The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) REPORT NO.: RES27614 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF ENHANCED PUBLIC SECTOR EFFICIENCY TECHNICAL ASSISTANCE LOAN APPROVED ON MARCH 3, 2011 TO THE REPUBLIC OF PANAMA GOVERNANCE GLOBAL PRACTICE LATIN AMERICA AND CARIBBEAN REGION Regional Vice President: Jorge Familiar Country Director: Yaye Seynabou Sakho Senior Global Practice Director: Deborah L. Wetzel Practice Manager/Manager: Robert R. Taliercio Task Team Leader: Joanna Alexandra Watkins The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) ABBREVIATIONS AND ACRONYMS CGR Office of the Comptroller General (Contraloría General de la República de Panamá) DAP Department of Project Administration (Dirección de Administración de Proyectos) DGCP General Directorate of Public Procurement (Dirección General de Contrataciones Públicas) ICT Information and Communications Technology IPSAS International Public Sector Accounting Standards ISTMO Panama’s Integrated Financial Management System (Integración y Soluciones Tecnológicas del Modelo de Gestión Operativa) MEF Ministry of Economy and Finance (Ministerio de Economía y Finanzas) PAD Project Appraisal Document PDO Project Development Objective The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) BASIC DATA Product Information Project ID Financing Instrument P121492 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 03-Mar-2011 31-Aug-2018 Organizations Borrower Responsible Agency Republic of Panama Direccion de Administracion de Proyectos, DAP Project Development Objective (PDO) Original PDO The objective of the Project is to assist public agencies of the Borrower in producing, using and disseminating timely and quality performance information, thereby allowing a more efficient, transparent and accountable use of the Borrower#s public budget funds. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-80160 03-Mar-2011 26-Sep-2011 07-Mar-2012 31-Aug-2018 55.00 40.46 14.54 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Project Background: The Project was approved on March 3, 2011 and became effective on March 7, 2012. The objective is to assist public agencies in producing, using and disseminating timely and quality performance information, thereby allowing a more efficient, transparent and accountable use of the Borrower’s public budget funds. Progress towards achievement of development objectives and overall implementation progress are both rated moderately satisfactory. Two out of three outcome indicators, measuring the quality public sector financial information and the performance orientation of the budget, are on track to achieve their end targets by the current closing date of August 31, 2018. The third outcome indicator (PDO #3) related to transparency in public procurement will not be achieved by the current closing date due to delays in procurement for the Panama Compra 3 system. In the early years of project implementation, issues related to complex Information and Communications Technology (ICT) procurement processes and weak project management led to slow disbursements and the need for a Level 2 restructuring in 2015 with a 23-month extension. Since then, the capacity of the Project Implementation Unit was strengthened and disbursement has reached 74 percent of the total loan amount. Ratings for achievement of the development objective and implementation progress were upgraded from moderately unsatisfactory to moderately satisfactory in October 2017. The Project’s objectives of increasing the efficiency, transparency and accountability in the management of public finances remain highly relevant, as evidenced by the government’s recent sponsoring of the Panama Accord agreement.1 The agreement is expected to enhance transparency and accountability in Latin America and the Caribbean, and is aimed at fighting corruption and mobilizing greater private financing for development. 2. Current Status: The main component on managing public resource information efficiently (accounting for over 60 percent of loan proceeds) supports the strengthening of budget execution, treasury, accounting and control systems through the introduction of the integrated financial management information system (Integración y Soluciones Tecnológicas del Modelo de Gestión Operativa - ISTMO). This component is advancing well. As of September 2017, the target of 100 percent of central government entities2 were utilizing the system. In the 2015 restructuring, an extension of the system to 80 percent of decentralized institutions was included (under a shared financing arrangement with the government). Its implementation is underway, with 58 percent of decentralized entities using the system as of February 2018. The government now aims to cover 100 percent of decentralized entities3 under the project. Two other components focus on developing capacities for results-based planning, budget management and evaluation and strengthening public procurement and contracting. Under the component on results-based budgeting, the methodology for a new program definition was completed and applied in five sectors in 2017 (Health, Education, Transport, Security, Justice), above the target of three pilot sectors. On the other hand, after significant delays, the public procurement component has seen recent progress with the awarding of the US$1.3 million Panama Compra 3 contract. Details on progress and challenges by component are provided below. 1 The Panama Accord has been jointly sponsored by the World Bank Group, the Organization of American States and the Government of Panama. Among the measures included in the Panama Accord are the production of high-quality financial reports from national and sub-national governments and the use of ICT platforms for procurement. 2 In the 2015 Restructuring, Panama had only 24 central government entities. In 2016, the National Environment Authority (ANAM in Spanish) was reclassified and established as the Ministry of Environment, forming part of central government. This resulted in the addition of one central government institution for a total of 25. 3 As of June 2018, the total number of decentralized entities in Panama is 36. The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Component 1: Developing Capacities for Results-Based Planning, Budget Management and Evaluation. The objective of this component is to improve institutional and technical capacities for performance oriented strategic planning and budgeting to enhance transparency and quality of public spending. With the application of a new program definition in five sectors as mentioned above, the target value (three pilot ministries prepare budgets using program classification and financial and non-financial performance information) for the related PDO-level indicator4 has been surpassed. In addition, the Budget Department is currently in the process of selecting additional pilot entities (for a total of 10) to prepare the 2019 budget using new programs with performance information, in parallel to regular budget submissions. Beyond conducting more pilots, to further deepen the results orientation of the budget, the government has requested the project to support activities focused on increasing the production and dissemination of results linked with budget information (see Annex 2 for more details). This is also expected to contribute to improving transparency. Component 2: Managing Public Resource Information Efficiently. This component supports the modernization of the current financial management, organizational management, and statistical information systems. To date, the ISTMO has been implemented in 100 percent of central government entities and is being rolled out to decentralized entities.5 The project is on track to achieve its target value for the related intermediate level- indicator of ISTMO coverage of 100 percent of central entities and 80 percent of decentralized entities by the current closing date of August 2018. With this restructuring the government has requested to roll out ISTMO to 100 percent of all central and decentralized entities. Notwithstanding, there are challenges with respect to the prospects of achieving the related PDO-level indicator on the use of the system to produce better quality consolidated financial statements for the central government adhering to specific accounting standards. The publication of these consolidated financial statements requires an intra-institutional agreement between the Ministry of Finance (specifically the Dirección General de Ingresos) and the Contraloría General de la República (CGR) on responsibilities for the provision of revenue information. A dialogue between the Ministry of Finance and CGR has been initiated to resolve this issue. The sub-component on the modernization of the external control framework has suffered delays in implementation due to procurement difficulties and capacity constraints, despite the issuance of Executive Decrees adopting International Standards of Supreme Audit Institutions (ISSAI) in 2012 and International Public Sector Accounting Standards (IPSAS) in 2014. Most of activities under this sub- component have been completed, including training, preparation of the implementation plan, development of an IPSAS manual, and a fixed asset management manual. As such, the government is proposing to re-orient activities meant for modernizing the public sector accounting framework through the adoption of international standards towards improving the audit function and requests a re-calibration of the PDO-level indicator in this regard. The sub-component on the support to statistical capacity has been progressing well, and the project is currently providing preparatory support for the 2020 Census, including software and hardware. Component 3: Strengthening Public Procurement and Contracting. This component intends to support the reform of the public procurement process in Panama. With the project’s support, a new Procurement Law6 was enacted in 2017 and will be implemented in 2018 (six months after approval). While the procurement law has changed several times in the past, the underpinning regulations have not. The recent approval of the regulations is 4 This restructuring proposes to move this PDO indicator to an intermediate level. 5 Given expected changes in the configuration of central and decentralized government institutions over time in the public sector (e.g. moving an Agency to Ministry status), the indicator to measure the roll-out of the system is a percentage. As of June 2018, the total number of decentralized entities in Panama is 36. 6Law 61, reforming public contracting in Panama, published September 27, 2017 in the Official Gazette (reforms the text of Law 22 of 2006). The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) considered a major achievement under the project.7 The acquisition of supporting hardware for the Direccion General de Contrataciones Públicas (DGCP) was also successfully completed. However, upgrading the Panama Compra system suffered significant delays stemming from difficulties in defining specifications and processing the procurement. To date, the Panama Compra 3 contract has been awarded and signed and is currently in the final stages of review by the CGR. The contract includes the design, configuration, testing, training, implementation and support and maintenance for the new procurement system. Contract implementation is anticipated to start in August 2018 and end in 12 months (beyond the current closing date). Accordingly, the PDO indicator measuring the utilization of the Panama Compra 3 system can only be achieved with an extension of the current closing date. The cost of the Panama Compra 3 system is much lower than what was anticipated and as a result this component has excess funding. Moreover, activities related to supporting further legal and regulatory reforms, as well as the development of a research center for Procurement Administrative Tribunal will be dropped to focus efforts on the implementation of Panama Compra 3. 3. There are no overdue project audits and audit reports which are not satisfactory to the Bank. The project is not subject to suspension of disbursement. Financial management and procurement are rated satisfactory and moderately satisfactory, respectively. B. Rationale for Restructuring 4. This restructuring will allow the project to complete ongoing critical procurement and implementation processes, satisfactorily achieve its PDO, and fully disburse funds. Specifically, with the on-going roll-out of the ISTMO system to decentralized entities and the planned implementation of the Panama Compra 3 contract, the completion of project activities will extend beyond the current closing date. Both contracts suffered significant delays because of the inherent complexity of acquiring major ICT systems. Restructuring the project will enable the government to consolidate public financial management reforms currently underway and ensure the sustainability of the system upgrade across government – critical activities that have been supported by the project. II. DESCRIPTION OF PROPOSED CHANGES 1. The proposed restructuring includes: i) changes in components and costs, ii) modification of the results framework, iii) extension of the closing date, iv) updated economic and financial analysis, and v) reallocation between disbursement categories, as well as changes in the disbursement estimates and implementation schedule. 2. Change in components and cost: As discussed above, the main changes in components and costs correspond to the scaling back of components 1 (performance-based budget management and evaluation) and 3 (public procurement and contracting), and the expansion of activities under component 2 (new financial management model). Under component 1, no new activities will be pursued on developing and institutionalizing the monitoring and evaluation functions and systems. Activities with respect to improving capacities for performance oriented strategic planning and budgeting would support additional pilots and the development of a normative framework for program budgeting will now be re-oriented to activities designed to relate budget execution data with performance information for selected public entities to improve the transparency of the expenditure side of national accounts. Under component 2, the project would extend support to the roll-out of the ISTMO system to 100 percent of decentralized entities and focus on securing the interface with periphery systems (such as the 7 Executive Decree (Regulation) 40, published April 10, 2018 in the Official Gazette (replaces Regulation 366 of 2006). The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Panama Compra 3 and E-tax systems). The sub component on the modernization of the public sector accounting framework will be re-focused on developing an updated internal audit methodology in the public sector. Component 3 will focus primarily on the implementation of the Panama Compra 3 contract and extensive training to procurement officers across government. As a result of these changes and the lower than anticipated cost of the Panama Compra 3 system, the restructuring would reallocate US$2.12 million from component 1 and US$3.95 million from component 3 to component 2, as shown in the table in section IV and detailed in Annex 2. 3. Changes in the Results Framework: While the PDO will not be revised, changes to selected indicators will be made to better capture results. The original PDO indicator 1 on performance budgeting which is currently output- focused (measured through number of pilots) is being moved to the intermediate level and a new outcome indicator (measured through the publication of reports linking performance to the budget) is being introduced. This new PDO indicator will provide better evidence of the achievement of the PDO with respect to producing, using and disseminating timely and quality performance information critical for a more transparent and accountable use of the Borrower’s public budget funds. The target value for PDO indicator 2 on the quality of public sector financial information will also be recalibrated to focus on the timely publication of the consolidated financial statements without specifying the accounting standards given noted delays with implementation. With the new implementation timeframe for Panama Compra 3, the target value of PDO indicator 3 on transparency in public procurement (that is to be evidenced by government procurement information being generated and disseminated semi-annually) will now be revised to the new proposed closing date of the project. Specifically, the target value will now be evidenced by 100 percent of competitive procurement processes being publicly available on a daily basis in Panama Compra 3. Intermediate indicators are also being revised to better measure results over time and to provide a logical connection to the PDO-level indicators. This entails replacing four intermediate indicators, adding one and revising three. The end target dates will be aligned with the proposed closing date of December 31, 2019. See Annex 1 for the full updated Results Framework by component, including the justification for the changes. 4. Change in Loan Closing Date: The Closing Date will be extended by 16 months, from August 31, 2018 to December 31, 2019. This would be the project’s second extension for a total cumulative period of 39 months from the original closing date. This would enable the project to fully complete several activities already under implementation, namely the roll-out of the integrated financial management information system to 100 percent of decentralized entities and the implementation of the upgraded e-procurement platform, Panama Compra 3. It would also allow implementation of new activities, amounting to 10 percent of loan funds (US$5.5 million), requested by the government that would further help consolidate the on-going reforms and sustain outcomes achieved to date. The table below summarizes the resources required for each group of activities. A plan is in place to ensure that all activities are completed by the new closing date, including close monitoring of the procurement and contracting processes and close implementation support on technical aspects. Annex 2 contains a list of the proposed new contracts to be financed under the loan with the remaining funds. Total Amount of Funds for Project Loan (USD millions) 55 Funds Already Disbursed (USD millions) 40.46 Funds Already Committed to On-going Activities till 5 Current Closing Date (USD millions) Funds Needed to Complete Activities Under 4 Implementation with Extension (USD millions) Total Amount for New Activities Proposed (USD millions) 5.5 (10%) The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) 5. Change in Economic and Financial Analysis: The Project Appraisal Document (PAD) recognized that a cost-benefit analysis was not well-suited to assess the impact of institutional reforms such as those supported by this project. Quantification of intangibles and issues of attribution make it difficult to express their impacts in monetary terms. Nevertheless, the PAD included a detailed qualitative list of expected benefits of the project in terms of financial, economic and social gains. To reflect the expansion of component 2, specifically the extension of ISTMO from the central government to decentralized entities, the economic and financial analysis described in the PAD has been adjusted. A list of potential financial and economic benefits has been included to reflect these adjustments. Annex 3 provides a detailed assessment of the potential benefits relative to costs by component. With this updated information, estimated benefits are expected to substantially outweigh the costs. Under the scenario that economic benefits were only 1 percent (though more likely on the order of 5-10 percent based on experiences of other countries) of the national budget of Panama (~US$25 billion), returns of roughly US$250 million would still result in a highly positive Net Present Value. A quantitative assessment of the two ICT systems (ISTMO and Panama Compra 3) is feasible and will be carried out at the Implementation Completion and Results stage. Such quantitative assessment will require a concerted research effort as no baseline data was included in the PAD (see Annex 3 for more details). 6. Reallocation between disbursement categories: Based on the changes proposed under components 1 and 3, as well as new activities proposed to be implemented during the extension period, the following reallocation of loan proceeds by disbursement category would be made: Current Proposed Proposed Disbursement Category allocation allocation reallocation (1) Goods, Non-consultant Services, Training, Operating costs and 39,030,000 42,980,000 3,950,000 consultants’ services for Parts 1 and 2 (a) and (b) of the Project (USD) (2) Goods, Non-consultant Services, Training, Operating costs and 2,520,000 2,520,000 0 consultants’ services for Parts 2 (c) and (d) of the Project (USD) (3) Goods, Works, Non-consultant Services, Training, Operating costs and 12,950,000 9,000,000 -3,950,000 consultants’ services for Part 3 of the Project (USD) (4) Goods, Non-consultant Services, Training, Operating costs and 500,000 500,000 0 consultants’ services for Part 4 of the Project (USD) Total (USD) 55,000,000 55,000,000 0 7. Additional changes will include adjustments to the implementation schedule and updated disbursement estimates. III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Components and Cost ✔ Change in Loan Closing Date(s) ✔ The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Reallocation between Disbursement Categories ✔ Change in Disbursement Estimates ✔ Change in Implementation Schedule ✔ Change in Economic and Financial Analysis ✔ Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Cancellations Proposed ✔ Change in Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Other Change(s) ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Performance orientation of the budget Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action The budget document DIPRENA selected 6 new Program budgeting Value does not use program entities to pilot approach is introduced Marked for Deletion classifications with very performance/program in three pilot The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) limited financial budgeting in parallel with ministries for the 2018 performance the regular budget budget year (budget information submission process this for three ministries are year. prepared using program classification and financial and non financial performance information Date 01-Jun-2011 23-Feb-2018 29-Dec-2017 Public entities increase the production and dissemination of performance information linked with budget information Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Information on the Performance budget associated with information is limited, key performance Value not publicly available indicators for 10 public New and not linked to sector entities is financial information produced and publically disclosed. Date 30-Aug-2013 31-Dec-2019 Quality of public sector financial information improved Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value Financial reports do not The first consolidated The government Revised provide complete financial statement for prepares through information on the central government ISTMO and publishes government revenue is expected to be within 6 months after and expenditures thus manually produced by the end of the fiscal impeding the June (within 6 months). It year consolidated monitoring of budget is also expected that such financial statements of execution financial statements the Central would be produced in Government even less time in the future, subject to the provision of timely revenue information, which requires an inter- institutional agreement The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) between MEF, Contraloria, and the DGI. Date 30-Aug-2013 23-Feb-2018 31-Dec-2019 Increased transparency in public procurement Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action The PanamaCompra3 contract has been signed and is awaiting final 60% competitive approval by the 100% of competitive procurement processes Contraloria for procurement of Central and implementation to start. processes of central Decentralized The new law for Public and decentralized Value Revised Government are Procurement was entities are publicly publicly and daily approved by Congress on available through available through August 24, establishing PanamaCompra 3 on a PanamaCompra 2 guiding principles for daily basis. transparency, professionalization, and efficiency. Date 17-Jul-2015 23-Feb-2018 31-Dec-2019 Intermediate Indicators IO_IND_TABLE Improved performance orientation of the budget Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Program budgeting In 2018, DIPRENA approach is selected 6 new entities introduced in three The budget document to pilot performance pilot ministries for the does not use program budgeting in parallel 2018 budget year classifications with very with the regular budget (budget for three Value Revised limited financial submission process. The ministries are performance draft Organic Budget prepared using information Law is currently being program classification reviewed by DIPRENA and financial and non- and Legal Services. financial performance information) The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Date 01-Jun-2011 23-Feb-2018 31-Dec-2019 Intermediate Result indicator 1.2: Evaluation of effectiveness of public policies Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Process of hiring a consultancies for the design of a methodology of evaluation of public The public policy There is no policies has lagged in effectiveness methodology for comparisson to other evaluation evaluation of public actvities of the Project. methodology is Value Marked for Deletion programs and no It would seem that developed and has systematic evaluations activities under these been used for analysis are carried out subcomponent do not of public policies in up have the same level of to three sectors support from the GoP than others included in the Project.. Date 01-Jun-2011 23-Feb-2018 29-Dec-2017 Increased institutional coverage of the new ISTMO model in Central Government Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 100.00 100.00 Revised Date 01-Jun-2011 23-Feb-2018 31-Dec-2019 Increased institutional coverage of the new ISTMO model in Decentralized Government Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 100.00 New Date 30-Aug-2013 31-Dec-2019 Increased use of ISTMO in Central Government Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) SIAFPA, RAMAN, and all the previous 75% of Central information systems Government’s Budget which supported the is subject to ISTMO budget execution, were controls and Value New basically ex-post registration by Dec. registry systems. 2019. (excluding Implementation of ex- transferences, Fondos ante controls was not Financieros, payroll) feasible Date 30-Aug-2013 31-Dec-2019 Increased use of ISTMO in Decentralized Government Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action SIAFPA, RAMAN, and all the previous 75% of Decentralized information systems Government’s Budget which supported the is subject to ISTMO budget execution, were controls and Value New basically ex-post registration by Dec. registry systems. 2019. (excluding Implementation of ex- transferences, Fondos ante controls was not Financieros, Payroll) feasible Date 30-Aug-2013 31-Dec-2019 Extended functional coverage of the new ISTMO model Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Value The current SIAFPA ISTMO includes all The new IFMIS model Revised does not include functions and integrates functionalities for integration with functionalities for budget preparation and National Debt (SIGADE) budget preparation, is not harmonized with and Single Treasury accounting, budget national payroll, Account. The only execution, treasury procurement and integration missing is and accounting; with public investment that with interfaces with system PanamaCompra 3 and national debt, the public investment. In treasury single addition, ISTMO has account, and the e-tax implemented system The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) integration with payroll (EPD), DGI and SIAFPA Consolidado. Date 01-Jun-2011 23-Feb-2018 31-Dec-2019 Intermediate Result indicator 3.1.: Building capacity of public officials involved in public procurement Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 30.00 Marked for Deletion Date 01-Jun-2011 23-Feb-2018 30-Aug-2018 Intermediate Result indicator 3.2: Standardization of processes Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 Marked for Deletion Date 01-Jun-2011 23-Feb-2018 29-Jun-2018 Intermediate Result indicator 3.4.: Increased use of e-procurement platform Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 100.00 Marked for Deletion Date 01-Jun-2011 23-Feb-2018 31-Jul-2018 Improved procurement complaint management Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action The current DGCP has PanamaCompra system implemented a has no instruments to procurement Value New facilitate complaints complaint module about procurement through processes PanamaCompra 3 Date 30-Aug-2013 31-Dec-2019 Modernized legal framework for procurement The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Unit of Measure: Text Indicator Type: Custom Baseline Actual (Current) End Target Action Updated procurement law (Law Law 22 (2006) and 61) and regulation 366 (2006). corresponding The law has changed 6 regulations (Decreto Value times between 2009 New 40) establishing and 2014, but the guiding principles for regulation 366 has transparency, never been modified. professionalization, and efficiency. Date 30-Aug-2013 31-Dec-2019 OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component/Part 1: Developing Component/Part 1: Developing capacities for results-based capacities for results-based 4.64 Revised 2.52 planning, budget management planning, budget management and evaluation and evaluation Component/Part 2: Managing Component/Part 2: Managing Public Resource Information 36.91 Revised Public Resource Information 42.98 Efficiently Efficiently Component/Part 3: Component/Part 3: Strengthening public 12.95 Revised Strengthening public 9.00 procurement and contracting procurement and contracting Component/Part 4: Supporting Component/Part 4: Supporting 0.50 No Change Project Management 0.50 Project Management Capacities Capacities TOTAL 55.00 55.00 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IBRD-80160 Effective 30-Sep-2016 31-Aug-2018 31-Dec-2019 30-Apr-2020 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IBRD-80160-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GO,NCS,TRGN,OPCOSTS,CS PARTS 1&2 39,030,000.00 33,167,418.06 42,980,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: GO,NCS,TRGN,OPCOSTS,CS PARTS 2C&D 2,520,000.00 1,272,939.33 2,520,000.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: GO,CW,NCS,TRGN,OPCOSTS,CS PART 3 12,950,000.00 4,150,870.29 9,000,000.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: GO,NCS,TRGN,OPCOSTS,CS PART 4 500,000.00 172,665.36 500,000.00 100.00 100.00 Total 55,000,000.00 38,763,893.04 55,000,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2011 0.00 0.00 The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) 2012 2,379,170.91 2,379,170.91 2013 1,719,310.86 1,719,310.86 2014 12,505,669.28 12,505,669.28 2015 9,749,954.95 9,749,954.95 2016 0.00 7,898,286.90 2017 10,500,000.00 6,141,717.56 2018 0.00 6,973,393.00 2019 0.00 7,632,496.54 The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) ANNEX 1: UPDATED RESULTS FRAMEWORK BY COMPONENT Component 1: Developing capacities for results-based planning, budget management and evaluation Indicator Unit of Baseline Target Values Frequency Responsibility Change/ measure 2017 2018 December 31, 2019 Justification PDO: Public Text Performance Information on the Annual DIPRENA New. entities information is budget associated Aligned to increase the limited, not with key reforms. production publicly performance and available and indicators for 10 dissemination not linked to public sector of financial entities is produced performance information. and publicly information disclosed. linked with budget information Improved Text The budget Program Program budgeting Annual DIPRENA Revised. performance document budgeting is approach is Moved to orientation of does not use introduced in introduced in three intermediat the budget program three pilot pilot ministries for e level, classifications sectors in line the 2018 budget replaces with very with normative year (budget for two very limited framework three ministries are similar financial approved by prepared using indicators. performance MEF program information classification and financial and non- financial performance information) The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Component 2: Managing Public Resource Information Efficiently Indicator Unit of Baseline Target Values Frequency Responsibility Change/ measure 2017 2018 Dec. 31, 2019 Justification PDO: Quality Text Financial The government The government Annual DNC Revised. of public reports do not prepares through prepares through Clarification of sector provide ISTMO and ISTMO and type of financial complete publishes within publishes within 6 information information information on 6 months of the months after the and dropping improved government end of the fiscal end of the fiscal of adherence revenue and year year consolidated to accounting expenditures consolidated financial standards. thus impeding financial statements of the the monitoring statements of Central of budget the Central Government execution Government that include disclosure of adherence to accounting standards (either IPSAS or National) Increased Percentage 0 100 100 Annual DNC Revised. institutional Refocused to coverage of (25/25 entities) measure type the new of institutions ISTMO model (central). in Central Government Increased Percentage 0 80 100 Annual DNC New. Measure institutional of roll-out to coverage of (36/36 entities*as decentralized the new of 2018) entities ISTMO model increased from in 80% to 100% The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Decentralized Government Increased use Percentage SIAFPA, 75% of Central Annual DNC New. Measure of ISTMO in RAMAN, and all Government’s use of the Central the previous Budget is subject system Government information to ISTMO controls (central). systems which and registration by supported the Dec. 2019. budget (excluding execution, were transferences, basically ex- Fondos post registry Financieros, systems. payroll) Implementation of ex-ante controls was not feasible Increased use Percentage SIAFPA, 75% of Annual DNC New. Measure of ISTMO in RAMAN, and all Decentralized use of the Decentralized the previous Government’s system Government information Budget is subject (decentralized). systems which to ISTMO controls supported the and registration by budget Dec. 2019. execution, were (excluding basically ex- transferences, post registry Fondos systems. Financieros, Implementation Payroll) of ex-ante controls was not feasible Extended Text The current ISTMO includes The new IFMIS Annual DNC Revised. functional SIAFPA does all model integrates Clarified coverage of not include functions and functionalities for relevant functionalities integration budget interfaces with The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) the new for budget with National preparation, the system for ISTMO model preparation and Debt accounting, budget target value is not (SIGADE) and execution, treasury (there is no harmonized Single and accounting; Central Bank in with national Treasury with interfaces Panama). payroll, Account. The with national debt, procurement only integration the treasury single and public missing account, and the e- investment is that with tax system system PanamaCompra 3 and public investment. In addition, ISTMO has implemented integration with payroll (EPD), DGI and SIAFPA Consolidado. Component 3: Strengthening public procurement and contracting Indicator Unit of Baseline Target Values Frequency Responsibility Change/ measure 2017 2018 Dec. 31, 2019 Justification PDO: Percentage 60% of Government 100% of DGCP Revised. Target Increased competitive procurement competitive for 2019 transparency procurement information procurement established. in public processes of generated processes of procurement Central and through the Central and Decentralized upgraded Decentralized Govt are platform Panama entities are publicly and Compra 3 and publicly available daily available disseminated by through via Panama DGCP semi- PanamaCompra 3 Compra 2 annually on a daily basis The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Indicator Unit of Baseline Target Values Frequency Responsibility Change/ measure 2017 2018 Dec. 31, 2019 Justification Improved Text The current DGCP has DGCP New. Addition procurement Panama implemented a needed to complaint Compra system procurement measure management has no complaint module progress. instruments to through Panama facilitate Compra 3 complaints about procurement processes Modernized Text Law 22 (2006) Updated DGCP New. Addition legal and regulation procurement law needed to framework 366 (2006). The (Law 61) and measure for law has corresponding progress. procurement changed 6 regulations times between (Decreto 40) 2009 and 2014, establishing but the guiding principles regulation 366 for transparency, has never been professionalization, modified. and efficiency. The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) ANNEX 2: PROPOSED NEW CONTRACTS FOR FINANCING Activity Component Amount (US$) Estimated Estimated end contribution to PDO start date date Programa de las capacidades técnicas para el diseño, implementación y Component 1 120,000.00 4-July-18 14-April-19 control de Políticas Públicas Consultoria para la Transformación Integral de la DTI Component 1 265,000.00 4-July-18 31-Oct-19 Consultoría para el servicio de Cyber Seguridad y prueba de Component 1 275,000.00 4-July-18 30-July-19 vulnerabilidad para la DTI Adquisición de una Solución para la Administración de Cuentas Component 1 151,300.00 16-Sept-18 30-Oct-19 Privilegiadas Consultoría para la Digitalización de lo archivos físicos y en cartrige Component 1 230,000.00 16-July-18 30-April-19 Hub de recaudación de impuestos Component 1 150,000.00 16-Aug-18 14-Aug-19 Plan de Mitigación de Riesgo Component 1 150,000.00 16-July-18 14-Aug-19 Consultoría - desarrollo e implementación para la actualización de la Component 1 500,000.00 16-July-18 14-June-19 cuenta corriente tributaria, incorporando ajustes de débito y crédito Adquisición de infrastructura Tecnológica, almacenamiento y licencias Component 1 350,000.00 16-July-18 14-Aug-19 Nube computacional para los ambientes de desarrollo y pruebas Component 1 175,000.00 16-Aug-18 30-Sept-19 Consultoría e implementación de Plan de Recuperación de desastres Component 1 200,000.00 16-Aug-18 14-Aug-19 Cumplimiento de estandares internacionales de transparencia fiscal Component 1 700,000.00 16-Sept-18 30-Sept-19 Identificación de transferencia recibidas en el Fondo General Cuenta Component 1 35,000.00 16-July-18 30-May-19 Única del Tesoro de bancos internacionales BID, BM, CAF y otros - DGT Sistema de encriptación de la Información - DGT Component 1 2,000.00 18-July-18 30-Mar-19 Servicio de entrenamiento para administración y control de Base de Component 1 3,750.00 21-Aug-18 30-Mar-19 Datos AS-400 - DGT Recaudación de las entidades CUT por Banca en Línea de Bancos Component 1 40,000.00 21-Aug-18 30-Aug-19 Privados y de Gobierno - DGT The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Consultoría para fortalecer las capacidades de la DIPRENA en el Component 1 100,000.00 2-Aug-18 30-Aug-19 desempeño de los sectores e introducir herramientas de trabajo Diseño para sectores pilotos en la formulación de la publicación de Component 1 250,000.00 2-Aug-18 30-Aug-19 información del gasto (a nivel global y funcional) Diseño de la Estructura Organizativa, Estructura y Perfiles de Puestos Y Component 1 25,000.00 4-July-18 30-Dec-18 Manuales de Organización y Recursos Humanos para Creación de la Unidad Especializada en Asociaciones Público Privadas (APPs) del Ministerio de Economía y Finanzas Elaboración de Manuales de procedimientos/ Guías Metodologicas de Component 1 125,000.00 3-Sep-18 30-May-19 la Unidad Especializada en Asociaciones Público Privadas (APPs) del Ministerio de Economía y Finanzas Fortalecimiento de las capacidades de la Unidad Especializada en APP Component 1 60,000.00 4-July-18 30-Oct-19 Consultoría en SAP (FI), orientado en eficiencia e integridad procesos de Component 2 45,000.00 1-Aug-18 30-April-19 SAP (transferencia de conocimiento) Consolidación de cierres contables basados en una Análisis de Políticas Component 2 45,000.00 1-Aug-18 30-April-19 Contables versus MEPP/FMI (2014) Y NICSP's Capacitación en Academias SAP- Usuarios de la DNC y la Entidades del Component 2 99,000.00 1-Aug-18 30-April-19 Sector Gobierno Central y Descentralizadas Alquiler de salas equipadas para Capacitaciones Component 2 120,000.00 1-Aug-18 30-Sept-19 Desarrollo de sistemas para la incorporación de dispositivos móviles Component 2 70,000.00 18-July-18 30-Mar-19 Android como soporte a la recolección de datos de campo para encuestas económica y agropecuaria Desarrollo e implementación de Apps para aceso a la información del Component 2 45,000.00 18-July-18 30-Jan-19 sitio web de los censos de población y vivienda 2020 y el portal de la estadística panameña Asesor en Tecnología de la información, para las modificaciones que se Component 3 44,940.00 1-Oct-2018 30-Dec-19 desarrollen en las etapas de desarrollo e implementación de la nueva Plataforma Electrónica de Compras Públicas PanamaCompras Estudio sobre Convenio Marco sobre la tendencia de compras del Component 3 150,000.0 1-Aug-18 30-April-19 Gobierno Asesoría para la formulación de establecimiento de Educación Continua Component 3 200,000.00 1-Aug-18 30-Dec-19 sobre Contrataciones Públicas a Nivel Escolar Asesoría para potenciar el uso de la catalogración de la UNSPSC Component 3 75,000.00 1-Aug-18 30-May-19 The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Consultoría para la Innovación en Compras Públicas, aplicando Compras Component 3 150,000.00 1-Aug-18 30-Sept-19 Sostenibles Consultoría para el establecimiento de una metodolgía para la Component 3 125,000.00 1-Aug-18 30-Sept-19 elaboración de los programas anuales de compras para las entidades del Estado Consultoría para el Diseño y Elaboración de políticas públicas aplicadas Component 3 100,000.00 1-Aug-18 30-Sept-19 en el Sistema de Contrataciones Consultoría para la adopción de metodología estándar de contratación Component 3 65,000.00 1-Aug-18 30-April-19 abierta "Open Contracting" Consultoría para la integración entre ISTMO y PanamaCompra Component 3 150,000.00 8-Jan-19 30-Oct-19 Consultoría para la integración de Registro de Proveedores Component 3 150,000.00 8-Jan-19 30-Oct-19 Coordinador de Proyectos Banco Mundia Component 3 74,900.00 21-Mar-18 30-Dec-19 Especialista de Compras para la implementación del nuevo sistema de Component 3 50,000.00 13-Apr-18 30-Dec-19 PanamaCompra Especialista de Tecnología para la implementación del nuevo sistema de Component 3 50,000.00 17-Apr-18 30-Dec-19 PanamaCompra Especialista Legal para la implementación del nuevo sistema de Component 3 50,000.00 17-Apr-18 30-Dec-19 PanamaCompra Consultor Internacional para la Auditoría del Proceso de Component 3 150,000.00 1-Aug-18 30-Oct-19 Implementación de la Nueva Plataforma Electrónica de Contrataciones Públicas Auditoria Externa - BDO Audit Component 4 16,050.00 1-Jul-18 30-June-19 Total 5,931,940 The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) ANNEX 3: UPDATE OF ECONOMIC AND FINANCIAL ANALYSIS Component Types of Activities Financial Benefits Positive Economic Externalities Notes Costs (Potential) (Potential) Component 1:  Piloting of  Reduced costs of capital  Improved allocation of  With the 2nd Direct Developing performance- investments through more budgetary resources to restructuring new costs of Capacities for based planning priority areas (MoF), activities will include 2.52M + Public Private Partnerships and budgeting resulting in greater support to the PPP labor costs Results-Based (PPPs) of official’s processes allocative efficiency framework and to Planning, (6+MDAs)  Savings from less debt (resources dedicated to increasing time + Budget  Initial financing (and associated higher return projects and transparency of rental Management foundational interest costs) as sounder programs) budget and costs work for PPP fiscal policy management performance and Evaluation framework and  Savings from greater information. Medium Term efficiencies resulting from Fiscal & better performance Expenditure information collected and Framework utilized, including targeting of beneficiaries and elimination of duplicate programs Component 2:  Roll-out of new  Savings from reduced  Saving from labor costs of  ISTMO processes Direct Managing Integrated administrative costs to the consolidating information require fewer costs of public resource Financial state in delivery of public from disparate systems 42.98M + bureaucratic steps and information Management outputs (MoF + MDAs) and time labor costs efficiently System (IFMIS)  Partial claim to savings on idle savings from lower paper authorizations of official’s to central working of cash balances from inconsistency in data, less  Previous system time + government benefits of Treasury Single reconciliation from (SIAFPA) did not cover rental institutions (25) Account. improved controls (MoF + Fondos Financieros costs + + decentralized MDAs) (more than 30% of the annual The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) institutions (36)  Savings from reduction of budget), had only operating with floating debt partial institutional costs connections to  Cost savings for vendors as coverage at central TSA, payment times have been government, and was Procurement, based on ex-post reduced Debt modules registration approach.  Modernization  Cost savings for state by ISTMO will cover 100% of the external reducing inputs required to of central and control manage payment process decentralized framework government, 100% of  Support the budget. country’s  The information about statistical payment obligations capacity and cash balances is updated in real-time; allows payments when cash is available, reducing floating debt.  Payment time was reduced because of streamlined and unified processes among budget, accounting and treasury.  Previous system (SIAFPA) was without support & extremely obsolete  ISTMO allows setting of commitment ceilings, which allows MEF to control the The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) rhythm of expenditure execution, and avoid financial obligations when resources are not available. Also allows MEF to set austerity rules.  Before cash balances in government bank accounts were unknown, now MEF knows exactly when more resources are needed or not, allowing for better cash management.  Because the information was locally distributed, the consolidation of information required important effort in terms of time and human capacities. Now the information is centralized and the consolidation is automatic. The World Bank Enhanced Public Sector Efficiency Technical Assistance Loan (P121492) Component 3:  Institutional  Cost savings from reduced prices  Cost savings from Direct Strengthening Strengthening of and transaction costs for greater competition, costs USD public DGCP government procurement i.e., more facilitation of $9M + procurement  Legal and the ability of existing or labor costs and regulatory new firms, especially of official’s contracting reform small and medium-size time +  Panama Compra enterprises that are not rental 3 Platform (ICT) currently doing much costs + business with the annual government, to operating successfully offer their costs goods and services, and eventually works, if the law is expanded to cover all aspects of procurement. (MoF + MDAs)  Labor and time savings from some process simplification. (MoF + MDAs)  Reduced corruption in procurement as a result of greater transparency and documentation. Note: Limitations for substantiating with quantitative data at this stage: The two main areas where conducting a more fine-tuned economic and financial analysis should, in theory, be more feasible are the two major ICT investments: ISTMO and Panama Compra3. In the case of ISTMO, the analysis would require information about short-term debt, financial investments, bank account analysis, etc. The analysis also requires information from spending units about cash balances from 3 – 5 years ago, and in all likelihood this information will not be available in all cases. This kind of analysis would demand a significant amount of time and resources and joint work with MEF. In the case of the Panama Compra3 contract (which has not yet been implemented), it would require a detailed analysis jointly with procurement offices at the stage of roll-out and a thorough assessment of the transaction process under the previous system. Building on the framework developed in this Annex, as part of the Implementation Completion and Results Report, a quantitative analysis of the projects costs and benefits will be carried out to demonstrate the project’s efficiency contribution.