ADB

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ADBs Project Cycle Managing Procurement Risks
and Governance
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• What are the implications of a risky procurement
  environment?

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Value of Public Procurement

• Public procurement can cost
• Around 8-20 of GDP
• As high as 30 of total public expenditure
• Leakages through fraud, abuse and waste can be
  20 to 70 of spending (if we estimate that 15
  of GDP is spent on public procurement)
• Implication conservative estimate of 3 of GDP
  is lost through public procurement corruption and
  waste (Source WB and OECD)

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Estimated Cost Implications for ADB
Country 2009 GDP (Mn US) Est. Public Procurement (Mn US) (15 of GDP) Est. loss to corruption / waste (Mn USD) (20 of Procurement Budget)
14,177 2,126 425 Million
89,360 13,404 2.7 Billion
1,259 189 37 Million
1,310,170 196,525 39 Billion
1,473 221 44 Million
12,531 1,880 376 Million
161,990 24,298 4.8 Billion
41,979 6,297 1.2 Billion
TOTAL 48 Billion
Based on World Bank/ADB figures
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Net effect Unfinished and substandard projects
Procurement corruption and waste undermines aid
effectiveness
PHOTO CREDITS Philippine Center for
Investigative Journalism
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• Managing procurement
• risks in ADBs project cycle
• 10 Point Action Plan

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Overview Past Procurement Governance in ADBs
Project Cycle

• Generally no in-depth procurement involvement
  during project preparation, as approach of ADBs
  is basically reactive
• Country level procurement assessments seldom
  conducted
• Country risk assessments are rarely updated
• Procurement method and review thresholds are not
  linked to country risks
• Most CPSs do not have country action plans to
  mitigate risks

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Overview Past Procurement Governance in ADBs
Project Cycle

• Procurement Capacity Assessments completed by
  project preparation consultants, and viewed by
  procurement specialist during the review of
  entire RRP (Report Recommendation of the
  President)
• Procurement Capacity Assessments tend to be
  accomplished perfunctorily

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Overview Past Procurement Governance in ADBs
Project Cycle

• Desk review of procurement arrangements and
  Procurement Plan
• Procurement Plans and review thresholds are
  rarely linked with actual country and project
  risk assessments
• Since prior and post review thresholds are
  pre-determined and based on contract value rather
  than risk, these are not sensitive to the actual
  capacity of executing agency

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10 Point Action Plan
1 New Procurement Risk Assessments
2 New ICB Thresholds
3 New Prior Review Limits
4 New Procurement Committee Level and Decision Authorities
5 Project Procurement Classification at Concept Clearance
6 Launch Procurement Review System or PRS
7 Agree Master Bid Document(s) during Project Preparation
8 New Streamlined PC Process
9 New Procurement Approval Form
10 End-to-end Consulting Services Process Review
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ADBs Improved Procurement Governance and Risk
Management and Project Implementation Efficiency
Action Plan
Country level risk assessment with linked
thresholds
Sector Procurement Capacity Assessment
Mid-term review of procurement outcomes
Proactive participation of OSFMD for complex
projects
Delegated reviews for low risk projects
More responsive Procurement Plans
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Improved Procurement Governance at CPS Stage

• CPS will be informed by robust multi-level
  procurement risk assessments
• There will be country specific thresholds for ICB
  based on market capacity . Reviews within ADB and
  the level at which they occur will be determined
  by the risk level

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Concept of Risk-Based Procurement Approach at
National Project Levels
Level
Step 1 Risk Assessment at National Level
Step 2 Risk Assessment at Project Level
When
With CPS Preparation
Project Processing
Objectives
To consider the country systems procurement
capacity To decide PC, NCB and Shopping
thresholds at national level
Categorize Low or High Risk Low Risk
Delegation of procurement decisions to regional
depts. with thresholds, with proper risk
management High Risk OSFMD and OGCs active
engagement
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Overview Present Procurement Governance in ADBs
Project Cycle
Country Risk Assessment Management Plan
(including Procurement)
Procurement Capacity Assessment
Desk review of Project documents (RRP PP)
Prior and Post Reviews
Finalization of Procurement Plan with risk
based thresholds
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Improved Procurement Governance at CPS Stage

• Country Procurement Profile (CPP)
• A consolidated platform that generates and
  presents information on selected
  procurement-related indicators for a country,
  focusing on priority sectors
• Gathers data from various sources
• National level procurement assessments CPAR and
  OECD-DAC BLI
• Agency level risk assessments Project-related
  Procurement Capacity Assessments and mid-term
  assessments from earlier projects
• Interviews with local industries and CSOs
• Matches policy achievements with actual practices

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Improved Procurement Governance at CPS Stage

• Purpose
• Identify country and sector level procurement
  capacity gaps that can inform sector road map and
  related CPS processes
• To frame procurement issues that, if addressed at
  CPS stage, can improve project implementation
• To facilitate informed dialogue on procurement
  issues as part of setting overall country
  strategic priorities for ADB interventions

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Improved Procurement Governance at CPS Stage

• Example of Country Procurement Profile showing
  Written Rules v. Actual Practices

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Improved Procurement Governance at Project
Preparation Stage

• Through enhanced agency procurement capacity
  Assessments
• Identify capacity, procedural and organizational
  constraints in executing/implementing agency
• Determine overall procurement risk
• Consider procurement by regular line units of
  executing/implementing agency (capacity
  strengthening extends beyond project life)
• Identify levels of reputational risks to ADB and
  DMC
• Identify implementation risks resources,
  structure and process
• Leverage on or consider existing knowledge base,
  legislative environment and processes
• Agree on Action Plan to strengthen capacity and
  lessen risks

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How ADB Assesses Risks at the Project Level
Procurement Capacity Devt Risk
Mitigating Measures
Procurement Capacity Assessment
Procurement Plan
Executing Agency
PREI
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Improved Procurement Governance at Project
Preparation Stage

• Regional departments will categorize procurement
  risk for each project as high risk or low
  risk
• High risk projects will require more upstream
  OSFMD involvement on procurement reviews, plus
  risk mitigating measures
• For low risk projects, reviews and approval
  authority will be delegated to regional
  departments, plus adequate risk mitigating
  measures (Action 4)

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Improved Procurement Governance at Project
Preparation Stage

• Informed by the results of the assessments at the
  country, sector and agency levels, a more
  responsive Procurement Plan should identify
• Procurement/consulting methods and thresholds
  (Action 2)
• Prior/Post review arrangements (Action 3)
• Goods/Works/Services Packages and advertising
  dates
• Efficient, economical and effective procurement
  packages
• Agreement with the Government on Master Bid
  documents (Action 7)

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Improved Procurement Governance at Implementation
Stage

• Review by Procurement Committee more streamlined
  with parallel reviews to be conducted internally
  in ADB (Action 8)
• Regular assessments of procurement processes and
  documentation (for both executing agencies and
  ADB) will be conducted to verify that the desired
  procurement objectives outcomes are being
  achieved
• A central system to compile data on all
  procurement activities (e.g. Procurement Review
  System PRS) - Action 9 follows

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• THANK YOU!