World Bank procurement reforms 'already saving millions of dollars'

WASHINGTON — The World Bank’s public procurement reforms have already helped countries including Kenya and Ghana save hundreds of millions of dollars a year, according to speakers at a panel event Friday. However, other speakers at the event, which scrutinized the early impacts of the reforms during the World Bank Spring Meetings, warned the new approach must be combined with capacity building for governments and harmonized across multilateral banks to work effectively as a “tool for development.” The World Bank reformed its procurement framework, which governs the way countries spend the institution’s annual $20 billion in investments, in 2015. The new approach puts greater emphasis on value for money, sustainability, innovation, and risk management, rather than the old model of selecting bids based on the lowest price. The bank’s chief procurement officer, Enzo de Laurentiis, said the results are already being seen, in helping to drive development impact while also saving money. “For us at the World Bank, procurement must be a tool to achieve development results on the ground for our clients with value for money and integrity,” he said. “This means the right balance between quality and cost … and sustainability is intrinsically related to this … Now, contracts are awarded to the most advantageous bid as opposed to the lowest bid.” Laurentiis hailed the case of Kenya, where he said the government saved $138 million last year by changing the way it procures textbooks for secondary schools, as an example of the reforms’ success. The savings were achieved by “introducing competition in the procurement of textbooks using framework agreements,” Laurentiis told Devex in an email. This approach was chosen after the government carried out a detailed analysis on procurement for development, introduced as part of the bank’s new strategy. Sweden's secretary of state for international development, Ulrika Modéer, who was also on the panel, agreed “procurement is an obvious and very powerful tool for development,” but added it must be combined with in-country “capacity building” and support from the bank and other actors in order to be effective. Private sector actors also raised concerns that the new framework, which is still being rolled out, could create more work for businesses hoping to win bank-financed contracts and will need to be harmonized across other multilateral development banks to work for companies. Capacity building Laurentiis said the new policy puts a big emphasis on building capacity within countries in order to drive more effective and sustainable domestic procurement systems. This is done by working “collaboratively” with client countries on bank-financed project procurement, which he said had led to a “paradigm shift in the way we work collaboratively with our clients and the markets.” Ghana, for example, has been working with the bank on a series of public procurement reforms which have saved it $174 million in a year, according to Sarah Adwoa Safo, who heads up Ghana’s newly created Ministry of Public Procurement. “Procurement done fairly and transparently will save money and puts [the country] in a good light internationally.” --— Sarah Adwoa Safo, Ghana’s minister of state for procurement Safo said the new framework is helping her government “use procurement as a tool for development,” in order to deliver on its “social contract” with Ghana’s voters — for example, better procurement will mean the government is better able to deliver on promised education reforms, she said. “Procurement done fairly and transparently will save money and puts [the country] in a good light internationally,” Safo said, adding that her ministry’s job was to “do away with corruption and collusion in procurement and do it in a more transparent manner.” Last year, Ghana embarked on an e-procurement project, with $97 million in financing from the bank, to improve transparency, reduce corruption, and provide better value for money from public procurement by “taking away the human element in procurement” and replacing it with more secure, centrally-controlled systems, Safo said. The new procurement ministry has also promised to award 70 percent of all public contracts to local contractors and 30 percent to women, people with disabilities, and young people. Some of these will be smaller contracts for cleaning, catering services, and gardening, for example, Safo told Devex after the panel. Business concerns Representing the view of the private sector on the panel, Roger Fiszelson, an adviser to MEDEF, the French business confederation, said the new framework heralded a “move from one size fits all” to a system that is “fit for purpose” and that has allowed companies to “express their full capacity of innovation and skills.” Fiszelson added that as the trend of co-financing on projects continues, the bank will need to “harmonize” its procurement system with those of the other MDBs, which will in turn create a larger market for companies. However, Gary Litman, vice president for global initiatives at the United States Chamber of Commerce, warned that companies hoping to win the bank’s contracts would need to dedicate more time and resources to understanding the new bidding process. “For a company, it’s still a huge investment to be part of your [the bank’s] processes,” he said. Laurentiis said it is worth it for businesses since the new framework assures greater transparency and fairness, as well as greater certainty of process and payment. Companies also know that if they offer “added value,” such as innovation and strong internal structures, these elements will be rewarded under the new system in a way they might not have been before, he said.