Public Investment Efficiency The Role of Procurement Washington – July 2010 Alfonso Sanchez

The Paper Recent Evolution of Procurement The triggers for reforms The status of the reforms Post-reform performance and impact on investment efficiency Procurement in the context of PSM Second generation reforms and retooling for them

The Role of Procurement Recent evolution of procurement From a process function to critical support for government attainment of strategic goals Triggers for PR reforms International arena Macro economic factors National considerations and events

Strategic Procurement The Procurement Path Administrative Regulations Management Standards Strategic Procurement Business Solutions Systems and Processes Concessions Management Trend Complex Procurement Infrastructure, Plant, Services Mission Support Process Management Capacity Complexity Simple Procurement Consumables Minor Works Procurement Planning and Process Administration Supplies and Inventory Mgmt. Process Compliance Results /Outcomes Performance

The Role of the IFIs Incorporation of PR as part of sector country work Development of diagnosis tools Promotion of reforms (often as condition of continued lending) Standardized approach and mostly input oriented

Progress of Reforms Uneven but substantial Unfinished business (slow down after initial legislative and institutional reform burst) Reformers wonder why even after all is done systems still do not perform as intended

Impact on Investment Efficiency Poorly designed systems High operating costs, less competition, long term overhead inflation, unnecessary delays, increased risks Corrupt systems Bribes during tendering increased cost (like taxes) Bribes during implementation (severely reduce ERR and distort funds allocation)

Second-generation Reforms Needs stronger focus on performance and incentives to promote it Scope and sequence tailor-made to capacity Transformation of cultures and behaviors Reforming procurement by itself is not enough Integration with financial management Civil service implications Control agencies approach Project preparation and appraisal

Retooling IFIs From technical fixing to transforming cultures Need for deeper and more nuanced political economy analysis (incentives, performance focus, new indicators) Recompose teams (multi disciplinary) Increased attention to demand side and social audit (CSOs) Frame within public sector reform strategies, not isolated

System’s Pillars and Foundation INIT System’s Pillars and Foundation El pilar del Marco Legal incluye todas la leyes y/o disposiciones legales, administrativas y de procedimientos establecidos para la operación del sistema. El pilar de las Instituciones incluye no solamente instituciones que regulan el sistema sino la que en alguna forma tienen responsabilidades asignadas que impactan directamente el sistema (por ejemplo entrenamiento de compradores, normas de control de calidad y estándares técnicos, asociaciones gremiales y profesionales, ONGs con funciones de contraloría social, etc.) El pilar Operacional incluye aspectos relacionados con la operación del mercado, la administración de contratos, la interacción del gobierno con el sector privado de proveedores, y la resolución de desacuerdos durante los procesos de contratación y ejecución de contratos. El piar de Integridad y Controles incluye los aspectos relacionados con el aparato de control interno y externo y los aspectos relacionados con la transparencia, rendición de cuentas y equidad del sistema. IFIs now look here Procurement System IFIs need to start looking here Institutions Integrity and Controls Regulations Operations CULTURE OF PERFORMANCE AND ACCOUNTABILITY

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