CARICOM: Small Market-Big Money

Amalgamating the Procurement Market to Transform Small Size into an Economic

Advantage By: Sharlene Shillingford-McKlmon and Shirley Gayle Sinclair

Introduction

Profile of the Caribbean Community

• Established by Treaty of Chaguaramas - 1973

• 15 states spread across the Northern, Central, and Southern Caribbean plus top of south America

• Total population – 17.3Mil

• CSME – CARICOM Single Market and Economy Space – unified approach to development/global competitiveness -2001

Countries of CARICOM

Economic and Geographic profile of CARICOM

Name of State GDP

US$ Billions

GDP per capita US$

Thousands

Physical size (sq km) Population

Antigua/Barbuda (A&B) 1.22 13,428.64 442 88,000

Bahamas (BAH) 8.373 22,832.91 13,940 352,000

Barbados (BAR) 4.262 16,151.70 431 278,000

Belize (BEL) 1.637 4,535.50 22,966 343,000

Dominica (DOM) 0.495 7,022.04 754 71,000

Grenada (GND) 0.811 7,496.46 344 105,000

Guyana (GUY) 3.02 3,596.43 214,970 775,000

Haiti (HA) 8.287 758.85 27,750 10,413,000

Jamaica (JA) 14.389 5,540.67 10,991 2,752,000

Montserrat* (MON) 0.04378 8,500 102 5,189

St. Kitts & Nevis (SKN) 0.767 12,803.52 261 57,000

St. Lucia (SLU) 1.377 7,276.09 616 168,000

St. Vincent & Grenadines

(SVG)

0.742 6,489.25 389 110,000

Suriname (SUR) 5.009 8,685.81 163,270 546,000

Trinidad & Tobago (TT) 27.13 19,018.21 5,128 1,329,000

TOTAL 77.519 17,387,000

17 Million Person Market

Public Procurement- Current State

• Procurement reform – all countries, varying degrees

• Regional (CSME) procurement Protocol – initiated

but low momentum

• Donor intervention: Inconsistent across region; not

holistic

• Only 1 country demonstrates some features of a

strong procurement system

• Very little economic cooperation taking place in

procurement.

• weak “Country Systems”

Public Procurement- Current State

Face significant challenges due to the lack of

• (i) well-functioning administrative systems and

processes;

• (ii) legislative and regulatory framework and

guidelines;

• (iii) distinctive leadership at the national level

• Little to no strategic vision of public procurement;

• (iv) Weak Human Resource in Public sector

Country Systems and

Market Operations

CARIBBEAN PUBLIC PROCUREMENT MATRIX

Shillingford-Gayle Scale: It does not exist 0; It exists in draft form; It is not yet implemented and or it does not impact on the operations of the system. 1; It may exist but it is weak

2; It exists. Its use is not mandatory hence occasional. It cannot always be found. It does not always work. It needs updating. 3; It exists; It is used. It functions though not exactly as

it should. It needs strengthening to do a better job. It is on the right track. 4; It exists. It has the qualities of and functions according to good international practices. 5

INDICATOR COUNTRY Indicator Average

AB

BAH

BAR BEL DOM GND GUY HA JA SKN SLU SVG SUR TT

Start of Reform 2008 2011 2010 2011 2008 2008 2000 1999 1998 2008 2008 2008 2011 2012

Legislative and regulatory

Framework

4 1 1 0 1 1 4 4 4 1 1 1 1 1 1.8

Complaints Mechanism 0 0 2 0 0 0 0 2 4 0 0 0 0 0 .6

Standard Bidding Documents 0 0 0 0 0 0 4 3 5 0 0 0 1 0

1

Regulations and guidelines 0 0 0 0 0 0 5 5 5 0 0 0 1 1 1

User guide or Manual 0 0 0 1 0 0 4 3 4 0 0 0 1 1 1

Institutional Framework and

management Capacity

0 0 0 0 0 0 2 2 5 0 0 0 0 0

.6

Normative or regulatory Body 0 0 0 0 0 0 1 3 4 0 0 0 1 1

.7

Central or accessible system

providing procurement information

0 0 0 0 0 0 2 2 3 0 0 0 1 1

.6

Electronic Information System 0 0 0 0 0 0 2 2 4 0 0 0 1 1

.7

Capacity Building Program 0 0 0 0 0 0 0 0 4 0 0 0 1 1 .4

Procurement Operations and

Market Practices

2 2 2 2 2 2 2 2 4 2 2 2 2 2

2.1

Training of Government and

Private Sector

0 0 0 0 0 0 0 0 3 0 0 0 1 1

.4

Tools and Technology 1 1 1 1 1 1 1 1 3 1 1 1 1 1 1

Records Safekeeping 1 1 1 1 1 1 1 1 5 1 1 1 1 1 1.3

Integrity and Transparency of the

Public Procurement System

1 1 1 1 1 1 1 1 5 1 1 1 1 1

1

Audit and Control systems 1 1 1 2 1 1 1 1 5 1 1 1 1 1 1

Appeals Mechanisms 0 0 0 0 0 0 2 2 5 0 0 0 0 0 .6

Access to Information 0 0 0 1 0 0 1 1 4 0 0 0 0 1 .5

Anti-Corruption Bodies 0 0 0 0 0 0 0 0 5 0 0 0 0 3 .5

Code of Ethics 0 0 0 4 0 0 0 2 5 0 0 0 0 2 1

Public is engaged and interested in

the integrity of the system

1 1 1 1 1 1 3 1 5 0 0 0 3 4

1.5

Country Average 0.5 0.4 0.4 0.7 0.4 0.4 1.7 1.8 4 0.3 0.3 0.3 0.9 1.1

Panoramic View IND AB BH BA BE DM GN GY HA JA SK SL SV SU TT

LR

CM

SBD

RG

UGM

RB

SY

EI

CB

T

TT

RS

A

AP

AI

AC

CE

CS

Value of Procurement Market Country GDP 15% 20% 30%

Antigua and Barbuda 1.22 0.183 0.244 0.366

The Bahamas 8.373 1.25595 1.6746 2.5119

Barbados 4.262 0.6393 0.8524 1.2786

Belize 1.637 0.24555 0.3274 0.4911

Dominica 0.495 0.07425 0.099 0.1485

Grenada 0.811 0.12165 0.1622 0.2433

Guyana 3.02 0.453 0.604 0.906

Haiti 8.287 1.24305 1.6574 2.4861

Jamaica 14.389 2.15835 2.8778 4.3167

Montserrat 0.04378 0.006567 0.008756 0.013134

St. Kitts and Nevis 0.767 0.11505 0.1534 0.2301

St. Lucia 1.377 0.20655 0.2754 0.4131

St. Vincent and the Grenadines 0.742 0.1113 0.1484 0.2226

Suriname 5.009 0.75135 1.0018 1.5027

Trinidad and Tobago 27.13 4.0695 5.426 8.139

Total 77.519 11.62785 15.5038 23.2557

Challenges to Procurement

o High debt

o procurement systems under-developed

o Weak human resource capacity

o Limited supplier base

o Segregated Market

o Limited use of modern technology and

techniques: e.g. e-procurement, framework

agreements

o Inadequate procurement planning

Debt to GDP Ratio

Case of the Organization of Eastern Caribbean States (OECS) Pharmaceutical Procurement Service (PPS)

- Sub group of 9 states within CARICOM with

total population of 550K-

- pooled procurement of pharmaceuticals

through PPS

- PPS established in 1986 by 1989 self sufficient

- Since 2012 – procurement via e-proc. system

- Current Average Annual Savings of 30%

- Average purchase value US$ 21M

OECS Pharmaceutical Procurement Service (PPS) Financial Arrangements

• Revolving drug fund

• Payments by ECCB

- Common currency

- Int’l credibility of bank

- Stability of EC$ vs US$

Country submits

requisition to PPS

PPS places

Order to Supplier

Supplier ships

directly

to consignee

Country receives

Goods and inform

PPS

Ordering Process

OECS Pharmaceutical Procurement Service (PPS)

Much Bigger Market Than Assumed

• It is 57 % of the amount spent ($26B) by the World

Bank in 168 developing countries in 2013

• Larger than the value of projects approved by the

IDB in 2012. IDB approved 169 projects for $11.4 B.

• $15B identified at risk in Indonesia. $50M invested

through MCC to modernize procurement.

• It compares to the GDP of Senegal, Georgia,

Mozambique and Papua New Guinea.

• $15B PP in CARICOM is imprisoned in a segregated

market under poor procurement conditions

• $15B should turn heads

Procurement Market Share

Possible Savings

• apply internationally accepted best practices -save

between 20% to 25% of the total procurement- in

CARICOM equivalent to about US$3.75 billion

annually.

• US$3.75 billion could impact on the five year

regional average negative balance of payments of

US-$1.5234 billion

• implementing a program of strategic and pooled

procurement the CARICOM region stands to save

at least 30% on goods and services.

Conclusion

• Small Size does not indicate small

Value

• Small Size does not mean constant

vulnerability

• OECS PPS Case Study

demonstrates both preceding

points

Going Forward

Operationalize the Regional Procurement Regime

Implement:

1. Community model law

2. Capacity Building and Training

3. Electronic Procurement Regional Information System

4. Professionalization of Procurement Staff

5. Permanent Joint Council on Procurement

6. Joint Bidding Facility

7. Standard Bidding Documents

8. Supplier Registry

9. Catalogue of Goods

10. Permanent Committee on Procurement

11. E-enabling legislation

12. Framework for procurement administration

“Do Not Send To Ask For Whom the

Bell Tolls” • Implement Regional regime; Use as a platform for

trade negotiation

• Enhance participation of Small Businesses

• Agree on Regional Thresholds and open the

CARICOM Market

• Awaken Civil Society through Transparency

• More Coordinated IDP approach

• Use a problem Driven Approach to procurement

related challenges facing the region

Problem Driven Approach # Problem Impact Opportunity

1 Domestic Market Size • diseconomies of scale; • Limited competition • High prices

Amalgamate the market

2 Limited Transparency

Obligations • Limited Publicity and advertisement; • Limited market access • Narrowly informed civil society

Establish regional transparency thresholds to facilitate

opening of the now segmented US$15 Billion Public

Procurement Market Establish regional public procurement notice board

3 Lack of Strategic

Procurement • Procurement is fragmented and has been subsumed

under Finance and Administration or Audit Acts.

Policies developed to address finance and

administration concerns; • High costs of the majority of goods and services.

Reclassify procurement from an administrative function

to a strategic function. Consolidate and pool procurement of certain

goods/services through a central fully capacitated

entity. 4 High cost of goods

including

pharmaceuticals and

school text books

• Shrinking budgets due to fiscal constraints; • Low quality products provided to consumers; • Inadequate supply of goods

Pool Procurement in Pharmaceuticals and other feasible

areas

6 Low number of bidders • Unequal access • Few contractors control the bulk of the market

Develop harmonized electronic procurement system; Advertise all opportunities above US$50,000

Regionally 7 Weak Human resources

capacity • Inadequate supply of trained persons to manage

procurement; • Frontline workers provide low level service to

private sector; • Inefficient spending

Professionalize Public Procurement Train personnel in public procurement, project and

contract management, by sector Partner with a regional institution such as the UWI to

develop a sustainable training program (diploma,

certificate, degree) in public procurement; UWI to partner with national universities and colleges

to provide diploma training.

Problem Driven Approach II # Problem Impact Opportunity

8 High Cost of Electronic

systems.

• Multiple donor funded national initiatives:

• Failure to maximize scarce resources

Pool national and donor resources to develop regional or

interoperable harmonize national systems

9 Small businesses

participating minimally in

procurement

No incentives for small

businesses

• Concern that Small Businesses may lose market

share and not survive competition;

• Small business sector not benefitting from

government support:

• Unable to make sustained contribution to

economic development

Develop small business laws and policies to legally support

small business,

Establish a carve out for vulnerable groups, local content,

community procurement and women in business, and use them.

Establish Joint Bidding Facility

10 Lack of donor

coordination for more

than diagnostics

• Multiple simultaneous initiatives, some of which

do not take into account legally binding regional

mandates;

• Strain on already limited human capacity

Engage with donors as a region on cross-cutting, common

issues;

Recognize and support regional obligations for a single

harmonized procurement system.

11 Limited to no

involvement of Civil

Society

• Limited accountability to citizens;

• Limited demand for transparency of process and

award;

• Lack of commitment to shared responsibility for

development

Bring civil society into the fold of discussion and accountability

regarding national and regional development and management;

Conduct country by country awareness campaigns

12 Lack of Institutional

capacity

• Institutional framework inadequate to meet current

procurement demands

Institution building/ strengthening both at the national and

regional level through benchmarking within and outside the

region

13 Lack of Collection of

Statistical Data

• Absence of key economic and planning

information decisions not based on empirical

evidence;

• Lack of Business Intelligence

Implement harmonized e-procurement system region-wide;

Implement other electronic PFM tools that collect data

14 Absence of a unified

codification system

• Barrier to market access and regional coordinated

procurement

Agree and implement common codification system

15 Absence of Regional

monitoring

• Lost opportunity for coordinated research,

development and innovation;

• Lost opportunity for wider funding beyond

traditional donors

Establishment of an Observatory