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PROCUREMENT REFORMS AND IMPLEMENTATION SUPPORT IN A FRAGILE STATE: CASE OF AFGHANISTAN

Fiduciary Forum - 2010

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FRAGILE STATE What is a Fragile State

Fragile states is the term used for countries which are characterized by

political instability, frequently on-going violence or the legacy effects of past severe conflict

The above lead to particularly severe challenges to development due to weak institutional capacity, weak governance ……….

Few Countries – Afghanistan, Bosnia & Herzegovina, Cambodia, Kosovo, Sudan, Somalia, Timor-Leste, West Bank and Gaza, Yemen ……………

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FRAGILE STATE

Countries at the end of conflict often need help to build an effective state. Such assistance needs to be comprehensive and requires the integration of security, diplomatic and development efforts

While the risk of failure in these countries is high, the risk of non- action is even higher.

As Robert B. Zoellick stated “Only by securing development can we put down roots deep enough to break the cycle of fragility and violence”

The cost of development including project preparation and implementation costs in a fragile state is relatively high in comparing with normal state.

Bank has developed Operational policy

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OPERATIONAL POLICIES FOR FRAGILE STATES

New Framework for Rapid Response to Crises and Emergencies: OP/BP 8.00

The new policy sets out a framework for a more rapid and effective response to crises and emergencies that is better aligned with Recipient/Borrower needs and the Bank’s experience and current engagement.

The note identifies various procurement issues that may arise during the preparation and implementation of emergency response projects. Guidance note available

Rapid Capacity Assessment Management and use of UN agencies under Bank Projects Simplification on certain procurement policies and procedures. Bank maintains a long list of procurement agents that clients/ borrowers can

consult when needed PPF facility for project preparation – 5 million USD Retroactive financing limit – 40% of loan/ credit / loan amount

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PROCUREMENT REFORMS IN A FRAGILE STATE---ISSUES AND MOVING FORWARD- EXPERIENCE FROM AFGHANISTAN

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BACKGROUND

Afghanistan Fully fits the characteristics of Fragile state has suffered from more than 30 years Conflict Destroyed all institutions, and any Governance No development works was done when the

county was in war Nearly all infrastructure were destroyed, and no

maintenance was effected during this period Development work started after 2002 when funds

were available from World Bank and other donors Multi Donor Trust Fund - ARTF

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BACKGROUND …

Brief history 1979 to1989 – Soviet Occupation 1989 to 1994 – Civil War 1994 to 2001 – Taliban Rule 2002 to 2003 – Afghan Interim Authority Subsequent to 2004 - country convened

a Constitutional Loya Jirga in 2003 and a new constitution was ratified in January 2004.

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BACKGROUND …

2002 – Status o Reconstruction and Development of Afghanistano Flow of Large Donor Aid

Brief of Public Procurement System in Afghanistan

Had series of provisions regulating procurement • A law on procurement of 1987• Rules and Regulations for procurement of works 1989 – replaced the

procurement law but very few amendments, mostly of religious nature

• Purchase regulation adopted as a decree in 2001 – Applicable to goods, routine works and maintenance

Issues with the provisions / rules regulations

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BACKGROUND …

Issues with the provisions / rules regulations Failed to meet the standards of International

Procurement Procurement of works – mostly based on 1989 rules –↓ resembled more like a set of bid and contract preparation

guidelines rather than a regulation to ensure competitive bidding↓ Minimum time limits, qualification criteria, processes ……

Procurement of Goods – mostly based on 1987 rules –

↓ Core problem with the provisions of the goods procurement was lack of detail and clarity in the qualification; specifications; drafting of bidding documents and award criteria

↓ Smaller contracts – Direct under which 1, 2 or 3 officials could purchased

No reference to Services contracts

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NEED FOR PROCUREMENT REFORMS Cope with the urgent task of reconstruction, the Transitional

Government of Afghanistan with the help of Donors Capacity to plan and implement reconstruction projects in line

ministries is very weak – Establishment of Afghan Assistance Coordination Authority (AACA) – So centralized technical assistance in critical areas – Financial management, procurement and auditing

AACA – dissolved and the department responsible for procurement was renamed as ARDS and was put under the Ministry of Economy

Crown Agents was contracted as the Country’s Central Procurement Agent – Role was to put in place emergency procurement capacity to facilitate rapid, transparent

utilization of donor resources for reconstruction and development – act as a facilitating purchasing by the Government - under different financing - nearly 100% of procurement

Carry out training needs analysis Develop framework for training

New PA – RITES India Ltd Challenge to Carry out Procurement Reforms and Procurement

implementation in such conditions and environment.

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PROCUREMENT REFORMS ….. May 2003 – Holistic procurement review carried out

and a number of serious constraints were identified• Limited procurement capacity at all levels• Lack of ownership of procurement• Obstacles to such ownership• No consistency in the structures of the line ministries

The need for adequate standards in procurement Procurement Law 2005 reflecting the current

international best practice and suitable to the local requirements

Three main pillars of new law• Creation of a regulatory body• Procurement function in all ministries and government departments• Capacity building thru formalised training and certification program

The law requires creation of units at National Level • Procurement Policy Unit (PPU)

• Contract Management Office (CMO)

• Special Procurement Commission (SPC)

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PROCUREMENT REFORMS - ORG

President

Special Procuremen

t Commissio

n

Procurement Policy

Unit (PPU)

Contract Manage

ment Office

Ministry of Finance ARDS Ministry of

Economy

Line Ministry Line MinistryMinistry of Justice

Administrative Review Committee

Procurement Liaison Officers

Procurement Controllers

Proc Capacity Building Officers

Proc Capacity Building Officers

Proc Capacity Building Officers

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PROCUREMENT REFORMS …..

Procurement Policy Unit (PPU) – Functions • Policy and professional development • Performance monitoring organ • Not involved in contract award or review of

Procurement process• What has been done / achieved – Rules of

Procedure, SBDs, Dissemination of Information, Capacity Building,

• Capacity Building – How it has been done, Impact evaluation of the Capacity building, Exit strategy

• Future vision / Steps - why

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PROCUREMENT REFORMS …..

Contract Management Office (CMO)• Serves as the office of the SPC • Provides secretariat support to SPC in conducting

business• To regulate and coordinate the Management of

State’s contract’s including procurement contracts• It has the overall responsibility for planning,

executing the work of SPC, as well as record keeping• Liaise with the procuring entity

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PROCUREMENT REFORMS …..

Special Procurement Commission (SPC)

• Highest authority under the Law to grant approval for procurement contracts

• All high value procurement contract awards- thresholds are in Annex of the Law

• The SPC membership consists of • Minister of Finance – Member and Chairman • Minister of Justice – Member • Minister of Economy – Member

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APPEAL AND REVIEW MECHANISM

Administrative Review Committee – Provide the PPU with a mechanism to ensure expert and independent decisions in respect of applications of complaints or Representations.

21 members – ensure sufficient choice and breadth of experience, various fields

Head of PPU – nominate suitably qualified members of Committee, from both public and private sector; nominated members not more than 7 for a period of max 3 years at a time

Other members competitive – open, every three years, new

Experts

Head of PPU appoints the Chairman from one of the

Members

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APPEAL AND REVIEW MECHANISM

Review Board – each time a complaint or representation

is received; 3 independent experts chosen from administrative review committee

Secretariat will register the commencement of the review procedure

No hearing requested by the Applicant – then orderissued based on documentation without hearing the parties

Order by Review Board – within 7 days of its

appointment and receipt of application

PPU will confirm the order

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CAPACITY BUILDING Carried out by a Consultancy Firm Three year capacity building program – including

Training of Trainers Multiple types of programs

Challenges Shattered education system due to 30 years of war Capacity of civil servants and functioning of public offices –

adversely affected Language and translation, Knowledge of IT High level of mobility Lack of technical support

ResultsTrained nearly 1750 trainees (1100 Basic; 250 Intermediate;

200 advanced; 160 short term and 125 Special)

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CAPACITY BUILDING

What was missed out

Technical Help Desk for dealing with the queries on the Procurement, SBDs, Procurement Law etc – This will provide a means of ensuring consistency of interpretation, application and removal of uncertainty in the use of documents

Allocation of a Dedicated PCBO - Trainer for each of the Ministry

Introduction of a Special Short Term Procurement Course in University - Diploma

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PROCUREMENT IMPLEMENTATION SUPPORT IN A FRAGILE STATE: CASE OF AFGHANISTAN

Afghanistan Procurement Team

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PROCUREMENT IMPROVEMENTS – WHY?

To do the same old thing the same old way And to expect some new outcome….. That is madness

- Einstein

Same Size does not fit all or The Same prescription cannot cure even if the symptoms are the same i.e. yield results

For Fragile Countries - The need for doing things differently, creative, out of the Box Procurement Solutions – is all the more important in such fragile countries than other Countries due to many reasons but need to be within the Boundaries of the Bank GL

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PROCUREMENT OF WORKS AND GOODS

Analysis of the Country situation, and MarketStudy – Customization of the SBD’s

Encourage bid securing declaration – Poor or no Banking Facilities

Post qualification Criteria – Similar experience, Annual turnover, liquid Assets?

To increase Competition and Development of Construction industry - Increasing the NCB threshold and use slice and package

Allow Procuring Entity to conduct pre-bid meeting for all NCBs to explain salient features of bidding document and preparation of bid

Conducted training workshops for local bidding community, Afghan Builders Association

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PROCUREMENT OF WORKS AND GOODS …,

Performance Security – Recovery from First Invoice

Insurance – Acceptance of Self Insurance Payment terms – Letter of Credit – Supply and

Installation Contracts. Requirement of Manufacturer’s Authorization -

Permitting dealership certificate in procuring standard equipments.

Flexible contracting arrangements to address rapidly any additional funds made available by the Government of Afghanistan, ARTF, IDA or any other donor by make changes in IFB, ITB and GCC/SCC

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PROCUREMENT OF WORKS AND GOODS ….,

Disseminate information about bidding thru the Radio stations

Sell bid documents electronically and free of charge – Poor or no postal service

Allow downloading of bid documents from PIU websites

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PROCUREMENT OF CONSULTANCY SERVICES Single RFP with both forms of Contract Lump

Sum and Time based Lump Sum contracts – Modifications

incorporated to indicate that equipment purchased would be the property of the Client at the end of the contract

Price Adjustment even in lump Sum Contracts which are long term

Strengthening of Contract Conditions Monitoring of Inputs in a Lump Sum

Contracts

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CONSULTING SERVICES …..

Health Sector – Service Delivery Contracts - Brief Details of the Services – Decision on What type of contract to be used

Use of Lump Sum Consultancy Contract for Delivery of Basic Package of Health Services to Rural Poor with the modifications to standard Contract Conditions of lump-sum contract

Opening of Separate and special account for the Contract 100 % verification of financial statements of expenditure

(SoE). Payment based on actual eligible expenditure based on SoE

and verification of services provided by third party monitoring evaluation team

Transfer of assets after contract completion to the client In the beginning Procurement of Pharmaceuticals, Vaccines

and Condoms, to be carried out by Service Provider as per the Firms Procurement Guidelines – Third Party Survey carried out to verify and check the Quality of the Goods Procured

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CONSULTING SERVICES …..

Health Sector – Service Delivery Contracts Now, Procurement of Pharmaceuticals, Vaccines and

Condoms following the World Bank Guidelines and specifically related to health sector goods. The Service Provider shall keep copy of GMP, COPP, license to produce drug in the country of manufacturing and test certificate for the batch for the Pharmaceuticals, Vaccines and Condoms dispensed in the health facility to ensure quality of drugs dispensed.

Verification by a Third Party M&E Consultant Results Based Financing Implementation

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CONSULTING SERVICES …

Community Driven Development (CDD) – National Solidarity program (NSP) - Brief Details of Services

Hiring of Facilitating Partners Challenge to Decide on what type of contract Changing the type of contract from time based to

lump sum based on per community based facilitation work defined in the operational manual.

Providing price variation as the contract duration was more than two years in lump-sum contract.

Providing for adding more communities depending on the performance of the NGOs and availability of funds.

Third party performance (Qualitative and Quantitative) and technical evaluation of facilitating partners

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CONSULTING SERVICES …

Third party evaluation of large Technical/ Project Support Consultant including financial audit.

Third party evaluation / quality of physical works

Impact Evaluation of the Project on welfare of community and get feedback on what is required, working or not working …

Appointment of Independent Consultant for handling of Financial Transactions, Float account

Introduction of MIS

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CONSULTING SERVICES …

Power Sector Projects - Brief Details of Services

Hiring Project Management Consultant

Devolving of Powers to Management Consultants

Responsible for entire procurement process including the preparation and submission of BERs with Government agreement and technical evaluation of Contractors, etc

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CONSULTING SERVICES …

Education Sector Projects - Brief Details of Services

Twinning of Higher University – Curriculum development, Capacity Building, Exchange of Staff, Conduct teaching

Large University Partnership contracts (around US$2 million) in Higher Education Sector to improve higher education in Afghan universities following CQS procedures.

Distribution of girls scholarship and teachers training expenditure as ‘pass through money’ in consultancy contracts and the consultants are responsible for distribution of girls scholarship or teachers training in view of weak government capacity

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INNOVATIONS IN SUPERVISION Supervision/ Fiduciary Verification – Issues in

Fragile state – Afghanistan Capturing the GPS coordinates of the

community (CDC) in the database

Verification of assets, and progress through GPS enabled digital cameras

Evaluation of physical Works by Third Party

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INNOVATIONS IN SUPERVISION

Performance Evaluation of Facilitating Partners by Third Party

Impact Evaluation study

Appointment of an Independent Consultant to handle Money

Third Party survey of quality of Pharmaceuticals procured by NGOs