ADB’s Project Cycle:
Managing Procurement Risks
and Governance
What are the implications of
a risky procurement
environment?
Value of Public Procurement
 Public procurement can cost:
 Around 8-20% of GDP
 As high as 30% of total public expenditure
 Leakages through fraud, abuse and waste can be 20%
to 70% of spending (if we estimate that 15% of GDP is
spent on public procurement)

Implication: conservative estimate of 3% of GDP is lost
through public procurement corruption and waste
(Source : WB and OECD)
Estimated Cost Implications for ADB
Country
2009 GDP
(Mn US$)*
Est. Public Procurement
(Mn US$) (15% of GDP)
Est. loss to corruption /
waste (Mn USD) (20% of
Procurement Budget)
14,177
2,126
425 Million
89,360
13,404
2.7 Billion
1,259
189
37 Million
1,310,170
196,525
39 Billion
1,473
221
44 Million
12,531
1,880
376 Million
161,990
24,298
4.8 Billion
41,979
6,297
1.2 Billion
TOTAL
* Based on World Bank/ADB figures
48 Billion
Net effect:
Unfinished and
substandard projects
Procurement
corruption and waste
undermines aid
effectiveness
PHOTO CREDITS: Philippine Center for Investigative Journalism
Managing procurement
risks in ADB’s project cycle:
10 Point Action Plan
Overview: Past Procurement
Governance in ADB’s Project Cycle

Generally no in-depth procurement involvement during project
preparation, as approach of ADB’s is basically reactive



Country level procurement assessments seldom conducted
Country risk assessments are rarely updated
Procurement method and review thresholds are not linked to country
risks

Most CPSs do not have country action plans to mitigate risks
Overview: Past Procurement Governance
in ADB’s Project Cycle

Procurement Capacity Assessments completed by project
preparation consultants, and viewed by procurement specialist
during the review of entire RRP (Report & Recommendation of
the President)

Procurement Capacity Assessments tend to be accomplished
perfunctorily
Overview: Past Procurement Governance
in ADB’s Project Cycle

Desk review of procurement arrangements and Procurement
Plan

Procurement Plans and review thresholds are rarely linked with
actual country and project risk assessments

Since prior and post review thresholds are pre-determined and
based on contract value rather than risk, these are not sensitive
to the actual capacity of executing agency
10 Point Action Plan
1
New Procurement Risk Assessments
2
New ICB Thresholds
3
New Prior Review Limits
4
New Procurement Committee Level and Decision
Authorities
Project Procurement Classification at Concept
Clearance
Launch Procurement Review System or PRS
5
6
8
Agree Master Bid Document(s) during Project
Preparation
New Streamlined PC Process
9
New Procurement Approval Form
7
10
End-to-end Consulting Services Process Review
ADB’s Improved Procurement Governance and
Risk Management and Project Implementation
Efficiency – Action Plan
1. Country Partnership
Strategy (CPS)
1
Mid-term
review of
procurement
outcomes
6.
Evaluation
5. Implementation
Delegated
reviews for
low risk
projects
2. Concept
6
2
5
3
4
4. Loan Negotiation&
Board Approval
More responsive
Procurement
Plans
Country level risk
assessment with
linked thresholds
3. Preparation
Proactive
participation
of OSFMD for
complex
projects
Sector
Procurement
Capacity
Assessment
Improved Procurement Governance at
CPS Stage

CPS will be informed by robust multi-level
procurement risk assessments

There will be country specific thresholds for ICB
based on market capacity . Reviews within ADB
and the level at which they occur will be determined
by the risk level
Concept of Risk-Based Procurement
Approach at National & Project Levels
Level
When
Objectives
Step 1: Risk
Assessment at
National Level
Step 2: Risk
Assessment at Project
Level
With CPS
Preparation
Project Processing
To consider
the country
systems &
procurement
capacity
To decide PC,
NCB and
Shopping
thresholds at
national level
Categorize Low or
High Risk
Low Risk: Delegation of
procurement decisions to
regional depts. with
thresholds, with proper
risk management
High Risk: OSFMD and
OGC’s active
engagement
Overview: Present Procurement
Governance in ADB’s Project Cycle
1. Country Partnership
Strategy (CPS)
1
6.
Evaluation
5. Implementation
Prior and
Post Reviews
2. Concept
6
2
5
3
4
Country Risk Assessment
& Management Plan
(including Procurement)
Procurement
Capacity
Assessment
3. Preparation
4. Loan Negotiation&
Board Approval
Finalization of
Procurement Plan –
with risk based
thresholds
Desk review
of Project
documents
(RRP & PP)
Improved Procurement Governance at
CPS Stage
Country Procurement Profile (CPP):


A consolidated platform that generates and presents
information on selected procurement-related indicators for
a country, focusing on priority sectors
Gathers data from various sources:
 National level procurement assessments – CPAR and OECD-


DAC BLI
Agency level risk assessments – Project-related Procurement
Capacity Assessments and mid-term assessments from earlier
projects
Interviews with local industries and CSOs

Matches policy achievements with actual practices
Improved Procurement Governance at
CPS Stage
Purpose:

Identify country and sector level procurement capacity
gaps that can inform sector road map and related
CPS processes

To frame procurement issues that, if addressed at
CPS stage, can improve project implementation

To facilitate informed dialogue on procurement issues
as part of setting overall country strategic priorities for
ADB interventions
Part 1
Part II
Part III
Indicator 9-Debarment
Mechanism
Indicator 8-External Audit
Indicator 7-Internal Audit and
Control
Indicator 6-Effectiveness
Indicator 5-Efficiency
Indicator 4-Transparency
Indicator 3-Procurement Market
and Operations
Indicator 2-Institutional
Framework
Indicator 1-Legal and Regulatory
Framework
Improved Procurement Governance at
CPS Stage
Example of Country Procurement Profile showing Written
Rules v. Actual Practices:
3.00
2.50
2.00
1.50
1.00
0.50
Written Rules
Procurement in Practice
Improved Procurement Governance at
Project Preparation Stage
Through enhanced agency procurement capacity
Assessments:
 Identify capacity, procedural and organizational constraints in






executing/implementing agency
Determine overall procurement risk
Consider procurement by regular line units of
executing/implementing agency (capacity strengthening extends
beyond project life)
Identify levels of reputational risks to ADB and DMC
Identify implementation risks – resources, structure and process
Leverage on or consider existing knowledge base, legislative
environment and processes
Agree on Action Plan to strengthen capacity and lessen risks
How ADB Assesses Risks at the
Project Level
Procurement
Capacity Dev’t
&
Risk Mitigating
Measures
Procurement
Plan
Procurement
Capacity
Assessment
Executing Agency
PREI
Improved Procurement Governance at
Project Preparation Stage
Regional departments will categorize procurement risk
for each project as “high risk” or “low risk”

High risk projects will require more upstream OSFMD
involvement on procurement reviews, plus risk mitigating
measures

For low risk projects, reviews and approval authority will
be delegated to regional departments, plus adequate risk
mitigating measures (Action 4)
Improved Procurement Governance
at Project Preparation Stage
Informed by the results of the assessments at the country,
sector and agency levels, a more responsive Procurement
Plan should identify:

Procurement/consulting methods and thresholds (Action 2)

Prior/Post review arrangements (Action 3)

Goods/Works/Services Packages and advertising dates

Efficient, economical and effective procurement packages

Agreement with the Government on Master Bid documents
(Action 7)
Improved Procurement Governance at
Implementation Stage

Review by Procurement Committee more streamlined with
parallel reviews to be conducted internally in ADB (Action 8)

Regular assessments of procurement processes and
documentation (for both executing agencies and ADB) will be
conducted to verify that the desired procurement objectives &
outcomes are being achieved

A central system to compile data on all procurement activities
(e.g. Procurement Review System PRS) - Action 9 follows
THANK YOU!
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Applying the Procurement Manuals at the Agency Level