Earlier this year, the Worldbank issued a new procurement strategy. After three years of negotiating on a strategy that had not been updated since 1970, it goes without saying that there are some significant changes…
The World Bank Team at the Netherlands Embassy has identified some of the most relevant changes:
• Tailored versus standardized procurement
With this review, the World Bank is moving away from a more standardized approach. In so doing, it will increasingly take into account the complexity of projects and the technical and administrative capacity of borrowing countries.
• Letting go of ‘lowest cost bidding’ principle (procurement for lowest price)
Previously, most World-Bank financed projects were based on the lowest cost bidding principle. This was not always beneficial for the quality and effectiveness of projects. The fact that the World Bank is letting go of the lowest cost bidding principle implies that there will be more recognition for concepts as ‘value for money’, ‘life cycle costs’ and other social and development-relevant factors.
The strategy allows for borrowing parties to devote extra attention to sustainability aspects. Sustainability is not automatically included in procurement procedures, since many borrowing countries are afraid that their companies will be disadvantaged vis-à-vis their (mostly Western) competitors.
• Alternative Procurement Arrangements (APA)
Alternative procurement arrangements can be used, as long as borrowing countries abide by demands pertaining to transparency and good governance. They could use the GPA, local arrangements, or arrangements designed by other IOs.
• Public Private Partnerships (PPP)
In the past, public private partnerships could only be set up through International Competitive Bidding. Upon recommendations coined by the private sector, the World Bank decided to loosen its PPP policies, so that it can deal with project development more pragmatically. In this vein, companies can now initiate PPPs through ‘unsollicited proposals’
• Procurement-related complaints
The World Bank is taking unprecedented responsibility to deal with procurement-related complaints. It recognizes its role as regulator and mediator in the procurement process, even if it is not a signatory to a contract.
• Assistance and tracking of tenders
The STEP (Systematic Tracking of Exchange in Procurement) system aims to give a better overview of World Bank projects around the world. The information on the STEP system equips both borrowing countries and the World Bank with a better oversight mechanism. The system should not only be more efficient and transparent; it should also contribute to the structural amelioration of borrowing countries’ procurement capacity.
• Involvement of the World Bank in the procurement process
The tailor-made approach advocated by the procurement review will call for an active World Bank. In this light, the World Bank plans to devote more capacity to supporting borrowing countries in developing and executing their procurement strategies.
• Capacity building
The World Bank is cognizant of the fact that the successful implementation and use of these possibilities is dependent of the borrowing countries’ capacity. The World Bank therefore emphasizes the importance of good technical assistance. On a practical level, the World Bank will found a Trustfund that will map and improve the procurement capacity of borrowing countries.
• China, India, and Saudi Arabia have expressed their concerns about the implications of the modernization of procurement rules. They fear that these rules will result in more expensive projects. They also foresee that the enhanced role of the World Bank that is promoted by this review will place a significant burden on World Bank staff.
• Ultimately, the extent to which the new possibilities can be used to its fullest will depend on the World Bank’s capacity. The World Bank acknowledges this, and indicates that it is willing to devote capacity and resources. At the same time, it relies on individual stakeholders when it comes to advice and financial support for specific sectors.
Factsheet written by the World Bank Liaison team.