UNIVERSIDAD NACIONAL DE COLOMBIA, ECONOMIC SCIENCE DEVELOPMENT RESEARCH CENTRE, BOGOTA, COLOMBIA

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1 UNIVERSIDAD NACIONAL DE COLOMBIA, ECONOMIC SCIENCE DEVELOPMENT RESEARCH CENTRE, BOGOTA, COLOMBIA SEMINAR - PUBLIC PROJECTS: CONTROL FOLLOW UP WITH CONTRACTORS John Brooks - ANJO Global Consulting Ltd, Canada August 19,

2 Public Procurement Impact on National Economies Categories of Program Procurement Risks Procurement Governance Strategies to Manage Specific Risks John Brooks - ANJO Global Consulting Ltd, Canada August 19,

3 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

4 RANK COUNTRY GDP PROC. % 1 EU $14,820,000,000, USA $14,290,000,000, (a) 29 COLOMBIA $ 250,00,000, (b) - OECD $400,138,000,000, Source; CIA Year Book 2008 and OECD Statistics 2008; (a) estimated; (b) Giraldo, R 2005 Policy and New Regulatory Framework. University of Warwick John Brooks - ANJO Global Consulting Ltd, Canada August 19,

5 Public procurement represents: Program support Wide range of goods, works and services Opportunities for domestic economic & social benefit Stimulate innovation International trade opportunities John Brooks - ANJO Global Consulting Ltd, Canada August 19,

6 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

7 The objective of government procurement contracting is to acquire goods and services and to carry out construction in a manner that enhances access, competition and fairness and results in best value or, if appropriate, the optimal balance of overall benefits to the Crown and the Canadian people. Source: Treasury Board of Canada Secretariat Contracting Policy - John Brooks - ANJO Global Consulting Ltd, Canada August 19,

8 Government contracting shall be conducted in a manner that will: Stand the test of public scrutiny in matters of prudence and probity, facilitate access, encourage competition, and reflect fairness in the spending of public funds; Ensure the pre-eminence of operational requirements; Source: Treasury Board of Canada Secretariat Contracting Policy - John Brooks - ANJO Global Consulting Ltd, Canada August 19,

9 Government contracting shall be conducted in a manner that will: Support long-term industrial and regional development and other appropriate national objectives, including aboriginal economic development; Comply with the government's obligations under the North American Free Trade Agreement, the World Trade Organization - Agreement on Government Procurement and the Agreement on Internal Trade. Source: Treasury Board of Canada Secretariat Contracting Policy - John Brooks - ANJO Global Consulting Ltd, Canada August 19,

10 LACK OF CAPACITY Governance, Organization, Human Resources, etc DEFICIENCY OF VALUES AND ETHICS Corruption, Fraud, Negligence ACTS OF GOD/FORCE MAJEURE Civil unrest, loss/damage from flooding, storms, etc John Brooks - ANJO Global Consulting Ltd, Canada August 19,

11 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

12 Legislative and Policy Environment International Obligations Regional & bilateral trade agreements Constitution; Financial Administration and Audit Act ; Corruption (Prevention) Act. ; Access to Information Act Financial Management Framework Financial Administration and Audit Act; Ministry of Finance Circulars Procurement Framework Policy on Public Sector, Procurement; Financial Administration and Audit Act; Financial Administration and Audit; Public sector Procurement Procedures; Contract General Act; Handbook of Public Sector Procurement Procedures Ministry/Agency/Public Enterprise Framework Annual Corporate Plans Internal Guidelines, Procedures, etc. Source: Adapted from Government of Jamaica: Handbook of Public Procurement Procedures Nov/08 John Brooks - ANJO Global Consulting Ltd, Canada August 19, 2009

13 Judiciary Parliament Cabinet Public account committee Anti Corruption Agency Auditor General Contractor General Procurement Policy Ministry of Finance Normative and Functional Responsibilities Internal Audit National Contracts Commission Procurement Implementation Procuring Entities (Ministries, Agencies, Public, Enterprises) Source: Adapted from Government of Jamaica: Handbook of Public Procurement Procedures Nov/08 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

14 Objective: to ensure the fairness, openness and transparency of government procurement Reports to the Minister of PWGSC Annual report of activities made to Parliament Source: PWGSC - John Brooks - ANJO Global Consulting Ltd, Canada August 19,

15 EXTERNAL FAIRNESS MONITOR Highly qualified procurement specialist Only on major/complex procurement/p3 programs Reports to Chief Risk Officer, PWGSC Provides independent oversight on PWGSC s actions Report on activities/findings available to public Source PWGSC - John Brooks - ANJO Global Consulting Ltd, Canada August 19,

16 PROCUREMENT OVERSIGHT/STAKEHOLDERS John Brooks ANJO Global Consulting Ltd, Canada August 19,

17 Expands access to supply markets Provides for greater transparency Increases confidence in government Increases efficiency Captures data for better management and results Involves non government stakeholders John Brooks - ANJO Global Consulting Ltd, Canada August 19,

18 1. Legislative and Regulatory Framework 2. Implementing Regulations & Documentation Source: OECD DAC Benchmarking Tool John Brooks - ANJO Global Consulting Ltd, Canada August 19,

19 3. Procurement integrated with governance 4. Normative/regulatory procurement body 5. Institutional Development Capacity Source; OECD DAC Benchmarking Tool John Brooks - ANJO Global Consulting Ltd, Canada August 19,

20 6. Operations and practices are efficient 7. The supply market for public procurement 8. Contract administration & dispute resolution Source; OECD DAC Benchmarking Tool John Brooks - ANJO Global Consulting Ltd, Canada August 19,

21 9. Effective Control and Audit Systems 10. Efficiency of Appeals Mechanism 11. Degree of Access to Information 12. Ethics & Anticorruption measures in place Source: OECD DAC Benchmarking Tool John Brooks - ANJO Global Consulting Ltd, Canada August 19,

22 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

23 Legislative framework, supported by regulations Institutional and administrative infrastructure; A review and accountability regime; A sanctions regime; Supported by adequate resources (human, financial, technological). John Brooks - ANJO Global Consulting Ltd, Canada August 19,

24 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

25 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

26 The abuse of entrusted power for private gain. Corruption can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs. Source: Transparency International Plain Language Guide July 2009 Corruption thrives in secrecy John Brooks - ANJO Global Consulting Ltd, Canada August 19,

27 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

28 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

29 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

30 ACTIVITIES Needs assessment RISKS Inadequate Political interference August 19, 2009 John Brooks - ANJO Global Consulting Ltd, Canada 30

31 ACTIVITY RISKS Planning Not conducted Restrictive delivery Non-optimal packaging Public/Private/Partnership John Brooks - ANJO Global Consulting Ltd, Canada August 19,

32 A cooperative venture between the public and private sectors, built on the expertise of each partner, that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards. Source: The Canadian Council for Public-Private Partnerships John Brooks - ANJO Global Consulting Ltd, Canada August 19,

33 John Brooks - ANJO Global Consulting Ltd, Canada August 19,

34 P3s offer cost efficiency over TPs A$4.9 billion P3 projects, cost over-run A$58 million A$4.5 billion TPs projects overrun A$673 million Source: Infrastructure Partnership Australia A report by the Allen Consulting Group - Performance of PPPs and Traditional Procurement in Australia - 30 November 2007 August 19, 2009 John Brooks - ANJO Global Consulting Ltd, Canada 34

35 ACTIVITY RISKS Budgeting Funds not available Costs underestimated John Brooks - ANJO Global Consulting Ltd, Canada August 19,

36 Source: Edwards, C (2009) Government Cost Overruns CATO Institute John Brooks - ANJO Global Consulting Ltd, Canada August 19,

37 ACTIVITIES Specifications RISKS Restrictive/biased Pricing basis Inappropriate Bid solicitation mode Restricted/Sole Source John Brooks - ANJO Global Consulting Ltd, Canada August 19,

38 An ACAN, openly published for 15 days, when Public Works and Government Services, Canada (PWGSC) proposes to award a contract to a pre-identified (sole source) for goods, services or works. Other potential suppliers may submit a statement of capabilities, if they believe they can compete. Where other supplier(s) submit valid statement of capabilities, then PWGSC must use competitive process. If not, PWGSC proceed to negotiate sole source contract. Source: Public Works and Government Services Canada - Supply Manual Chapter John Brooks - ANJO Global Consulting Ltd, Canada August 19,

39 ACTIVITIES RISKS Time to prepare bid Treatment of bidder(s) Insufficient time Late changes by Buyer Not equal John Brooks - ANJO Global Consulting Ltd, Canada August 19,

40 ACTIVITIES RISKS Treatment of bidders Competition Bid evaluation Unequal Few compliant bids Bid Rigging Inappropriate bid criteria Biased/conflict of interest Unauthorized negotiation Political interference John Brooks - ANJO Global Consulting Ltd, Canada August 19,

41 Schemes used by firms to rig bids vary, but they all have one thing in common the prices are higher and the government pays more. Collusion in public procurement may be reduced through strict, effective competition law enforcement. Reverse Auctions mitigate John Brooks - ANJO Global Consulting Ltd, Canada August 19,

42 ACTIVITY RISKS Bidder complaints Not fairly handled John Brooks - ANJO Global Consulting Ltd, Canada August 19,

43 ACTIVITY Contract execution RISKS Material changes to terms Failure to perform Payment Not per contract Warranty Voided by purchaser Audit Lack capacity/follow up John Brooks - ANJO Global Consulting Ltd, Canada August 19,

44 Consequence TRANSFER TERMINATE TOLERATE TREAT Likelihood John Brooks - ANJO Global Consulting Ltd, Canada August 19,

45 In conclusion, public procurement; Is major socio-economic tool Represents 16-20% of GDP Goal to achieve Best Value Use of fair & transparent processes Subject to risks: lack capacity, poor ethics, Acts of God Must have sound governance environment John Brooks - ANJO Global Consulting Ltd, Canada August 19,

46 QUESTIONS WELCOME John Brooks - ANJO Global Consulting Ltd, Canada August 19,

47 REFERENCE MATERIAL CONSULTED IN THE PREPARATION OF PRESENTATION (1) Allen Consulting Group 2007 Performance of PPPs and Traditional Procurement in Australia Infrastructure Partnership Australia Edwards, C 2009 Government Cost Overruns CATO Institute cost overruns CIA 2008 Year Book Colombian Government s Trade Bureau Colombia Report on Barriers to Foreign Trade Gordon, Daniel Constructing a Bid Protest Process Choices Every Procurement Challenge System Must Make The George Washington University Law School Public Law and Legal Theory Working Paper 200 Government of Colombia law no. 816/2003 on Public Procurement John Brooks ANJO Global Consulting Ltd, Canada August 19,

48 REFERENCE MATERIAL CONSULTED IN THE PREPARATION OF PRESENTATION (2) Government of Jamaica 2008 Handbook of Public Procurement Procedures Islam, Nafisal 2008 Centre for International Private Enterprise Creating Frameworks for Anti Corruption and Ethics Kauffman d, 2006 Frequency of Corruption World Bank LaguadoGiraldo, Roberto 2005 Public Policy and the new regulatory framework on Electronic Government Procurement in Colombia` Dissertation submitted in partial fulfillment of the requirements for the Master of Laws degree in International Economic Law at the University of Warwick September 2005 OECD 2007 Integrity in Public Procurement Good Practice from A to Z OECD 2008 Enhancing Integrity in Public Procurement: A Checklist OECD 2008 Policy Brief Fighting Cartels in Public Procurement OECD 2008 Policy Brief Keeping Government Contracts Clean OECD 2009 Principles for Integrity in Public Procurement John Brooks ANJO Global Consulting Ltd, Canada August 19,

49 REFERENCE MATERIAL CONSULTED IN THE PREPARATION OF PRESENTATION (3) OECD DAC 2006 Procurement Benchmarking Tool Public Works and Government Services Canada 2008 Supply Manual The Canadian Council for Public Private Partnerships Transparency International Victorian Government Purchasing Board (Department of Treasury and Finance) 2001: Probity Policy and Guidelines: Government Tendering Projects. John Brooks ANJO Global Consulting Ltd, Canada August 19,

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