The African Development Bank has decided to undertake a comprehensive and detailed review of its procurement policy to ensure that it remains in tune with the changing world situation, particularly in Africa. The review is expected to be transformational - a 1% reduction in procurement costs on the continent would represent an annual savings of approximately US $3 billion, money that could be invested elsewhere. The Bank is inviting the views of stakeholders, partners and civil society to take part in the process. An extensive consultation process, kicking off on March 10, 2014 in South Africa, will inform the procurement policy review, and will include both online and face-to-face exchanges, as well as an online survey.
Vinay Sharma, Director of the AfDB's Procurement and Fiduciary Services Department, explains the importance of such a review at this time, and why the African Development Bank has decided to take the lead.
How did the Bank's procurement review process come about and what are the timelines?
The operations of the Bank, largely through investment lending to countries, is executed through contracts that are awarded to suppliers, service providers, contractors and consultants. The procurement policy of the African Development Bank, like that of most other MDBs, has been in existence for many decades. Over the years, as the country contexts have changed and as the complexity of what we procure has increased the general feeling has been that the procurement policy has not kept pace with these developments. Changes in the procurement policy over the years have been incremental and more needs to be done to help the projects and the countries achieve effectiveness and value-for-money. These concerns have been raised by our stakeholders and also discussed at the level of heads of procurement of the Multilateral Development Banks (MDBs) and it was felt that a review of the procurement policy was overdue. The World Bank started a review in 2012 and the process is ongoing. We felt, however, that we also needed to do something similar, particularly on account of the specific challenges of African countries. We started this process late last year and expect to have the major work completed in about seven to eight months' time. There would still be some work that would remain including developing some additional subsidiary documents, but we expect that by the third quarter of this year (September or October 2014), we should be substantially completed. If things go according to plan, we hope to be able to implement the new procurement policy to the new projects of the Bank by early next year.
You're launching a consultation process in South Africa, and taking these consultations to many countries in Africa, and elsewhere. What will these consultations bring and what will they entail?
A procurement policy cannot function in a vacuum. It has to be informed by the needs of our various stakeholders - the line ministries, the borrowing entities, the Ministries of Finance, the private sector, the donor community, civil society and the general public. We are formally launching the consultation process with South Africa in Pretoria on Monday, March 10. That is going to be followed by many more consultations in Africa and also with some non-Regional Member Countries - the donor countries, who also have a great stake in making sure that the procurement process is fair, transparent and rigorous. Whenever we are doing consultations in Africa, we are also inviting the donor communities to get their points of view. Some non-Regional Member Countries have expressed interest in hosting these consultations, which will be done either virtually or in person. We expect that the consultation process will be largely completed by end-of-April this year. We hope that the results of the consultations will feed into the procurement policy.
There is also an online aspect of these consultations as well.
That is true. A separate web page that gives the details of the work-in-progress has been created and will outline what exactly the procurement policy and procedures review will entail. It also features an online questionnaire, which will hope will be accessed by a very large number of people. The questionnaire will be open until April 30, 2014.
What kind of impact will this review have on the work of the other multilateral development banks?
The African Development Bank has at every stage engaged with the MDBs and taken their views and comments because they are very important stakeholders for us. We often do projects together. MDBs try as much as possible to have policies that are similar so that the transaction costs to the borrowers are lower. Harmonization of procurement policies and procedures has been a very successful initiative for the MDBs and we do hope that we would be able to take it forward. So far, the MDBs have been very cooperative and enthusiastic towards our work as they have been to the work of the World Bank.
What is the potential cost-savings that could result from this streamlining and harmonizing of the procurement process?
The primary objective of this review is to make the procurement by the African Development Bank, and hopefully, that of the partner countries more effective. So it is more about development effectiveness, to ensure procurement plays a more strategic role in terms of bringing efficiency, economy, effectiveness and equity through value-for-money; bringing flexibility in terms of fit-for-purpose procurement methods; bringing more effective results-based procurement. We expect this to bring about a transformational change, not only in how we do business, but also in how the countries themselves do their own public procurement. We hope this will actually catalyze the countries to review and examine very carefully their own procurement processes. We are hoping that the fiduciary standards will actually increase and that greater flexibility will be brought in so that the effectiveness of public expenditure goes up. It must be remembered that almost 20% of a country's GDP is spent through public procurement. Even a 1% reduction of this expenditure through more effective public procurement means huge savings and benefits to the countries. The direct and indirect benefits will be substantially more as socio-economic considerations are mainstreamed into procurement.
For some African countries, procurement represents a much higher percentage of the GDP. According to figures provided by the OECD, in most countries public procurement does represent double-digit expenditure of the GDP. In some countries, where a lot of services are delivered through the State, the percentage is much higher and this includes many countries in Africa. In any case, public procurement represents a very large percentage - often more than 50% - of a country's national budget, so we're talking about public procurement playing a catalytic role in helping these countries achieve their strategic objectives.
Would you say that the AfDB is uniquely positioned to lead in this review process?
The African continent has countries across the spectrum of development, from middle-income to low-income to fragile countries. As an African institution, we believe that we have the experience and the expertise to do this review. We hope that the work that we are doing is of high standard and that the review helps not only the Bank, but the countries that we operate in.
What is the format of the in-person consultations?
During the consultations, we shall make a presentation that explains the context, the imperatives and the challenges for the review. We have eight questions that we want the participants to answer. The consultations are a transparent exercise and the results of the process will be on our website. In addition to that, as I said, there is an online questionnaire that would allow various stakeholders anywhere in the world to give their comments. With this, we hope that we would get a large volume of information that will help us craft the procurement policy.
It's a huge undertaking for the end of this year.
By end of June, we are hoping that we shall be able to craft a policy, informed by the consultations, and based on very sound principles. This will then be put up to the Board committees for their review and approval. We also have to work on secondary documents like manuals, the toolkit, and the strategy of implementation of the policy. We want to do that before the end of the third quarter of this year, so that we are able to start trainings to staff and projects. The implementation should start by early next year. This is an extremely tight deadline. We are aware of this, but believe that we can achieve this.
In terms of the old policy, how that be phased out?
It's not going to be phased out overnight because there are projects that have already been signed based on the existing policy. So depending on the final shape that the new policy takes, and depending on the appetite and the maturity or the level of progress of the projects, one of the options is to propose to the project authorities to choose the new policy if they wish for the subsequent contracts. If that happens, this would mean that the old policy is going to be phased out fairly quickly. In any case, the old policy and the new policy will work together for some more time until the new policy takes over completely.
