Procurement Professionalization in the new World Bank Procurement Framework

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1 Procurement Professionalization in the new World Bank Procurement Framework 2016

2 World Bank Facts and Figures Multilateral Development Bank Most Government s represented Bank funds over 1,800 investment projects in 172 countries Procurement portfolio worth about US$44 Billion in total Annual procurement s circa US$15 to $20 Billion New modernized Procurement Framework based on feedback from 5,000 people around the World Great Apps for finding information 225 procurement staff in 72 countries support projects 2

3 Core Procurement Principles Value for money Fairness Economy Transparency Integrity Efficiency Fit for purpose 3

4 Key changes Core principles, rather than extensive rules Emphasize: Problem solving meeting the real need Managing risks getting ready to fix problems Commercial edge getting a good deal over the long term Incentivizing performance motivating people to do a good job Focusing on results getting the right solution Building tri-partite partnership (client, contractor, bank) Early focus on strategy and planning to engage business Justify the most fit for purpose procurement approach Project Procurement Strategy for Development Achieve value for money

5 Developing the right procurement strategy PPSD (Project Procurement Strategy for Development)

6 Developing the right procurement strategy Detailed description of preferred option Implementation risk assessment Procurement route to market Contract management provisions Strategy options Evaluation against organizational requirements Comparative risk assessment SWOT Options appraisal Development objectives Task team Borrower team Project Concept Note Current approach, working or not? Why? Operating context i.e. Fragile Conflict States Market analysis - Capability, capacity & practice (resilience) - Competitive tension - Suppliers / Contractors - Supply chain - Market management 6

7 Generating and evaluating procurement options Input Existing Procurements Strengths & Weaknesses Opportunities & Threats Market Capability, capacity & practice Competitive tension Suppliers/Contractors Supply chain Market management Input Organization s Needs Development Objectives Stakeholder Objectives Procurement Objectives Input Input Test Input Procurement Options: In-house or Buy Service or asset Work packaging Collaboration Cross project opportunity Value chain integration Supply chain integration Risk allocation Type & terms of contract Type of specification VFM & Whole life cost Incentive mechanisms Relationship Conditioning 7

8 Thinking about market dynamics Goal: To gain a common understanding of the current supply market in order to be able to clearly: Identify the type of market and the nature of the competition Know the factors influencing the market and how they may change it Describe the nature of competition Assess Borrowers previous experience in getting VfM and their impact on the market Know who the key players are and their plans for the future Define current best practice pricing methods and benchmarks Output: A clear understanding of the target market and its dynamics A set of ideas for how value for money will be achieved How opportunities/risk will be managed at different procurement stages (Prequalification through to Contract Management) How suppliers/contractors will be motivated to bid/innovate How the Borrower will incentivize suppliers/contractors to perform 8

9 How do contractors regard you? High Attractiveness Low Low DEVELOP CORE NUISANCE HARVEST % of Revenue High The Supplier s view of the client? Nuisance Supplier gives minimum attention and seeks to withdraw Develop Supplier nurtures relationship, performs very well and provides incentives for growth Harvest Supplier seeks short term advantage, no long term potential Core Supplier seeks strategic, long term customer relationship 9

10 PPSD sections Project overview Project Development Objectives Key result indicators Statement of requirements Project components Operational Context Governance (FCS, Legal & regulatory factors) Economic factors Sustainability aspects Technology factors Market Research Market identification and segmentation Previous experience Market capability, nature of competition Current practice, pricing methods, benchmarks Client capability Experience and capacity in this procurement Level of any support required to do the procurement and manage contracts Strategic approach to procurement activities What is a good result? How will value for money be achieved? How will opportunities/risk be managed at different procurement stages: - Prequalification - Specification - Evaluation - Contract Management How will suppliers/contractors be motivated to bid/innovate? How will you incentivize suppliers/contractors to perform? Determine the right procurement arrangements: - World Bank in full - Other MDB/bilateral - Borrower s arrangements (APA) Will the procurement use (for example)?: - Request for Bid, or Proposal - International/National - Pre/post qualification - Special conditions of contract - Framework agreements - Reverse auctions - Competitive dialogue - Value engineering - Best & Final Offer - Negotiation How will the bid be costed? - Lump sum - Target fee - Schedule of rates - Time based - Performance based How will responses be evaluated? - Substantially responsive/lowest evaluated cost - VfM rated criteria Contract Management approach: - Risk management - Monitoring of costs, key performance indicators, milestones and deliverables - Contract variations Outputs For all projects: Procurement Plan Summary PPSD for inclusion in the Project Appraisal document Where needed: Procurement Risk Management Plan Contract Management Plan 10

11 Procurement Professionalization Rigid rules to core principles

12 Professional Procurement is key Regulations are a guide, with many choices Analyzing, strategizing and options appraisal is critical Justify the right procurement approach: Operating context Risk Market dynamics Capacity Judgement needs professionals in order to live Getting the right result needs judgement Emphasis on building professional procurement quickly 12

13 Conclusions

14 Conclusion Large and diverse procurement portfolio Support some of the World s most complex procurements All countries are different, so procurement needs to be fit for purpose Fit for purpose doesn t work with rigid rules Core principles guide us Project Procurement Strategy for Development directs us Proportional approach, based on risk and value Professional procurement is key to success Build more market confidence to get the right bidders Work together to deliver development results 14

15 Key message Setting the right procurement approach based on risk, operating context and market dynamics gets the best results, but only if there are confident procurement professionals in place to do it 15

16 Procurement Professionalization in the new World Bank Procurement Framework 2016