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ADB

Procurement Reforms
Manmohan Parkash
Advisor, OSFMD and Head, OSOM

31 January 2017

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Agenda
Background
Procurement Reform:
Drivers for Reform
Proposed Procurement Framework
Quality and Value for Money
Procurement of High Level Technology
Change Areas and Action Plan:
Time, Quality and Delivery System
Organizational Delivery Model
Summary
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Background

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Procurement at ADB
Category Number of Value
Background

contracts

Goods, works and


related services 4,700 $7.2 billion

Consulting services
(firms and 3,200 $650 million
individuals)

96 % contracts are less than $10 million


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Background Contract Award and Disbursement S-Curve

$28 billion (44%) uncontracted balance in 2015 $43 billion (64%) undisbursed balance in 2015

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Average processing time for
procurement contracts 10Mn
2014 2015 2016
Background

(Jan June)
(days) (days) (days)

ADB
processing 151 144 103 (-28%)
time
EA
processing 211 262 237 (-10%)
time
Total
processing 362 406 340 (-16%)
time
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EA = Executing Agency
MTR 10-Point Action Plan
1. Robust
Procurement Risk
Assessment

10. Consulting 2. Market-


Services reforms based
Background

Thresholds

9. New e- 3. Risk-
Approval based
Forms Procurement
Reviews

8. Streamlined 4. New
Approval Decision
Processes Making Levels

7. Project 5. Project
Specific Master Procurement
Bidding Classification at
Concept Page
Documents 6. New IT-based
Procurement
Review System
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10-Point Action Plan Progress
12 procurement risk assessments completed, 10 new ones
under process
26 developing member countries have adopted the
Background

revised ICB thresholds


New Procurement Committee (PC) and RD decision
authorities - Implemented by all RDs
PRS mainstreamed - 470 transactions using it in 2016
Post review (sampling) - 6 projects in 4 countries
53 projects classified as Category A for hands on
support
33 projects have adopted master bidding documents
Recruitment time for TA consulting firms : 263 days in
2014 to 237 days in 2015

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Procurement Reform:
Drivers for Reform

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The Need to Change
Rising Expectation Developments
2nd Generation
Drivers for Reform
and Changes in among MDBs:
Reforms:
Public Procurement:
Mandate by the
ADF-OCR merger WB and AfDB President
increased number of new procurement Steering
contracts framework Committee:
Chaired by MDG
Increased use of high Entry of AIIB Members: RD DGs,
level technology and NDB GC, Controller,
Head OAI
Slow and Working Group: All
unresponsive to RDs, SDCC, RMs,
clients and SPD, CTL, OAI,
technologies OGC, OSFMD
Consultations in full
Low quality swing
consultants and
contractors
Current Model Proposed Model
Drivers for Reform

Project Planning Procurement Contract


Transaction Management
More upfront engagement Market assessments Contract monitoring
by procurement specialists Design of appropriate Resolving issues and
Enhanced Procurement bidding modalities (Two disputes
Plans Stage Bidding for high
Quality-based selection of technology or complex
consultants for design of projects)
complex projects Efficient bidding
Progress
Procurement Reform

3 Steering Committee meeting


Procurement Reform 4 Working Group meetings
Group Meetings Held 9 Sub-Group meetings
2 Sub-Group convener meetings

Consultation with PAU Heads


Internal Consultations
Completed Consultation with OSFMD Procurement
Specialists

Private sector consultation during BO Fair


and 2016 Annual Meeting
External Consultations Held Consultation with MDBs
EA consultation survey sent to 215 EAs
& IAs
BO Fair = Business Opportunities Fair
EA = Executing Agency
IA = Implementing Agency 12
22 DMCs responded to the survey so far
CWRD SARD
Afghanistan Bhutan
Armenia India
Azerbaijan Nepal
Client Survey

Kyrgyzstan Sri Lanka


Pakistan
SERD
EARD Cambodia
Mongolia Indonesia
People's Rep. of China Lao PDR
Philippines
PARD Viet Nam
Cook Islands
Palau
Papua New Guinea

Republic of Marshall Islands


Solomon Islands
Timor-Leste
Client Survey Survey Results: Key Areas of Change

Time 41%

Quality 21%

Delivery
System 38%

Procurement processing time, delivery system and quality


received significant responses from EAs/IAs
Key Suggestions/Ideas
Procurement Reform
Less prescriptive policy, principles-based
Simplify procurement procedures and make them
more flexible
Respond to emerging needs, offer new
procurement methods and modalities
Focus on quality, engage better contractors and
consultants
Reduce end-to-end procurement time
Decentralize procurement functions
Enable procurement of high value technologies
Stronger measures to prevent conflict of interest,
and corruption

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Procurement Reform
Existing Procurement
Framework

SBD = Standard Bidding Document


PAI = Project Administration Instruction
RFP = Request for Proposal
FAQs = Frequently Asked Questions 16
Procurement Reform Proposed Procurement Framework
Procurement Policy Board of Directors

Directives for Borrowers


Management
Staff Instructions

SBDs, Guidance Notes,


OSFMD
Memos, FAQs

Action Plan to deliver reforms

Stronger focus on (i) Quality, (ii) Governance, and (iii) Responsiveness


Proposed Procurement Policy
Procurement Reform

Core procurement principles


Considerations
Fit for purpose relevant to
principles
Eligibility

Accountability, Integrity, Conflict of interest Stronger


focus on
Complaints mechanism Governance

Alternative procurement arrangements Delivery


modes to
E-procurement meet
emerging
Procurement plan needs

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Core Procurement
Procurement Reform

Principles
Economy

Efficiency Current
Policy
Fairness

Transparency

Quality
Proposed
Value for money
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Value for Money
Procurement Reform

Optimal benefits
In addition to initial cost, also consider:
costs over the economic life
fit-for-purpose
socio-economic and environmental development
benefits
Facilitate high technology procurement
Keep up with policies of WB, AIIB, AfDB

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Quality
Procurement Reform

Facilitate high and proprietary technology


Covers bidding or selection criteria designed to
ensure high quality of inputs
Includes consulting services
Encourage high quality suppliers, contractors and
consultants

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How Quality will be embedded?
Procurement Reform

Include quality elements in qualification


criteria

Provide clear evaluation criteria

Help clients in application of


qualifications and evaluation criteria

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Procurement Reform Procurement of high value technology

Project Design
Greater emphasis on market assessments
Use of better quality consultants in order to help
with project preparation
Procurement methods
Use of appropriate procurement methods to ensure
the engagement of quality contractors (1S, 2E)
Use of 2-stage process to permit discovery and
improvement of initial specifications

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Procurement Reform Procurement of high value technology

Bid evaluation
Inclusion of quality criteria in specifications, bid
evaluation
Work out life cycle cost and value for money
Delivery systems
Upfront involvement of procurement staff (during
project design stage)
Decentralize procurement function to field offices
Contract management
Provide support for contractual issues

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Procurement Reform How Core Procurement
Principles work together
Non standard and
strategic:
Value for
money
Quality

Standard
Complexity

procedures:
Economy
Efficiency

Risk Value
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Risk based ADB oversight
Procurement Reform

Trust and Verify Procurement Review

Upfront ADB procedures


assessment

Procurement Post
Prior
Review and
audits Review Sampling

Core Procurement Principles


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Change Areas
and
Action Plan

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Three Pillars
Change Areas

Delivery
Time Quality System

End to end Suppliers, Robust design,


procurement contractors and effective
time consultants implementation
Action plan includes specific time-bound measures to address each of the above28
Organizational
Delivery Model

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Organizational Delivery Model Existing Structure

DG OSFMD

Procurement Procurement
Director OSP1 Director OSP2

CWRD EARD
Procurement Procurement
Unit Unit

SARD PARD
Procurement PC Procurement
Unit Unit

SERD
PSU Procurement Procurement
Unit

Consulting Consulting
Unit

Individual

TA
OSP1 = Procurement Division 1
OSP2 = Procurement Division 2
Staff
PC = procurement committee 30
Organizational Delivery Model ADB RMs and Sector Divisions with $1B+ Portfolio
DIVISION PROJECT
RM PROJECT PORTFOLIO
PORTFOLIO

RM $B RM $B
INRM 7.3 CWTC 3.9
PRCM 5.6 CWEN 3.8
VRM 3.7 SETC 3.1

BRM 3.6 SAEN 2.8

AFRM 2.2 SAUW 2.1

PRM 2.1 SATC 2.0

SLRM 1.9 EATC 1.7


CWUW 1.6
NRM 1.1
SEEN 1.5
URM 1.1
EAER 1.5
TOTAL: EASS 1.3
9 RMs
11 Sector Divisions
Organizational Delivery Model Out-posted with Delegation
DG OSFMD

OSP1 OSP2 Policy

Procurement
Policy
CWRD SARD EARD PARD Special Initiatives
SERD
CSU
Capacity Building
HQ HQ HQ Quality Assurance
HQ HQ HQ
Complaints
CWOD SAOD EAOD PAOD SEOD SDCC

CWTC SATC EATC SETC ERCD


RM
CWEN SAEN EASS SEEN SPD
PNG
CWUW SAUW Others
FIJ RM
RM
VIE
RM RM PRC
AFG BAN
PAK IND
UZB NEP
SRI
*Placement is indicative and will be decided in consultation with the RDs.
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Organizational Delivery Model Out-posted with Delegation
Procurement Specialists outposted to field, sector divisions, and
front offices

Outposting with authority:


SDs/CDs can approve up to $40 million, with work done by the
Procurement Specialists with authority given to the latter
OSFMD directors will approve $40-100 million contracts
PC will approve contracts above $100 million

PRs of Procurement Specialists will be done by the OSFMD


Directors, with mandatory inputs from Sector or Country Directors
and D/DGs as "Input Supervisors"

OSFMD will have a Central Policy Team (including expertise for


Policy/Guidelines; New Procurement Modalities such as those
involving PPPs; Alternate Procurement Arrangements;
Accreditation of Staff); Support Team (e.g. Risk Assessments); and
PC Secretary for High Value/High Risk Transactions.

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Summary

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Proposed procurement reforms build on ADBs 10-Point Procurement Reform Plan (2014), which
aimed to increase operational efficiency and reduce ADB internal procurement time

Goal of the proposed reforms is to help ADBs developing member countries (DMCs): (a) design
Executive Summary
better projects; (b) procure goods, works and services with quality and Value for Money; and (c)
implement projects faster by resolving procurement-related issues.

The key features of the proposed reforms are:

A less prescriptive and more principles-based procurement policy, to meet emerging needs
of DMCs, as well as market conditions
Procurement principles expanded to include Quality and Value for Money, in addition to
Economy, Efficiency, Fairness, and Transparency
Enabling procurement of high value technologies
Focusing on quality of consulting services, civil works and goods
Risk-based procurement approach, to help ADB focus better on more complex projects
Alternative Procurement Arrangements, to reduce transaction costs for DMCs as well as
ADBs co-financiers

To help roll-out these reforms, ADB will also adopt a detailed Action Plan focused on: (a) Reducing
Overall Procurement Time; (b) Improving Quality of Procurement Outcomes; and (c) Strengthening
Procurement Support Delivery Systems

Specifically, ADB will significantly overhaul its procurement delivery model, by decentralizing and
placing procurement specialists either closer to DMCs (in Resident Missions) or Project Teams
(particularly in Energy, Transport and Urban Sectors, accounting for 70% of ADB lending)

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For further information:
Ramesh Subramaniam, Director General, Operations Services and Financial Management
Department (Email: rsubramaniam@adb.org)

Manmohan Parkash, Advisor, Procurement Policy and Portfolio Management, Operations


Services and Financial Management Department (Email: mparkash@adb.org)

For Procurement Issues in Central and West Asia and South Asia: Ignatius Santoso, Senior
Director, OSFMD (Email: isantoso@adb.org)

For Procurement Issues in East Asia; Southeast Asia; and Pacific Region: Walter Poick,
Director, OSFMD (Email: wpoick@adb.org)

For Procurement Policy/Guidelines: Ashish Bhateja, Principal Procurement Specialist,


OSFMD (Email: abhateja@adb.org)

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