedule.” New approval authority Another salient feature of ADB’s procurement process reform is the establishment of a new procurement committee and approval authority. O’Sullivan said the new setup will give greater authority and autonomy to the bank’s country offices while making the process in the Manila headquarters more efficient. Prior to the reforms, procurement contracts exceeding $10 million need approval from headquarters, particularly O’Sullivan’s signature. While this is standard bank protocol, the official shared it slowed down the whole process. In the new setup, regional directors — who previously could only approve contracts below $10 million — will have greater authority over higher-value projects. Executing agencies in the country will be empowered to approve and do a post-review sampling of procurement contracts up to $5 million, while resident missions will have authority over projects up to $20 million. Projects between $20 million and $40 million will need approval from both the resident missions and one of the operations officers or directors in the Manila headquarters. The new procurement committee, which O’Sullivan will head, will only decide on contracts exceeding $40 million. The ADB official said the new committee targets to shorten contract approval time from the current 57 days down to an ambitious 10 days — although the official conservative goal is 40 days. “We can probably do things faster because there’s less scrutiny although there will still be enough [monitoring],” O’Sullivan said. “This has the potential to cut at least a year in a project’s timeline [which is a positive development] because whenever there’s delay, inflation and loss of interest happens.” Apart from faster and more efficient delivery of development programs and greater recognition of member countries’ capacity to conduct the procurement process, these reforms aim to streamline the entire workflow at the bank. Total contracts that need to be reviewed at headquarters are expected to drop 25 percent as a result — and a more manageable workload for bank staff. The reforms would also result in a shift away from the one-size-fits-all approach to procurement to increased country ownership and decentralized procurement. Check out more insights and analysis provided to hundreds of Executive Members worldwide, and subscribe to Money Matters to receive the latest contract award and shortlist announcements, and procurement and fundraising news.