Procurement

The World Bank Board of Directors received a new Procurement Policy on July 23. This important new policy describes how borrowing countries must execute their tender processes. It includes stipulations regarding transparency, publication, economic and environmental sustainability, life-cycle cost, and price-quality considerations.

i-love-procurement2Perhaps the most important element of the new Procurement Policy is the vision, or guiding principle. It states: “Procurement in Bank operations supports clients
to achieve value for money with integrity in delivering sustainable development.”

Value for money

One element the Dutch government has paid much attention to is value for money, which means a number of things. First, it means procured goods, services, and works should be of high quality. The Dutch government believes it does not make economic sense to procure something that is cheaper and of sub-par quality only to replace it quickly. This means quality will get more attention and weight in a bid evaluation than currently is the case.

Second, it means that life-cycle cost will play a more important role in procurement. It is no longer just about the price tag of, say, a million light bulbs, but also about the cost of operating and maintaining those light bulbs over the next 10 years.

This brings us to the point of sustainable development. The World Bank uses a broad definition of the term “sustainable development.” It can refer to economic sustainability, social sustainability, and environmental sustainability. These aspects will be addressed in the Project Appraisal Document (PAD), but the World Bank has decided to leave it up to the borrowing countries to determine the extent of the sustainability criteria within procurement.

Other special topics

The revised procurement policy is designed to be less rigid while incorporating more common sense. In the words of the policy, it is designed to “apply tailored, fit for purpose procurement approaches to any operational circumstance.”

Another topic is that of prior review. To date, the view was that prior review, in which the World Bank needs to submit a “no objection” to approve the selection of a vendor by the borrowing country, should be applied more or less randomly. The new policy chooses to strategically target the “high risk, high value” contracts in order to “avoid diverting valuable staff time into low-value-added activities.”

Going forward, the World Bank will play a more important role in contract management, and will be more involved in engaging suppliers in strategic markets and sectors. This will, for instance, include competitive dialogue to increase vendor participation and overall contract performance.

Lastly, the World Bank is cautiously exploring the issue of a proper complaints mechanism. As a bank, it continues to argue that a contract is between the borrower and its vendor, and that the World Bank is a third party. However, it recognizes that it is, at the least, an interested third party. The bank is therefore exploring ideas to expand its complaints mechanism, for instance, by offering mediation, dispute review boards, or, as the Netherlands advocates, an ombudsman.

Consultations

With the draft Procurement Policy approved by the Board, the procurement team is authorized to take it to interested governments and companies for consultations. Consultations with the Netherlands will be held in the coming months at a yet-to-be-determined location. Those organizations that have been involved in the past will be invited to provide input during this session.

Additionally, feedback can be provided online The Netherlands embassy and Ministry of Foreign Affairs are closely involved with the Procurement Review.