New World Bank procurement policy framework is promising but the devil will be in the detail

Added 13 Feb 2014
World Bank clients spend several trillion dollars annually on procuring goods or services on behalf of public authorities, of which the Bank finances less than 1 per cent. Despite this it has a large amount of influence on its clients’ public procurement policies, particularly in the poorest countries.

Public procurement is an area of spending that is directly under public control and makes up 15-20 per cent of global GDP. In the past, governments have been discouraged from incorporating social and environmental criteria in their procurement policies in favour of a “lowest cost” approach.

But all of this could change, as the World Bank is currently undergoing a review of its procurement policies and has developed a new framework for investment project finance that has been approved by the Bank’s executive directors. The framework proposes several broad principles guided by a vision statement - "Procurement in Bank operations supports clients to achieve value for money with integrity in delivery of sustainable development" - and the Bank is hoping to leverage its influence to promote “good procurement” reforms in client countries.

The vision and the principles are a step in the right direction but the framework is intentionally vague in terms of how it would be implemented as that will be discussed in the next phase of the review process. A recurring theme is to develop a World Bank procurement policy that allows for greater flexibility at global, national and project level with a focus on assessing and increasing the capacity of client institutions and systems, and tailoring procurement guidelines to address weaknesses identified by World Bank diagnostic tools.

Many of the issues presented by the framework are addressed in the initial CSO Joint Submission to the phase one consultation, but some require further consideration. The focus on capacity development and supporting "good procurement" should be qualified to ensure that it is demand driven and conforms to national development objectives. The principles themselves should explicitly state how they will be implemented to achieve sustainable development and should adhere to international agreements and conventions on human, labour, environmental and social rights.

The framework also makes some mild concessions to demands from CSO groups in targeting the domestic private sector in partner countries which could be made more explicit. A recent report by the World Bank’s internal watchdog the IEG noted the importance of good procurement practices in producing good project outcomes, and highlighted that the Bank could be better at promoting local sectors. A study last year by Unctad and BMZ - the German Federal Ministry for Economic Cooperation and Development - highlight the need for strategic procurement policies to foster sustainable and competitive sectors in partner countries that are not just export oriented but promote and meet domestic demand.

Overall the framework is promising but there are still many competing interests. An evaluation last year by the Dutch foreign ministry on their engagement with the World Bank noted that in the procurement review “more attention should be paid to sustainability, environmental considerations, and Corporate Social Responsibility in awarding contracts. This would not only be consistent with the Bank’s mission, but also give Dutch firms a better chance of winning future contracts.” The principles that are being promoted should not be distorted to improve access to markets for firms in donor countries. Increased standards should go hand in hand with increasing the capacity of entrepreneurs in partner countries to meet these standards. 

As well as the points raised in the initial submission by CSO groups, for the second phase of the review we would like to see the World Bank:

• Clearly outline how the principles and vision expressed in the policy framework would be implemented in practice.
• Assess the barriers to SMEs and social entrepreneurs in benefitting from public procurement contracts.
• Assess the support that local suppliers in partner countries would need to benefit from Bank supported procurement.
• Ensure that creating better country systems includes giving partner countries the policy space to use public resources to achieve their development and industrial strategies.
• Ensure that World Bank supported procurement reform in client countries should not serve as a backdoor for procurement liberalisation agreements such as the World Trade Organisations (WTO) Agreement on Government Procurement (GAP).