Critical Issues in Procurement
in
Europe and Central Asia
World Bank Perspective
Devesh C. Mishra
Regional Procurement Manager
Europe and Central Asia Region/The World Bank
Seventh Regional Public Procurement Forum
Tbilisi: May 16-19, 2011
Introduction
Strengthening country procurement systems is core to
improving the development effectiveness of public expenditure
Topics covered:
Critical issues in public procurement
Latest developments in Use of Country System,
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Topics Covered
Dialogue with EC on Procurement Harmonization
Progress on public procurement in client countries,
Procurement issues in Bank- funded projects and
Issues and way forward
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Critical Issues in Public Procurement
Transparency of budget and linkage with procurement planning
Coverage of public procurement and exclusions
Capacity and independence of institutions on public procurement
Civil service reform, remuneration for public procurement officials
Rules for Conflict of Interest for public officials
Fraud and Corruption clauses in public procurement laws and tender
documents
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Bank’s Experience in Europe and Central Asia on
Use of Country System
Several countries in pilot for all the regions in the Bank did not meet
minimum requirements and no specific mitigating measures were
agreed with the government. The review process is on.
This exercise has established basis for continued dialogue, capacity
development initiatives and harmonization with other donors
In Europe and Central Asia, UCS pilot started with Turkey as “pilot”
of pilots in 2008. Turkey opted out due to review in legislation based
on EC requirements
Extensive work done for Stage I and II of the assessment on Poland
and FYR Macedonia. Need for further dialogue.
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Bank’s Experience in Europe and Central Asia on
Use of Country System
In general Bank-wide as also in ECA need for improvement
seen in several areas.
Weak complaint handling mechanisms
Lack of full range of model bidding documents , general
conditions of contracts and user’s guide
Unclear dispute resolution procedures
Procurement is not seen as a profession and need for civil
service reforms
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Recent Developments in World Bank’s (WB)
Dialogue with European Commission (EC)
Discussions held in the context of
UCS for Poland and FYR Macedonia
EU directives apply above defined
thresholds
Review of EC Directives planned
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Recent Developments in World Bank’s (WB)
Dialogue with European Commission (EC)
Issues where differences between the World
Bank and EC continues relates to:
• Eligibility: In WB all countries are eligible
• Use of procurement methods (Open Competitive
Bidding vs. Restricted Procedure)
• Evaluation of Bids
• WB: Award to the lowest evaluated substantially
responsive bidder, no merit point evaluation, bid
evaluation by excluding import duty and taxes.
• EU: Use of price and non-price criteria in evaluation,
bid evaluation by including all taxes and duties.
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Recent Developments In WB & EC Dialogue
Procurement Procedures for Consulting Services:
• WB: Separate methods for consulting services.
• EU: Three methods (Open, Restricted and Negotiated
Procedures) apply
Two-Stage Bidding vs. Competitive Dialogue: These
are similar but different in approach.
Negotiated Procedure:
• WB: Negotiations are not permitted, except under certain
circumstances
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Central and Eastern European Countries
WB, EBRD, EIB, EC supported the public
procurement reform through technical
assistance, grants and several diagnostic studies
• Discussions held with Public Procurement Officials in May
to August 2010 on UCS for Poland
• Issues in Poland include: (i) lack of rules for participation
of State- Owned Enterprises(SOEs);(ii) use of merit point
system in bid evaluation; (iii) lack of first level of complaint
review mechanism;(iv) lack of standard bidding document;
(v) lack of provisions addressing fraud, corruption, conflict
of interest, unethical behavior etc.
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South Eastern European Countries / Balkans
EU Accession is a very important incentive for all of these countries
to improve their legislation and align with EC Directives. Even
though there are several improvements, many challenges still remain.
WB, EBRD, EIB, EC supported the public procurement reform
through technical assistance, grants and several diagnostic studies.
Albania: First country in the region to carry out OECD-DAC
benchmarking in 2006 and has implemented several procurement
reforms including on e-procurement. Law amended to prevent
overuse of direct contracting.
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South Eastern European Countries / Balkans
Kosovo: Bank is conducting Country Fiduciary
Assessment in May 2011. OECD-SIGMA involved in
assessment.
FYR Macedonia: PPL aligned with EC Directives.
One of the Countries as pilot for Use of Country
System. Issues relate to:(i) Use of General Conditions
of Contract; (ii) provisions on fraud and corruption;
(iii) registration and licensing requirements
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Turkey
Current PPL enacted in 2002.The Public Procurement Law
No.4734(PPL) establishes the principles and procurement
procedure to be applied by all public entities and institutions
governed by public law or under public control or using
public funds. Allows use of IFI’s procurement procedures.
Moving towards compliance with EU Directives
Debarment provisions for national firms: Firms debarred by
government authorities and appearing on PPL web-site may
not appear on IFI’s list and therefore eligible for participation
in Bank-funded projects.
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Ukraine, Moldova, Belarus
Ukraine: Bank and EC involved in providing advice. Public procurement essentially
privatized during 2005-2008. New Framework law adopted in June 2010. Situation not
stable. Negative campaign on PPL by vested interest who do not support improvements in
PPL. Existing PPL does not provide legal basis for the implementation of e-procurement,
which is one of the requirements for enhancing transparency
Moldova: CPAR 2010 done using OECD-DAC benchmarking
Belarus: Procurement was regulated by a Presidential decree and other decrees and
resolution on supplies of goods for state needs. The procurement was centralized and
ministries were required to procure through central enterprises. Recently adopted a PPL
which is prepared as part of trade agreement among Belarus, Russia and Kazakhstan
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Russian Federation
WB, EBRD, EIB, EC supported the public procurement reform through
technical assistance, grants and several diagnostic studies Current public
procurement law dated 2005
While there are several improvements in the public procurement area, there
are many deficiencies and negative aspects of the laws yet to be addressed
Recently a “Department on Federal contact system development” created.
This Department will be responsible for state procurement system, further
improvement of FZ94 (on state procurement) or development of its new
version, etc. Lots of public debates and consultations in progress to amend
the law.
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Caucasus
Bank has recently carried out CPAR for all the three countries using OECD-DAC Benchmarking tool. In
active dialogue with the government to implement CPAR recommendations. More required on
enforcement of legislation
Azerbaijan: has an advanced Public Procurement Law. Action initiated on e-procurement and on
complaints review. Lot of improvements in handling complaint. Last year business outreach was done
by PPA in collaboration with Bank.
Armenia: a new PPL of adopted in 2010( effective January 2011). e-Tendering system being developed.
Procurement activities decentralized.SPA converted to Procurement Support Center. Procurement
appeals council established, In December 2010 Armenia became forty-second WTO GPA member.
In Georgia capacity of State Procurement Agency strengthened. More transparency and eprocurement introduced. Several innovative provisions in the current practices
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Central Asian Countries
Weak capacity and widespread implementation
issues exist
Current public procurement laws dated late 2000s
and mostly in line with internationally accepted
standards, but still some countries do not have any
public procurement law at all. Weak capacity and
widespread implementation issues exist
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Central Asian Countries
Kazakhstan: New Public Procurement Law introduced in on July 21, 2007 and put into force on
January 1, 2008 with amendments on February 18, 2011. Implementation issues on use of direct
contracting and complaints review body. New developments on e-procurement
Tajikistan: Current PPL of March 2006 more aligned with international standards. Law provides
for decentralized procurement, PPA still performs the purchase function for most of the
government agencies. PPA was reestablished in May 2010 under the Presidential administration
Turkmenistan: No PPL. Procedure on holding tenders for selection of suppliers or contractors
issued by resolution of the President on March 05, 2002.
Kyrgyz Republic: The current/applicable PPL dated July 2008 is substantially in line with
international standards. Procuring entities at governmental level poorly organized, internal and
external controls weak. New e-procurement initiatives
Uzbekistan: There is a draft PPL. Improvement in dialogue with the government. Multiple bodies
on public procurement control, issues of import contract, Country Fiduciary Assessment was
done in 2010.
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Procurement Issues in Bank Portfolio in ECA
Low disbursement in certain countries due to lack of
project preparation: need for procurement readiness
Size of contracts (local vs. international firms)
Cases of misprocurement increasing
Treatment of abnormally low bid prices
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Procurement Issues in Bank Portfolio in ECA
Situations of Conflict of Interest
Country Fiduciary reviews examples
Monitoring tools like SEPA
e- procurement initiatives
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Issues and way forward
How we as donor and Bank in particular
are helping the countries to improve public
procurement system and provide value for
money in donor- funded operations ?
Is there an evidence that in the last decade
we have made a difference( towards better
or worse) in ECA client countries ( from
Poland to Kazakhstan)
Are we taking into account ground
realities and need for differentiated
approach based on client needs and their
established practices
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Issues and way forward
How different funding agencies and client
countries work together to improve the
public procurement system in ECA region
? Is there a duplication of efforts?
Need to share knowledge on a continuous
basis, all for the benefit of the Client
counties.
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MANY THANKS FOR YOUR ATTENTION
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