Procurement Professionalization in the new World Bank

Procurement Framework2016

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

Core Procurement Principles

Value for money

Economy

Integrity

Fit for purposeEfficiency

Transparency

Fairness

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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

Developing the right procurement strategy

PPSD (Project Procurement Strategy for Development)

Developing the right procurement strategy•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

•Strategy options •Evaluation against organizational requirements

•Comparative risk assessment

•SWOT•Options appraisal

•Detailed description of preferred option

•Implementation risk assessment

•Procurement route to market

•Contract management provisions

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Generating and evaluating procurement options

Organization’s NeedsDevelopment ObjectivesStakeholder ObjectivesProcurement Objectives

Procurement Options:

In-house or BuyService or assetWork packaging

CollaborationCross project opportunityValue chain integration

Supply chain integrationRisk allocation

Type & terms of contractType of specification

VFM & Whole life costIncentive mechanisms

RelationshipConditioning

MarketCapability, capacity & practice

Competitive tensionSuppliers/Contractors

Supply chainMarket management

Existing Procurements

Strengths & WeaknessesOpportunities & Threats

Test

Input

Input

Input

Input

Input

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Thinking about market dynamicsGoal: 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

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How do contractors regard you?

High

DEVELOP CORE

NUISANCE HARVEST

Low

Low% of Revenue

Attr

activ

enes

s

The Supplier’s view of the client?

• NuisanceSupplier gives minimum attentionand seeks to withdraw

• DevelopSupplier nurtures relationship,performs very well and providesincentives for growth

• HarvestSupplier seeks short termadvantage, no long term potential

• CoreSupplier seeks strategic, long termcustomer relationship

High

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• 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

Stra

tegi

c ap

proa

ch to

pr

ocur

emen

t act

iviti

esO

utpu

tsProject overview• Project Development

Objectives• Key result indicators• Statement of

requirements• Project components

For all projects:

• Procurement Plan• Summary PPSD for inclusion in the Project

Appraisal document

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

Where needed:

• Procurement Risk Management Plan • Contract Management Plan

Client capability• Experience and capacity

in this procurement • Level of any support

required to do the procurement and manage contracts

PPSD

sec

tions

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Procurement Professionalization

Rigid rules to core principles

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

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Conclusions

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

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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

Key message

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Procurement Professionalization in the new World Bank

Procurement Framework2016