PROCUREM ENT INN0VATI ON CHALLEN GE About The World Bank Institute The World Bank Institute seeks to strengthen the capacity of developing countries to reduce poverty. We connect individuals, networks and institutions to help them find solutions to their development challenges. With a focus on the ‘how’ of reform, we facilitate knowledge exchange, foster innovation and build coalitions for positive change. To reach more people and to increase our impact, we work with and through global, regional and country-based institutions, as well as global and local networks of development practitioners. P R O C U R E M E N T I N N 0VATI ON C H A L L E NGE © 2012 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW COMPETITION WINNERS Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org Publication Coordinator: Norma Garza, World Bank Institute Editor: Stephanie Debere Design: Greg Berger This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org Cover Photos: Top: A training session for monitors using the Procurement Monitoring Portal Observatory, Nigeria Bottom: Monitors verify the quality of newly procured school furniture in the Philippines i FOR EW ORD Dear Readers, Our hope is that this publication will be a useful tool We invite you to engage in the discussion through the We are very pleased to present the top entries to our first Our special thanks go to their authors, for their in the growing global movement toward innovative ProAct community (www.pro-act.org), where you ever Procurement Innovation Challenge. On behalf of willingness to elaborate on their submissions. procurement reforms. We hope that it promotes further can support the knowledge exchange and learning of the World Bank Institute and our partners, I would like knowledge-sharing and learning, and contributes to this nascent network. We envision ProAct as space to to take this opportunity to thank you for your interest The publication’s aim is to highlight a variety of innovative strengthening a community of practitioners. share, learn and collaborate with your peers worldwide, in our work and to invite you to learn more about these solutions and approaches used by practitioners to and look forward to seeing you there. inspiring case stories in public procurement innovation. address common challenges related to procurement We also hope that you will keep us informed of any reform, or to improve procurement performance. It also thoughts you have on how we might make this Happy reading and innovating, We hope you will find these case stories as inspiring identifies common trends and learning. We hope it will publication more useful, or of any innovations that as we have. This publication is a reflection of the work advance understanding of barriers to reform, lessons you implement in your own work as a result. Please Marcela Rozo being done around the world to help advance openness, from experience and the success stories that can help continue to share your ideas and experiences with us! Procurement Team Lead transparency and efficiency in procurement processes. accelerate shared standards of good practice. The format The overwhelming response we received to our call for used to capture these experiences is designed to inform entries to the Challenge is a testament to the importance you in a practical way. of, and interest in, this work worldwide. The WBI would like to thank the Procurement Innovation Challenge Circle of Advisors for their invaluable support: This publication would not have been possible without One of the most exciting outcomes has been a tangible the support of our partners at the UN Procurement Angelita Gregorio-Medel, ANSA EAP, Ateneo School of Government demonstration of the vital role played by public Capacity Development Centre (UNPCDC), Deutsche Asha Ayoung, World Bank procurement. It is an essential government function, Gesellschaft für Internationale Zusammenarbeit (GIZ) Ashish Bhateja, World Bank but perhaps most importantly, it can provide a means GmbH with the financial support of the German Federal Claire Schouten, Integrity Action for socio-economic development and improved social Ministry for Economic Cooperation and Development Florence Dennis, Ghana Anti-Corruption Coalition equity, particularly in fragile settings. In developing (BMZ), the Public Procurement Research Group from Irina Luca, World Bank countries, public service delivery is important both the University of Nottingham (UK) and Integrity Action. Joel Turkewitz, World Bank for alleviating poverty and enhancing government Kathrin Frauscher, World Bank Institute credibility. High-performing and transparent procurement We owe our gratitude to the members of the Circle of Kirsten Hommann, World Bank systems are fundamental in guaranteeing cost-effective Advisors who provided guidance, helped peer-review Marcela Rozo, World Bank Institute delivery of goods and services for societies at large, and the case stories and contributed to the selection of top Michael Jarvis, World Bank Institute particularly for the poor. entries and awarded authors. We are also grateful to Michael Roesch, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Nadine Stiller, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH the WBI Procurement and Innovation Teams who have Peter Trepte, Public Procurement Research Group, University of Nottingham, UK We would like to extend our thanks to all those who been essential in formulating and overseeing the entire Rasmus Jeppesen, UNDP Capacity Development Group (UNPCDC) submitted an entry for consideration – we wish we were Challenge process. For their efforts in making this Robert Hunja, World Bank Institute able to include each of them! This publication showcases publication possible, and to our editor, thank you. Teresa Omondi, Transparency International Kenya the top 15 case stories, chosen from over 60 entries. ii iii INTR OD UC T ION An innovative crowdsourcing mechanism The World Bank Institute Open Government Practice to reform build on traditional capacity by enhancing Throughout the Challenge, organizations, companies Johannesburg, South Africa, in October 2012. These top (WBIOG) provides cutting-edge knowledge and capacity existing practices or embracing new ones intended to and individuals from civil society and the public and five case stories are: building opportunities to practitioners in the public and make public procurement more open, fair, inclusive, private sectors were engaged through traditional and • Creating Public Oversight in Nigeria: The Procurement private sectors and civil society in developing countries. transparent and accountable. Such approaches lead to non-traditional communication channels. This virtual Monitoring Portal Observatory, by Seember Nyager This work focuses on some of the most challenging areas improved procurement performance, and may include: engagement fostered peer-to peer interactions and of the Public and Private Development Centre, Nigeria of governance reform, including procurement – areas Greater use of information and communications inspired practitioners to participate in the Challenge, • Promoting Transparent Contract Awards: Shedding where success could have transformational impacts on technology (ICT); Better access to, and use of, data sparking further discussions around these thematic light on unannounced public tenders, by Sergej the lives of the poor. in making decisions; Adoption of performance- or results- areas. In April, all case stories were peer-reviewed by Muravjov of Transparency International Lithuania based processes, and the establishment of industry- the Challenge’s Circle of Advisors using four evaluation • The Best of Both Worlds: Centralized purchasing Organizations around the world face a common or sector-wide framework agreements for commonly criteria: Clarity, innovation, lessons learned (including power meets local autonomy, by Jorge L. Gonzalez challenge to promote the documentation and sharing purchased items. Fundamentally, these innovative impact) and scalability. The 17 advisors were identified of the National Institute of Public Purchases, Ecuador of experiences for further learning. Efforts offering approaches transform existing capacity and capability, for their expertise in the overall Challenge theme and its • The Power of Grassroots Procurement: Transforming powerful insights into the drivers of reform are frequently producing better development outcomes. key thematic areas. They provided guidance throughout Assam by giving farmers choice, by Mustaqur not documented because practitioners lack the tools, the Challenge process. Rahman of the Assam Agricultural Competitiveness incentives, channels or support to share their work. At In February and March 2012, to boost the effort toward Project (AACP), India the same time, those experiences that are documented procurement reforms, the WBI in collaboration with a As a result of this evaluation, five top entries were • Saving Costs and Trees: Using desktop IT for green remain fragmented, and the opportunity for peer-to-peer group of partners asked practitioners and stakeholders selected and their authors recognized and awarded with procurement, by Steven R. Samlalsingh of Petrotrin, connections around that knowledge is limited. To address from around the world and across sectors to submit participation at the Open Contracting Global Meeting in Trinidad and Tobago. this and similar challenges, the World Bank Institute entries online to a competition on innovations in (WBI) seeks to adopt new approaches to identifying procurement. The strong response of over 60 entries experiences, knowledge and good practices. With this conveyed experiences from diverse settings worldwide, in mind, the WBIOG Procurement Program designed including fragile and conflict-affected countries. These the Procurement Innovation Challenge as an innovative were shared under the competition’s four thematic areas: crowdsourcing mechanism to identify and highlight • Use of ICT to improve performance of procurement evidence of new approaches, processes, initiatives, systems policies or tools that have led to effective procurement • Procurement reform in fragile and conflict-affected reforms or better performing systems. countries and small states • Managing procurement systems for enhanced The Challenge addressed the common objectives of performance Innovation in procurement can have transformational impacts collecting practical experiences and facilitating learning • Contract monitoring to enhance accountability and on the lives of the poor, through initiatives such as O trade’s and sharing in what has worked and in the lessons effectiveness of public contracts. Local Community Procurement Program (left) and the Assam learned in procurement reform. Innovative approaches Agricultural Competitiveness Project iv v In addition, the Innovation Award from UNPCDC further the potential for a ‘ripple effect’ to spread procurement recognized the Ecuador case story mentioned above, and innovation among countries, and recognition of the need the Public Procurement Law Review granted awards to: for ongoing improvement. These common trends further demonstrate the vast potential of good procurement • Profiling Public Procurement: Leveraging e- systems in efficiency savings, reduction of corruption, procurement databases in Ireland, by better service provision, better value for money, Anthony Flynn of Dublin City University environmental benefits and economic development, • Making Use of Procurement Data: Slovakia’s among others. Open Public Procurement Portal, by Matej Kurian of Transparency International Slovakia. All the case stories from the Procurement Innovation Challenge, including those not included in this As well as the top five case stories, this publication Strong procurement innovations can have a ripple effect, driving improvements around the world. publication, are now part of a growing knowledge base showcases the next 10 leading entries. All 15 authors Clockwise from top left: Trinidad and Tobago, South Korea, Paraguay and Liberia. on procurement reform in the ProAct community. We received guidance to further develop their original hope this will continue expanding, with more experiences submissions for publication, in the hope that this will and stories gathered from around the world and across contribute to a common knowledge-base, drawn from sectors. These case stories contribute to enhancing experience, on what is working and of lessons learned collective understanding of which innovative solutions in dealing with issues related to procurement reform. have been used by organizations and practitioners, what The publication is designed to help promote further has worked and what challenges remain in addressing knowledge-sharing and learning between practitioners, procurement reform. procurement professionals and reformers around these issues. Our mandate at WBI is to gather and consolidate global knowledge and learning in how reform can The Challenge revealed several key lessons and common best be approached. We hope these practitioner-driven trends spanning the global effort toward innovation experiences will strengthen learning, support network- in procurement reform. These include the critical role building and help scale-up reform in existing areas of of ICT in improving public procurement systems, the focus in public procurement. importance of stakeholder buy-in for successful reforms, vi vii PR O C U RE MEN T I NNOVAT I O N C H A L LE NG E Aggregating buried data page 31 Equipping stakeholders to rebuild a nation page 61 Transparency International (TI) Slovakia Government of Liberia and the World Bank AT-A - G L A N C E : T HE TO P 1 5 E N T R I E S Scattered public procurement data was preventing Liberia’s urgent need for post-war reconstruction meaningful contract monitoring or analysis. In response, demanded a strong procurement function, so the CHALLENGE COMPETITION WINNERS TI Slovakia created a publicly accessible online database, government took a comprehensive three-pronged with simple, effective tools to browse, filter and visualize approach: reforming procurement regulation, procurement data for evidence-based advocacy. training a new cadre of professionals and engaging the private sector. Challenging secrecy in procurement page 1 Recognizing untapped potential page 37 Public and Private Development Centre (PPDC) Dublin City University Business School Opening up the supply chain page 67 PPDC has created an online portal that helps train procurement monitors across Nigeria, and collates Researchers harnessed Ireland’s e-procurement database O trade and market access and analyzes their findings. The reports are used to promote accountability and transparency, to carry out an innovative survey, giving valuable insights A Canadian firm has developed the Local Community challenging a culture of secrecy in the procurement process. into the market for public sector contracts. The findings Procurement Program, which equips marginalized people have already led to policy changes for more effective with the technical and business skills to enter the supply Making the most of freedom of information page 7 procurement. chain, earn a sustainable living and help develop their Transparency International (TI) Lithuania local economies. TI Lithuania used freedom of information laws to obtain government procurement data. Its analysis Beating corruption with biometrics page 43 confirmed alarmingly high numbers of unannounced tenders. Published online, the findings helped The Public Procurement Service of Korea An IT revolution on India’s railways page 73 fuel public and media scrutiny of procurement reform. By adopting the latest fingerprint recognition Indian Railways technology, Korea has dramatically cut bid-rigging To help modernize the country’s rail system, Indian Purchasing power meets local autonomy page 13 and illegal proxy bidding, increasing transparency Railways successfully rolled out a grand-scale switch National Institute of Public Purchases (INCOP), Ecuador and fairness in its electronic tendering system. from paper-based procurement to electronic bidding, By centralizing procurement of medicines, then listing items in an electronic catalogue, Ecuador’s real-time performance monitoring, priority identification health system has escaped fragmentation while still enabling local health institutions to order the Boosting efficiency and local business page 49 and contract management tools. medicines they need. Public Procurement Office, Paraguay Although less than 13 percent of Paraguay’s population Creating an online community page 79 Driving an agricultural revolution page 19 had internet access, the country found a way to National Resources Fund (FNR), Uruguay The Assam Agricultural Competitiveness Project introduce electronic reverse auctions without harming Uruguay’s national high-cost medical treatment insurer By trusting local famers to procure the irrigation pumps they need, a once-failing scheme to small business. Success lay in giving emerging local has used web-based technology to create a ‘social improve Indian farm production turned itself around, resulting in increased productivity of more companies a chance to improve submitted bids. network’ between the government, healthcare providers, than 95 percent. patients and medical suppliers, resulting in significant Starting from scratch page 55 cost reductions and better treatment for patients. Saving costs and trees page 25 Government of South Sudan Petrotrin, National Oil Company, Trinidad and Tobago Through a novel system of on-the-job training and Harnessing volunteer power page 85 Using standard desktop computer software in new ways, Petrotrin has slashed the environmental mentoring, South Sudan is creating a professional Procurement Watch, Inc. impact of its procurement function through electronic meetings and tenders and a document cadre of public procurement staff who are helping A Philippine civil society organization has trained parents tracking database. to build the world’s youngest country. and staff to monitor furniture procurement in schools – turning round quality and value for money, and raising local people’s involvement in promoting transparency across public procurement. viii ix WINNER CR E ATI N G PUBLI C OVE R SI GH T IN NIGERIA The Procurement Monitoring Portal Observatory Author: Seember Nyager, Procurement Program Administrator Organization: The Public and Private Development Centre ‘ Over 200 procurement (Civil Society Organization) Theme: Contract monitoring Country: Nigeria monitors receive training and reporting support The Procurement Monitoring Portal through the portal ’ Observatory is an online mechanism to SU MMARY collate, analyze and channel feedback from citizen procurement monitors across Citizen participation in the public procurement process can make significant contributions to Nigeria. Its library is an open source of achieving a transparent, accountable and efficient procurement system. Oversight by trained procurement-related resources, including reports, guidelines and training tools. members of civil society helps deliver value for money in procurement and raise the quality of public services. To promote and facilitate citizen oversight in Nigeria, the Public and Private Development Centre (PPDC) has created a robust web-based system: the Procurement Monitoring Portal Observatory. This central online portal provides training for procurement monitors across Nigeria and a mechanism to collate, analyze and channel their monitoring feedback. The resulting evidence-based reports are then used to promote accountability and transparency in the procurement process and enforce compliance with regulations. This way, effective procurement oversight can help improve service delivery and reduce poverty. x 1 C H A L LE N G E • Stakeholder consultation 2. Participatory monitoring, analytical and technical With these aims in mind, the procurement portal pages, with access restricted to verified Nigeria’s Public Procurement Act requires all federal analyze and channel feedback from various monitoring observatory was innovatively designed with careful procurement monitors. These are focused on public procurement processes to be monitored, whether activities. Their reports would be made available to consideration for the needs of stakeholders across generating procurement reports, offering online for goods, works or services (except procurement relevant bodies (from the media to the regulators) who the procurement process, including civil society, the procurement training and providing procurement- involving national security, unless with presidential could use them to demand compliance with procurement media, procuring entities, regulators, suppliers and related legal advice to registered monitors. PPDC approval). To hold government officials to account, regulations. This would enable monitors to make a Nigeria’s people. All stakeholders were involved in staff verify that monitors meet legal monitoring the media, regulatory bodies and civil society need real difference in supporting the oversight functions of the portal’s development, with regular consultations requirements (that they are a trained procurement evidence-based monitoring reports on procurement Nigeria’s procurement regulators (the Bureau of Public to ensure that the system was user-friendly and met monitor and are a representative of a relevant processes. Such reports are vital for detecting early Procurement and the legislature). their needs. So that procurement information can NGO or professional body). Staff also check warning signals of processes that are not compliant be reported with uniformity, a standard checklist they are fully independent, with no conflicts with good practice or regulations. In a country as large Civil society also needed access to resources to train was developed based on benchmarks in the Public of interest, and that they are affiliated with an as Nigeria, the need for procurement monitors is vast. more monitors and raise public awareness of the vital Procurement Act. Stakeholders’ feedback helped make organization that has also been checked. This But few civil society organizations have the technical role they play in public life, encouraging ordinary people’s the portal easier to use – for example, the reporting helps ensure the integrity of submitted reports. knowledge, skills or resources required to monitor support and participation. In response, PPDC sought checklist was simplified, with some of the compulsory procurement. Those that do are distributed unevenly a way of collating monitors’ feedback from across the fields removed and the availability of some questions • Seeking expert advice within the country. country, while increasing the spread of monitoring dependent on the previous responses. To create shared ownership and synergy with existing oversight through training and support for civil development programs, the portal has an independent Civil society procurement monitors therefore needed society organizations. • Developing the structure Advisory Board, with members from the development a central mechanism that would allow them to collate, Based on the identified objectives, the portal was sector, the regulators, the media and the legislature. designed with two sections: The board helps ensure the portal remains relevant to all stakeholders. It feeds back on new program I N N O VAT IO N 1. Descriptive pages, for information receiving developments and peer review assessments before and sharing, including an open-source library. release and meets in person at least once a year. To help achieve the statutory objectives of transparency wide range of analysis, and disseminate the results Access is open to the general public, with regular The board keeps the portal truly independent, its and accountability in procurement, PPDC decided in to people and organizations (from journalists to website tab displays for ease of navigation. ownership lying with the stakeholders. November 2009 to build on its previous procurement- regulators) who could demand compliance with watch initiatives and develop a web-based system to procurement regulations. Through a blog, the support civil society monitoring of Nigeria’s federal system would also channel real-time procurement- RE S U LTS procurement process. Using free and open software, the related legal advice to investigative journalists and system was launched in June 2010 after a four-stage procurement monitors seeking clarity on a point of The project has successfully established the Procurement monitors, and is equipped with free online support development process: law. Online training and tutorials would also improve Monitoring Portal Observatory as a web portal for materials. The results are immediately evident: the capacity of procurement observers and other the collation, analysis and e-reporting of citizen-led • Setting clear objectives stakeholders, while a library would give accurate, procurement monitoring in Nigeria. The portal provides • A trained cadre of procurement monitors PPDC sought to develop an online analytical tool that timely and detailed information for anyone interested 24-hour access for the virtual submission and collective Over 200 procurement monitors receive training would allow the submission of feedback reports from in the Nigerian procurement system. analysis of procurement monitoring reports by registered and reporting support through the portal. The procurement monitors across the nation, perform a 2 3 system provides a user’s guide to the public annual procurement assessment report is also released between ministries over a period of months. The • Share credit for your success procurement checklist (benchmarks set under the through the portal, and reports have been used in process is also time-consuming – monitors may work Civil society should take care to share the credit Public Procurement Act) and guidelines to help advocacy with federal ministries for better access to more than 10 hours a week trying to access relevant for successful program outcomes – for example, monitors access procurement information from federal procurement information. information. PPDC therefore tries to provide a token with public regulators, whose long-term support bodies. Separate training modules include the Public amount to help with monitors’ expenses. is essential. It is important to acknowledge their Procurement Act, bid evaluation, the complaints • Library of procurement resources valuable input to policy enforcement – even if mechanism and codes of conduct for procurement The portal has provided an open source of • Assign monitors to subjects they care about civil society contributed more to the workload. monitors. The site also provides a facilitator’s manual procurement related resources for various Experience shows that people find it easier to monitor to enable trained procurement monitors to pass on stakeholders, including three series of procurement procurement in subject matters they are already Despite the portal’s initial successes, many more trained their learning. reports, guidelines on accessing procurement interested in. This makes training and mobilization monitors are needed to ensure that procurement information, and training tools and manuals. more effective. Ultimately, people are the drivers of becomes truly transparent and accountable across • Detailed procurement reports submitted to key the procurement reforms. The portal is only an enabler Nigeria’s public sector. PPDC will keep working through stakeholders • Ongoing evolution to reach more people and is wholly reliant on willing citizen participation. the portal to boost the number of trained monitors and The portal has received 135 reports from procurement Although still a work in progress, the portal has reinforce civil society’s capacity to monitor procurement. monitors. These have been collated, analyzed and already proven useful in mobilizing, coordinating made available to stakeholders such as regulators, and sustaining citizens’ engagement with the public legislative committees and development partners. sector on issues of accountability and transparency. RE S OU RCE S : Monitors are freely posting reports of wrongdoing Stakeholder consultations are ongoing and and non-compliance and regulators receive procurement monitors constantly provide feedback Procurement Monitoring Portal Observatory: www.procurementmonitor.org summarized analysis of reports from the portal. to help improve the reporting platform. The portal’s Portal library: www.library.procurementmonitor.org This supports early intervention by regulators and approach is new and very different from the culture legislators to prevent wrongdoing and improve budget of secrecy within government that has long existed in implementation. For example, soon after the portal Nigeria. It therefore requires much awareness-raising was launched, the Bureau of Public Procurement and capacity building – both within the government responded promptly to a report that a college had not and among civil society. carried out bid-opening for a tender as advertised. An LESSONS LEARNED As the portal continues to be developed, several useful such as help covering their costs. Reporting on the Members of the portal’s stakeholder advisory board join lessons are emerging: portal is just supporting the core mandate of actual representatives of development organizations for the public procurement monitoring – but monitoring can launch of the procurement monitoring portal. The advisory • Give users material support be a long process, due to difficulties in accessing board ensures the portal remains objective and independent. Technology-based development projects can benefit information from federal ministries. It can entail costs from incentives that encourage people to participate, from photocopying large documents to travelling 4 5 WINNER PR OMOTI N G TR A N SPA R E N T CO NTRACT AWARDS Shedding light on unannounced public tenders in Lithuania Authors: Sergej Muravjov, Executive Director Ruta Mrazauskaite, Project Coordinator ‘ Lithuania’s Prime Minister said procurement reforms Organization: Transparency International Lithuania (NGO) Theme: Open contracting would allow “fewer Country: Lithuania undisclosed tenders” ’ TI Lithuania’s report brought attention to the number of unannounced tenders across government ministries. SU MMARY With the number of unannounced tenders in the country’s public sector alarmingly high, Transparency International (TI) Lithuania decided to investigate. Although an undisclosed tender is not necessarily corrupt, it does incur higher risks of corruption and unfair competition. Using freedom of information legislation to obtain data from the Public Procurement Office, TI Lithuania analyzed the occurrence of unannounced tenders, creating graphs and charts for comparison. It found that many tenders were not publicly announced, including for high-value contracts. Armed with these hard facts, it published its findings, helping fuel public and media scrutiny of the implementation of reforms to reduce the scope for unannounced tenders. 6 7 C H A L LE N G E • Obtaining new data • Publicizing findings To obtain the information it needed, TI Lithuania The initiative aimed to publish clear visual data on In Lithuania, the use of unannounced tenders as a of Health awarded Siemens a contract with a value filed requests to the Public Procurement Office under the practice of unannounced public procurement means of awarding the country’s public sector contracts of around US $14.5 million. Although unannounced the country’s freedom of information legislation. It in Lithuanian ministries, inviting the public and the had become widespread. Such tenders involve the use tenders may be conducted with perfect integrity (and asked for details of all unannounced public tenders media to monitor the situation and press for policy of either simplified procurement procedures without may, for example, take place due to a misinterpretation and the share of such procurement in the total of all changes that would restrict the use of unannounced prior notice, or negotiated procedures without prior of legal regulations), the extremely limited provisions procurement carried out by each ministry annually. tenders. These should only be used in special cases, publication. Although the fact that a tender was for transparency mean the risks of corruption increase Once this data was received, TI Lithuania processed such as unforeseeably urgent procurements, or undisclosed does not necessarily mean it was corrupt, it significantly in a context involving many unannounced it and prepared an overview profiling practices of those where only a sole supplier is available. TI also does have limited provisions for transparency, meaning tenders. This means the method could theoretically be unannounced public procurement through diagrams, conducted advocacy with the media and the public, higher risks of corruption and unfair competition. In order chosen deliberately to create favorable conditions for comparative statistics and key insights. Although a emphasizing the general need for transparency in to prevent discrimination and ensure fair competition, certain suppliers. new profiling system was being introduced on the public procurement and highlighting the risks that both EU and national legal regulations encourage public central procurement website, allowing at least general accompany unannounced tenders. institutions to restrict the use of unannounced tenders. In order to tackle the practice, TI Lithuania needed comparisons, TI Lithuania decided to take the quest to quantify its extent. But TI’s research found that all for readily available information one step further, A report of its findings was published in September In Lithuania the practice had grown to account for a Lithuania’s on-line data on public procurement was creating a detailed publicly-available report on 2011, coinciding with the government’s introduction worryingly large percentage of public tenders – including scattered in the form of different reports across unannounced tenders. This would allow it to into parliament of amendments to the Law on some of high value. In 2006, for example, the Ministry different websites. The organization had to find a draw attention to this generally neglected issue. Public Procurement. TI’s analysis received wide of Justice had used an unannounced tender to award way of consolidating all the data about public media coverage, both in print and online, with construction company UAB Vetruna a contract worth procurement, so it could profile the practice of using one headline quoting Lithuania’s Prime Minister approximately US $11.5 million. In 2008, the Ministry unannounced tenders and take action against it. commenting on the proposed reforms: “There will be fewer undisclosed tenders.” I N N O VAT IO N RE S U LTS In 2011, to tackle the proliferation of unannounced procurements? TI wanted to see if consolidated tenders, TI Lithuania mapped the country’s existing data was available, but found that many Lithuanian The initiative aimed to create a clear analysis of • Increased public scrutiny procurement landscape, before drawing attention to government ministries lack this information on their unannounced tenders, in order to provide society The 2011 amendments to Lithuania’s procurement the hidden practice of closed tendering. websites. All tender announcements and reports and the media with material to begin monitoring legislation restricted the current widespread practice of past tenders are published only on the Public public procurement by national ministries. Although of using unannounced public procurement in • Assessing available information Procurement Office website, but they are scattered the initiative itself was a short-term one, it sought ministries. The amendments rule that a tender TI began by analyzing how Lithuanian ministries and hard to locate, and often lack information. They to contribute towards long-term changes in public can only be conducted through a negotiated publish their public procurement reports – on can also be downloaded only in PDF format, making procurement practices, proving a strong incentive procedure without prior notice when permission past procurements, planned tenders and tender it hard to extract information for comparison and for a reduction in the number of unannounced is given in advance by the Public Procurement Office announcements. For example, how detailed are the analysis. Under such a system, the proliferation of tenders across ministries. (the national procurement oversight body) or where published annual or quarterly plans for up-coming unannounced tenders could easily go unnoticed. the contracting authority issues a prior voluntary 8 9 transparency declaration on a particular tender. The have encouraged local journalists to take a similar • Promote the approach, not just the issue In 2012, TI Lithuania applied the approach in a Public Procurement Office either issues permission to approach themselves, using formal requests for Focusing on a specific issue can drive not only change different context, launching a second round of proceed with the proposed unannounced tender or information to obtain data for oversight and analysis. around that issue but can also promote use of a new procurement analysis, this time covering all national changes it to an open public procurement procedure. methodology, which can then be beneficially applied municipalities (instead of ministries) – also attracting • Better public awareness of the right to know in many different situations. By tackling the issue of a strong media and public response. Its experience These rules do not apply where the contracting Using freedom of information requests to hold the unannounced tenders this way, TI Lithuania promoted shows that this initiative can be replicated in any authority has to conduct a tender of particular urgency public sector accountable is still a relatively new public oversight and a legal framework to tackle a country or context with similar legal and practical and no other types of tenders are applicable. In this concept in Lithuania.The country has adequate corruption-prone procurement practice. But it also circumstances. case, the Public Procurement Office must be presented freedom of information legislation, but the logistical promoted public and media awareness of legal rights with arguments for this choice as soon as possible. and attitudinal framework needed to implement it to access information, which can be used to demand All the requests are made public on the central public is lacking. A survey by TI Lithuania in 2011 revealed accountability and promote change in any area of procurement portal, along with decisions by the Public that there are no major legal obstacles to the public public life. Procurement Office, so that the public and the media accessing of information, but less than a third of can monitor the use of unannounced tenders. respondents had made requests to public institutions for information over the previous two years. The main • Diversification of investigative journalism factors preventing people from exercising their right By identifying a problematic issue and linking the to information are practical ones (such as people use of data analysis with concrete legal reforms, TI not knowing they can ask for information or not Lithuania helped spark interest among the media in knowing whom to ask). TI Lithuania’s work to tackle probing into national statistics (or the lack of them) unannounced tenders provides an essential example and using findings to drive legal and social change. of how ordinary citizens can use their right to know to Recent media content suggests that by demonstrating engage in democratic processes and call for change. what can be done with freedom of information requests and data analysis skills, TI Lithuania might An unintended benefit was a boost for data-based investigative journalism and higher awareness of LESSONS LEARNED public rights to freedom of information. The analysis of unannounced tenders in government diagrams all helped TI’s audiences understand ministries revealed useful insights into optimizing public key messages instantly, making them memorable oversight of procurement processes: and accessible. For a subsequent similar report on procurement in municipalities, TI Lithuania sought • Make data visual local infographers and designers to work with on a The response to the report on procurement in pro-bono basis, who created highly engaging visuals, ministries showed just how powerful visual aids including maps, charts and comparative diagrams. to understanding data can be. Graphs, tables and 10 11 WINNER THE BE ST OF BOTH WOR LD S Centralized purchasing power meets local autonomy Author: Dr Jorge Luis González Tamayo, Executive Director (2008 – August 2012) Organization: National Institute of Public Purchases ‘ The system of reverse (INCOP), Ecuador (Government)) Theme: Managing procurement systems Country: Ecuador auction, time-bound agreements and electronic cataloguing can be SU MMARY Tenders were opened and evaluated transparently, to ensure suppliers met the necessary criteria to participate in widely replicated ’ Ecuador’s highly fragmented system for procuring medicines involved around 1,200 separate the auction. state health bodies carrying out autonomous purchases. Such decentralized purchasing absorbed high levels of time and human resources, and resulted in unstable, cost-ineffective supplies of medication. To deliver improved medical services and make better use of resources, the government initiated a three-pronged system. It centralized the procurement of medicines for all institutions through the use of electronic reverse auctions, and signed two-year framework agreements with chosen suppliers to commit them to agreed terms. Medicines were then listed in an electronic catalogue through which individual health institutions could requisition supplies as needed. Ecuador’s health system now enjoys both the purchasing power of centralized procurement and the benefits of local autonomy in ordering medicines. 12 13 C H A L LE N G E medicine market operates with price controls) and the prices are frozen, ensuring quality and value for historical data from previous drug auctions. Ecuador’s people. Before 2011, the acquisition of medicine across Ecuador’s The situation had to be tackled. A new procurement public health sector was highly fragmented. Responsibility law was enacted in 2008, providing for the centralized Information about the upcoming reverse auction was As a result of the reverse auction, close to 50 suppliers for ensuring a steady, reliable supply of essential medicines purchase of medicines for use by all four institutions. then broadcast to potential suppliers, informing them were selected. Each signed a two-year framework was spread across four governmental bodies: the Ministry One single procurement procedure would be used to clearly about the process to follow, and giving them agreement. The medical products were then uploaded of Public Health, the Ecuadorian Institute of Social acquire a specific medicine in quantities to meet the the chance to respond and raise concerns. Some were to the electronic catalogue and access given to the Security, and the Army and Police Social Security total demand of all four, in a process coordinated by worried about the logistical expenses of the new four participating health institutions. Each chose Institutes. Between them, they had around 2,800 public the National Institute of Public Purchases (INCOP). In approach. Previously they only made deliveries to one which of its subsidiary entities would be able to use health establishments across the country, approximately 2010-11, the Institute set about creating a system to location in a main city. Under the new system, they the system. More than 350 health entities can now 1,200 of which carried out autonomous purchases. This deliver that centralized process. would be obliged to make deliveries directly to each submit purchase orders according to their needs. traditional, highly decentralized purchasing of medicines health entity, regardless of location. Bidders also asked These will then be met by the supplier according was seriously undermining planning, efficiency and for a reduction in the economic warranties they would to the timeframe, cost and quality specified in the control. It caused duplication and erratic supply, and be asked to give. Usually in framework agreements, framework agreement. reduced the state’s ability to negotiate favorable prices a winning contractor is required to present warranties and delivery times. The ultimate effect was on the health such as insurance policies for faithful fulfillment of • Electronic catalogue of medicines of Ecuador’s people. the contract. To reassure bidders, INCOP asked only The electronic catalogue is accessible online by for technical warranties for the product, relying on professionals at the health establishments, who can other mechanisms to enforce contract obligations, order medicines as required. The catalogue reduces I N N O VAT IO N such as fines or disqualification from participation in the workload at the health units, freeing them from public procurement for five years. Free from insurance having to carry out complete procurement processes. In 2010, INCOP began developing a new system that a centralized system that would enable it to see obligations, bidders were able to offer better prices Logistics become the suppliers’ responsibility, allowing would allow centralized procurement of medicines, while its overall demand for a particular drug. So INCOP when tendering. the entities to reduce their storage infrastructure, retaining the role of individual health establishments released a form to be completed by each of the eliminate waste through expiry and reduce the risk in ensuring they have the medicines they need. To hundreds of health units within each organization. The reverse auction was then carried out through a of shortages. ensure transparency and oversight, INCOP invited Many units (especially small ones) did not complete special website, created using experience gained in national oversight bodies to participate in the process, this properly, which made it difficult to consolidate electronic reverse bidding in other areas of Ecuadorian INCOP trained all participating health entities to use and worked with the Department of Transparency so much information. To get round this, projections public life since 2008. Offers from suppliers that the electronic catalogue and produced procedural throughout. The system has three stages: were made based on similar health units. qualified went through to the bidding process (or manuals to help users carry out purchases. This was negotiation if there was only one qualifying offer). a substantial change: procurement staff were not • Centralized reverse auctions A record of authorized drug suppliers was then used to such a simple, paperless procedure. Some The initial step was to establish the overall need established, including pharmaceutical laboratories • Two-year supply agreement entities worked very well with the electronic for drugs in the health sector. Each of the four and distributors legally licensed to provide drugs to Winning suppliers signed a framework agreement system, but others – especially small ones – were participating bodies was asked to supply quantities the public health sector. To calculate reference prices with INCOP, establishing the commercial and technical uncomfortable about not having paper back-up required of each drug so they could be consolidated for each drug, INCOP used a formula based on the conditions for the purchase of medicines over a two- documents. Experience is now showing that it is into a big auction. However, each institution lacked official price used by the health authority (Ecuador’s year period. The agreements mean the technical simply a matter of time before all users are at ease characteristics of the medicines cannot vary and using this completely electronic procurement system. 14 15 R E S U LT S suppliers. Realistic timeframes for the process could be replicated anywhere with electronic procurement also be established. For example, it took more than systems, and across many sectors well beyond health The resulting increases in management efficiency have by pharmaceutical labs and sales and distribution two months to calculate realistic levels of demand, and medicines. allowed Ecuador’s health establishments to focus on organizations demonstrated their trust in the based on the input of over 1,200 health entities. their core activity: delivering quality healthcare to the process, helping ensure a smooth, cost-efficient Had this been rushed, the whole process would At the end of this two-year process, the system will country’s people. supply of medicines. have been based on faulty demand calculations. indicate to a precise degree the levels of use of each item, by each health unit. So future planning will be • Financial savings • Socio-economic benefits • A replicable system based on real data, enabling the system to deliver More than 520 reverse auction processes for the As part of government policy, the reverse auction This three-stage system of reverse auction, time-bound even greater benefits to Ecuador’s health sector. supply of medicines have been planned, worth around process was designed to give preference to medicines framework agreements and electronic cataloguing can US $948 million. More than 320 processes have produced in Ecuador. A total of 41 percent of the already been awarded for US $447 million, resulting contracts awarded were for medicine of Ecuadorian in a cost reduction of US $327 million or 42 percent. origin. Although this meant that some contracts were RE S OU RCE S : awarded not based solely on price, this cost to the • Better relations with suppliers state was balanced by wider social and economic Ecuador’s electronic procurement system: www.compraspublicas.gob.ec The process improved relations and understanding gains, such as industrial development and improved between Ecuador’s state medicine purchasers and working conditions. authorized suppliers. The high levels of participation LESSONS LEARNED Given the magnitude of the change and budgets at some public officials unable to conceive that such stake, the process revealed the importance of several a huge change could be carried out efficiently and crucial factors: improve the way public institutions acquire medicines. But once INCOP had demonstrated that the process • Win strong commitment from participating had been successful and attained the expected results, institutions it gained the necessary support. It was important that within each of the four institutions taking part, there was strong commitment • Ensure the right resources The centralized reverse auction of medicines brought to the process, from the top leadership through to the Crucial to the success of the project was a team of together Ecuador’s four major health institutions in staff implementing change at the technical level. Even experts dedicated exclusively to the process. This a consolidated, efficient procurement process. though the process was defined in the Procurement meant that proper foundations could be laid. The Law and Guidelines, without such managerial and team carried out effective market studies so as to technical engagement, implementation would have ensure the reference prices of medicines were realistic, been difficult. There was criticism of the process from and was able to build a database of trusted, reliable 16 17 WINNER THE POWE R OF G R A SSR OOT S PRO CU REMENT Transforming Assam by giving farmers choice ‘ Community Procurement Author: Mustaqur Rahman, Procurement Engineer has meant wider uptake Organization: Assam Agricultural Competitiveness Project of pumps, better value (Government of Assam) Theme: Managing procurement systems Farmer Moinul Islam irrigates from manufacturers Country: India his small farm using a pump procured through the Assam Agricultural Competitiveness and improvements to project. This assures him of a good crop during the dry agricultural productivity ‘ season, enabling him to switch to grow high-value vegetables SU MMARY during the rains. In a bid to increase farm production, the Assam Agricultural Competitiveness Project began a scheme in 2005 to supply farmers with centrally procured irrigation pumps. But when low uptake by farmers left the irrigation drive on the brink of failing, the project devised an innovative community procurement process instead. This allows small groups of farmers to choose their own irrigation pumps from a pre-selected databank drawn up through a competitive process. This demand-driven process is transparent and cost-effective. It enables farmers to tailor purchases to their preferences and encourages dealers to provide quality after-sales service, while With irrigation from the pump-sets to sustain still permitting economies of scale. Farmer empowerment resulted in a high uptake of pumps – them through the dry season, farmers can leading to increased productivity of more than 95 percent and a high rise in cropping intensity. now grow two rice crops per year. Photos: Michael Foley 18 19 C H A L LE N G E • Creating a catalogue of pump-sets and the cost of the alternative pump-set is not more To ensure that pump-sets of acceptable quality were than 10 percent above that of the average price of Irrigation is the core intervention of the World Bank- processes (worth some US $5 million each) to procure procured at reasonable prices, technical standards the models shortlisted. (Very few farmers have chosen financed Assam Agricultural Competitiveness Project. tranches of 10,000 pumps centrally, but none of them were defined by the state. Pump-set manufacturers this option as they were satisfied with the list, which Most of the state’s cultivation – including 70 percent of were successful. Low-priced, poor-quality and unpopular were then invited to submit offers through a includes almost all major brands and models available its rice crop – takes place during the monsoon season. pump manufacturers kept winning the bids. Unfamiliar widely-published open competitive process. This in India which meet the technical specification.) Without access to water in the dry winter months, with the brands, farmers were slow to take up the sought manufacturers willing to sell pump-sets to farmers are unable to increase their yields, improve their opportunity to acquire a pump-set for irrigation. the farmers’ groups at predetermined prices, against • Getting pumps into the fields cropping intensity or diversify away from rice growing. The pumps that were installed experienced frequent laid-down technical specifications and with after-sales Once a farmers’ group has chosen a pump-set, it Irrigation would enable farmers to exploit Assam’s breakdowns and received little after-sales service from service. After evaluation, the shortlist of qualified contributes 50 percent of the costs of the set and significant but largely underused groundwater resource suppliers, resulting in complaints from farmer groups. manufacturers, and their brands, models, prices installation, paying in cash to the manufacturer’s local during the long dry season. By midterm review, the project had resulted in the and local dealers was given wide publicity through dealer. The project bears the remaining 50 percent installation of fewer than 3,000 pump sets (out of a newspapers, local NGO networks, and officials of the cost, paying the dealer once a bill is submitted Under the project, groups of 3-5 small-scale farmers target 60,000) – a spend of only 16 percent of the and village-level extension workers from Assam’s with necessary certification by the project officer were to receive a 50 percent grant to purchase a shared allotted budget. There was even a suggestion that the Agriculture Department. responsible and leader of the farmers’ group. The irrigation pump for shallow tube wells. The project tried project should close. The need for a new approach project also developed a robust system for monitoring four times to carry out international competitive bidding was urgent. Farmers’ groups can procure pump-sets of their the targeting and use of pumps. A third party choice from this list, at their own preferred time, from physically monitored 10 percent of every batch of the manufacturer’s local outlets or from authorized 4,000 pumps distributed. The review helped identify I N N O VAT IO N dealers. To maximize their autonomy and ensure their deficiencies and areas of weakness in systems, controls needs are met, farmers are also able to select pump- and the equipment’s field performance. But above all, The project analyzed the situation from the farmers’ of different manufacturers and models. The list sets from other manufacturers, provided they receive it reassured the project that the pump sets were being viewpoint in search of a solution that addresses their is compiled through a transparent, competitive prior approval from the state agriculture department used by the intended recipients. needs and preferences. The idea was conceived during selection process, to guarantee cost-effectiveness a field visit, when one farmer asked: “We may be poor, and quality. but since we’re paying half the cost of the pump-set, RE S U LTS don’t you think we should have a right to select the type 2. Driven by open competition and the potential and model?” size of the market opportunity, pump-set The Community Procurement process adopted by the significant improvements to agricultural productivity and manufacturers would offer lower competitive project transformed the apparent failure of the pump-set cropping intensity: • Making farmers the procurers prices and provide better after-sales service to scheme into significant success. As the process was Based on this, an innovative ‘Community attract and retain farmers’ custom. compatible with government promises to involve and • Increased uptake of pumps Procurement’ process was devised and adopted. It empower community groups in developmental schemes, More pumps were distributed in the six months of had never previously been tried in India – nor perhaps 3. An audit process would verify that pump-sets it was widely met with immediate acceptance. By the 2009-10 winter dry season than in the project’s anywhere. The model was based on three principles: were delivered, installed and used by the groups trusting the farmers to select pumps-sets to meet their previous four years. The project won approval from of farmers they were intended for. own needs, the project has resulted in wider uptake of the farming community, which translated into high 1. Farmers would be able to choose and procure pumps, better value and service from manufacturers, and demand for the irrigation pumps on offer, in place pump-sets themselves, from a pre-selected list 20 21 • of the previous low uptake. The process allowed now being marketed rather than consumed by the supplied good quality products and provided strong • Decentralize payment to keep the process manufacturers of varying sizes and capacities to apply. family, resulting in significant increases in income. after-sales support, including training to farmers for flowing So instead of a large single supplier being selected Productivity has risen by more than 95 percent and routine maintenance. The project included twice- In order to streamline the process, payments to through international competitive bidding, the process cropping intensity leapt from 128 percent pre-project yearly workshops to obtain feedback from shortlisted local dealers are now decentralized to district level, resulted in a catalogue of differing pumps, covering to 195 percent. A typical group of three small farms manufacturers and farmers. By acting on their so suppliers do not have to wait to get paid from 13 suppliers and 25 models for farmers to choose sharing a single diesel pump-set will almost double recommendations, it ensured that the process a central source before they have funds to restock. from. This range of choice and the accompanying its rice production. Home consumption of rice has went smoothly. Decentralized payment is much quicker, so dealers can autonomy allowed farmers to buy the pump-sets increased by about 10 percent, while marketed constantly replenish supplies. they knew and found reliable – resulting in complete surplus has increased more than five times. In total, • Persevere through initial difficulties ownership of the asset. Farmers have also been able the project has increased Assam’s rice production by Being new to everyone, the process went through • Adapt regulations where needed to build relationships with local dealers for efficient over 300,000 tonnes and vegetable production by a gestation period involving initial difficulties. These New procedures can sometimes stall over regulations after-sales service. about 100,000 tonnes. This process is credited with included resistance to change among field-level designed for a previous system. It is important to switching the state from being a net importer of officials, NGOs and farmers, and shortages in the try and anticipate and prevent regulatory hitches, or • Reduced costs, better service rice to having a surplus to export. It has since won a supply of pump-sets. As the process is demand-driven, respond quickly if they arise. For example, delays arose In most cases, the unit cost of pump-sets was reduced national award for improved food security. no one knew which model and brand the farmers owing to the limited number of officials allowed to by up to seven percent below the market price – would choose. Some local dealers ran out of stock certify the depth of the shallow tube wells used in probably because suppliers were local and no longer • A replicable model due to sudden spurts of bulk orders by farmers. This conjunction with the pump-sets. This obstacle was had to distribute pumps across the state. This use of Building on the success of this model, the Government resulted in delivery delays. These difficulties were removed by opening up the certification of boreholes local dealers also meant communities were able to of Assam has mainstreamed this community overcome through perseverance. Project staff held to a wider number of officials. Now, farmers with get prompt after-sales service, with dealers providing procurement process for the procurement of irrigation awareness meetings across the state to convince field- pump-sets no longer need to wait before they can services proactively as a marketing strategy. pump-sets, as well as for other farm machinery such level staff of the change required. With experience, use them, as village-level agriculture department as tractors and power tillers. India’s Government has the supply of pumps has now stabilized in all districts. officials and NGO staff can certify the depth of • Higher agricultural production also recently circulated the community procurement Farmers of a particular village generally go for the boreholes for wells. The wide use of pump-sets is helping farmers to model to all the country’s states for adoption same brand and model, influenced by seeing similar increase crop production. Most of their produce is wherever appropriate. pump-sets in action locally. This gives local dealers an In one of India’s poorest states, each individual idea of how many pump-sets to keep in stock. pump-set is helping unleash an agricultural revolution. It is testament to the strategy’s success that Assam’s LESSONS LEARNED Government is now using the community procurement model in all similar projects. The main success factors were willing participation solution that addressed their needs. Pump-set from farmers, and the authorities’ willingness to procurement succeeded by adopting an approach empower them. driven by community demand. RE S OU RCE S : • Listen to the community’s needs • Harness the power of the market For a 30-minute film about the project, visit Youtube: http://youtu.be/lSO5CyF_xA0 Considering the problem from the viewpoint of Market driven dynamics played a key role. Under farmers enabled the project to devise an innovative this model, manufacturers quoted reasonable prices, 22 23 WINNER SAVI N G COSTS A N D TR E E S Using desktop IT for green procurement Author: Steven Samlalsingh, Contracts Coordinator ‘ Using standard desktop software, Organization: Petrotrin (State-owned oil company) Theme: Using ICT to improve procurement systems Country: Trinidad and Tobago the initiative reduced paper use by 75 percent and the procurement cycle by 30 percent ’ Petrotrin introduced its procurement SU MMARY initiatives at a large symposium, giving all its contractors the chance When Petrotrin’s Contracts Office adopted Go Green! as its 2010-12 theme, the team leader to feed into Go Green! challenged the staff to embrace the initiative using a readily available existing resource: the Microsoft Office suite of software on their desktop computers. Staff were challenged to come up with innovative ideas to increase efficiency and reduce the environmental impact of the procurement process. Standard desktop software is vastly under-utilized in terms of functional capacity, with most users worldwide embracing just a few of its applications. This challenge resulted in its being used for the development of an electronic meetings system, a paperless document tracking system and the electronic issuance of tenders. These in-house applications enhance the accuracy, cost effectiveness and timeliness of the office’s contracts-related processes – while cutting its carbon footprint. 24 25 C H A L LE N G E • HEARTbeat document tracking system • Electronic issuance of tenders To manage the high volume of correspondence All tender documents are converted to PDF format Like offices across Petrotrin, the Contracts office had cost-effectiveness and timeliness of the office’s received and disseminated by the Contracts Office, using Adobe Acrobat, and are issued to all contractors a manual record-keeping system, with incoming and procurement system, while minimizing the environmental staff developed an in-house Microsoft Access database on a CD. This has resulted in a significant reduction outgoing documents and correspondence logged by impact of its operations. The challenge to staff to use system to track the receipt and issue of all incoming of paper. For urgent services, tenders are issued via hand in a book. This made it hard to track procurement existing desktop software grew out of the annual and outgoing documentation, both internal and email using authorized email addresses provided processes and search for specific documentation – as well budgeting process, when the line item for the software external. The system, known as HEARTbeat (Heartbeat by contractors. Due to limitations of the local as requiring expensive and environmentally damaging license arose. Although companies buy the whole suite Electronic Access Retrieval and Tracking system), legal system, which does not recognize electronic amounts of paper. One office had a stack of record of Office applications, most staff just use the spreadsheet allows recording, reporting, tracking, searching signatures, bids cannot yet be submitted by email notebooks three feet (a metre) high. and word processing functions, ignoring the other and archiving of all documentation, in place of and are still received in hard copy. applications. By exploring the oppor-tunities to automate correspondence being recorded under ‘In’ and ‘Out’ Within the context of Go Green!, the Contracts processes using the full range of Office software, the in a notebook. The paper system simply did not allow This new system standardizes the procurement Coordinator challenged staff to see if they could use Contracts office sought to introduce sustainable practices for tracking, nor did it allow for follow-up or at-a- process, ensuring all bidders receive the same standard desktop software in a creative manner to that would optimize use of existing technology, while glance status updates. documents at the same time. Through the use of improve or automate long-standing, deep-rooted achieving the overall goal of reducing the environmental a dedicated Petrotrin email address, bidders can send business processes. This could enhance the accuracy, impact of the procurement process. HEARTbeat allows reports to be generated according any queries for clarification. All Petrotrin contractors to sender, recipient, location and timeframe. The were involved in developing this initiative. Many system is integrated with Microsoft’s Outlook email come from the community where the business is I N N O VAT IO N application, enabling it to identify sender or recipient. located. They have grown over the years in terms HEARTbeat has now been implemented in a number of technical and financial capability, but are limited The team came up with three key initiatives that together single document is then presented at the meeting for of offices throughout the organization, including in terms of technology. In order for this innovation have transformed Petrotrin’s procurement process from a final sign-off. Additionally, with electronic documents, finance, human resources and production operations, to work it was necessary for the contractors to obtain slow, paper-heavy system to an agile, low-carbon one: the committee members no longer risk receiving their replacing the outdated notebook system used for email addresses, so Petrotrin held a symposium with tender packages late and have ample time to review acquisitions procedures. Advantages include improved the contractors at the town hall and encouraged • E-meetings the submissions. efficiency, with better document turnaround times them to bring younger-generation relatives involved Paperless Tender Committee meetings are now and easy tracing of long-outstanding or urgently in their business. They could act as change agents, conducted by scanning and emailing the agenda This approach has been effectively used for over a year required documents. The timely retrieval and tracking recognizing the benefits of new technology and and recommendations to core members for review at more than 50 such meetings. Generally the tenders of documents helps prevent lost documents and revised business processes. Although a big cultural in advance of the meeting. Previously for each tender are for major offshore civil works, equipment hire or unnecessary delays. Offices are more environmentally shift for many suppliers, it is one they have embraced meeting, packages had to be compiled and delivered drilling services. Further carbon footprint reductions friendly and vastly less cluttered. and are now benefitting from. to each committee member and representatives of should arise through the acquisition of video the procuring department. These packages were conferencing software to conduct Tender Committee used only during the meeting, with piles of paper meetings. Senior managers can then attend virtually being left behind afterwards. At the meetings, a from their offices and would no longer have to spend multimedia projector is used to display the scanned valuable hours on the road, emitting carbon to recommendations for discussion, which has allowed attend meetings. for more focused and participative meetings. One 26 27 R E S U LT S • Take time to gain staff support Petrotrin now intends to spread the message and The success of a transition from traditional paper- encourage state enterprises and their stakeholders The gains made by moving from a paper-based culture and faster, promoting operational excellence. based procurement processes to a technology- to reduce their paper and carbon footprint by at least to automated processes have been significant. This The department has seen enhanced operational based approach requires general support from staff half. In its wider business dealings, the company’s approach allows the entire procurement process to be efficiency, with the overall procurement cycle time involved. The Contracts Office conducted around 30 Procurements Office will also seek to share its experience smoother and faster, promoting operational excellence. improved by 30 percent. As well as the reduction training sessions for almost 500 people throughout internationally, encouraging organizations in developing in paper requirements, costs have been reduced the company for explain why this innovation was countries to embrace sustainable e-solutions for • Environmental benefits in terms of time needed for developing and being introduced, as well as how it would work. procurement, based on existing desktop technology. This approach has resulted in a 75 percent reduction in preparing paper-based tender documentation. The practical training covered areas such as preparing paper consumption over four years. It has also reduced The transparency and effectiveness of procurements a scope of work, carrying out evaluations, terminology the carbon emissions generated by contractors who have also been improved. for tenders and contracts, and legal terms and used to visit the office physically by vehicle to collect conditions – so that everyone felt confident with tender packages and related correspondence. • Better relationships with contractors the new system. Enhanced communication and shared experience • Financial gains have improved relations between the company and E-procurement procedures have achieved significant its contractors. Suppliers have also benefitted from RE S OU RCE S : gains for procurement operations. By moving from the exposure to new technological approaches. Some a paper-based culture to automated processes, the have begun to source ideas, research information www.petrotrin.com entire procurement process has become smoother and purchase materials online as a result. For the e-procurement story on film, visit: http://www.youtube.com/watch?v=bC12RW3ssz4 LESSONS LEARNED The implementation of the Go Green! initiatives proves Electronic Transaction Act in 2012, tenders can now the synergy between waste-reducing eco-friendly be issued via email rather than needing to be on CD. operations and business efficiencies, revealing several This process is being worked on with special focus on useful lessons: security, compliance and effectiveness. • Keep updating the system • Back up all electronic documentation The success of using ICT in the procurement process Just as paper systems retain copies of documents, highlights the dynamic nature of the business electronic systems must be designed to ensure that Suppliers were encouraged to bring younger-generation environment. Periodic security checks must be all documents – including emails – are backed-up relatives to the symposium, to help them embrace the benefits developed and implemented to meet integrity and retrievable in a readable format for a defined of technology. For the innovation to work they needed email requirements for contract documents and meet time period. addresses, which all obtained – some for the first time. changing circumstances. With the passage of the 28 29 TOP 15 MA KI N G USE OF PR OCUR E MENT DATA Slovakia’s Open Public Procurement Portal Author: Matej Kurian, Program Coordinator ‘ The portal has boosted Organization: Transparency International Slovakia (Civil Society Organization) procurement knowledge Theme: Using ICT to improve procurement systems Country: Slovakia and the regional drive for transparency ’ SU MMARY Official procurement data was published online in Slovakia only as disaggregated individual The Open Procurement Portal is entirely automated, with a function which scans new official procurement documents, effectively preventing any meaningful contract monitoring or evidence-based analysis information every night, rearranges it into a database of procurement practices. In a country where 20 percent of public spending is on procurement and visualizes it for the end-user. and where surveys find an overwhelming majority of tenders to be corrupt, Transparency International (TI) Slovakia saw the need to create a new, public, accessible procurement database. It developed the Open Procurement Portal, a single-stop website for procurement analysis in Slovakia. The site provides easy and effective tools to browse, filter and visualize procurement data worth more than €23 billion. Providing high-quality data, it has become an indispensable source for evidence-based analysis (such as estimates of the financial impact of mandatory e-auctions). The portal could easily be replicated across the EU, allowing for pan-European monitoring and analysis. 30 31 C H A L LE N G E TI approached major Slovak newspaper SME – the • User community development newspaper with the biggest online presence – to In an ongoing process, TI is approaching politicians, How many tenders were won by a particular company barrier to holding the country’s public sector to account. host and promote the site. They responded with journalists, NGOs and procurement experts to in the past three years from a certain ministry? How In addition, in a public opinion survey carried out for TI enthusiasm, moving the site to their servers. SME encourage them to use the site. Specific niche many bidders did it win against on average? This sort of in January 2012, 80 per cent of respondents believed therefore bears the portal’s operating costs, making groups interested in procurement will also be question was virtually impossible to answer in Slovakia public tenders to be ‘often’ or ‘almost always’ corrupt. the project sustainable while also raising its profile. identified, introduced to the tool and consulted until recently. Official data was publicly available online TI Slovakia saw an urgent need for a new, public and The revised Open Public Procurement portal was on its functionality. (at www.e-vestnik.sk), but only in a scattered form, wholly accessible procurement database. This would officially launched in late 2011, in partnership with as individual HTML documents. This disaggregated allow increased oversight of the procurement process SME, whose website now hyperlinks every instance • Liaison with authorities information effectively prevented any meaningful by anyone interested – from the media and regulators of the words ‘procurement’ and ‘tender’ to the portal. Perhaps even more importantly, buy-in or even contract monitoring or evidence-based analysis of to contractors and civil society – increasing transparency, possible incorporation of the portal by public procurement practices. promoting fair competition and gaining Slovakia’s • Data analysis authorities – such as the Office for Public Procurement taxpayers value for money. The system is entirely automated, with a function (the national procurement regulator) – would In a country where 20 percent of public spending goes which scans new official procurement information provide further legitimacy and sustainability for the on procurement, this obstacle to oversight was a serious every night, rearranges it into a database and project. When approached early in the process, the visualizes it for the end-user. The only manual input Procurement Office declined to adopt the system required is the posting in the ‘Analyses’ section of and introduce its data, but TI’s efforts to gain their I N N O VAT IO N new articles based on data from the portal. cooperation are ongoing. As a result, in 2010, TI Slovakia set about creating the encouraging all parties involved in tenders to act honestly Open Public Procurement Portal, a single-stop website and with integrity. Secondly, it is a monitoring tool for the RE S U LTS for procurement analysis in the country. The portal media, law enforcement agencies or anyone interested. aggregates procurement data and provides business- Finally, the portal data can be used for the analysis of The portal and subsequent analysis of its data had one offer. This could be due to overly strict terms of intelligence tools for its analysis, enabling procurement procurement practice, to inform future policymaking significant consequences, both in terms of knowledge supply or potential collusion by bidders. monitoring and evidence-based advocacy. Based on and implementation. about procurement and of boosting the regional drive open-source technology, the portal cost less than for transparency. • The introduction of electronic reverse auctions €30,000 and is replicable across the EU (and beyond, The portal development had four stages – the last two TI’s findings based on the portal data provided adjusting for local information requirements and still ongoing: • Significant research findings major evidence for the introduction in Slovakia of procurement rules). The portal has revealed key insights, for example, that mandatory electronic reverse auctions in procurement. • Site development and launch 43 percent of tenders attract only one bidder, which TI estimated that mandatory auctions could save The portal automatically collects official procurement TI Slovakia created the specifications for what the site leaves room for the significant savings that would €250 million a year as a result of more competitive data (currently worth more than €23 billion), stores it should be able to do, then worked with an external IT result from increased competition. Another finding prices from suppliers in tenders. In 2011, the average in a database and provides easy and effective tools for consultant to build it using open-source technology. A aimed to shame public institutions drew attention to number of bidders per tender climbed from 2.3 in data analysis and visualization (as tables, graphs and beta version of the project was launched in a testing the fact that while citizens insuring their cars have 2009 to 3.6, with the widespread introduction of diagrams). The project serves three main goals. First, phase lasting almost a year to address any outstanding more than 10 companies to choose from, when the e-auctions being a major factor. In 2009, less than it brings transparency to public procurement data, issues of data quality, analytical tools or usability. government seeks the same service, it usually receives one percent of tenders in Slovakia involved auctions. 32 33 Two years later, 20 percent did. Had the portal not project with Oziveni, a Czech anti-corruption NGO. RE S OU RCE S : existed, the ministry proposing the initiative would Another version is scheduled to be implemented in not have been able to evaluate the effectiveness of its Georgia in early 2013. The portal also serves as a Open Public Procurement Portal: http://tender.sme.sk/en/ policy. Slovakia’s main ruling party, which introduced showcase for the open data movement in Slovakia. SME, the portal’s partner newspaper: www.sme.sk electronic auctions, used TI’s charts in a subsequent This is a small but influential movement comprising A similar project recently launched in the Czech Republic: www.vsechnyzakazky.cz election campaign. half a dozen NGOs and many activists, experts and sympathizers from the public administration. It helped • Momentum for regional transparency push the Slovak government to join early signatories Based on open-source technology, the portal can of the Open Government Partnership, an open data easily be replicated. A similar portal for the Czech initiative led by the UK and US Governments. Republic was launched in June 2012 under a joint LESSONS LEARNED Developing the public procurement portal and making Society Institute who are interested in promoting sure it is put to good use is a complicated task – open data projects was also crucial. especially for a small NGO with a full-time staff of just five. Key lessons help make it possible: • Maximize early buy-in Early buy-in from the Slovak authorities would Partnership with major Slovak newspaper SME • Have a clear vision have made the development easier and could have – which hosts the site on its servers – makes Having a solid vision of what you want to achieve, driven wider usage. Similarly, activities to create a the project sustainable while also raising its but being flexible and planning to allow for early user community around the portal – of journalists, profile. SME’s website hyperlinks the words failures, have been important factors behind the procurement experts and citizen oversight groups – ‘procurement’ and ‘tender’ to the portal. project’s success. Building the partnership with SME – should have been started early in the project, perhaps which makes the project sustainable while raising its even in the development phase. profile – was an important part of this vision. While ongoing portal development and professional use • Get your team right of the data are well underway, community development TI Slovakia is lucky to have procurement experts who and liaison with the authorities will be intensified. TI knew what data they needed for analysis and became Slovakia is holding training workshops for journalists early users of the portal. Likewise, having a staff and lobbying procurement regulators – demonstrating member with advanced IT skills was vital for managing to all stakeholders the portal’s immense added value. the IT supplier. The importance of having the right capacity to manage complex IT projects cannot be Co-authored by Gabriel Šípoš overestimated. Support from donors such as the Open 34 35 TOP 15 PR OFI LI N G PUBLI C PR OCUREMENT Leveraging e-procurement databases in Ireland Author: Anthony Flynn, Researcher, Strategic Procurement Research Unit ‘ Complex problems aren’t Organization: Dublin City University Business School insurmountable: just (Academia) Theme: Using ICT to improve procurement systems Country: Republic of Ireland deploy existing resources in innovative ways ’ Researchers at Dublin City University SU MMARY Business School recognized the potential of Ireland’s e-procurement Researchers at Dublin City University Business School identified a knowledge deficit in Irish public database – with over 4,000 public procurers and 70,000 suppliers – as a procurement. Although a recognized leader in the use of e-procurement across the public sector, basis for profiling public procurement. Ireland had a poor record in collecting and analyzing public procurement data. Collaborating with academia, industry and the public sector, staff at the School’s Strategic Procurement Research Unit leveraged Ireland’s e-procurement database, creating an innovative survey to obtain data on the characteristics, behavior and opinions of over 600 public procurers and 4,000 private Small-business suppliers learn about public sector suppliers. This allowed comprehensive assessment of the market for public sector procurement opportunities as the SPRU team share their findings at a trade association contracts, giving insights into procuring and tendering practice, the effects of e-procurement, conference. Findings include the effects of implementation of measures to support small business and the impacts of EU Procurement e-tendering and how procurement policy can Directives. The findings have already led to policy changes for more effective procurement. benefit Ireland’s economy. 36 37 C H A L LE NGE • Technical and content design • Launching the survey Access to the database was granted in autumn 2011. In December 2011, after making the necessary While Ireland is a recognized leader in the use of Based in Dublin City University Business School, SPRU began work on designing an online survey that adjustments in response to the pilot group’s e-procurement across the public sector, the same the Strategic Procurement Research Unit (SPRU) would profile current public procurement practice. suggestions, SPRU distributed the survey in electronic cannot be said of its record in collecting and analyzing contemplated this ‘knowledge deficit’ in Irish public The design process involved much debate on format to approximately 70,000 suppliers and public procurement data. Without such analysis, it’s procurement. The challenge for SPRU was how to what data was to be captured and how various 4,000 public sector procurers registered on the hard to know where opportunities lie for improvements profile a market that was dispersed and fragmented procurement practices and behaviors should be Irish government’s e-tenders website. This step was to the public procurement system. Until recently, little and had never been researched in any meaningful way. measured. SPRU had to work from a blank canvas, but repeated exactly one week after the first emailing. if any data existed on the Irish public procurement Initially this challenge seemed insurmountable but by used this as an opportunity to explore contemporary Although risk is inherent when trying an innovative market. This made the task of policy impact assessment thinking from fresh perspectives, a way forward soon challenges in procurement, such as increasing the approach, any apprehension SPRU felt over whether difficult and left all stakeholders – procurers, suppliers, presented itself. number of smaller enterprises competing for public the survey would succeed quickly disappeared, as policymakers and researchers – in the dark regarding sector contracts, using public procurement to promote thousands of responses poured in on the first day. public procurement trends. Finding a solution to this the eco-technology sector, and the insertion of problem had become a priority. environmental criteria into public tenders. Of those registered users who received the survey, more than 4,000 suppliers and 600 public sector The survey was innovative in its design. SPRU was procurers responded. With over 50 questions to I N N O VATIO N firmly of the opinion that both buyer and supplier answer for each survey, many of them requiring perspectives were needed in mapping Irish public detailed information, the level of response from both SPRU saw the potential of Ireland’s e-procurement buyers and suppliers. As academic researchers know procurement. They were to be approached separately, suppliers and procurers was excellent and adds to the database as a basis for researching public procurement. only too well, the best-laid research plans often come with some survey questions common to both, and credibility of the data and the general applicability of Over 4,000 public procurers and approximately 70,000 to nothing because access to a research population others particular to one or the other. The survey also the findings. This willingness of both suppliers and suppliers are registered on the government’s e-tenders cannot be secured. But, impressed by SPRU’s idea, made use of the latest data collection software (in this public procurers to engage with the survey made website, making it an existing database of the research the procurement service agreed to partner it in using case, Survey Monkey). It allowed for comparison to be it a resounding success. It yielded data essential to population SPRU needed to access. This presented the e-procurement database to carry out Ireland’s first made of buyers’ and suppliers’ responses on the same understanding the profile and workings of the Irish an ideal way to survey the actors within the market national survey of public procurement practice. SPRU or similar questions and topics. For example, both public procurement market. SPRU had achieved its for public sector contracts, including suppliers also gained the support of industry representative buyers and suppliers were asked whether they central objective – in a cost-neutral, environmentally- based overseas. groups, ensuring the cooperation of significant thought the Irish public procurement market had friendly way. numbers of buyers and suppliers. become more or less business-friendly over the • Building partnerships previous three years. SPRU’s innovation lay in identifying and seizing this The collaborative approach was central. Throughout opportunity. It collaborated with industry actors and this period SPRU maintained ongoing contact with the public sector to make possible the mapping of the National Procurement Service, keeping its partner RE S U LTS Irish public procurement. The first step was to form a informed of progress and soliciting its advice and working partnership with the National Procurement expertise on certain issues. SPRU also used its industry Analysis of the survey data in the early weeks of 2012 Procurement, was launched in March 2012 by Service of Ireland, which has ultimate control over contacts to develop the survey and pilot it with 30 enabled a benchmark profile of public procurement in the Irish Government Ministers for Public Works Ireland’s e-procurement portal and its database of industry experts. Ireland for the first time ever. A report based on the and for Small Business. The outcomes of the survey survey findings, Opportunities in Public Sector were extremely useful and almost immediate: 38 39 • Unprecedented insight need of further reform, particularly barriers to the LE S S ONS LE ARNE D The profiles of buyers and suppliers are now known, participation of micro-enterprises in the public as are the organizations in which they are employed. procurement market. Several lessons emerge from this experience. powerful one: complex problems are never Buyer-supplier interaction has been assessed and By thinking from a completely new angle, SPRU insurmountable. All that is needed is ingenuity the tendering and procuring behaviors of each group The report presents a range of opportunities that its identified and grasped the potential of e-procurement to deploy existing resources in innovative ways. analyzed. The impact of e-procurement on buyer authors believe should be seized by those involved in databases – making a seemingly overwhelming Among the key difficulties was prioritizing data and supplier roles has been documented and the both public procurement policymaking and everyday challenge easily solvable. to be captured. This issue was resolved through translation of procurement policy into practice has practice. Public procurement is discussed at policy consultation with key public procurement stakeholders been assessed. level not only in terms of achieving financial savings, • Seize opportunities who advised on desirable questions and topics for but also in terms of offering growth opportunities SPRU was proactive in creating access for itself to the inclusion. Among the changes suggested for the The survey report, Opportunities in Public Sector to small Irish suppliers who have been hardest hit e-procurement database of buyers and suppliers. This 2012 survey are a reduction in the number of Procurement, maps the Irish public procurement by the downturn in the domestic and international ‘can-do’ attitude was well rewarded. It was important questions and more targeted questioning on landscape and identifies opportunities for the creation economies. Recommendations include more training to nurture partnerships with key stakeholders: without contemporary topics such as ‘green procurement’. of a more effective public procurement system. It for procurers and suppliers to research their markets, National Procurement Service support, the initiative profiles the prevailing conditions in both public and reduced paperwork for suppliers and ongoing would never have taken off. Equally, SPRU’s industry • This approach is widely replicable private sector procurement. More than 90 percent skills development for those operating in public contacts proved invaluable in devising, testing and Looking beyond Ireland, this is an initiative that of respondents use the e-tenders web portal to procurement. Taking these opportunities will lead to promoting the survey across the private sector. other countries can easily exploit, especially given identify available contracts. The portal is shown to better outcomes for all stakeholders in Ireland’s public the common use of e-procurement portals. The cost have increased the number of public sector contract procurement market, while also benefitting the • Devise a project plan and manage by objectives and resource requirements are negligible and online opportunities available to suppliers and made the wider economy. SPRU spent approximately four months bringing its surveying is environmentally-friendly. However, process of tendering for contracts easier. Findings innovative solution from conception to fruition. To survey fatigue on the part of buyers and suppliers from the survey not only reveal what has happened Increased understanding of the procurement function maximize the chances of success, a project plan was is one potential obstacle that researchers should in the public procurement market but, equally, what will help the government ensure fair competitive created, a project leader appointed and key milestones take into account. is likely to happen in the future. For example, it was conditions for all businesses, therefore allowing set down, linked to the achievement of specific found that 40 percent of suppliers intend to increase smaller enterprises a better chance to win public objectives. This enabled coordination and focus SPRU’s innovative proposal has led to a strategic their tendering activity in 2012. contracts. For example, the survey findings will help throughout the project. partnership with the National Procurement Service, the government ensure that pre-qualification criteria, which will prove vital for future research and lead to • Input for future policy such as turnover levels or previous experience, are not • Complex problems are never insurmountable ongoing improvements in the efficiency of Ireland’s The survey will inform government attempts to weighted against small business and are proportionate The key lesson from this case is a simple but procurement system. balance the need for the public sector to obtain the to the contract itself. best value for money and find innovative solutions to public needs, with the need to improve access by • An ongoing resource RE S OU RCE S : small and medium-sized businesses to government Thanks to its success, the survey will not be a one-off contracts. The report highlights successful initiatives event. SPRU has secured agreement with the National The Irish government’s electronic procurement portal: www.etenders.gov.ie such as e-tendering and progress in ensuring that Procurement Service to continue it on an annual basis The e-procurement survey report, Opportunities in Public Sector Procurement. financial capacity and insurance requirements are and benchmark procurement performance from year relevant and proportionate to public sector contracts. to year. But the findings also draw attention to areas in 40 41 TOP 15 SMA R T SE CUR I TY FOR E THICAL PRO CU REMENT Fingerprint recognition e-bidding in Korea Author: Oh Yeon-Chil, Organization International Cooperation Division ‘ The fingerprint recognition Organization: Republic of Korea Public Procurement Service system prevents bid rigging, (Government) Theme: Using ICT to improve procurement systems Country: South Korea ensuring a level playing field for suppliers and value for Korea has pioneered the use of fingerprint recognition technology to counter proxy bidding and bid rigging the authorities ’ in electronic procurement. Vendors’ SU MMARY fingerprints act as an electronic key, meaning they can only submit one The Public Procurement Service of Korea introduced the Fingerprint Recognition e-Bidding bid per contract. System in April 2010 to prevent forms of corruption such as illegal proxy bidding and bid-rigging. By reading a bidder’s fingerprint electronically and comparing it with pre-registered user data, the adoption of fingerprint recognition technology prevents illegal proxy bidders from participating using borrowed registration certificates. It also means no supplier can enter false bids to skew the tendering process, nor can anyone access submitted bids in an untimely or inappropriate way. As a result, illegal e-bidding attempts have been dramatically cut. Without compromising the economic efficiency and convenience of electronic tendering, transparency and fairness have been reinforced. 42 43 CHALLENGE specifications for the token. The biometric security • Roll-out to users token chosen for the fingerprint recognition e-bidding By appointment at local procurement offices Korea’s Public Procurement Service (PPS) launched the Investigations by police and prosecutors, reports system uses the latest technology, making Korea’s nationwide, bidders started to register their Korea On-line E-Procurement System in September from other bidders and internal monitoring processes procurement service the first in the world to use such fingerprints on the system. An estimated 2002, making the country’s entire public procurement revealed that such illegal practices occurred continuously, a method. 270,000 potential bidders, including suppliers’ process electronic. It became a world-class e-procurement causing doubt about the reliability of e-bidding, as well representatives and proxy bidders, were required system, used by 44,000 public organizations and as wasting portions of the national budget. • Consultation with stakeholders to register. After a thorough verification of bidders’ 220,000 suppliers. However, the nature of e-bidding Before implementing the system, PPS staff met with identification by relevant officials, their fingerprints conducted on-line enabled illegal proxy bidding and bid To eradicate fraudulent practices, the procurement specialist IT manufacturers and the public certification were taken electronically. rigging. Suppliers or third-party brokers could participate service introduced measures such as a tighter bidder authorities to gather opinions and suggestions. in electronic bids on behalf of others by borrowing identification system, an informant reward policy and Suppliers’ opinions were also gathered online and To make the process as smooth as possible for registered suppliers’ e-certificates of registration. This a system for analyzing corrupt activity. However, the taken into account before proceeding with the suppliers, PPS allowed them to make an appointment meant one broker could submit many bids for a single great amounts of time and effort required to investigate system. Their initial responses were mixed. Supporters to register at a time and location of their convenience. contract, manipulating the bid price and profiting illegally fraudulent bidding practices and impose administrative agreed that the new system would enhance fairness, Suppliers located in remote areas were visited in when the contract was awarded. (Third-party brokers measures against the perpetrators meant some of the transparency and security, while others opposed it person by officials who carried out the registration receive on average 2-5 percent of the amount of an measures proved ineffective. Korea’s procurement service on grounds of complexity and additional expense. process on their premises. In April 2010, given stable awarded contract.) needed an alternative way to increase security around These concerns were overcome as the program technological trials and successful bidder registration, electronic bidding. was progressively promoted to bidders via multiple PPS first introduced the fingerprint recognition system, communication channels, including a website, faxes starting with construction contracts. After a gradual I N N O VATIO N and mailings, and through regional briefing sessions roll-out across sectors, the biometric system was fully held in partnership with relevant industry associations. implemented in every bidding process by July 2010. After thoroughly reviewing all available measures, PPS ‘e-signature key’ (fingerprint) and other personal decided to introduce a fingerprint recognition e-bidding information. It is a piece of hardware which generates • Piloting the system To boost security, it was reinforced by other new system, inviting only qualified and registered bidders the e-signature key and verifies a user through the PPS acquired approval for the fingerprint recognition regulations, including the introduction of a measure to take part. The system allows users to submit bids coding software installed. Working with five local system from the Korea Internet Security Agency, allowing only one proxy bidder per company. Suppliers only when their fingerprint matches a pre-registered certified authentication agencies, PPS discussed ways and in November 2009 recruited a trial group of wanting to register a proxy bidder had to submit a fingerprint in a biometric security token. Unlike other to register fingerprint information in the token after 300 volunteers from among its suppliers to test the certificate of employees’ insurance to confirm that authentication certificates, this biometric certification verification of a bidder’s identification during the system. The suppliers were chosen according to their the proxy bidder was employed by their company. cannot be used by anyone other than the registered process of issuing a certificate. experience with submitting electronic bids – each bid participant. As a result, the system helps ensure used the system more than 20 times a month. In transparency and fairness in the e-bidding process. To ensure a stable, reliable system, PPS needed to January 2010, an anti-forgery fingerprint test was This ambitious innovation required several key stages: establish functions and standards for the fingerprint also successfully completed in the Biometric Research security tokens. For 18 months during 2008-9, the Center in Seoul’s Yonsei University, verifying the safety • Finding the right technology procurement service continuously held discussion of the system. After successful early testing, initial The system would revolve around a ‘security token’, meetings with certified authentication agencies and implementation of the fingerprint recognition system a USB-type device which stores a user’s biometric manufacturers, developing and reviewing the technical began in February 2010. 44 45 R E S U LT S cost of purchasing the device and early-stage technical • Keep on innovating hitches. Through continuous communication and PPS is consistently working to improve the system, The introduction of the fingerprint recognition e-bidding accurate verification of actual bidders and provided promotions, the procurement service succeeded in both institutionally (so bidders cannot arrange system had direct and indirect effects: a fundamental solution to the problem of loaned convincing users that the system was the fundamental bid-rigging off-line) and technologically. Off-line e-certificates. Bid rigging was prevented, giving way to eradicate illegal bidding practices and make bid-rigging is by nature difficult to prevent, but by • Increased transparency, fairness and reliability participants a level playing field and enabling the tendering fairer for them and better for Korea. In using fingerprint recognition, PSS is preventing The system’s main objectives – to improve Korean authorities to secure the best prices for goods order to prevent suppliers becoming disadvantaged multiple tenders from flowing into a single bid transparency, fairness and reliability – were realized. and services. by not being registered for the system, PPS hosted through the same computer. It is also examining By reinforcing the verification of bidders’ identity, it meetings with a number of vendors based in the other biometric information, such as iris, face and helped eradicate illegal and manipulative e-bidding • Better rights for legal proxies regions and held six regional briefing sessions in voice, for cases where users’ fingerprints cannot practices. As a result, not one case of loaned An indirect social benefit of the fingerprint recognition collaboration with the Korea Construction Association. be recognized, e.g. for people suffering from certificates has been reported since the system’s system was that the need for proxies to be registered, Measures were taken to minimize inconvenience to hyperhidrosis (a condition causing excessive launch – compared to 1,777 cases (worth about US requiring their employee’s certificate of national suppliers, such as allowing registration at a time and sweating). PPS chose fingerprint recognition $30 million) uncovered by prosecutors and police insurance, led to an increase in the number of legal location of their choice. because of its wide use with proven technological involving the illegal lending of certificates prior to proxies with full employment rights. The employees’ stability, but is open to alternative options as long implementation. Most of these cases were of a single insurance is a proof of employment in Korea, and • Be flexible where appropriate as they meet required standards. broker with many e-certificates, gaining inflated covers health, unemployment, pensions and workers’ Although technical trials of the system went smoothly, profits when the contracts were awarded. compensation. During the fingerprint registration, a there were some cases soon after its launch where With this ongoing innovation, Korea aims to continue procurement service official checks via the employees’ the device failed to recognize a fingerprint. In such its pioneering use of biometric security to promote After the introduction of fingerprint recognition, insurance database whether the registrant is actually cases, and where bidders were being excluded procurement of the highest ethical standards. the Korea Association of Procurement and Supply employed by the supplier. from a bid due to having not yet registered, a Management conducted a survey among suppliers temporary exceptional procedure was enacted. who had used the system to participate in e-bidding. After its initial success, the fingerprint recognition system This allowed bidders to submit the bid using the The results clearly showed that fingerprint recognition is now the universal approach applied in every e-bidding pre-existing method. had positive effects on the process, with 78 percent process in Korea. It is continuously being updated and of respondents saying it enhanced transparency, 73 developed to meet user needs and enhance transparency percent reporting improved fairness and 80 percent and reliability for bidders. RE S OU RCE S : noting improved reliability. The system prompted more http://www.pps.go.kr/english/ LESSONS LEARNED The introduction of the Fingerprint Recognition e-Bidding • Communicate openly Korea’s Procurement Service System was viewed as an exemplary approach to Although bidders were widely consulted during the teamed up with Yonsei introducing innovation, thanks to its careful incorporation process, the new fingerprint system sparked strong University in Seoul to carry out of stakeholders’ suggestions and opinions. Despite this, opposition among some in its early stages. They anti-forgery fingerprint tests. the process still revealed valuable lessons: objected to the additional registration process, the 46 47 TOP 15 R E I N VE N TI N G PR OCUR E ME NT IN PARAGUAY: Introducing electronic reverse auctions Author: Dionisio Mereles, Norm Coordinator ‘ Paraguay’s challenge was Organization: Public Procurement Office (Government) to develop an electronic Theme: Managing procurement systems Country: Paraguay system that did not exclude its small-business sector ’ SU MMARY Despite concerns about implementing an electronic system in a country with Paraguay faced a potential crisis as the scale of state purchasing and the number of bidders low internet usage, Paraguay’s reverse auction has been a great success, in public tenders could not be managed efficiently using traditional procurement systems with over 10,000 registered users and scattered across government. Urgent modernization was needed, but with less than 13 percent 1,200 auctions in the first three years. of Paraguay’s population having internet access, small and emerging companies were at a disadvantage. Paraguay’s challenge was to develop a user-friendly system that would support this vital sector of the economy, while also generating significant government savings. In 2008 the electronic reverse auction was successfully introduced, with measures to give small businesses a second chance to improve their bids, in an attempt to help them win government contracts. In 2011, the system resulted in savings of almost 12 percent in relation to Paraguay’s acquisitions budget, surpassing targets with more than 10,000 registered bidders and over 700 auctions, almost a quarter of which supported the country’s small business sector. 48 49 C H A L LE N G E technology, providing top security for sensitive businesses. Under Paraguay’s reverse auction system, data and guarding against cyber-attacks. The these enterprises are given a second chance to The Paraguayan state is the country’s greatest buyer between bidders, sometimes even involving public electronic reverse auction system authenticates all improve their bids, in an attempt to help them of goods and services. The scale of transactions was officials. This meant the state often made acquisitions users’ information and enables procurers, bidders, access government business opportunities. generating an urgent need to amalgamate the many at inflated prices. Innovation in the system was government agencies and citizens to observe the diverse processes and policies of public procurement, urgently needed. auction process as it happens. To ensure equality and • Training users and winning support and align them with private sector standards. The fairness throughout the process, the system maintains A key challenge was addressing entrenched ways volume of goods and services required meant large In 2003, a new Paraguayan public procurement law strict confidentiality regarding bidders’ identities until of working in a country where internet and even numbers of local and international companies were was passed, allowing for electronic reverse auctions. the final result. Yet the transparency of the process computer usage remain uncommon. Although the competing in government tenders. The scale of state But even in 2011, less than 13 percent of the Paraguayan allows any interested observer to follow it. This procurement service website was being used, it was needs and the number of bidders were becoming population had access to the internet. This made it promotes a fair, competitive environment conducive merely a consultation tool, while the auction system unmanageable via traditional procurement systems difficult for small and emerging companies with little or to driving down the prices of goods and services for was a highly interactive interface, requiring users to scattered across government. no internet access to participate. Paraguay’s challenge Paraguay’s government. The bidding process ends submit information and interact with other users. was to develop a user-friendly system that new internet with the automatic generation of an audit report Paraguay’s procurement service tackled this head-on, These procurement methods did not allow for adequate users could access, which was also reliable and could detailing every stage of the process, including starting holding ongoing weekly training sessions for both planning, and permitted significant degrees of collusion generate significant savings for the government. prices, questions asked and the evolution of the state agencies and any interested potential bidders. bidding down to the second. This report is publicly Through videos, brochures and presentations, the available online for anyone interested. service was able to convince potential bidders that I N N O VAT IO N the auction system was more effective and fairer, • Supporting small businesses and would give them better chances of participating Paraguay’s public purchasing law of 2003 made about their electronic system. Drawing on these The innovation enabled the government to support and winning. imperative the transition to electronic public purchasing. meetings and technical explanations, Paraguay’s certain economic sectors, such as small and emerging The Public Procurement Office faced the challenge of legal framework and interface were designed. implementing a public procurement mechanism based Extensive legal work was required in order to adapt exclusively on an electronic platform, despite the low existing procurement regulations to a new electronic RE S U LTS internet usage among small local suppliers. The team set purchasing system. Regulations needed to ensure it about creating a system for electronic reverse auction, to would be transparent and free of loopholes, providing Paraguay’s bespoke electronic reverse auction system took off in 2010, with around 500. This growth boost transparency and offer the state significant savings. a fair environment for all bidders and an effective has been very well received, with an ongoing increase allowed the procurement office to establish a goal basis for competitive tendering that would give the in the number of companies registered to bid for for 2011 of 500 auctions. However, by December, that • Harnessing existing expertise government the best value for money. Meanwhile, IT government contracts. goal had been surpassed by over 40 percent. More To make the most of existing regional expertise, experts worked on the development of the custom- than 700 electronic reverse auctions had taken place. the project began with an exchange with Brazilian made software needed for the electronic platform. • Targets greatly surpassed public procurement experts who had implemented a From 2009-11, the number of companies registered • Significant government savings similar scheme. Paraguayan procurement technicians • Introducing unprecedented transparency to take part in electronic auctions doubled from 5,000 In 2011 savings of almost 12 percent were made specializing in legal and IT matters visited their The reverse auction system was developed by to more than 10,000. After a tentative start, with only across parts of Paraguay’s acquisitions budget using counterpart agency in Brazil’s Government to learn Paraguayan technicians using the latest open-source eight electronic reverse auctions in 2009, the system electronic auctions. For health services and medical 50 51 products, savings of 22 percent were obtained. • Foundations for diversification • Demonstrate clearly how the system helps been the opportunity the system offers for small or With 34 percent of Paraguay’s public procurement The electronic reverse auction is currently used for people emerging suppliers to improve their final bids. procedures currently using the reverse auction system, generic goods such as office supplies and food The public response was overwhelmingly positive. Paraguay’s Public Procurement Office continues the potential for further savings as it expands across products, which are not complex and have a uniform Through wide publicity online and in the national to explore the scope for applying its tailor-made government remains significant. quality level. In the longer term, based on success to media, people realized the system meant better value electronic reverse auction system. It is increasing not date, Paraguay will increase of the number of auctions for public money and fairer opportunities for their only the number of auctions held, but also exploring • Support for small business held and the range of items procured this way. The businesses. After just three years, Paraguay’s reverse the possibility of using e-auctions for procuring more In 2011, 157 auctions (22 percent) benefitted small procurement service is also exploring the possibility of auction system has more than 10,000 registered complex packages of goods or services. and emerging Paraguayan enterprises, making the making use of reverse auctions mandatory for certain companies. One of the greatest incentives has reverse auction system an economic stimulus for the purchases which yield the most successful results. small business sector. These companies now see the system as a reliable way of being able to gain access RE S OU RCE S : to government business opportunities. Paraguay’s electronic reverse auction website: https://www.contrataciones.gov.py L E S S ONS L E A R N E D As Paraguay continues to develop its e-procurement several modifications and adjustments during the capacity, the process has revealed valuable lessons to process in order to retain optimal efficiency. These take forward: adjustments continue constantly, especially regarding information security and the speed with which the • Draw on existing experience system operates. The value of the exchange visit with Brazil was immense. Paraguay’s procurement specialists knew • Have faith in people’s ability to adapt they needed to develop a system tailored to their The implementation process demonstrated the country’s own situation, but gained huge benefit from flexibility and adaptability of both companies and being able to draw on existing expertise and avoid government agencies. Paraguay’s procurement service common mistakes, and from simply not having to feared a general reluctance to use the radically new Through weekly training sessions, start again from scratch. system, but it is becoming increasingly popular and Paraguay’s procurement office widely used. Companies are embracing a system convinced potential users that the • Keep innovating and adapting that offers an open and non-restrictive opportunity electronic auction system was fairer Paraguay’s greatest challenge is to keep the system to participate in the whole auction process, while and more effective than the traditional working to fast-evolving speed and security standards. procurers and citizen groups welcome the opportunity paper-based approach. Even while the system was being built, international to be able to oversee the process. public procurement norms were changing, requiring 52 53 TOP 15 STA R TI N G FR OM SCR ATCH Creating procurement capacity in post-conflict South Sudan Author: Richard Olowo, Procurement Hub Coordinator, The World Bank Group ‘ From just a dozen national Organization: South Sudan Ministry of Finance and Economic procurement staff in 2007, Development (Government) Theme: Procurement reform in fragile states Country: South Sudan there are now 84 across 25 ministries, departments and A wide range of national assets – government agencies ’ SU MMARY from schools (above) to roads and water systems – has been acquired In the world’s youngest nation, South Sudan, a team of national procurement officials has been thanks to the procurement staff newly in place to conduct the acquisition built after decades of conflict, to enable budgets to be spent and service delivered to citizens in process efficiently and professionally. war-torn towns and villages. In place of procurement agents contracted after competitive selection processes, a government scheme is now training young South Sudanese graduates to form the core of a new procurement service. With no prior procurement training or experience, they are learning on-the-job, working alongside specialist procurement consultants, recruited individually to build capacity comprehensively on a one-to-one basis. The process requires a delicate balancing act between the need to rapidly supply highly expectant citizens with peacetime services and infrastructure, and to create procurement capacity mainly through ‘learning-by-doing’, to ensure good governance and sustainable service delivery. 54 55 CHALLENGE This approach would result in individual ministries among government ministries and departments. taking responsibility for their procurement, with The procurement specialists trained government South Sudan emerged in July 2011 as the world’s Review of the first agency contract confirmed that procurement staff in each ministry and department staff on trust-fund financed procurement, but the newest nation, after decades of civil conflict and a no significant procurement capacity was built during implementing the multi-donor trust fund, drawing skills acquired are now used mostly for procurement Comprehensive Peace Agreement between Sudan and its duration (possibly because there is an inherent support from a pool of procurement officers in using the government’s own resources. the Sudan Peoples’ Liberation Movement in 2005. The disincentive for procurement agents to work themselves the Finance Ministry. This was in line with the autonomous Government of Southern Sudan acquired out of a role). As a result, the second procurement South Sudanese Government’s priority of capacity Funds that became available when procurement access to a multi-donor trust fund for delivery of agency contract excluded capacity building, and development. Two sets of standards were available agency contracts were not extended were used to services, and – for the first time – to revenues from oil government procurement staff did not work with or to ministries and departments: World Bank guidelines support the procurement specialists in the Ministry production. The World Bank was selected to manage the in parallel to the procurement agents. In 2009, the for trust-fund projects, and South Sudan’s Interim of Finance, as well as financing formal training for trust fund, an important part of which was supporting World Bank advised South Sudan’s government against Public Procurement and Disposal Regulations for the private sector. Training suppliers was vital for the development of a reliable procurement system. A renewing the contract with the procurement agent. government-financed procurement. Various donors achieving sufficient impact on service delivery. procurement agency was hired to carry out procurement The new country needed a different way to develop to the trust fund also provided procurement specialists Companies involved in banking, agriculture, consulting using both government and trust-fund resources, and to the robust procurement capacity that would enable it to the Ministry of Finance and funded formal and construction were invited by the Regional build procurement capacity within the new government. to nation-build. procurement training. Chambers of Commerce to send representatives to a Business Outreach Seminar. This achieved an • Providing ‘training by doing’ outstanding attendance rate of more than 80 percent. I N N O VATIO N Procurement training is most effective when done Participants were informed about the business on-the-job and complemented by short-term opportunities created through trust-fund financed As an alternative to procurement via hired agency, • Recruiting trainees and specialists formal courses. Courses were held by the World projects, and given materials such as procurement the World Bank’s Africa Regional Procurement Manager Procurement specialists were recruited through Bank, offering targeted training on specific areas guidelines and web-links, as well as tips for preparing recommended that individual ministries and departments advertising in East African newspapers, coming mainly of procurement identified as a general problem successful bids. hire independent procurement specialists for each from neighboring countries such as Ethiopia, Kenya, trust-fund project, and assign counterpart staff to the Tanzania and Uganda. specialists to train with them while on-the-job in South RE S U LTS Sudan’s capital, Juba. The government was originally As an initial step, the Ministry of Finance and unsure about the idea. One school of thought, fuelled Economic Development would hire a procurement State procurement capacity has been successfully good governance. The multi-donor trust fund by a fear of the unknown, held that the procurement specialist and a procurement training adviser, before developed as planned. From just a dozen national disbursement rate, very low in early years, has risen agency took responsibility for the result of the recruiting 10 graduate nationals to be trained as procurement staff in 2007, there are now 84 significantly, so that only minimal amounts will remain procurement process and was building capacity. The Procurement Officers. These graduates would procurement staff at various levels in 25 ministries, unspent when the fund closes later in 2012. A wide other saw that the agency was costly and yet wasn’t go on to support government bodies weak in departments and government agencies in South Sudan. range of national assets – from offices, vehicles and leaving any positive legacy of skills. However, the Bank procurement management. The 10 South Sudanese roads to water systems, schools and medication – has demonstrated to the government that the procurement graduates were not required to have any prior • Funds disbursed for national development been acquired thanks to the procurement staff now specialists working within ministries could perform experience in procurement management, but were These procurement officers can reliably perform the in place to conduct the acquisition process effectively satisfactorily without the help of a procurement agent – recruited by the Ministry of Finance using civil service public procurement function and facilitate budget and professionally. and achieve more in the longer term. recruitment procedures. execution, enabling service delivery and promoting 56 57 • Ongoing momentum for reform • Improved cross-governmental cooperation • Be aware of staff turnover The World Bank has found that when it provides These new procurement professionals have become The activities under the initiative have involved the Although the overall procurement performance of procurement training, the working relationship champions of reform, demanding recognition of collaboration of different government ministries and South Sudan’s government bodies has dramatically between the Bank and the Borrower improves. the procurement profession, as well as international bodies. The Ministry of Finance is in charge of overall improved, there are early signs of staff turnover, as South Sudan is no exception, and the capacity- standards in procurement management. They procurement policy development and the centralized the best performers leave to take up private-sector building training continues, with several procurement provided crucial input to both the World Bank’s procurement of the South Sudanese Government. It or donor-agency postings offering more competitive staff taught under the program now taking over Country Procurement Assessment Report and the dealt with the termination of procurement agency reward packages. If turnover levels become significant, from the specialist consultants who trained them drafting of South Sudan’s new public procurement bill, contracts and the recruitment of Sudanese graduates they could affect further improvements in government and have since left. identifying important opportunities for improvement for the new positions. The Ministry of Labor and the procurement performance, so it is important to ensure in the national procurement system. As procurement Civil Service Commission approved the recruitment that government structures of reward and recognition champions, they have also requested further World process, while the Budget Directorate financed some remain attractive for newly-trained professionals. Bank training for the private sector, as well as for of the training. senior government officials, which the Bank plans to provide. Judging from this input, the achievements in procurement capacity-building are sustainable. LESSONS LEARNED These outcomes indicate that the innovation can be clear from the start that transfer of knowledge was replicated in similar contexts. Several lessons emerged a key objective of the consultants’ assignment. that will help ease the process: • Don’t hire agencies to capacity-build • Provide adequate capacity for contract Procurement agency contracts should not include supervision capacity building, as there is a potential conflict of Procurement agencies, like other consulting services, interest. An agency has little immediate incentive Trainee procurement staff from South Sudan’s require a minimum capacity for contract supervision to work itself out of a role by quickly building Government gather for a formal course by the employer if they are to give satisfactory procurement capacity in its client. to complement their on-the-job learning performance. This was a problem with the consulting alongside expert consultants charged with firms, but in general is much less of a problem with • Ensure counterpart staff are available knowledge transfer. individual consultants. However, a proper watch Take care not to simply assume that counterpart should be kept on the working style of the individual staff (i.e. staff responsible for procurement in consultant. It is possible that some consultants government offices) will be available. Special effort may not pay sufficient attention to the question of needs to be made to ensure that there are dedicated knowledge transfer, simply in order to extend their government staff to work with and learn from hired role for a longer duration. This did not affect the procurement specialists. South Sudan program, possibly because it was always 58 59 TOP 15 R E CON STR UCTI ON I N POST- WAR L IBERIA Holistic procurement reform ‘ Building capacity Author: Winter Chinamale, World Bank Procurement Specialist among all stakeholders – regulators, public sector Organizations: Government of Liberia and the World Bank (Donor Agency) Theme: Procurement reform in fragile states To rebuild trust and help companies take part in competitive bids, staff and private suppliers – Country: Liberia Liberia’s Government runs workshops for the private sector. is transforming Liberian procurement ’ SU MMARY Liberia’s civil war caused the complete destruction of the country’s public procurement system. Yet the urgent need for post-war reconstruction made a strong, effective procurement function more important than ever. So a vital first step to enable the country to rebuild its infrastructure was the launch of a specific program to regenerate public procurement. The government took a World Bank staff present training materials comprehensive three-pronged approach: reforming procurement regulation, training a new cadre from Ghana’s Millennium Challenge of professionals and engaging the private sector. Together, these measures ensured that all Corporation for adaptation into Liberia’s intensive one-year procurement curriculum. procurement stakeholders are equipped to help rebuild the country. 60 61 CHALLENGE individual government ministries; the installation who deliver a curriculum adapted from a successful of suitable computer equipment; the creation of program run by the Millennium Challenge Corporation Fourteen years of civil war (1999-2003) destroyed This held back Liberia’s recovery on a dramatic scale. a role for an advisor to help facilitate smooth in Ghana. The school was opened in April 2012 by the Liberia’s professional workforce, infrastructure and With procurement carried out by untrained staff, only procurements, and the revision of procurement Deputy Finance Minister for Administration. In parallel, institutional capacity. The public procurement system 47 percent of the capital budget was spent in the fiscal regulations. Funding for these activities has been the Civil Service Agency is developing a procurement disappeared and the country was left without skilled year 2009-10. Much of that expenditure was ineffective, secured from a multi-donor trust fund dedicated career track, to recognize and reward professional practitioners. Procurement was carried out by civil owing to the lack of training, management capacity to public financial management reform. procurement personnel serving the public. servants without the necessary training and experience, and regulation. Free from the constraints of adequate drafted in to fulfill the requirements of Liberia’s Public institutional oversight, corruption also thrived. And yet • Developing skilled practitioners • Building suppliers’ capacity Procurement and Concessions Act, which had been with its physical infrastructure in tatters, the country To meet the urgent need for procurement staff The government recognized the importance of revised in 2010. They had only minimal training in the needed an effective procurement system more than ever with specific skills, the government focused both going beyond simply reforming its own capacities. terms of the Act. As a result, the procurement that did as it tried to rebuild. Finding its drive for development on upgrading the skillsets of existing employees, To promote competition among suppliers and increase take place lacked efficiency and transparency, and was and recovery undermined by the weak procurement and on training brand new procurement personnel. their responsiveness to procurement opportunities, it not cost-effective. Quotations were often obtained only function, the government focused on developing a also needed to work with local companies to develop from known suppliers or contracts awarded directly to a robust procurement capacity, able to meet Liberia’s A short-term in-service training program was begun their skills for taking part in competitive bids – as well specific company. massive demands. through an existing parastatal organization, the Liberia as to win their trust. Following the war, the private Institute for Public Administration (LIPA), to train public sector lacked confidence in the public procurement sector practitioners in basic procurement. The program process, seeing it as inefficient and corrupt. I N N O VATIO N leaders were themselves trained at the International Companies also lack knowledge about how to Labour Organization in Turin, Italy, while a consultant prepare bids for contracts with government Faced with such an overwhelming lack of capacity, Procurement and Concessions (PCC) Commission, hired through a World Bank-funded project assisted institutions. To help local suppliers of goods and Liberia’s Government realized it needed to go beyond but this urgently needed strengthening so it could with development of the curriculum. services participate effectively in the tender process, traditional procurement reform, which tends to adequately perform its regulatory function. The first the PPC Commission began regular training sessions emphasize the establishment of a strong regulatory step was to define the commission’s immediate needs. To expand the cadre of procurement staff, the to teach private sector staff how to submit strong system while often simply hoping everyone concerned With World Bank backing, a consultant assessed its government also established a school to deliver an competitive bids. These sessions are open to all will adapt to it. The Liberian approach went further, human resource requirements, identifying a severe intensive one-year procurement training course to interested companies and consultants, and have aiming to ensure that all stakeholders – from monitors shortage. As a result, the government employed 25 students per year, for deployment in the public been welcomed by the private sector. As well as to suppliers – had the right knowledge and systems to 12 additional procurement monitors, increasing the sector. Competition for places is high: the course was helping suppliers submit quality bids, the sessions play their part fully in the new framework. total number of staff to 40. It also bought them new advertised to the public in local newspapers, resulting are helping rebuild wider public trust in procurement, equipment and refitted the commission’s offices. in more than 370 applications. The program is led by and increasing companies’ willingness to take part. To drive the massive reconstruction effort, the experienced international procurement professionals, government adopted a three-pronged approach The consultant then assessed the commission’s to procurement reform: overall institutional capacity, in order to develop a roadmap to further strengthen it. The roadmap’s • Creating robust oversight recommendations included specialist staff training, Liberia did have an existing oversight body, the Public particularly in procurement monitoring within 62 63 R E S U LT S so that the PPC Commission, procurement staff and • Bridge the gap between theory and practice the private sector all felt equally supported, and The process exposed the importance of supplementing By addressing capacity issues for all stakeholders – the staff to identify areas for improvement in subsequent no-one felt singled out. Where external expertise was reforms with practical coaching so that procurement regulatory body, public sector personnel and private sessions, and there are plans to develop intermediate needed, the consultants were experienced and suited staff are well equipped with the skills to implement service providers – the approach is already transforming and advanced courses for those who succeed. Staff to the task. The government took a broad approach new measures. Beyond their theoretical training, PPC Liberia’s procurement process. are enthusiastic about their new training and are to identify potential partners, such as Ghana’s Commission staff need practical coaching in how looking forward to taking higher-level courses. Millennium Challenge Corporation, whose successful to oversee procurement processes, especially within • Effective procurement oversight The full-time one-year intensive course for external training curriculum was adapted for Liberia’s use. ministries. Donor funding has been agreed, and The reforms have strengthened the PPC Commission, students is being transferred to the University of consultants and IT equipment will be put in place enabling it to recruit and train new monitors so it Liberia, where it can generate a pool of professional • Ensure capacity building is holistic for further coaching initiatives. can begin the procurement monitoring expected of a practitioners to help the government reduce the The process highlighted that in a fragile state regulatory body. Government institutions must have existing skills gap. with a dearth of critical skills, intensive capacity • Make the approach sustainable approval from the commission for their procurement building requires effort from all angles. Training and Among the strengths of the Liberian government plans before they can access their allocations from the • Tangible economic impact capacity building should also be accompanied by approach is that although it was mostly funded by national budget. The commission now has a website The percentage of budget spent rose nine points improved incentive schemes (such as salaries, career donors, it is sustainable. No donor financing was open to the public where it publishes information to 58 percent for the year 2010-11, benefitting all development and promotion) in order to retain newly- used for recurrent costs, with salaries for extra PPC including procurement plans and opportunities. It sectors, from agriculture and infrastructure to health skilled staff in public institutions and prevent leakage Commission staff financed by the government. has also started reviewing government institutions’ and education. Instead of obtaining quotations from to better-paid donor projects. The intensive in-service The approach drew on existing resources wherever procurement documents, for compliance with the only known suppliers or awarding contracts directly training should also have been available as pre-service possible, with professional training taking place PPC Act. to a specific company, procurement staff now place training. It revealed the importance of ensuring through existing institutions and a curriculum being notices of public procurement opportunities in the participants’ commitment to the course for their own developed from a successful model in Ghana. • Foundations for cadre of professionals newspapers for all to see. Tighter procurement career development, so they don’t see it simply as The short-term in-service training, along with monthly practices have helped Liberia improve its score on a work obligation. As an incentive, the government This ongoing three-pronged reform process will ensure procurement clinics, has strengthened staff capacity, Transparency International’s Corruption Perceptions is developing a cadre system which will define the that procurement continues to play a vital role in Liberia’s resulting in better quality documents and reduced lead Index (which measures perceived levels of public- minimum training and qualifications required for a continuing reconstruction. times for procurement processes. The first session has sector corruption in a country). particular procurement role. been evaluated by the training consultant and LIPA RE S OU RCE S : LESSONS LEARNED Public Procurement and Concessions Commission website: www.ppcc.gov.lr Even in circumstances where the need for procurement • Foster inclusive collaboration reform is not as urgent as Liberia’s, the country’s three- Strong commitment from both the government pronged approach holds valuable lessons: and donors underpinned the entire process, and was nurtured at every stage. The reforms were well-balanced across key procurement stakeholders, 64 65 TOP 15 USI N G PR OCUR E ME N T TO DRIVE DEVEL O PMENT The Local Community Procurement Program ‘ The program is designed Author: Monica Ospina, Founder and Director to avoid dependency Organization: O trade and market access (Private company) on the immediate project Theme: Managing procurement systems Country: Canada / Ecuador around which it is based ’ The program trained 19 local people – mostly from vulnerable SU MMARY social groups – in food handling and management, resulting in O trade and market access, a Canadian firm specializing in sustainable supply chain and six sustainable small businesses. It teaches them to access the community development solutions, wanted to harness the potential of large procuring entities local supply chain and compete (public or private) to impact a community’s livelihood and development. In 2007, it developed successfully in the procurement the Local Community Procurement Program, a market access and capacity-building model bidding process. which aims to provide small and medium-sized community enterprises with the necessary skills Although she has never attended school, to access their local supply chains and become competitive suppliers in their local economies Maria Utitiap (left), from Ecuador’s indigenous Shuar community, successfully completed the on a sustainable basis. The program brings together private or public procuring entities, local Local Community Procurement Program and communities, governments and industry associations, to identify opportunities and provide the became one of the first catering suppliers to mining giant Kinross Gold. necessary training to enable community enterprises to enter the supply chain. 66 67 CH A L LE NGE identifies industries that can serve as job creators for O trade’s socio-economic assessment identified high communities, but that will also provide a sustainable unemployment among vulnerable groups in the area, O trade realized that as procurers, the private and public entities in their region and so are often excluded from livelihood for the community beyond the project due to the lack of skills and opportunities. So with sectors both have a powerful ability – and responsibility – the bidding process. This exclusion often results in lifecycle. The procuring entity is responsible for the Kinross’s support, a catering program was established to impact a community’s livelihood and development. conflict between local communities and large players. wellbeing of the communities in its direct area of to help vulnerable groups meet the company’s meal But this potential is often overlooked. In particular, This is particularly true in the extractives industries, influence, the physical and natural environment requirements during the road-building project. the private sector can be either a source of conflict which bring together big international business and that its operations impact, and its employees. Under the program, 19 local people were trained in for communities or a strong force for development, small local communities. So O trade sought to develop Throughout the implementation of the program, O food handling and management and six new small helping local people create meaningful and sustainable a way to help local communities by enabling them to trade continues to work with the procuring sponsor businesses established. Of the 19 participants, 17 were livelihoods. O trade was determined to try to nurture secure inclusion in the private sector’s supply chain. By and local community members to ensure the ongoing from vulnerable groups (including women, indigenous this positive powerful force. accessing business opportunities this way, communities collaboration and support of everyone involved, and people and the elderly) and six were illiterate (with less can create sustainable livelihoods for themselves, that their expectations are met. than three years’ formal education). The challenge for many local businesses is that they do alleviating poverty and stimulating socio-economic not meet the pre-qualification criteria of large procuring development in their region. To begin the process with Kinross Gold in Ecuador, • Pillar 3 – support to access the supply chain for example, O trade approached the company’s Beyond technical training, the program involves Community Relations and Procurement teams, educating participants about how to access the I N N O VATIO N leaders from the 23 communities in Kinross’s direct local supply chain and compete successfully in the area of influence, local government, and industry procurement bidding process. In the case of Kinross, The results was O trade’s Local Community Procurement the model, including the necessary background research, associations. It worked to identify the main needs of the catering business training built on local people’s Program, through which local small businesses are initial assessment, and ongoing evaluation and coaching. each stakeholder group, looking for ways in which existing skills, while opening the possibility of future provided with the knowledge and tools to become The model centers on a four-pillar approach to enabling the company and communities could work together. opportunities for participants by emphasizing how qualified suppliers and gain access to the supply chain. local communities to enter private or public sector supply they could diversify their clients in the future. This chains. Each pillar can be customized to meet both • Pillar 2 – building capacity way, the program creates sustainable change. All Research for the development of the program focused the needs of the communities in a company’s area The program then focuses on transferring technical six new businesses are now legally registered in on the extractive industry, as one with a particularly of influence and the operational needs of a big knowledge to participants to build their capacity shared ownership of the participants, and are active strong impact on local communities and the environment. organization, achieving a balance between community in areas where industry demand and market pre-qualified catering suppliers for Kinross Gold, the This focus allowed O trade to implement the model and and business development: opportunities have been identified. The training municipality of Los Encuentros and local schools. ensure that it was an effective solution for communities is customized to ensure all participants are able to before seeking to expand its scope. The program was • Pillar 1 – dialogue with stakeholders complete the program successfully, regardless of • Pillar 4 – ongoing support successfully implemented in 2009 by Productivity The program starts with engagement with communities, their social status and knowledge level. The program provides ongoing coaching, evaluation Alberta in Alberta, Canada, and in 2011 by Kinross local industries, governments and the private sector, and training of community participants, to ensure Gold Corporation in Los Encuentros, Ecuador. to achieve understanding of each party’s needs Initial dialogue with Kinross revealed that the their continuous development. This way, local and establish transparency within the process. O company was building a new road to a specific site, communities and small businesses are responsible The project sponsor – a procuring organization, either trade works with the private sector and regional which would cut through the community of Pindal. for helping stimulate the local economy by being from the private or public sector – is responsible for stakeholders to understand the industry’s demands To maximize productivity during construction, workers competitive, creating new jobs, securing access to funding the customized design and implementation of and requirements and the communities’ capacities. It would need catering services available on-site. local market opportunities, and providing required 68 69 goods and services. Local governments and agencies for their members. Since the Kinross program, this LE S S ONS LE ARNE D are encouraged to support the development of local ongoing support has helped participants diversify to businesses, and industry associations are brought in become active food and catering suppliers for local Key drivers behind the success of the Local Community sustainable development. It also helps small local to help promote production and secure opportunities schools and government offices. Procurement Program included: businesses understand and comply with human and labor rights and is designed to meet global standards, • Gain communities’ trust such as the International Finance Corporation’s Promoting local procurement can help prevent Sustainability Framework, UN Millennium R E S U LT S conflict between communities and the private sector. Development Goals and Global Compact. It’s important to enable communities to identify The Local Community Procurement Program • Social and economic sustainability their competencies and set realistic expectations • Win the sponsor’s full commitment maximizes efficiencies in the sponsor’s supply chain Participants gain the skills to carry on developing around their involvement in a project. If local The Kinross case showed the importance of training and procurement process by securing local content, themselves and identify opportunities in other talent is integrated into the supply chain, providing a sponsor in the initial program stages. Without while at the same time developing the existing capacity markets. The program has been specifically communities with meaningful opportunities, they sufficient early engagement, the sponsor cannot of local communities and businesses to meet industry designed to avoid dependency on the employment feel engaged in the process which helps the sponsor support implementation as thoroughly as required, standards and demands. In this way, it acts as a tool opportunities and social programs provided by to build strong community relations, secure the resulting in logistical challenges and differences in for conflict mitigation between the private sector and the immediate project around which it is based. It social license to operate and avoid conflict. The opinion. The most critical advice is to gain early and communities by promoting economic inclusion and transfers necessary skills and capacity to small and Ecuador program overcame communities’ initial ongoing engagement, in order to ensure transparency helping stimulate community development. medium-sized enterprises, ensuring that they adhere hesitation – due to previous negative experiences and ease of program implementation. Without to industry standards so that procurement managers with extractive companies – through meetings, long-term commitment from the sponsor (a projected • A win-win situation can hire them. This way, local requirements are met informal visits and community observation. This timeframe of 1-3 years), the vital ongoing evaluation The program encourages open dialogue, multi- and productivity is maximized in the supply chain. meant realistic expectations were established and and coaching in the fourth pillar of the program stakeholder collaboration and transparency. then met, gaining people’s trust and securing the cannot be guaranteed. Local suppliers are able to develop their capacity • A ripple effect social license to operate. to satisfy a procuring organization’s demands and In Ecuador, participants took the initiative and After the success with the local catering businesses in meet industry and market standards. They develop shared their learning in good hygiene and nutrition • Include vulnerable groups Ecuador and with local metal fabricators in Alberta, sustainable skills while helping clients maximize practices with their families, helping improve health To maximize the social impact of a community Canada, the Local Community Procurement Program can project quality and productivity, avoid costly delays in the community. procurement program, it’s important to include now be customized to fit the needs of varying industries and reduce administrative costs associated vulnerable groups, transferring knowledge and and communities. O trade continues to work with both with the procurement process. skills effectively to women, indigenous people, the private and public sectors and development banks to older people, those without education and youth. identify new opportunities to implement the LCPP as a • Strengthening the supply chain The program leaves knowledge in the hands of the solution in achieving sustainable procurement and supply By drawing on local skills and resources, the community and acts in support of dignified and chain practices, as well as acting against poverty. program helps maximize productivity and quality in the supply chain. It also supports the creation of environmentally sustainable jobs, and promotes RE S OU RCE S : agriculture and production. www.omarketaccess.com 70 71 TOP 15 MOD E R N I Z I N G I N D I A’ S R A IL NETWO RK Electronic procurement as a key step Author: Pon Sivalingam, Deputy Chief Material Manager, Indian Railways Stores Service ‘ Increased flexibility Organization: Indian Railways (Government) Theme: Using ICT to improve procurement systems Country: India and reduced crisis management mean ongoing cost reductions across the whole organization ’ SU MMARY E-procurement is underpinning the Indian Government’s drive to When India’s Government sought innovations to modernize its railway system, Indian Railways develop the country’s rail network, decided to switch from a paper-based procurement system to electronic tendering. It created enabling modernizations such as electrification. automated systems to comply with industry benchmarks in data-driven approaches and procurement ethics. These included electronic bidding, real-time performance monitoring, contract management tools and priority identification. It also developed a roll-out program to help users adapt from existing systems – vital in overcoming resistance to change. The new system has increased the effectiveness of the procurement process across India’s vast rail network, while cutting overall costs. Benefits include better lead-time and reorder calculation, identification of successful suppliers and transparency throughout the procurement process. 72 73 CHALLENGE materials for the rail network, before proceeding with public procurement manager, customized progress other aspects of their work. The system also helps reviews and post-contract management. Until 2011, Indian Railways’ procurement procedures To reduce procurement costs and improve the availability procurement managers identify effective suppliers were based on time-consuming and unproductive yearly of materials for the smooth functioning of the train and establish the rate at which items needed on an Communication with stakeholders was as important to reviews. Across the organization, individual staff carried system, Indian Railways realized that the procurement ongoing basis should be procured to avoid ‘stock-outs’ the success of the process as the software creation. Staff out hundreds of separate review procedures, trying to system needed streamlining. It needed to be able (gaps in availability within the organization). and suppliers were consulted and informed throughout, assess past performance and anticipate future needs to better identify the organization’s needs, and to with comments and feedback on the system recorded on based on information that was often inconsistent or run electronic tenders for contracts to ensure those • Electronic tendering system an electronic forum. Training programs were developed incomplete. When the Indian Government decided needs were met. This meant a system that would rank Automated tender solicitations and submissions are and the system implemented across the organization in to modernize its railway network to improve safety procurement priorities and calculate lead-times and now made via a password-protected online portal, phases, with weekly two-hour training sessions for staff and efficiency, it was soon evident that this laborious reorder points more accurately. It would also evaluate the Indian Railways e-Procurement System. Instead of over six months, review meetings and the circulation of process would hold back progress. As well as facilitating appropriate suppliers, run tendering processes and printing and sending solicitation bulletins to vendors, user-friendly operational and user manuals. Dedicated modernization of the rail network infrastructure, monitor contract performance in real-time. Much greater the electronic system posts bulletins online where they computers were also provided to train suppliers in the revitalizing the procurement process itself would be transparency was also needed, to ensure both efficiency can be accessed by registered suppliers. Every stage of electronic bidding process. During the pilot period, the a crucial step in modernization. and integrity. Indian Railways realized ICT could deliver a tender is handled through this portal, which allows system was implemented for selected items, and different all this, if it could develop a tailor-made system – and protest and clarification provisions for vendors, online tender solicitation methods were introduced one at a get staff and suppliers to embrace it. negotiations, real-time workload monitoring for each time, to allow suppliers and staff to adapt. I N N O VATIO N RE S U LTS Once it had identified its needs and developed a brief The resulting system (Indian Railways Material In the three months after the system was fully launched, money and public accountability, lead times for an for the ICT systems engineers, Indian Railways worked Management Information System) has three interfaces: staff across Indian Railways noticed increased efficiency item can change according to market conditions. with specialists to develop a portal for electronic tender one for the procurement office, one for warehousing in the procurement processes needed to keep their The old paper-based system of lead-time calculation solicitation and software to handle all aspects of the and one for the finance branch. Each covers two main departments running smoothly. Previous difficulties in was rigid and unable to respond quickly to market procurement process – from warehousing and inventory aspects of procurement: ensuring constant availability of safety items such as fluctuations. The new system enables procurement management to financial controls. The bespoke system buffer coupler components, springs and bearings have officers to react to changes such as advances in was developed by experts from the Centre for Railway • Demand forecast planning been resolved through the new real-time monitoring and product technology, a new supplier offering quicker Information Systems – an Indian Railways umbrella Instead of monthly demand forecast planning reliant data-driven approach. In light of these improvements, delivery times, or a readiness to pay higher rates for organization for all computer activities – with IT industry on two-way paper flows, the system identifies priority users are overcoming their initial reluctance to adopt this earlier delivery. Lead-time assumptions for each item support from an external supplier. Starting in 2003, it needs and schedules them into the daily program radically different system, instead appreciating its ease of can be quickly adjusted to reflect organizational needs took two years to develop a common system platform at of the procurement officer and warehouse manager use and efficiency. and the market, so Indian Railways can still get the corporate level. This was then customized and rolled out responsible. A soft copy of the data is accessible best from its suppliers. gradually in different departments, with implementation through a customized menu online on a real-time • Increased system responsiveness across the entire Indian Railway system in 2008-09. basis. By addressing these priorities first every day, In a public procurement process where competition • Reduced crisis management procurement staff can ensure a steady availability of among suppliers is central to achieving value for The previous system offered procurement managers 74 75 • no help in advance identification of priorities, The increased flexibility and reduced crisis and even to senior management. Familiarization the importance of strong leadership support: early meaning much of their time was absorbed in crisis management brought about by the system with inefficient but long-established systems, and successes were seen in units where individual leaders management as they struggled to source items also generate ongoing cost reductions across a reluctance to make the efforts required to learn a took the initiative to ensure smooth implementation. quickly that were suddenly out of stock. As well as the whole organization, as items are procured new system, can pose real barriers to implementation impairing Indian Railways operations, this increased in a timely manner which allows for price across a large, decentralized organization. But through • Adapt to available resources costs, often necessitating higher prices because of negotiation and thorough quality control. a real understanding of stakeholders’ feelings, Budgetary shortfalls held the process up. Some of the urgency of a purchase. The electronic system combined with strong interaction and persistence, these could have been avoided by better engagement enables procurement and warehouse managers to • New stakeholder adaptability resistance can be overcome effectively. with senior management, others by better planning. know at once when an item reaches reorder point. With help through training and consultation, For example, in future, instead of an individual server Preventative action can then be taken against stock- members from every stakeholder group have • Retain top leadership support at each procurement office, a central server should be outs, ensuring constant availability of items, sourced overcome their resistance to change. This process Implementation of the new system was delayed by used with proxy server capabilities. This would have at an optimum price. fosters a new adaptability which has the potential frequent changes in leadership during the process, reduced the cost of implementation, enabling the to extend beyond the procurement function and and the absence of a sufficiently strong mandate whole system to be developed once and replicated • Cost and efficiency savings benefit the wider organization. People are more from Indian Railways’ top management. Successive across all organizational processes in a single platform. Automated tender solicitations dramatically cut open to new approaches, and readier to question new leaders didn’t fully appreciate the benefits of paperwork, and as most day-to-day functions are whether ways of working could be made more the electronic system, and so were risk-averse. As a Despite these lessons, the benefits to Indian Railways of carried out by the e-procurement system, the costs efficient. “Electronic procurement has enhanced result, non-cooperation among stakeholders emerged, switching to electronic procurement will continue to be of Indian Railways procurement function have been transparency and competitiveness in the tendering there was no time-bound implementation plan and felt by Indian rail passengers – and taxpayers – for many reduced by an estimated US $1 million per year (one process,” reports one supplier. “This will be one of the project sometimes lacked adequate resources. years to come. percent of total procurement value). The system also the best websites for e-procurement in India.” The phased implementation process revealed starkly reduces the timeframe of the procurement cycle, resulting in improved efficiency and logistics savings. The 300,000 electronic tenders carried out so far RE S OU RCE S : have been more secure and ethical than was previously possible. Indian Railways e-procurement portal: http://www.ireps.gov.in LESSONS LEARNED Inevitably in such a comprehensive process, valuable understand stakeholders’ responses to the prospect The new system enables procurement lessons emerged which could have made procedures of change. Levels of consultation, awareness-raising officers to prioritize needs and react smoother. Several will be useful as ongoing refinements and training can then be tailored to meet stakeholder to market changes, resolving difficulties to the system are made. needs. With an exciting new system to implement, it’s in ensuring essential items are easy to underestimate reservations among staff and constantly available. • Assess stakeholders’ attitudes to change suppliers using existing local systems. This can extend It’s worth taking time before such a process begins to to other departments such as finance and mechanics, 76 77 TOP 15 PR OVI D I N G OPTI MA L HI G H- CO ST MEDICAL TREATMENT Web-based solutions in Uruguay Author: Mauro Labello, Public Accountant ‘ The system has allowed new bidders to compete Organization: National Resources Fund (Government) Theme: Managing procurement systems Country: Uruguay to supply treatments previously restricted to one or few competitors ‘ SU MMARY Uruguay’s system for procuring Uruguay’s former procurement system for high-cost medical treatments allowed inconsistencies high-cost medical treatment defines that were making it impossible to manage. Different doctors used different criteria for prescribing acceptable healthcare service levels, authorizes treatment for individual treatment, and with ever-increasing numbers of patients and high-cost therapies, the system patients, enables negotiation with became too unpredictable to be sustainable. A more efficient, structured system was needed. suppliers, and allows data analysis for effective policymaking. Taking advantage of new web-based technology, Uruguay’s government high-cost treatment insurer, the National Resources Fund (FNR), created a new system based on cross-cutting agreements between patient-related stakeholders, forming a ‘social network’ among patients, the FNR, healthcare providers and medical suppliers. The system defines acceptable healthcare service levels, authorizes high-cost treatment for individual patients, enables effective negotiation with suppliers, and allows data analysis for effective policymaking. The results are significant cost reductions and better treatment for patients. 78 79 C H A L LE N G E stock shortages or breaks in the ‘cold chain’ (the • Authorization process and individual prescription temperature controlled supply chain, for treatments auditing In 2005, the provision of high-cost medical treatment guidelines and protocols. Logistically, the medical needing constant refrigeration). By making data and Through a web-based interface, FNR physicians in Uruguay was consolidated for the first time procurement system relied mainly on a price agreement resources readily available to physicians and healthcare authorize prescriptions written by the medical under a national policy. The FNR took on ultimate with established pharmaceutical traders, with individual managers, the system could contribute to overall professional treating a patient. The process is responsibility for financing treatments for diseases physicians determining when an approved treatment management capability, enabling reductions in waste initiated by the primary request for treatment such as certain cancers, rheumatoid arthritis and should be applied, including the patients’ dosage. through a centralized process of anticipating demand, financing by the medical professional. The FNR other immunological or chronic conditions. Such based on patients from a broad sample of institutions. doctors can ultimately require a second opinion treatments pose not only a financial challenge to However, this system allowed variations and inconsistencies from a specialized council. Authorization by FNR individuals and healthcare providers, but also a that made it increasingly hard to manage. In light of The resulting system is a web-based ‘social network’ physicians results in a cross-cutting electronic technical problem, given the different medical ever-increasing costs, numbers of doctors and patients, allowing cross-cutting collaboration between the FNR, system entry, which identifies a patient and creates criteria for treatment used by physicians. and types of high-cost therapy available, the approach healthcare providers, medical suppliers and patients an electronic schedule including dosage, physician became too unpredictable to be sustainable. It was themselves. The system defines the duties of every actor, controls and any supplementary medical interventions FNR pursued an overall goal of funding strictly essential to implement a more efficient, structured from pharmacies to health providers, and has three steps: associated with high-cost treatments. cost-effective therapies, prescribed under consistent, system. With the potential of new web technology, specifically designed guidelines. It monitored the such a system could to go beyond simply centralizing • Defining healthcare service levels • Risk-sharing negotiation with suppliers suitability of criteria for treatment used by physicians procurement policies, to create a new electronic To agree definitions of appropriate levels of healthcare, The growing demand for new and established from different health providers, by obtaining second approach altogether. a group of expert physicians within FNR analyzed treatments and their increasing cost make it vital medical opinions and with reference to well-publicized mainstream evidence around high-cost medical to optimize negotiations with vendors, as well as treatment in relation to economic concepts around to review treatments on an ongoing basis in light public health. They looked at how far it is appropriate of new evidence and financial issues. The system I N N O VAT IO N for the state to fund high-cost interventions, and in allows for agreements with suppliers to link price and what circumstances (such as a patient’s prognosis). effectiveness. Some agreements have been established The new system needed to take advantage of every process, reducing trade restrictions and entrance They defined ruling guidelines and protocols for in such a way that only doses beyond a certain efficiency possible to provide optimum value for money barriers (particularly in the distribution process). This treatment, including the medications to be universally precisely defined stage of treatment are financed by for Uruguay’s people. Its overarching aim was to build a would increase value for money for the state. It also financed by this process, and for what symptoms. the state. This way, the trader assumes the risk of better service for patients by improving data availability, needed to promote the use of generic medicines treatments which do not reduce the progression of an consolidating FNR as a leading procurer of high-cost (i.e. those no longer patented, therefore less illness in a short timeframe. For this approach to work, treatments, and improving logistical links between expensive) by compiling data about their availability the availability of information is essential, so suppliers of high-cost medication and the patients and effectiveness. It should prevent duplication of the system must be easily audited. needing treatment. resources by taking advantage of existing networks of pharmacies and hospital facilities. And it should drive • Setting core objectives further efficiencies by collecting high-quality clinical Before the system was designed, it was important data online, and presenting it in widely accessible to define key objectives. Any new system would forms. If healthcare providers could share information need to increase vendors’ access to the procurement about resources, they could reduce the risk of 80 81 RE S U LT S LE S S ONS LE ARNE D Even before it was fully deployed, the process quickly beyond this context, as it has been seen as a useful Several useful lessons emerged from this process of • Be open to other opportunities began to deliver results. It has allowed FNR to negotiate way of addressing operational matters within the creating a web-based network between high-cost The implementation of new technologies in Uruguay’s trade benefits with individual vendors and by individual procurement process, rather than simply managing healthcare stakeholders: health sector has generated a dramatic awakening pathology. These have meant significant cost reductions formal tenders. to the power of using web-based technology in a and better medical care. • Cultural issues matter cross-cutting way. Measures such as interoperability • Valuable data for treatment and cost evaluation Be prepared for the effort required for people used to standards and electronic signatures have allowed • Wider treatment options As well as centralizing procurement, the web-based working in a deeply paper-based culture to embrace different stakeholders across the country’s health The system has worked exceptionally well in tracking process has a vital data-sharing role which empowers web-based concepts and trust security measures such service to be brought into one system, resulting in medical results from the use of generic drugs, to the actors and stakeholders and facilitates business as electronic signatures. Users are now seeing the effective communication and leaps in efficiency. extent that it has actually changed opinions in the processes. Shared access to reliable data allows benefits, with time and with help from the cross- This approach could be used elsewhere in the medical community over the issue – for example, the procurement staff and vendors to devise innovative cutting structure of the new system, which provides health service. prescription of Beta Interferon for multiple sclerosis or deals and new ways of reaching goals together. It a lively forum for sharing ideas and outcomes. Imatinib for leukemia. It has allowed new bidders to also allows FNR physicians to trace patients’ progress, Thanks to FNR’s web-based initiative, Uruguay’s state compete to supply treatments which were previously both individually and epidemiologically. This helps • Invest in team building health system now has a tool to both promote and restricted to one or few competitors. The number of healthcare providers to give patients – and wider Team-building and the integration of different measure effectiveness and equitability. This is essential suppliers of new treatments has increased significantly society – an optimal approach to high-cost treatments professions are also necessary in such a major cross- in a sector which absorbs a substantial amount of and physicians now have more options for treatment, without destroying financial equilibrium in the state cutting project. Winning the approval of the medical public resources. as well as online access to their own patients’ health system. profession for a purely computer-based system took laboratory test results or to consolidated data. time and is still an important issue. The work of skilled Having appropriate data readily available is vital ICT technicians has been crucial in the creation of • Better cooperation from suppliers for informing highly sensitive decisions about what a user-friendly range of interfaces that meet users’ Through the electronic consolidation process, suppliers treatment is financed and what it is not. For example, needs and address their concerns. are now recognizing FNR as a significant channel to Tacrolimus, an immunosuppressive drug mainly used a relatively big market. The Fund’s technical approval after organ transplants, had chiefly been supplied is highly valued when pharmaceutical suppliers are by only one vendor. Able to meet all supply criteria, RE S OU RCE S : introducing new products to the medical community, this company had a perfect market share before and even more so when presenting audited medical 2010, despite prices more than twice those of its www.fnr.gub.uy results in the evaluation of several risk-sharing competitors. Under the new system, this suppliers’ The system has resulted agreements between vendors and the government. market share is just 26 percent, despite reduced in significant cost savings, Some aspects of the system required legal changes, prices, as the system has made patients and doctors including by changing the which were dealt with by legal experts. However, the aware of strong clinical results from alternative medical profession’s attitude risk-sharing contract model can also be replicated drug options. to many generic drugs. 82 83 TOP 15 HA R N E SSI N G PE OPLE POWER Grassroots procurement monitoring in the Philippines Author: Vivien Suerte-Cortez, of the Affiliated Network for Social Accountability ‘ The volunteers’ presence in East Asia and the Pacific (ANSA-EAP) Organization: Procurement Watch, Inc. (NGO) compelled suppliers to Theme: Open contracting Country: The Philippines deliver classroom chairs Community monitors carried out that met contract an inventory of existing school chairs to ensure procurement was specifications ‘ SU MMARY needs-based, then went on to inspect new chairs at a supplier’s factory before delivery. Although the Philippines’ legislation supports citizen involvement in procurement monitoring, civil society’s capacity to provide adequate oversight is constrained by a lack of resources to train enough staff and cover transport costs for on-site monitoring. In response, Procurement Watch, Inc. launched an innovative monitoring program called Bantay Eskuwela (‘school watch’), which trained parents and staff at 39 schools across the Philippines to monitor the procurement of furniture for their school. Because monitors were local, travel costs were minimized and the monitors had a strong interest in holding suppliers accountable for delivering goods that met the quality specifications in their contracts. As a result, consistently high-quality furniture was delivered to schools for the first time, and local stakeholders have an ongoing direct interest in raising transparency and accountability in public procurement. 84 85 CH A L LE N G E proved keen to be involved. More than 650 PTA benchmarking inventory of old classroom chairs in volunteers were recruited to monitor critical stages each pilot school to ensure that the procurement was The Philippines’ Government Procurement Reform makes This was a particular problem in the education sector, of the procurement cycle at the Department of needs-based. Before delivery, volunteers and education provision for civil society organizations to help ensure given its size and the national importance of good Education’s regional offices. officials carried out inspections at the manufacturer’s sound procurement practices and oversight mechanisms. schooling. The Department of Education receives the factory to check whether the new chairs being However civil society’s capacity to monitor government largest annual budget allocation of all government The process began with capacity-building training produced matched the technical specifications of procurement remains severely limited, due to a lack agencies and has the most stakeholders – from officials for the volunteers. A PWI workshop outlined the the contract. Volunteers found shortcomings such of financial and human resources. In the absence of to teachers, parents and children. When a 2008 Audit principles in the Philippines’ procurement reform as rough surfaces, protruding nails, cracked wood, greater support from national and international donors, Commission report stated that US $800,000-worth of legislation, giving volunteers the technical knowledge uneven writing tablets and patchy varnish. Based on the potential of grassroots organizations to step up school furniture delivered to government schools was they needed to observe the procurement process their findings, education officials rejected chairs that and expand the quality and coverage of procurement of substandard quality, Procurement Watch, Inc. (PWI) effectively. Topics included the Procurement Act’s failed to meet the required technical specifications. monitoring continues to be unrealized.The national civil knew it had to take action. rules and regulations, how to draft procurement Contractors were given the chance to rectify the society community has proved unable to cover the costs monitoring reports, the use of monitoring tools, how deficiencies before monitors returned. After the of training monitors and transporting them to places they to spot signs of malpractice, and the observers’ code chairs had passed the factory inspection, monitors need to reach for on-site monitoring. of conduct. Participants were keen to learn, and soon then counted and inspected them when they were overcame initial wariness about their ability to use the delivered to the schools. monitoring tools correctly. They were given specially I N N O VAT IO N developed Bantay Eskuwela operational guidelines and Although contractors initially resisted the factory ongoing mentoring by PWI staff after the workshops – inspections, they soon realized that immediate To overcome civil society’s lack of funds and trained PWI began by approaching the Philippines’ Department important in developing their confidence. compliance would be less inconvenient and costly staff, PWI devised a procurement oversight project based of Education, which has an official policy of collaboration than compliance adjustments made after delivery. directly in individual schools. This would eliminate the with civil society organizations in procurement • Bidding oversight If they delivered rejected chairs, these would now need for monitors to spend time and money travelling monitoring efforts. Once the two had signed a Based on an Education Department schedule for be returned by school principals, increasing their long distances. The project’s name, Bantay Eskuwela Memorandum of Understanding in 2009, their staff the procurement of classroom chairs with writing freight handling costs. (literally meaning ‘school watch’), was chosen by PWI jointly planned the monitoring exercise, with four tablets, community volunteers were invited to staff to reflect the initiative’s focus on schools and their key stages: observe several stages of the procurement process • Assessment of the procurement process immediate stakeholders – students, parents and teachers. – particularly the submission and opening of bids The final stage of the project measured procurement Instead of a top-down approach in monitoring, it took • Building effective monitoring teams from potential suppliers. With support from PWI, they efficiency relative to market prices and the time a bottom-up approach. Based on local monitors’ findings, Education officials and PWI together chose 39 wrote procurement monitoring reports which were required to complete the procurement cycle – from school principals can refuse deliveries of goods that pilot schools in six areas nationwide and began submitted to the national oversight bodies, including advertisement to payment of suppliers. PWI carried don’t meet agreed technical specifications in a supply recruiting volunteers for participatory monitoring the Bids and Awards Committee and the Office of out a market survey to compare the unit cost of the contract. As well as increasing the quality of furniture of the Education Department’s procurement of school the Ombudsman. procured chairs with the standard retail cost, then delivered to schools, the project aimed to stimulate furniture. PWI approached local organizations such used evaluation tools to measure the actual cost stakeholder interest in increasing overall transparency as Parent-Teacher Associations (PTAs) to involve them. • Monitoring contract implementation and time allocated for procuring the items against and accountability in public procurement. Given their direct interest in whether children had a Once a contract was awarded, the volunteers set values, so it could measure changes in operating functioning chair to sit on while learning, members monitored implementation, starting with a efficiency over time. Procurement and transaction 86 87 documents were examined to plot whether the The assessment was presented to the Department of LE S S ONS LE ARNE D Department of Education was meeting guidelines Education to help it enhance its systems before the prescribed by Philippine procurement legislation. next procurement cycle. Although the Bantay Eskuwela procurement monitoring • Secure early buy-in throughout a government influenced contractors’ and government behavior agency favorably, the process revealed significant lessons for Support throughout a government agency is needed R E S U LT S the future: for the project to be sustainable. Although buy-in can be easily secured at the central office of a large The process showed the value of local monitoring. Chairs The process also uncovered irregularities such as • Keep politics separate bureaucracy, pockets of resistance can remain at the with a clear increase in quality were delivered to each missing signatures of accountable procurement Grassroots monitoring activities may be used for periphery. To overcome such resistance, PWI had school within the prescribed timelines. The volunteers’ officers in the transaction records. political purposes, for example, if PTA officers are to show copies of the agreement signed with the presence during the manufacturing and delivery stages also politicians. They may use a project to further Department of Education. An important lesson was compelled the contractors to deliver chairs that met the • Creation of a sustainable monitoring force their political ambitions, which has a negative impact that efforts should be made to include regional staff technical specifications stated in the contract. The use of volunteer monitors who live near a on how other stakeholders perceive it. In one area, early on, rather than when the project is rolling out. school proved effective and sustainable. This cuts the PTA Federation President was the deputy mayor. This enables them to realize they are stakeholders too. • Consistently good-quality furniture delivered transportation costs and increases monitors’ stake in During the volunteer mobilization and orientation, PTA monitors recommended that several batches the process (compared to monitors from organizations he sent out a memorandum requiring most town-hall PWI has future plans to extend the local-volunteer of chairs be rejected by education officials, due to based in the capital, Manila). “Even if I don’t have staff to attend. This resulted in Bantay Eskuwela monitoring approach to cover other government suppliers’ failure to meet the technical specifications money, I can give my time to Bantay Eskuwela. We becoming identified as a political project, rather than agencies, such as the Department of Public Works in their contract. As a result, quality improved. In one can’t count on the government to do everything. an objective and unbiased activity for the education and Highways. It also encourages other organizations school, after effective factory monitoring, only four It doesn’t have enough money or people,” says sector. Although corrected eventually, this had a to adopt the Bantay Eskuwela approach. The model is out of 500 delivered chairs were rejected. The damage Emmanuel. “We have to help – not just criticize.” negative impact on volunteer retention compared to easily adaptable and can be applied in many different had been caused during transport, and was repaired The process was so successful that two further other pilot areas. contexts and locations. satisfactorily on the spot. Bantay Eskuwela organizations were independently formed by PTA members themselves. • Cost and efficiency savings RE S OU RCE S : With monitors overseeing the bidding process, suppliers became more competitive. “Contractors For a video of the story, visit: http://ansa-global.net/movies/31 used to bid high,” says PTA monitor Emmanuel Villegas. “Since we started monitoring, bid amounts went down by about a third.” After the whole process, PWI carried out its assessment of Stakeholders including parents, teachers and pupils took part in post- procurement cost efficiency, highlighting further delivery inspections of the new classroom chairs. “In all these years, room for improvement. Procurement timelines were thanks to the volunteer monitors, this is the first time I have actually followed, but inflated cost estimates for the school received good quality chairs,” said one school principal. “The surfaces furniture led to an aggregate procurement inefficiency are not rough and there are no protruding nails.” in the six pilot areas of more than US $236,000. 88 89 KEY L E S S ON S F RO M T H E C H A L LE NG E W I NN E R S Good procurement has a ripple effect experience before it began creating its own electronic auction system. • Investment in procurement often repays more than expected returns. Many winning entries show that • Even if things are working well, don’t stop looking good procurement has benefits that spread beyond for opportunities to improve. Ireland was a leader in Despite the rich diversity of all these winning solutions shows, stakeholders at all levels are important – from e-procurement, but realized it could do even better if the immediate procurement function. In Uruguay, – both in terms of context, geography and innovative the very top management to system users. And it found a way to analyze the procurement market. for example, physicians are now far more accepting approach – several overarching lessons emerge. Each is of the Philippines case highlights the importance of • If something isn’t working, take a new approach. of more affordable generic drugs in high-cost continuing importance in the ongoing drive to increase achieving buy-in not just at headquarters but at an South Sudan only began to build procurement medical treatments. integrity and efficiency in procurement, and will help organization’s periphery too. capacity when it switched from procurement agencies • Improvements in procurement often have unintended make future innovations easier to design and implement. • Effective communication about the reasons for to on-the-job training for staff working with individual benefits. Thanks to the innovations in Slovakia, your innovation – as well as how it will work and consultants. data-based investigative journalism has been given Harness the power of ICT impact stakeholders – is vital for its acceptance and a boost and there is higher awareness of public • As so many of these case stories show, tailor-made ICT sustainable success. rights to freedom of information. In Trinidad and programs offer endless flexibility and can be built or • Listening is as important as explaining. Consult with stakeholders to hear both their concerns and Tobago, suppliers who embraced email in order to Transparency: The foundation-stone of adapted to meet your exact needs. suggestions. This can affect a system’s design and use Petrotrin’s electronic procurement system are now strong procurement • Be creative. Rather than asking what existing IT enjoying the wider benefits of the internet. solutions can do, think what would be your best-case make the difference between failure and success. Underpinning all the stories and lessons from • Smart procurement can leave a lasting legacy. the Procurement Innovation Challenge is one vital scenario – then tailor IT to deliver it for you. In Ecuador, suppliers requested reduced warranty Although O trade helped communities enter the factor: transparency. If systems are transparent, • Make use of open-source technology – this keeps requirements, which resulted in supportive vendors supply chain for a particular project, local people corruption or inefficiency cannot hide within them. costs down and makes innovation affordable even and lower prices. are now using their skills to serve other customers. So innovation in procurement should always when resources are limited. The stories from Lithuania • Allow enough time and resources for the cultural Assam’s agricultural revolution – the result of changes be made with increased transparency as the and Nigeria (among others) are good examples. changes that can accompany new ways of working. in pump-set procurement – means the state is now a ultimate goal. • Even standard desktop packages are full of unexplored This is especially so if new procedures are very net exporter of rice. And by building its procurement potential, as the Petrotrin case proves. different (e.g. from paper to electronic processes) function, Liberia is rebuilding its entire war-torn As the winning entry from Nigeria shows, if • Although IT offers many opportunities, there are or involve shifts in responsibility or perceived power infrastructure. you can challenge a culture of secrecy around accompanying challenges. The fast pace of change (e.g. a centralizing process or one that empowers is exciting, but as Korea found when developing communities, such as the pump-sets procured by procurement, train people in open contract Keep innovating monitoring and make their findings widely its fingerprint recognition system, it takes ongoing farmers in Assam). • Be aware that some innovations might introduce • All these entries show that both the procurement accessible, you can introduce transparency to vigilance to keep up. a whole new set of stakeholders. In Nigeria, the world itself and the wider business context are situations where it has never previously existed. drive for procurement monitoring by members of dynamic and will constantly keep changing. So it’s And if greater transparency is achieved, social Win stakeholder buy-in from the start civil society creates a cadre of citizens with expert important that procurement adapts to these changes justice and value for money will follow, both for • Several entries emphasized the importance of having too and that you keep examining procurement procurement knowledge. Improvements to the system organizations and the people and communities stakeholder buy-in from the outset – or wished with operations to find new ways of improving. are successful because they take this new group they serve. hindsight that they had obtained it earlier in the • This doesn’t mean you need to reinvent the wheel. into account. process (e.g. Slovakia). As the Indian Railways example Paraguay was smart enough to draw on Brazil’s 90