Procurement Professionalization in the new World Bank Procurement - PowerPoint PPT Presentation

Procurement Professionalization in the new World Bank Procurement Framework 2016

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 Fairness Economy Transparency Integrity Fit for Efficiency purpose 3

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 •Detailed description objectives of preferred option •Task team •Implementation risk •Borrower team assessment •Project Concept •Procurement route to Note market •Contract management provisions •Current approach, working or not? Why? •Operating context i.e. •Strategy options Fragile Conflict States •Evaluation against •Market analysis organizational - Capability, capacity & requirements practice (resilience) •Comparative risk - Competitive tension assessment - Suppliers / •SWOT Contractors •Options appraisal - Supply chain - Market management 6

Generating and evaluating procurement options Input Input Existing Procurements Procurement Strengths & Weaknesses Options: Opportunities & Threats In-house or Buy Service or asset Test Organization’s Needs Work packaging Development Objectives Collaboration Stakeholder Objectives Cross project opportunity Input Procurement Objectives Value chain integration Supply chain integration Risk allocation Type & terms of contract Market Type of specification Capability, capacity & practice Input VFM & Whole life cost Competitive tension Incentive mechanisms Suppliers/Contractors Relationship Supply chain Conditioning Market management Input 7

Thinking about market dynamics Goal: 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 8

How do contractors regard you? High The Supplier’s view of the client? • Nuisance DEVELOP CORE Supplier gives minimum attention Attractiveness and seeks to withdraw • Develop Supplier nurtures relationship, performs very well and provides incentives for growth • Harvest Supplier seeks short term NUISANCE HARVE ST advantage, no long term potential • Core Supplier seeks strategic, long term Low customer relationship High Low % of Revenue 9

Project overview Operational Context Client capability Market Research PPSD sections • Project Development • Governance (FCS, • Experience and capacity • Market identification and Objectives Legal & regulatory in this procurement segmentation • Key result indicators factors) • Level of any support • Previous experience • Statement of • Economic factors required to do the • Market capability, nature requirements • Sustainability aspects procurement and of competition • Project components • Technology factors manage contracts • Current practice, pricing methods, benchmarks • What is a good result? • Determine the right procurement • How will the bid be costed? arrangements: - Lump sum procurement activities • How will value for money be - World Bank in full - Target fee Strategic approach to - Other MDB/bilateral - Schedule of rates achieved? - Borrower’s arrangements (APA) - Time based • How will opportunities/risk be - Performance based managed at different • Will the procurement use (for procurement stages: example)?: • How will responses be - Prequalification - Request for Bid, or Proposal evaluated? - Specification - International/National - Substantially responsive/Lowest - Evaluation - Pre/post qualification evaluated cost - Contract Management - Special conditions of - VfM rated criteria contract • How will suppliers/contractors be - Framework agreements • Contract Management approach: motivated to bid/innovate? - Reverse auctions - Risk management - Competitive dialogue - Monitoring of costs, key • How will you incentivize - Value engineering performance indicators, suppliers/contractors to perform? - Best & Final Offer milestones and deliverables - Negotiation - Contract variations Outputs For all projects: Where needed: • Procurement Plan • Procurement Risk Management Plan • Summary PPSD for inclusion in the Project • Contract Management Plan 10 Appraisal document

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 12

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 14

Key message 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 15

Procurement Professionalization in the new World Bank Procurement Framework 2016