World Bank set out to reform its procurement process. What's changed?

The World Bank’s ambitious new procurement framework, the product of three years of work and extensive consultation, officially went live in July. Now all new projects use the new system. The procurement reform process, which officially started in 2012, was designed to address concerns raised by businesses, staff and borrower countries about the policies for buying goods, works and services with bank-financed loans. Approximately 5,000 stakeholders were consulted as part of the process and 13 issue areas were identified as needing to be addressed. These included the bank’s tendency to award contracts on the basis of lowest price as opposed to best value — meaning quality, warrantee, design aspects, service and other factors were potentially not being taken into account. Another issue was a call for the bank to move toward a more country-specific model which relies more on national procurement systems. Businesses had also complained about the complaints process, and staff had complained the procurement process took too long. To address these concerns, a new procurement framework was developed and received board sign off in July 2015. Devex caught up with Christopher Browne, the World Bank’s chief procurement officer, to find out what impact the reforms were having so far. Here are the highlights of the conversation. How have the reforms been received? It’s early days but we’ve had good feedback so far from business. What they are waiting to see is how it actually work in practice. We haven’t been through a whole procurement cycle under the new framework yet so the jury is still out. Please can you summarize the main reforms? The first major reform is that the new framework puts a much bigger focus on value for money decision making and not just lower price. We heard from businesses that our old procurement system, which tended to opt for the lowest price, was preventing quality and innovative companies from bidding on projects financed by the World Bank. So in the new framework, we see a move away from price to looking at things such as quality, sustainability, and how long it’s going to last. We’ve also put a lot more choice into the procurement system including new system and techniques, and in particular procurement methods which involve much more dialogue with businesses and other parties to develop solutions together. Thirdly, we have reformed the kind of assistance we provide in fragile, conflict countries where there isn’t the capacity on the ground to get the procurement done. Traditionally we would offer consultants or technical advice to the borrower. But now we’ve made a provision that that service can be offered by bank staff directly in a more hands-on way. The fourth, and most controversial reform, is the introduction of Alternative Procurement Arrangements, whereby we’ve opened up an option which allows borrower country agencies, or other development banks and institutions we are working with, to use their procurement rules and run the process on our behalf. Tell us more about the Alternative Procurement Arrangements? The APA is about allowing the borrower to use their own regulations and processes to run a procurement that we finance up to any value, so this could be multihundred million dollar projects. This is the “Holy Grail” of development procurement, it shows you’ve got the country to a point where you don’t need to be holding their hand and you can step back and leave them to run things themselves. It’s part of the World Bank’s commitment to greater use of country systems, and it also releases bank staff to be used in area where more help is needed. But it’s also controversial due to the risks associated, especially as we are talking about using the APA for large, expensive projects, not just the small ones. To mitigate that risk, we agreed with our board to initially only use APA on an agency by agency basis as looking at a whole country would be impossible. This way it’s smaller and therefore quicker to do the assessment, and it’s not so politically sensitive. We are currently piloting using the APA in two countries, Bhutan and India, and we are still in the testing phase, making sure we have a methodology which enables us to choose the right agencies for APA. Once an agency gets cleared to use its own systems, the bank will then decide whether to initiate the APA on a project-by-project basis. What’s next for procurement reform at the World Bank? Writing a procurement framework which has to cover everything from ordering school supplies to building an underground metro system, is a challenge and inevitably we ended up with a framework which only covers 80-90 percent of what we do. However, some things are so specific they need a more tailored procurement approach. That’s why we’ve set up another program, the External Sectoral Engagement Program, which looks into specific problems in specific sectors and works on how we can adapt our procurement system to address them. This year we are medical equipment and high voltage direct current power projects, which both have their own sets of issues and complaints. At the end of this fiscal year we will determine the next areas to work on. We are also committed to growing the use of the APA, and that is a big priority for the procurement team here. We’ve also now introduced mechanisms whereby if we receive a bid which is abnormally low, this triggers a lot of additional review and forces a decision around whether the project can be done for that price, and if not it is discarded. No other development bank has done any of these things before, they are all new. We’ve done the best we can using research and our brainpower to come up with these approaches, but what happens next is going to be dictated by seeing what happens in reality. We will spend the next two to three years embedding and reviewing the reforms and asking if they are delivering and if not then we will adapt and change as we go. Ultimately, we don’t know until we do. Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.