Document of The World Bank

Report No: ICR0000666

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-36390)

ON A

CREDIT

IN THE AMOUNT OF SDR 3.6 MILLION (US$ 4.5 MILLION EQUIVALENT)

TO THE

PEOPLE’S REPUBLIC OF BANGLADESH

FOR A

PUBLIC PROCUREMENT REFORM PROJECT

June 25, 2008

Procurement Services Unit South Asia Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective February 28, 2002)

Currency Unit = Bangladesh Taka Tk. 57.25 = US$1.00

US$0.01747 = Tk. 1.00

FISCAL YEAR July 1 --- June 30

ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory Activity APD Academy for Planning and Development BIM Bangladesh Institute of Management BIAM Bangladesh Institute of Administration and Management BOO Build, Own, Operate BOT Build, Operate, Transfer BWDB Bangladesh Water Development Board CAS Country Assistance Strategy CCGP Cabinet Committee for Government Purchase C&AG Comptroller and Auditor General CPAR Country Procurement Assessment Report CPI Corruption Perception Index CPTU Central Procurement Technical Unit DAC Development Assistance Committee DCA Development Credit Agreement DFP Department of Films and Publication DG Director General e-GP Electronic Government Procurement FMR Financial Management Report GoB/ GOB Government of Bangladesh IDF Institutional Development Fund IMED Implementation Monitoring and Evaluation Division ILO International Labor Organization I-PRSP Interim Poverty Reduction Strategic Paper ITC-ILO International Training Center of ILO, Turin LGED Local Government Engineering Department MDTF Multi-Donor Trust Fund MIS Management Information System MOI Ministry of Information

MOP Ministry of Planning NGO Non-Governmental Organization NSAPR National Strategy for Accelerated Poverty Reduction 2005 OECD Organization for Economic Cooperation & Development PD Project Director PDO Project Development Objective PFM Public Financial Management PFMIP Public Financial Management Improvement Program PIP Project Implementation Plan PPA Public Procurement Act PPPAP Public Procurement Processing and Approval Procedures PPR Public Procurement Regulations/ Rules PPRP Public Procurement Reform Project PRMP Procurement Risk Mitigation Plan REB Rural Electrification Board SBD Standard Bidding Documents SOE Statement of Expenditure SRFP Standard Request for Proposals TA Technical Assistance TI Transparency International WB World Bank

Vice President: Praful C. Patel Country Director: Xian Zhu

Sector Director Barbara Kafka Sector Manager: Nadjib Sefta

Project Team Leader: Zafrul Islam ICR Team Leader: Zafrul Islam

Bangladesh Public Procurement Reform Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design............................................... 12. Key Factors Affecting Implementation and Outcomes .............................................. 73. Assessment of Outcomes .......................................................................................... 134. Assessment of Risk to Development Outcome......................................................... 185. Assessment of Bank and Borrower Performance ..................................................... 196. Lessons Learned ....................................................................................................... 247. Comments on Issues Raised by Borrower / Implementing Agencies / Partners ...... 25Annex 1. Project Costs and Financing ......................................................................... 26Annex 2. Outputs by Component ................................................................................. 27Annex 3. Economic and Financial Analysis................................................................. 30Annex 4. Bank Lending and Implementation Support / Supervision Processes .......... 31Annex 5. Beneficiary Survey Results ........................................................................... 33Annex 6. Stakeholder Workshop Report and Results................................................... 37Annex 7. Summary of Borrower's ICR and / or Comments on Draft ICR................... 38Annex 8. Comments of Cofinanciers and Other Partners / Stakeholders..................... 41Annex 9. List of Supporting Documents ...................................................................... 42

MAP :IBRD 36265

OPCS PAD Form: Rev. March, 2000

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A. Basic Information Country: Bangladesh Project Name:

Public Procurement Reform Project

Project ID: P075016 L/C/TF Number(s): IDA-36390 ICR Date: 06/29/2008 ICR Type: Core ICR

Lending Instrument: TAL Borrower: PEOPLE'S REPUBLIC OF BANGLADESH

Original Total Commitment:

XDR 3.6M Disbursed Amount: XDR 3.5M

Environmental Category: C Implementing Agencies: Implementation Monitoring and Evaluation Division (IMED) Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 11/14/2001 Effectiveness: 08/08/2002 08/08/2002 Appraisal: 02/04/2002 Restructuring(s): Approval: 05/02/2002 Mid-term Review: 05/08/2004 Closing: 11/30/2005 09/30/2007 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance: Moderately Satisfactory Overall Borrower

Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments

(if any) Rating

Potential Problem Project No Quality at Entry None

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at any time (Yes/No): (QEA): Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

Moderately Satisfactory

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) General public administration sector 100 100

Theme Code (Primary/Secondary) Public expenditure, financial management and procurement

Primary Primary

E. Bank Staff

Positions At ICR At Approval Vice President: Praful C. Patel Mieko Nishimizu Country Director: Xian Zhu Frederick Thomas Temple Sector Manager: Nadjib Sefta Kevin William Casey Project Team Leader: Zafrul Islam Zafrul Islam ICR Team Leader: Zafrul Islam ICR Primary Author: Florent Agueh F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the Project is to improve governance in public procurement, thereby increasing efficiency, transparency, and accountability, and increasing the perception of probity in the procurement of goods, works and services by the Borrower's ministries, departments, statutory corporations and other public bodies. Revised Project Development Objectives (as approved by original approving authority)

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(a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Timeliness of award of contract

Value quantitative or Qualitative)

Average time elapsed (Invitation to Contract Award): M1. 40% contracts- awarded after 12 months M2. 8% contracts- awarded within 4 months

M1. No contract- awarded after 12 months M2. 50% contracts- awarded within 4 months

M1: 10% contracts awarded after 12 months M2. 19% contracts awarded within 3 months and 20% within 5 months

Date achieved 06/30/1998 11/30/2005 06/30/2007

Comments (incl. % achievement)

12 months target- 90% achieved; 4 months target- modestly achieved mainly due to a low rate of compliance for contracts at the ministerial and cabinet level approvals where elapsed time between bid opening and award averaged 7 and 9 months respectively

Indicator 2 : Reduction of unit rates of cost for major civil work contracts

Value quantitative or Qualitative)

M1. No conclusive baseline data was available. Competitiveness of the bidding process was later considered as a proxy qualitative indicator.

M1. Increased competitiveness with lower costs at key agencies (LGED, Municipalities)

Environment for and quality of competition have started to improve as a result of the more level playing field created by the new system. For instance average number of bidders increased from 3 to 6 at LGED over the project period

Date achieved 12/31/2001 11/30/2005 06/30/2007

Comments (incl. % achievement)

It is recognized that measurable cost reductions would take longer time for a new system; at mid-term,this was gauged partially. A study is underway to measure efficiency of system with a more solid baseline for follow-up operation(results- Oct. 2008)

Indicator 3 : Decrease in corruption perception and misprocurement cases

Value quantitative or Qualitative)

M1. Corruption perception data was not available (as per CPI of TI Bangladesh stood at 163rd position in 2001) M2. Bank declared 316 contracts ineligible in

M1. No target value for change in corruption perception was provided. Reduction in the number of misprocurement

M1. Per CPI of TI in 2007, Bangladesh stood at 156th position. The positive effect of procurement reforms are even more visible

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1999 (~ US$ 2 million), and 84 contracts misprocurement in 2000 & 2001 (~ US$ 4.9 million)

cases was focused as a proxy. M2. Number of misprocurement reduced. Better enforcement of sanctions by local bodies (LGED & Municipalities)

recently due to anti-corruption drive M2. Enforcement improved;misprocurement reduced(FY06: 25 contract; FY07- no contract)

Date achieved 12/31/2001 11/30/2005 06/30/2007

Comments (incl. % achievement)

Reduction in misprocurement as proxy for decrease in corruption was questionable; such changes occur gradually through sustained reforms. There was an incipient change in perceived corruption towards the final years; its extent was difficult to ascertain.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : M1. Public Procurement Rules (PPR) and Procedures developed and introduced. Procurement Law drafted.

Value (quantitative or Qualitative)

Fragmented and outdated government rules, procedures and standards prevailed prior to this project

Promulgation of new improved rules, approval process and appeal procedure by November 2002 Issuance of standard bidding documents (SBDs) and of revised delegation of powers by February 2003 Preparation of a draft Procurement Law by February 2004.

The PPR was made effective October 1, 2003. Key SBDs and financial delegations were issued together with the new Regulations. Draft law was prepared by March 2004, passed in Parliament in July 2006, and made effective in January 2008

Date achieved 12/31/2001 06/30/2004 06/30/2007 Comments (incl. % achievement)

Targets have been fully achieved (albeit with some delays). Enactment of a comprehensive modern Procurement Act, facilitated by strong linkages between this and other new lending operations, clearly went beyond initial expectations.

Indicator 2 : M2. Critical mass of national trainers developed and providing training to

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approximately 400 staff annually

Value (quantitative or Qualitative)

Limited ad hoc and ineffective training prior to the project

A total of 25 trainers developed and 1600 staff trained

40 trainers have been trained of which 25 have been accredited as national trainers. 1800 staff of about 300 organizations have been trained in main three-week courses. Besides, about 300 senior/ mid-level staff and auditors trained in short courses

Date achieved 12/31/2001 11/30/2005 06/30/2007 Comments (incl. % achievement)

Targets have been fully achieved for the training of trainers and exceeded for the training of staff, although with some delays.

Indicator 3 : M3. Centralized MIS established at CPTU and made fully functional

Value (quantitative or Qualitative)

No systematic procurement monitoring system or centralized MIS existed

MIS established, made operational and procurement monitoring data published on CPTU's website

Centralized MIS has been established at CPTU and made fully functional. Invitation for bids and contract award data are published in CPTU's website as per PPA/ PPR. Timely updating, however, needs to to be improved.

Date achieved 12/31/2001 11/30/2004 09/30/2005 Comments (incl. % achievement)

Targets have been fully achieved although with some delays.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP

Actual Disbursements (USD millions)

1 12/28/2002 Satisfactory Satisfactory 0.85 2 02/10/2003 Satisfactory Satisfactory 0.89 3 08/12/2003 Satisfactory Satisfactory 1.59 4 11/20/2003 Satisfactory Satisfactory 1.59 5 05/19/2004 Satisfactory Satisfactory 2.38

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6 11/04/2004 Satisfactory Satisfactory 2.59 7 06/20/2005 Satisfactory Satisfactory 3.19 8 12/18/2005 Moderately Satisfactory Satisfactory 3.57 9 06/26/2006 Moderately Satisfactory Moderately Satisfactory 4.03

10 12/21/2006 Moderately Satisfactory Moderately Satisfactory 4.16 11 06/21/2007 Moderately Satisfactory Moderately Satisfactory 4.97

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design 1. Investing for good governance is a high priority for the World Bank (WB) and the Government of Bangladesh (GOB). WB’s Country Assistance Strategy 2006 (CAS) – aligned with the Government’s National Strategy for Accelerated Poverty Reduction 2005 (NSAPR) – identified governance as the major constraint that held Bangladesh back from improving its investment climate and empowering its poor – two pillars of the CAS for accelerating the pace of poverty reduction. Governance has continued for a long time to be the focus of all sector programs that the WB supports and engages in; and those programs address both sector and core governance issues in public procurement and public financial management. Similarly NSAPR highlights its strategic goals as relating to good governance, enhancing efficient use of resources, promoting transparency and accountability in resource use, and tackling corruption. 2. Public procurement is not merely a mechanism for executing transactions – it is an integral part of the development process and a priority area for improving governance within the overall framework of public financial management (PFM). Budgets get translated into services in large part through the operation of procurement. Public procurement is also an area where corrupt practices can be exposed and addressed with the expenditure of reasonable efforts; and successful procurement reform can help curb corruption. Widespread corruption in public procurement is particularly damaging because it perverts public spending (generates a lower rate of return), reduces the value of public assets (bribe-givers benefit by skimping on quality), and distorts the economy (firms invest in competing politically rather than economically). 3. Bangladesh played, with World Bank support and this project’s interventions, a prominent role within the South Asia region during the last five years in changing the procurement environment by establishing a procurement policy unit (Central Procurement Technical Unit – CPTU; http://www.cptu.gov.bd), and through an array of policy reform actions which included the passage in Parliament in July 2006 of a Public Procurement Act (PPA) embodying a comprehensive set of international good procurement practices. PPA 2006 became effective from January 31, 2008 after the government promulgated the Procurement Rules (for implementing the Act) through its gazette notification of January 28, 2008. Prior to that, the government formulated and promulgated the Public Procurement Regulations (PPR) in September 2003 to govern all procurements with public funds throughout the country. PPR had features and provisions similar to those in the PPA including provisions of publishing contract award results, annual post procurement audit, and independent review panel for addressing bidders’ grievances. Review panels are functioning reasonably well; they handled 18 cases as of December 2007 and the Government acted in compliance with the panels’ recommendations in all but four of them. The Government has also been piloting procurement performance monitoring in two key sector agencies. 4. Though implementation of public procurement reform has been slow and numerous challenges still remain, initial results clearly demonstrate (i) improvement in competitiveness, (ii) reduction in inordinate delays in contract awards (except large value

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contracts), (iii) better transparency and accountability in public procurement, and (iv) growing confidence of the people in the country’s own system. To consolidate the benefits of the reform process and make it sustainable, the Government started a second follow-on procurement reform project with the Bank’s assistance, focusing largely on implementation, monitoring, e-procurement, and social accountability aspects of procurement.

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1.1 Context at Appraisal 5. The 2000 CAS identified governance and institutional constraints as the most serious impediments preventing Bangladesh from achieving its full economic potential and accelerating its pace of poverty reduction. Opaque public procurement practices, poor financial management, high level of corruption, and decline in the quality of civil service led to low expectation from public services and contributed to high cost of doing business that in turn hindered private sector development. The World Bank Country Procurement Assessment Report (CPAR) of 2002 identified deficiencies in public sector procurement practices of that time as the most serious issue affecting activities of the entire public sector. Outdated procurement rules and procedures, inadequate capacity to manage public procurement, lack of accountability, and corruption seriously impacted the country’s aid utilization capacity and aid effectiveness. It was estimated by some that economic losses due to overall corruption were costing the country about 2.5% in GDP growth each year. There has been growing recognition within the country that improved governance is a prerequisite for improving investment climate and accelerating private sector-led economic growth. 6. In this context, the Government’s commitment to undertake a broad-based reform agenda on governance was set by the 2000 CAS as a trigger for the Bank moving towards high case lending support. Procurement reform was (and still is) an identified priority area for governance improvement. The Public Procurement Reform Project (PPRP) being reviewed in this report, a Technical Assistance (TA) project, was thus closely aligned with the Bank’s assistance strategy for Bangladesh. 1.2 Development Objective 7. The development objective of the project was to increase efficiency, transparency, and accountability in the procurement of goods, works and services by government ministries, departments, statutory corporations and other public bodies. The project aimed to support public procurement reform through the introduction of appropriate procurement rules and procedures; building up procurement management capacity; and establishing a series of mechanisms to improve transparency and reduce corruption. This reform was deemed crucial to strengthen the country’s aid utilization capacity, improve aid effectiveness, and to gain donor group’s confidence to justify continued development assistance to Bangladesh. 8. Key Performance Indicators (KPIs) in the PAD were:

- Timeliness of award of contract; - Reduction of unit rates of cost for major civil work contracts; and - Decrease in corruption perception and misprocurement cases.

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1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 9. PDO and Key Indicators were not revised during project implementation period [was probably required, as discussed further in the ICR]. 1.4 Main Beneficiaries 10. This project was designed to support priority reforms to reduce delays, improve quality and ensure transparency in public sector procurement. Direct benefits envisaged under the project included faster and better use of public resources, significant reduction of corruption and increased aid utilization capacity. The project was expected to restore public confidence, thereby contributing to the creation of favorable investment climate in Bangladesh. It was also expected to enhance the capacity of domestic construction and consulting industries to participate more effectively in national and international procurement. Achieving all the above was expected to create, in the longer term, a powerful force that would foster more transparent and accountable institutions, resulting in accelerated economic growth and faster poverty reduction. 1.5 Original Components (as approved) 11. The project has three broad components: i. Establishing a Central Procurement Technical Unit (CPTU). ii. Implementing Public Procurement Reforms and Rules / Procedures. iii. Improving Procurement Management Capacity. 12. Establishing a Central Procurement Technical Unit (CPTU): A Central Procurement Technical Unit was to be established in the Implementation Monitoring and Evaluation Division (IMED) of the Ministry of Planning with adequate staffing and logistics. CPTU was to be responsible for carrying out procurement reforms in line with the recommendations of CPAR 2000, and would function as a permanent entity of the Government to handle procurement policy matters including providing guidance on technical matters. CPTU was not to carry out any procurement / contracting related functions at any level except for meeting its own needs. The Unit was designed to provide technical / professional advice on generic procurement issues referred to it, but was not to get involved or provide opinion in any specific procurement evaluation or contract award – thus preserving its pristine role as a policy, technical assistance, training and oversight body. One of the functions of CPTU was to create procurement awareness at all levels. GOB was to establish CPTU as a permanent institution of the Government, funded under its revenue budget, thereby ensuring sustainability beyond the project period. 13. Establishment of CPTU with adequate staffing was a condition for Board presentation. The Government confirmed on April 4, 2002 though a memo that CPTU had been created in IMED as a permanent institution funded under its revenue budget.

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The Board thereafter approved the Credit on May 2, 2002, which became effective on August 8, 2002 after signing of contract with International Training Center of the ILO, Turin (ITC-ILO) for providing services relating to procurement reform and training – this last being a condition for Credit effectiveness. CPTU and its role has been made part of the Public Procurement Act 2006, thus ensuring its sustainability regardless of whether there is any project or not. 14. Implementing Public Procurement Reforms and Rules / Procedures: Public procurement rules / procedures and standard bidding documents were to be developed in line with CPAR 2000 recommendations. CPTU was to follow a participatory consultation process involving government and private sector stakeholders to develop ownership and support for reforms. GOB was to furnish the draft new rules / procedures to IDA for review and to incorporate recommendations for changes, if any, into the final documents prior to their implementation. Activities under this component were to include:

Improving economy and efficiency by:

• Developing and introducing public procurement rules and procedures. • Developing and publishing a set of:

(a) standard bidding documents for goods and works, including sample models for BOT / BOO / turn-key contracts and community contracting; and

(b) standard request for proposals for consultants services, including NGO services.

• Drafting a procurement law.

Improving transparency by:

• Publishing in the press and website awards of all contracts valued at US$200,000 and above.

• Simplifying procedures for advertisement by making the procuring organization directly responsible for publishing invitation for bids, instead of routing invitations for bids / pre-qualifications through the Department of Films and Publications (DFP) of the Ministry of Information – as was the rule at that time.

• Introducing public procurement website and electronic bidding. • Including an expert of known probity in the evaluation committee for selection of

consultants. • Sequestering of evaluation committee for contracts valued above certain

thresholds.

Improving accountability by:

• Revising procurement approval process with significantly reduced number of layers.

• Revising delegation of powers. • Introducing appeal procedure in the rules.

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• Introducing mandatory procurement audit by independent auditors for each public sector entity, regardless of the source of funding.

• Introducing code of conduct for procurement professionals. 15. Improving Procurement Management Capacity: Procurement management capacity was to be developed via a two-pronged effort: (a) institutionalization of comprehensive and regular training programs through selected institutions; and (b) establishing monitoring and evaluation capacity in CPTU to track procurement performance of public sector entities. Contents and delivery modalities of the training programs were to be tailored to the needs of various target groups, including private sector construction / consulting industries and NGOs. Activities under this component were to include:

Procurement Training

• A critical mass of 25 trainers was to be built up through intensive training, on-the-job evaluations and a rigorous accreditation process, with the aim of building up and helping sustain the in-country training capacity.

• Approximately 1600 participants were to be provided with in-country procurement training during the project period.

• Course curriculum, teaching material and training programs for various target groups, including government officials / auditors / selected private sector staff, were to be developed.

• The International Training Center of the ILO, Turin (ITC-ILO) was to be selected on a single-source basis to provide services for the above activities. Bangladesh Institute of Administration and Management (BIAM) was to initially provide in-country training logistics.

Procurement and Compliance Monitoring

• A fully computerized and real-time procurement management information system

(MIS) was to be established in CPTU to monitor and enforce compliance with new procurement rules and procedures, and evaluate the impact of public sector procurement reform.

• A public procurement website was to be established to provide access to procurement related information.

Project Management Training

• A separate project management training program was to be supported under the

project to provide training to about 600 project staff of the government. IMED was to conduct this training in collaboration with the Academy for Planning and Development (APD) or similar institutions.

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1.6 Revised Components 16. Project components did not require revision during project implementation. 1.7 Other significant changes 17. Project closing date was extended from the original November 30, 2005 on three different occasions. First, GOB requested an extension of the Credit up to June 2006 to complete programmed activities. It also requested for a follow-on assistance after June 2006 to address, in particular, procurement monitoring, capacity building, and introduction of e-procurement. 18. WB responded positively and extended the credit up to June 30, 2006. At the same time it undertook preparation of a second reform project with associated AAAs so that there could be a continuity of reform beyond June 2006 – thereby ensuring sustainability of the reform effort. 19. Acting upon GOB request, WB subsequently extended the Credit up to June 30, 2007 to achieve continuity with the commencement of the second reform project. 20. Finally, GOB requested a selective extension of the Credit for 3 months beyond June 30, 2007 (only Category 2 of Development Credit Agreement- DCA: consultant services) to complete critical actions relating to the preparation of procurement Rules by ITC-ILO and continuation of training until the new consultant are on board. WB concurred and revised the closing date to September 30, 2007. 21. The formal Credit closing date was thus extended twice (the extension to September 30, 2007 being a selective extension). Disbursement schedule was formally revised to accommodate reallocation among disbursement categories and extension of closing date. Last formal revision was in June 2006. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 22. The Bank, with support of the government, conducted a country procurement assessment in 2002. CPAR 2002 identified a number of deficiencies that were contributing to poor performance of public sector procurement, such as: absence of a sound legal framework governing public sector procurement leading to proliferation of diverse rules and procedures among various agencies; protracted bureaucratic procedures allowing multi-point rent seeking; lack of critical mass of professionals to manage public procurement as reflected in poor quality bidding documents and bid evaluation, inordinate delays in completing the procurement process; ineffective contract administration; and absence of mechanisms for ensuring transparency and accountability in public procurement. Its recommendations were:

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⎯ Create a Central Procurement Policy Unit in an appropriate ministry having the mandate to manage the public sector procurement reform program.

⎯ Prepare and issue Public Procurement Rules and Procedures. ⎯ Introduce a set of Standard Bidding Documents for goods, works, and professional

services, applicable to all public procurement. ⎯ Revise delegation of powers and de-layer the procurement approval process. ⎯ Publish award of contracts, introduce appeal procedures, and a code of ethics for

procurement staff. ⎯ Establish regular training programs to develop needed human resources. 23. The project design was based on the CPAR recommendations. The strategic choice was to support the creation of basic policy and institutional frameworks in the medium term, which will sustain further reforms and institutional capacity building effort in the longer term. The strategy’s first set of priority actions therefore included (a) reforming the procurement rules and mandatory use of standard bid documents so as to cut procurement delays – the single most important problem in public sector procurement in Bangladesh, and (b) introducing mechanisms to ensure transparency in the procurement process and restore public confidence. The second priority was to gradually improve the quality of procurement through attracting and retaining suitable staff and training them over time. Taking cognizance of the political sensitivity and long drawn process for a law combined with the need to start reform, preparation and enactment of a public procurement law was considered a follow-up action to be taken after urgently needed basic reforms were successfully completed, and accordingly this was reflected in the PAD (Annex 1: Project Design Summary- last output of second component of the project).. 24. From the outset, there was limited international experience in preparing such procurement reform interventions as stand alone project and therefore little guidance on how to design procurement reform in an environment where the entire public sector administration is outdated and broad reforms are needed. Thus, project design – this being the first stand-alone Bank-financed procurement project – has had to opt for approaches that were likely to generate a “good local fit.” In this the project succeeded, creating a sound foundation and attracting a constituency for reform. 25. However, the lack of prior experience frame for project design, processing and implementation might have also meant a lack of reliable base for calibrating implementation pace and results expectations. As an example, increased efficiency in public procurement was included as a project outcome while the strategic context of improving the quality of procurement was clearly a second priority to be achieved over a much longer term than the project implementation period would allow. The absence of precedent programs also meant that criteria for selecting baseline data, that could be directly used to evaluate achievement of project objectives, were generally not available. It is a lacuna that these deficiencies were not adequately addressed during supervision. 26. At the same time, certain critically important developments took place that, in the course of implementing the project and in its direct consequence, were clearly beyond

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design expectations. Enacting and giving effect to a public procurement law (the project envisioned only the preparation of a draft) is an example. It is imperative to recognize and balance out those developments if the true dimension of public procurement reforms in Bangladesh is to be understood, appreciated and, in the end, supported. This is more fully explained in Section 3.4. 27. As regards GoB commitment, clearly the implementing agency and the concerned ministry were fully onboard during the entire project period. Though broadly it enjoyed the support of most policy makers, because of the nature of this reform, several constraints were managed during the process. For instance, approving the law in the cabinet before its placement to the Parliament was debated at length despite the fact that the issued PPR 2003 (most provisions are same in the law) was widely consulted with broad spectrum of stakeholders including implementing agencies, bidding community, and civil society. From this perspective, political economy was all along a risk part of the project requiring skilled interventions and maneuvering at the right time. The project managed to overcome those sensitivities through skillful handling. 2.2 Implementation 28. Implementation of project components was deemed generally satisfactory in terms of achievement of key outcomes and objectives. The country created the foundation of an improved procurement environment; has been applying an uniform set of procurement rules and procedures to all public procurements; achieved better transparency and reduced time-lag for award of contracts – particularly where approving authority lies at the agency level; reduced the number of re-bids (re-rendering in GOB terminology); increased competitiveness in the bidding process; created an independent grievance address mechanism and made it reasonably well functioning. It also improved its position in the Corruption Perception Index of Transparency International from 163 to 156 over three years; some credit for which should be attributable to the reforms carried out in public procurement. 29. GOB established a procurement policy unit (CPTU) in IMED with staffing funded from its own resources, thus ensuring sustainability. CPTU and the consultant’s team (ITC-ILO) have been functioning from a centralized location at IMED. Some staffing issues however remain in CPTU. 30. GOB completed most policy reform actions that were agreed under the project by mandating new procurement regulations and associated procedures; passing a procurement law in Parliament; and making the law operative. Some delays in implementation occurred that somewhat retarded the attainment of project objectives. 31. CPTU / ITC-ILO, in collaboration with Bangladesh Institute of Administration Management (BIAM) and Bangladesh Institute of Management (BIM), developed a critical mass of about 25 accredited national procurement trainers and provided three weeks’ procurement training to about 1800 staff of 276 organizations against a target of 1600.

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32. A crucial deliverable of the project was that the government would develop and introduce a set of public procurement rules and procedures (including standard bidding documents, appeal procedures, revised procurement approval process, and simplified advertisement procedures) by November 2002. The government was able to promulgate the Public Procurement Regulations (PPR) in September 2003, the Procedures for Implementation of the Public Procurement Regulation 2003 in September 2004, and the Public Procurement Processing and Approval Procedures (PPPAP) in October 2004. Also, CPTU issued standard bidding documents. Preparation of regulations/ procedures/ bidding documents appeared to have been done with adequate consultation with stakeholders; there were two working groups for these activities comprising representatives of implementing agencies, contracting communities, consultants associations, NGOs, and professional bodies. Commencement of other project deliverables was predicated on this one, so that the entire project suffered less than satisfactory implementation progress. Credit closing date was extended on three different occasions to absorb this impact; ensure implementation of agreed reforms; and ensure continuity with its successor project to better ensure sustainability of reforms. 33. In addition to the delay in promulgating the PPR, its operation became uncertain through an unforeseen development. The government had covenanted with the Bank that procuring entities would directly advertise invitation for bids and pre-qualification without routing through the Ministry of Information (the extant practice at that time) and that the advertisement would appear in at least two national dailies (one Bengali and one English). Acting on this covenant, the government issued (through the Prime Minister’s Secretariat) the policy of decentralizing advertisement through its memorandum of May 28, 2003 and subsequently mandated observance of the covenant through Regulation 21 of PPR 2003. However the High Court issued on November 2, 2003 a Rule Nisi on the government and put a three-month stay order on Regulation 21. The High Court extended the stay order on January 18, 2004 till disposal of the Rule. IMED at one stage engaged a legal expert to seek an early resolution of the case with the High Court. The High Court disposed of the Rule and vacated the stay order on March 7, 2005. 34. Another crucial project deliverable was that the government would prepare a draft procurement law within 18 months of Credit effectiveness, which calculates to February 2003. The government prepared the draft procurement law within March 2004, finalized the draft Public Procurement Act in June 2005, and it was expected to be placed before the Cabinet the same month for approval. It would then be placed before Parliament for enactment. A number of issues came up concerning certain provisions of the draft Act during review by the Cabinet sub-committee and the Ministry of Law, requiring revisions in the draft Act. The revised Act was placed before Parliament in February 2006; a Parliamentary Standing Committee reviewed it thoroughly and made some adjustments; and it was passed in Parliament in July 2006. 35. The Public Procurement Act contained the proviso that it would come into force after the government promulgates through a gazette notification the Rules for its implementation. Formulation, review, and approval of the Rules by relevant government

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organizations consumed one and a half years after enactment of the law, and the gazette notification promulgating the Rules appeared on January 28, 2008 – the Act becoming effective on January 31. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 36. M&E broadly involved tracking implementation progress, project outputs, achievement of PDOs, and stated project outcomes.

• Tracking of PDOs relied heavily on MIS reports and a Mid-term evaluation report. Coverage of these reports was partial and relevant MIS reports took time to produce. The PAD referred to Business environment surveys for tracking aspects of expected impact outcomes relating to improved governance in procurement. While the “Doing Business” annual reports provided some relevant information, these were not sufficiently disaggregated to allow the stated expected project outcomes to be appropriately measured.

• Difficulties in tracking stated project outcomes were not only a reflection of the fact that the M&E design was not appropriate for tracking them or that this aspect was somewhat overlooked in an otherwise proactive supervision effort. These difficulties were also a reflection of the fact that these impacts would have only begun to emerge in the timeframe of the project. A better choice of DOs and associated indicators could have been made at the appraisal stage, a shortcoming that was recognized but not adequately addressed at the mid-term review or in the course of supervision.

• Other aspects of M&E (progress and outputs monitoring) were appropriately designed, satisfactorily implemented and effectively used to address implementation performance problems. Of particular note was the effective use of the recommendations of the “Benchmark and Procurement Environment Assessment” study, carried out as part of the Mid-term review preparation, in strengthening the results-focus of the supervision efforts. This report substantiated that the time elapsed time between invitation for bids and contract award has been reduced (except for large value contracts), and this has been highlighted in the PDO indicators as well.

• Positive progress of reform has been demonstrated by securing a rating of “Substantially Achieved” (3 on a scale of 4) in the independent assessment of the national system using baseline indicators similar to the initial OECD-DAC indicators, as described in the report “Review of Institutional Arrangement for Public Expenditure, Financial Management, and Procurement”.

37. Several analyses and assessments supported by the Bank have provided independent assessments of aspects of project achievements. Of particular note is the (i) “Operational Risk Assessment of Roads and Highways Investment” which provided an extensive and thorough evaluation of the status of implementation of project-supported systems and reforms in the Roads and Highways Department, a core procuring agency in Bangladesh; (ii) “Assessing Procurement Environment” for key sectoral agencies (RHD, LGED, BWDB, and REB) which provided useful information regarding improvement in

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timeliness for award of contracts; (iii) Quarterly reports on “Procurement Risk Mitigation Plan (PRMP)” with a set of indicators, evidencing improvement in the competitiveness of bidding process; and “Beneficiary Survey Report” of 2007 indicates growing confidence of people in the country’s own system. 38. A Beneficiary Survey, carried out for stocktaking purposes and as an inputs into the preparation of the follow up project provided valuable insights from individuals who had first-hand working experience with public procurement during both the pre- and post-reform eras and who could provide useful pointers about what would need to be done to take public procurement reform forward during the second phase of the project. 2.4 Safeguard and Fiduciary Compliance Safeguard Compliance 39. OP4.01 was applied for screening and categorizing the project. No safeguard issues and impacts were expected to arise, and they did not, as a result of project implementation. Fiduciary Compliance 40. Financial Management: CPTU followed the government accounting system in force at the time (as well as at present). The main focus of the system was book-keeping and transactional control over expenditure and that was considered adequate for the project. Policy and procedures for transactions relating to government funds followed the guidelines contained in the (then) recently introduced Project Accounting Manual of the government. The existing financial management system in CPTU was able to process all financial transactions following the Project Accounting Manual because most of the project transactions related to a small number of local and international consultants. CPTU prepared Financial Management Reports (FMRs) on a semi-annual basis and monthly Financial Statements within fifteen days of the following month. A set of customized formats of FMRs, included in the PIP, was used to submit project physical and financial progress data to the Bank for monitoring. 41. The annual financial statements of the project were audited by the Comptroller and Auditor General (C&AG) and submitted to the Bank within six months of the end of each financial year. The audit reports included separate opinions on Project Financial Statements, Special Account and SOE. 42. Procurement: Implementation of procurement was generally satisfactory although there were delays in some specific procurement. The large value consultancy assignment for the ITC-ILO was the key procurement under the project, followed by the consultancy contract with the local training institutes BIAM and BIM. There were low value procurement of goods. Findings of procurement administration by CPTU, based on post reviews conducted for several contracts, did not show significant procurement issues except delays.

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43. These arrangements proved adequate for fiduciary compliance. 2.5 Post-completion Operation / Next Phase 44. The Bank undertook in 2006 the preparation of a second project for public procurement reform with associated AAAs so that reform efforts undertaken during this project can be sustained, and reforms accomplished under this project can be consolidated and internalized. 45. The AAAs associated with the new project were specifically chosen so that paucity of baseline data, which made it difficult to evaluate some of the PDO indicators of this project, is addressed at the outset. The AAAs should also provide early indications of whether some of the PDO indicators of the new project would be difficult to monitor, so that corrective measure can be adopted early on. 46. This project created an enabling procurement environment – with country’s own regulatory institutional framework (CPTU), its own procurement laws / regulations, and a critical mass of procurement professionals – which forms the basis for the follow-on project. The design of the new project drew heavily on strengths identified, problems encountered, and lessons learnt during implementation of this project. Design decisions included: focus on implementation challenges, share procurement reform experience from different regions; form task team with more diversified mix of skills from different sectors; make suitable arrangements to improve procurement implementation capacity at the targeted procuring entity level rather than at CPTU; involve key sectoral implementing agencies / procuring entities through a technical working group (TWG); focus more on the demand side of reform through participation of civil society / beneficiary groups / stakeholders in the monitoring of procurement process and outcomes; provide electronic disclosure of procurement process information through an improved MIS and introduction of e-GP; use more realistic and relevant performance indicators; and link procurement reform with public financial management reform, anti-corruption and broader governance-related reforms. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 47. The relevant objectives, design and implementation are summarized below: • Project was highly relevant against the background of continuing efforts by the donor

community to ameliorate the entrenched governance and institutional weaknesses of Bangladesh. The focus of the project has remained closely linked with objectives that have been central to a succession of CASs since 2000. It gained added visibility and importance under the 2006 CAS that placed governance at center stage.

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• The government that came into power in 2002 initiated promising reform efforts that culminated in a 2003 I-PRSP (later NSAPR in 2005) that set improving governance as the first of its five pillars. While this reform drive could not be sustained in many areas, significant advances were nevertheless achieved in critical areas such as procurement and financial management, where champions eager to do something about the persistent negative image of the country and against corruption and support from a large cross-section of the civil service and public opinion succeeded in overcoming opposition by powerful vested interests.

• Evidence of high relevance of project to Bank assistance strategy was demonstrated,

at the implementation stage, by the close linkage established between project’s results and the shape and pace of overall assistance program.

3.2 Achievement of Project Development Objective Rating: Moderately Satisfactory 48. PDOs were cast too broad in view of project’s scope, content and timeframe, but meaningful progress toward several of them has begun to emerge but is not easy to document. There exists however verifiable opinion among government officials and business community – counterparts in the procurement transaction – that meaningful progress towards achieving several of the broad objectives of the project has taken place. Progress thus recognized includes:

• Significant strides have been made towards the overarching objective of improving governance in public procurement. Coherent frameworks and systems have replaced fragmented and chaotic set of rules and practices. Extent and consistency of adherence remain to be established and are clearly partial, but available data and information point to a widespread acceptance and use of the project-supported improved procurement frameworks and systems. Clearly, the prevailing procurement environment is a much improved one.

• Harmonization of rules, regulations and standards has allowed an increasing use

of national procedures in procurement by donor partners, including the Bank, specially for local procurement. In that sense, the project has indeed contributed to improved aid utilization and effectiveness.

• Achievements in terms of increased efficiency, transparency and accountability

consisted mainly in the markedly improved timeliness of award of contracts at agency level, with targets being fully met for contracts awarded at agency/department levels and only partially met (40%) for contracts requiring ministerial and cabinet approvals. Cutting procurement delays has been an objective of critical importance as such delays had been identified as the single most important problem in public sector procurement in Bangladesh. Reduction of unit rates of cost for major civil work contracts and other possible cost efficiency gains could not be ascertained and the expectation that such cost

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reduction would materialize during the project’s timeframe was probably excessive.

• Improvement of public confidence and decrease in corruption perception

appeared to have begun to emerge but besides being incipient and inadequately tracked under the project, isolating the possible contribution of this project from those of other many possible contributing factors is not feasible under the current circumstances. Nonetheless, the project appears to have been one of the most visible Government’s answers to questions about what was being done to fight corruption.

49. In reference to the achievement of the intermediate outcome indicators, attainment of each of the project’s specific objectives and related outputs was as follows. • Establishing a Central Procurement Technical Unit (CPTU): CPTU was established

in April 2002 as a permanent unit of IMED, headed by a Director General with 10 officers and 9 support staff. Actions taken were timely and effective. CPTU continues to be a lean, well focused, fully established and highly respected institution. Its success may be attributed to its location within the Ministry of Planning, assured funding from the government’s revenue budget, dedicated and competent leadership and staffing, good TA support and arrangements, and strong but invisible support among the reformist (and non-rent-seeking) politicians and bureaucrats. Overall component rating: Satisfactory.

• Implementing Public Procurement Reforms and Rules / Procedures: Achievements

under PPRP include (a) regulating framework, (b) Public Procurement Regulations 2003, (c) Procedures for Implementation of the Public Procurement Regulations 2003, (d) Public Procurement Processing and Approving Procedure, (e) Public Procurement Act 2006, and (f) Key Standard Tender Documents and Standard Request for Proposals. Overall component rating: Satisfactory.

• Improving Procurement Management Capacity: Policy reform actions have started

building confidence among citizens about the country’s own procurement system. The project provided institutional training to relevant procurement officials including policy makers and decision makers. The project developed twenty-five accredited national procurement trainers and provided three-week-long procurement training to about 1800 staff of 276 organizations against a target of 1600. CPTU established a website where all policy related procurement information are available including publication of invitation for bids and contract awards as per the PPA. In addition, to track procurement performance, CPTU established a centralized MIS with a set of procurement performance indicators, similar to OECD-DAC, and made it functional with two pilot agencies. Overall component rating: Satisfactory.

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3.3 Efficiency 50. In view of the nature of the project, no calculation of the economic rate of return was attempted. The project was designed to support priority procurement reforms; the direct benefits were related to faster and better use of public resources and increased aid utilization capacity which in the longer term would result accelerated economic growth and faster poverty reduction. 51. To ensure sustainability of the reform initiatives, the Government provided counterpart funding including budgetary support to maintain CPTU. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 52. Though the project is considered as a flagship project in the area of procurement reform and all components were implemented satisfactorily achieving targeted outputs by creating significant contribution in changing the actual procurement environment in the country, it is rated as Moderately Satisfactory because of the way the PDO and its indicators were articulated which appear to be too optimistic to achieve within the project life in case of PDO (rather those were close to impact) and some are not easily measurable. Reviews of documentations reveal that, the concept of procurement reform in itself was at the initial stage of development and there were not readily available reliable source of information, in particular reference to the preparation of such stand alone project. There were numerous interventions to address procurement related issues on a piece-meal basis using either IDF grants or some similar arrangements. The distinguished achievements that the project made on the ground would otherwise be easily advocated for satisfactory rating, if not highly satisfactory, had the PDOs been defined more precisely with measureable indicators. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 53. The project was designed to improve governance in public procurement, which in turn is widely believed to have a significant bearing on overall governance in the country. The Bank has long held that improvement in governance has a positive impact on poverty issues. The project was thus expected to have an indirect and non-insignificant positive impact on poverty. It was not envisaged to have any impact on gender aspects or social development except that the bidding documents have specific provisions to discourage child labor in line with UN Conventions and the contractors would guarantee that it does not happen. This contract provisions have created awareness among contractors about untoward use of child labors.

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(b) Institutional Change / Strengthening 54. One of the most important requirements for sustainable procurement reform is satisfactory policy reform with adequate institutional arrangements for its implementation. Most policy reform actions including the creation of a nodal procurement policy unit (CPTU) have been completed for this project. The follow-on project intensifies the role of CPTU as the premier organization to formulate and implement procurement related policies. It aims to augment the resources and personnel available to CPTU in specific areas so that it may provide a strong foundation to sustain ongoing and future reforms, and institutionalize capacity development effort at local level in the longer term. At the same time key sector agencies / procuring entities will be strengthened to enhance the quality of managing the public procurement process. (c) Other Unintended Outcomes and Impacts (positive or negative) 55. There has not been any unintended outcome or impact. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 56. A beneficiary survey (see Annex 5) was carried out to obtain in-depth analysis of those individuals who had first-hand working experience with public procurement during both the pre- and post-reform eras and who could provide useful pointers about what would need to be done to take public procurement reform forward during the second phase of the project. Major parts of the interviews dwelt on efficiency, transparency and accountability in public procurement – the development objectives of the project. 57. Most respondents felt that efficiency in public procurement had improved as a result of PPR 2003. Almost all respondents agreed that the bid evaluation regime under PPR 2003 had the potential to assure better value for money. Some respondents felt that procurement funded with the government’s own money used to be processed faster when contracts could be awarded solely on the basis of price. The current requirement of determining responsiveness and commercial qualification of bidder were seen by these critics as slowing down the process. 58. A conclusion that could be drawn form the above is that PPR 2003, and the subsequent PPA 2006, contain ample provisions for enhancing efficiency in public procurement – both in terms of time and money. Systemic defects persist that take away those efficiency gains. It has been demonstrated that some of the problems can be effectively addressed by the procuring entities themselves, or by their controlling ministries, simply through greater respect for and sincerity towards current procurement rules. A few minor issues may require some adjustments in the Public Procurement Rules of 2008. 59. As regards Transparency: All respondents agreed that PPR 2003 and its associated rules provided an excellent framework for ensuring transparency in public procurement. The contracting / supplying community expressed their satisfaction that

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unsuccessful bidders now had the opportunity to know in clear terms why they could not be awarded a contract and, if not satisfied with a decision, knew how to go about trying to get a grievance addressed. Clearly defined criteria for advertising invitations for bids / proposals removed a widely abused avenue for non-transparent procurement behavior, where advertisements used to appear in little known regional newspapers with the intent to severely curtail competition. The procurement regulations and rules are not entirely immune from abuse. Technical evaluation remains a weak area, where subjective grading by an evaluator is possible, and proof is not easy. The reported experiences appear to confirm that the full benefit of even well-designed laws, regulations, and rules may be obtained only when there is proper enforcement and observance of those laws, and behaviors are changed. 60. Regarding Accountability: Respondents felt that the standardized processes prescribed in the regulations and rules ensured that each procurement generated proper documentary trail – which is a fundamental requirement for establishing accountability. They felt that gross irregularity in public procurement was encouraged earlier because lack of adequate or appropriate documentary evidence made it difficult to prosecute perpetrators. The complaints and appeals process laid down in the rules was generally appreciated as aiding accountability. The effectiveness of the review panel in reversing some inappropriate procurement decisions at the highest levels of government during a particular period drew much public approval. Some respondents however noted the impunity with which the government of the time had ignored some of the decisions of the review panel. Respondents felt that the public procurement law, once effective, would have more teeth than the regulations, and would lead to prosecutions for such violations. 4. Assessment of Risk to Development Outcome Rating: Substantial 61. The intervention itself is in a risk-prone, highly sensitive, and at times politically charged area, with entrenched powerful vested interests. Given that Bangladesh occupied the bottom position for five consecutive years in the CPI of TI, it is evident that the forces for corruption – rent seekers and rent givers – have been pervasive in the country and entrenched in positions of power. Possession of a good set of regulations or laws has never been a guarantee of good governance in this situation, because the corrupt are in a position to break and even rescind laws with impunity. Public procurement reform threatens corruption at its roots, and the development outcome of such reform will be constantly at high risk from the cabal of corrupt politicians, business people, and bureaucrats. However, major changes in the political landscape of the country in January 2007, and subsequent developments to-date, indicate that reforms in governance may not suffer reversals under a future political government; though the level of commitment that those reform measures may then enjoy cannot be predicted.

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5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 62. The Bank responded promptly to GOB request for possible technical assistance in improving the country procurement environment through implementation of the recommendations of CPAR. Though the CPAR was formally published in 2002, its preparation started in 1998 and in late 1999, a draft CPAR was ready that thereafter went through an intensive consultative process. There was no difference in views in principle that the country’s procurement environment has inherent weaknesses at that point in time and that were need for substantial change in terms of its policy as well as capacity development. Key inherent weaknesses include no uniform procurement policy, no central procurement policy handling institution, protracted bureaucratic procedures, rent-seeking behaviors using ambiguous provisions of the bidding documents, vague evaluation criteria, lack of procurement professionals. 63. There was broad consensus on procurement issues such that the CPAR was endorsed in 2001 by an outgoing Government, with the succeeding Government that came to power in 2002 starting to implement its recommendations. The entire project was processed on a fast-track basis; from concept to Board, its processing was completed in nine months time. 64. Initially, the Bank started preparation of a global public sector modernization project for Bangladesh that among others included a small sub-component on improving procurement. Subsequently, it came out during project preparation review that the Government was not very encouraged to undertake such a global public sector modernization project in one go that would call for a massive change in the way the public sector operates including civil service reform which is always contentious, yet needed. And for this reasons, clearly, the Government did not hesitate to pick-up the procurement part and asked the Bank for TA to implement that part as a stand alone project. 65. Project design was well focused, addressing three key areas of problems (policy unit, policy formulation, and capacity development ) through a single intervention. From the view point of identifying reforms and instrument to implement the reform, this project certainly played a pioneering role and is generally appreciated not only by the Government, but other development partners as well. Though the components were well developed in the project document, the PDO and its indicators had some weaknesses in the way those were defined and articulated. More attention to the results framework would have provided a better results framework for this project.

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(b) Quality of Supervision Rating: Moderately Satisfactory 66. Overall, as procurement reform is a long-term process, this first operation was relatively focused on the actual implementation of changes in policies and laws/rules, and on capacity development program. The supervision was field-based and intensive, requiring considerable inputs of staff time and close monitoring to get changes through multiple country agencies. While recognizing the work that has been done by the Team and the difficult context in which the reform was implemented, delayed implementation, with two formal extensions, could be seen as the need for more solidification of broader ownership by some stakeholder ministries who actually carry out procurement, although clearly there were significant ownership of the implementing agency and its associated ministry. 67. The Panel for Quality of Supervision Assessment (QSA7) rated the quality of supervision as Moderately Satisfactory overall, pointing out that the realism and fit of performance indicators could have been improved, and there could have been more effort in developing baselines relevant to key outcomes. The Panel was concerned that some of the performance indicators were not monitored, did not have baselines, and were related to longer-term changes which would need time to measure. The Team accepted this criticism of supervision in the period under evaluation, and noted that there was a second follow-up operation in preparation which would take these observations into account, which has been done in the second project. The Panel also mentioned that Management in particular provided timely and focused comments; however, guidance was apparently inadequate on the need to re-do performance indicators for greater realism and to focus on baselines relevant for key development outcomes (as against outputs).

68. The QSA7 panel viewed that greater country ownership could have been obtained for procurement reform by mainstreaming procurement into broader public sector and public financial management reform. There are no hard conclusions about this as much depends on the context and country environment where such reforms are being implemented. In the case of Bangladesh, inclusion of procurement reform as part of the overall public sector modernization did not work because that project never materialized though the bank put in a lot of efforts and produced substantial documentations. In the longer-term, the approach needs to be opportunistic, rather than waiting for an overarching reform. Subsequent to the procurement reform, recently, the Bank initiated preparation of a Public Financial Management Improvement Program under a Multi-Donor Trust Fund (MDTF) where some procurement related issues have been made its integral part to ensure better sustainability; this includes integration of procurement planning with budget formulation and execution, and fund release mechanism. So, a combined approach for Bangladesh appears yielding positive outcomes on the ground. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory

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69. Despite significant contributions in changing the procurement environment in the country, the rating for overall Bank performance is Moderately Satisfactory, mainly due to the inadequacy in the realism and fit of performance indicators that could have been improved; it also associated with the need for more effort in developing baselines relevant to key outcomes.

70. The project was implemented in an environment where certain quarters of the political leadership, while paying lip-service to procurement reform, were trying hard to derail it. However, the executing implementing ministry (and the successive governments more generally as stated under section 5.2 Borrower Performance]) remained committed throughout the entire project life. Within these constraints, the Bank managed the project successfully, making it a “success story” for the implementation of procurement reform in terms of policy reform, institutional change through establishment of a nodal agency, capacity development and procurement performance tracking. The Bank exerted efforts beyond the Credit’s scope to ensure that procurement reform remains on track. 71. Project design closely followed recommendations made in CPAR 2002, and remained fully aligned with CAS objectives during its lifetime. It correctly selected medium and long term strategic goals so that basic policy, institutional and regulatory frameworks were laid that would support and sustain further reforms and institutional capacity building. 72. The project effectively assimilated international procurement good practices into the local context – in the face of limited international experience and guidance on how to design procurement reform in an environment of outdated public sector administration that was in urgent need of reform in many areas. 73. Yet it must be conceded that: some stated project objectives were not fully consistent with the well staged strategic framework adopted for project design; generation of baseline data and identification of indicators to monitor PDO achievement did not receive required level of attention during project design; and these misalignments and shortcomings did not receive expected corrective actions during supervision. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory. 74. The Government of Bangladesh was generally committed to the project regardless of the change in Governments between the project preparation and implementation. This is one of the very few projects that enjoyed such unbroken support, recognizing the need for an efficient, transparent and accountable procurement system in the country, an essential feature for creating better investment climate and better utilization of aid. Consistent with the CPAR recommendations, the Government was very supportive of the idea of implementing all recommendations of the CPAR through a single project. As a

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clear signal of commitment, before the project was placed for Board’s approval, GOB established CPTU, the procurement policy making unit, appointed its Director General and funded all its staff from its revenue budget. The Government engaged reputed international consultants of ILO, Turin who has an established track record of helping governments to carry out their procurement reforms and capacity development programs. 75. Nevertheless, political interference was there at number of times during implementation of the project. For instance, all invitations for bid were supposed to be advertised directly by the implementing agency as per the PPR, without routing through the Ministry of Information. But, there was High Court injunction for several months on this which eventually was vacated. Also, though as per the PPR, the decision of the independent review panel (complaints handling mechanism) on complaints was binding, the Government in four out of 18 cases reversed the decision of the panel. There were also significant delays in the implementation and decision-making process of the Government. Still, the streamlined procurement approval process with reduced number of layers is facing some problems, specially for contracts with large value requiring approval of the ministry or its higher level (cabinet Committee for Government Purchase- CCGP). (b) Implementing Agency or Agencies Performance Rating: Satisfactory 76. From the view point of commitment of the implementing agency and concerned implementing ministry, the actions were mostly consistent with the DCA, and was noted Satisfactory. Although CPTU has lean staffing, most of them are committed to the goals. This is seen as one of the success factors of this project. During the project life of five years, despite numerous changes in the position of Secretary, IMED (six times) under which CPTU operates, there was no change in the head of the CPTU (Director General) who was also the Project Director, that is, the PD retained his position during the entire project period including preparation of the follow-on reform project and preparation of the first project (total seven years). Even when the head of CPTU/ PD was promoted to higher post (Division Chief, equivalent to Additional Secretary of GOB), at the request of the Bank, GOB agreed to retain him as DG, CPTU and he agreed to continue to serve. This was a rare example in Bangladesh of a committed civil servant who accepted to stay in a position where he could continue to operate as an active agent at the price of foregoing promising available career opportunities. 77. The Ministry of Planning, the administrative ministry of IMED, also provided adequate support to the project. While the State Minister for Planning was directly involved with the project, the Minister for Finance and Planning was responsible for overall guidance. At both level, the project received substantial support in handling complex issues with vested interest groups even within the various ministries of the Government. A case in point is the procurement law that went through extremely arduous bureaucratic process but all the time the Minister for Finance and Planning was determined to get it approved in the cabinet, and eventually he succeeded.

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78. At the late stage of project, there were some changes in project staff which affected to some extent its later part of implementation. However, overall, CPTU managed to implement the project successfully although substantial delays were experienced. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 79. It has been noted in earlier sections that certain vested interest groups within some of the ministries exhibited behaviors not conducive for smooth project implementation, specially as regards procurement law and functioning of independent review panels for addressing complaints. These groups, however, did go along with agreed reforms when goaded. Political opposition to procurement reform became virtually imperceptible after January 2007, though pockets of resistance from the bureaucracy persist. The country now has a fully functional public procurement law supported with detailed rules, and the government must receive credit for this very important accomplishment. 80. IMED played a good supportive role throughout project implementation. It allowed CPTU, the nodal procurement policy and reform organization, full administrative and financial autonomy to fulfill its mandate. Personnel in the CPTU worked tireless hours, even on holidays, to finalize and publish the numerous documentation required to support implementation of PPR 2003, followed by Procurement Act 2006, and Procurement Rules in 2008. They worked with the same zeal in drafting the public procurement law and rules, and in conducting the innumerable discussion sessions and re-drafting exercises that followed. 81. The legal attack against Regulation 21 of PPR 2003 (publication of invitation for bids directly by implementing agency without routing through Ministry of Information) saw CPTU pursuing the case – first with the law ministry and then with the appointed law firm – as if it was a CPTU lawsuit that they were fighting. The donor community has all along emphasized the importance of “ownership” and “champions” for the success of reform oriented development interventions. The way CPTU went about fulfilling its role provides one of the brightest and most satisfying examples of ownership and championing the cause. 82. Now that procurement entities throughout the government are coming on board in adopting the reformed public procurement framework, wide variations in adoption and competence have become evident. Major and sustained effort will be required to raise the performance of the government as a whole to meet the standards of efficiency, transparency and accountability envisaged in the project, a goal being pursued on a larger and more comprehensive scale by the recently approved follow up project.

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6. Lessons Learned 83. The PPRP attained its key objective of introducing the concept of efficiency, transparency, and accountability in the public procurement system through a series of mechanisms, that include among others, establishing a nodal procurement policy agency, adopting a procurement law with associated rules and procedures; building up of procurement management capacity; and introducing a system of tracking procurement performance. The following major lessons have been learned:

(i) Reform is achievable when there is a determined and powerful champion within the Government system even in the face of opposition from different constituencies of the Government with variety of interests. This is more evident when at least the key implementing agency and the concerned ministry owns the broader vision of reform. CPTU of IMED within the MOP thus played the pivotal role in procurement reform.

(ii) In-built institutional mechanism within the Government’s existing framework makes the reform more sustainable in the longer-term, although reform pace may be slow at the beginning. Establishment of CPTU with staff fully funded from GOB’s own revenue budget, as opposed to creating a Project Implementation Unit with project fund, is an illustration of such sustainable mechanism. CPTU’s role is now embedded in the Procurement Act, and is therefore, irreversible.

(iii) Continuity of qualified and experienced Project Director for the initial years of the project, if not for the entire period, can contribute immensely to moving difficult reform agenda forward and while providing better conduit for project implementation.

(iv) Reform actions should be sequenced for a longer-term horizon with clearly laid out phased approach, most likely through a number of interventions/ projects, each with specific objectives, focused within the framework of the project.

(v) Continuous efforts need to be made through successive interventions to institutionalize capacity development with a robust framework for monitoring and evaluation of procurement performance through a set of clearly defined well articulated set of indicators.

(vi) More diversified mix of skills in Bank’s project team and greater intensity of supervision with adequate budget provision will result in better project design and implementation of such projects. Taking this into cognizance, the second follow-on project includes a team comprising multi-sectoral skills (besides fiduciary, it includes power, transport, rural, public sector governance, social, communication), and provisions made for more budgetary resources.

(vii) “Demand side” of reform involving the beneficiary/ civil society is critical to bring in change in the mind-set of various constituencies and to make the system more transparent and accountable, thus contributing to greater effectiveness of the reform towards creating a better investment climate. This notion has been critical in designing the second phase of reform that has a

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separate component on communication, behavioral change and social accountability.

(viii) Linking procurement reform with country’s other broader reform could bring in quicker benefits, such as in the areas of civil service, public finance, and anti-corruption. The current PFM Improvement Program that is under preparation specifically includes the relevant procurement issues such as procurement planning and budgeting, fund release mechanism, etc.

(ix) Focused PDO with measurable performance indicators makes the project design more robust. This has been given due importance while designing the follow-on project, and the PDO has been defined with measurable indicators in the second phase reform project.

(x) Improved monitoring and evaluation mechanism of the results framework helps to track performance of the project. The second project takes this into account, and a specific M&E framework has been put in place, with provisions of six-monthly M&E report through a third party.

7. Comments on Issues Raised by Borrower / Implementing Agencies / Partners (a) Borrower / implementing agencies 84. There were no issues raised by borrower / implementing agencies. (b) Cofinanciers 85. There were no co-financiers. (c) Other partners and stakeholders 86. There were no issues raised by other partners and stakeholders.

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Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate (USD millions)

Actual / Latest Estimate (USD

millions)

Percentage of Appraisal

Establishing Central Procurement Technical Unit 1.25 0.94 75.20

Implementing Procurement Reforms and Rules/ Procedures 1.59 1.56 98.11

Improving Procurement management capacity 2.07 2.67 128.98

Total Baseline Cost 4.91 Physical Contingencies 0.00 0.00 0.00 Price Contingencies 0.002 0.00 0.00

Total Project Costs 4.91 5.17 Front-end fee PPF 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00

Total Financing Required 4.91 5.17 105.29 (b) Financing

Source of Funds Type of Cofinancing

Appraisal Estimate

(USD millions)

Actual / Latest

Estimate (USD

millions)

Percentage of Appraisal

Borrower 0.46 0.20 43.47 International Development Association (IDA) 4.45 4.97 111.68

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Annex 2. Outputs by Component Component 1: Establishing a Central Procurement Technical Unit (CPTU) Output: ⎯ GOB established CPTU in April 2002 as a unit of IMED with revenue budget. ⎯ A total of 19 staff, including the Director General and two Directors were on board

before Credit effectiveness, and worked for the entire project period with satisfactory performance.

⎯ IMED signed in June 2002 a service agreement with the International Training Center of the ILO, Turin for procurement reform and procurement training.

Component 2: Implementing Public Procurement Reforms and Rules / Procedures Output 1: improving economy and efficiency The government issued the Public Procurement Regulations 2003 (PPR 2003) through a Gazette notification on 1 October 2003. PPR 2003 is a set of nationally applicable procurement rules and procedures modeled after international good practices of procurement – including the World Bank Guidelines and UNCITRAL. The government subsequently published the Procedures for Implementation of the Public Procurement Regulations 2003 in September 2004, and the Public Procurement Processing and Approval Procedure (PPPAP) in October 2004. The government issued the Public Procurement Act 2006 through a Gazette notification in July 2006. It published the Public Procurement Rules 2008 in January 2008, on the basis of which it made the Public Procurement Act 2006 effective from 31 January 2008. CPTU has published, finalized or drafted the following standard bidding documents listed under Schedule 1 of the Public Procurement Rules 2008: Goods and related services ⎯ Standard Tender Document for restricted or open tender, up to taka 2.5 million –

domestic (form PG 2) ⎯ Standard Tender Document for open tender, above taka 2.5 million – domestic (form

PG 3) Works and physical services ⎯ Standard Request for Quotation, up to taka 0.5 million – domestic, international (form

PW 1) ⎯ Standard Tender Document for restricted or open tender, up to taka 10 million –

domestic (form PW 2)

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⎯ Standard Tender Document for open tender, without prequalification, up to taka 350 million – domestic (form PW 3)

⎯ Standard Tender Document for open tender for design and construction, above taka 350 million – domestic (form PW 4)

⎯ Standard Prequalification Document, above taka 350 million – domestic (form PQW 4)

Intellectual and professional services ⎯ Request for Proposal for selecting community services organization – domestic (form

PS 1) ⎯ Request for Proposal for selecting NGO – domestic (form PS 2) ⎯ Request for Application for selection of lump-sum consultant – domestic (form PS 3) ⎯ Request for Application for selection of time-based consultant – domestic (form PS 4) ⎯ Standard Request for Proposal for selecting consultant firm, simple lump-sum

contract up to taka 10 million – domestic (form PS 5) ⎯ Standard Request for Proposal for selecting consultant firm, simple time-based

contract up to taka 10 million – domestic (form PS 6) ⎯ Standard Request for Proposal for selecting consultant firm, complex lump-sum

contract above taka 10 million – domestic (form PS 7) ⎯ Standard Request for Proposal for selecting consultant firm, complex time-based

contract above taka 10 million – domestic (form PS 8) ⎯ Request for Proposal for non-consultancy services, all amounts – domestic (form

PS 13) Evaluation (Drafts) ⎯ Format and instructions for opening tender and preparing evaluation report for goods

and works (form EVWG) ⎯ Format and instructions for opening tender and preparing evaluation report for

consultancy services (form EVS) ⎯ Format and instructions for evaluation committee to prepare summary titled

"procurement proposal" for approving authority (form PAP) ⎯ Procurement post review process (form RPP) Output 2: improving transparency CPTU is collecting and publishing contract award information from public sector entities of contracts valued at US$200,000 and above. For the same threshold, CPTU is also publishing the invitations for bids, received from the implementing agencies. All invitation for bids are directly published in the newspapers of wide circulation (one Bengali and one English) by the implementing agencies. Public Procurement Act 2006 contains formal provisions for direct advertisement in print and electronic media, both nationally and internationally.

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Major procuring entities maintain their own websites which, along with other information specific to the organization, contain tender notices. The CPTU website contains links to tender notices of a number of organizations, as well as links to standard bidding documents and standard request for proposals. These developments are the precursors of a public procurement website – which were envisaged under the project but are now slated for implementation under the follow-on project. The Public Procurement Act 2006 contains specific clauses to support introduction of electronic procurement system. The provision of inclusion of independent expert in proposal evaluation committee has been partially implemented. The Public Procurement Rules 2008 mandates inclusion in tender evaluation committees of external members with required knowledge, and contains provision for selecting external members from universities or reputable professional bodies. Output 3: improving accountability: The government issued in October 2004 the Public Procurement Processing and Approval Process for all public procurement covered under the Public Procurement Regulations 2003 with the purpose of streamlining those. The PPPAP has been embodied in the Public Procurement Rules 2008 and specifies processing and approving entities / authorities with respective time-lines for different types and magnitudes of procurement. This has greatly helped in streamlining the procurement approval process. The government, through the Finance Division, published: Partial modification of Sub-delegation of financial powers order (revenue budget) in August 2004; Partial modification of delegation of financial powers for development projects in July 2004; and Delegation of Financial Powers for Corporations, Autonomous, Semi-Autonomous bodies in September 2004. The government constituted in August 2005 a Review Panel for Complaints and Appeals to address bidders’ complaints and appeals, and increased the number to three in April 2006. Each Review Panel consists of three experts selected from a list of distinguished personnel and is located in the CPTU (one retired senior civil servant, one legal practitioner, and one member from business apex body, all with experience in handling procurement matters). The Public Procurement Act/Rules made the decision of the review panel as binding upon parties. The Public Procurement Rules 2008 specifies the requirements and conditions of periodically carrying out post-procurement review by independent consultants, and submission of the review report to CPTU. The Public Procurement Act 2006 contains specific provisions for preventing and dealing with professional misconduct of procurement professionals. The Code of Ethics for Public Procurement appears as Schedule 13 of the Public Procurement Rules 2008. CPTU has drafted a full set of code of conduct for public procurement staff and code of

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ethics for business communities (suppliers, contractors, and consultants) which the government is likely to approve during the tenure of the follow on project. Component 3: Improving Procurement Management Capacity

• GOB developed a critical mass of 25 national procurement trainers, who are now providing their services as associate procurement trainers.

• Over 1800 staff from over 276 agencies have been provided three-week procurement training in goods, works, and services. This exceeded the project target of 1600 staff.

• 88 senior level public officials (ministry and agency) and about 150 mid-level ministerial officials have been provided short-training.

• About 100 auditors have been trained through customized short-courses. • CPTU established a website that contains all policy related informations and

publications including Act/ Rules/ SBDs/ SRFPs • A centralized procurement performance tracking system (MIS) has been

established in CPTU that is being piloted with two implementing agencies. In the follow-up project, this will be expanded to a fully functional e-procurement system.

• Two MIS reports have already been published at CPTU’s website. Annex 3. Economic and Financial Analysis Economic and financial analyses were not carried out during appraisal since this is a TA project.

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Annex 4. Bank Lending and Implementation Support / Supervision Processes (a) Task Team members

Names Title Unit Responsibility/Specialty

Lending Zafrul Islam Lead Procurement Specialist SARPS TTL Suraiya Zannath Senior Financial Management Specialist SARFM FM Mohammad Sayeed Disbursement Officer (retired) SARPS Disbursement Ivonna Kratnyski Senior FM Specialist LOA Loan Kishor Uprety Senior Counsel LEG Legal Raghavan Srinivasan Consultant SARPS Proc. Policy Md Mokhlesur Rahman Consultant SARPS Proj. preparation Md. Khaled Jahangir Procurement Assistant SARPS Support service Supervision/ICR Zafrul Islam Lead procurement Specialist SARPS TTL Burhanuddin Ahmed Senior Financial Management Specialist SARFM FM Jose-Manuel Bassat Senior Communications Officer EXTCD Communication Marghoob Bin Hussein Procurement Specialist SARPS Procurement Mohammad Sayeed Disbursement Officer SARFM Disbursement Tanvir Hossain Procurement Specialist SARPS e-bidding Md Abul Kalam Khalifa Consultant SARPS Mid-term study Narayan D Sharma Consultant SARPS Mid-term study Peter-Armin Trepte Consultant SARPS Capacity dev. Shejuti A Ahmed Research Assistant SARPS Analyt. support Sushil Kumar Bahl Senior Procurement Specialist SARPS Mid-term reviewFlorent Agueh Consultant SARPS ICR Syed Ahmed Ali Consultant SARPS ICR

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(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks USD Thousands (including

travel and consultant costs)Lending

FY02 13.83 49.20 FY03 0.00

Total: 13.83 49.20 Supervision/ICR

FY03 8.54 12.51 FY04 6.08 31.76 FY05 7.93 11.00 FY06 8.88 48.64 FY07 9.10 22.22 FY08 7.54 31.18

Total: 48.07 157.31

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Annex 5. Beneficiary Survey Results Officials directly involved with procurement planning and execution in major procuring entities under the ministries of Communication; Power, Energy and Mineral Resources; Education; Water Resources; Health and Family Welfare; and Local Government, Rural Development and Co-operatives were interviewed, as were major contractors and suppliers of those entities. The purpose of the interviews was to obtain in-depth analysis of those individuals who had first-hand working experience with public procurement during both the pre- and post-reform eras and who could provide useful pointers about what would need to be done to take public procurement reform forward during the second phase of the project. Additionally, selected officials of the Ministry of Planning; Ministry of Finance; and the office of the Controller General of Accounts were interviewed to elicit information about the planning, budgeting and accounting aspects of public procurement, since these have direct bearing on the quality and efficiency of public procurement. Practical experience of the procuring, contracting and supplying community with reforms in public procurement is limited to the Public Procurement Regulations of 2003 (PPR 2003) because the Public Procurement Act of 2006 (PPA 2006) became effective only from January 31 of 2008. Major parts of the interview dwelt on efficiency, transparency and accountability in public procurement – the development objectives of the project. Responses received on these aspects are summarized in the following paragraphs. Efficiency: Most respondents felt that efficiency in public procurement had improved as a result of PPR 2003. In many instances, donors are now permitting the use of the national procurement rules, and accepting reports in a single format agreed beforehand. Before that, different procuring entities followed their own rules which were different from one another. Bidders had to prepare their documents in different ways for different organizations. Desk officers and evaluation committees had to spend a lot of time making sure that procurement rules of each donor were satisfied. Desk officers also spent a great deal of time preparing multiple reports for the same procurement in the respective formats of each individual donor. Almost all respondents agreed that the bid evaluation regime under PPR 2003 had the potential to assure better value for money – which is the other measure of efficiency in procurement. However, some respondents felt that procurement funded with the government’s own money used to be processed faster when contracts could be awarded solely on the basis of price. The current requirement of determining responsiveness and commercial qualification of bidder slows down the process.

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Respondents agreed that the delegation of approving authority made under PPR 2003, and the sub-delegation of that authority within organizations, speeded up the approval process. Many of them however observed that approving authorities were generally taking much longer than the timeframes prescribed under the regulations; this is specially true for large value contracts where still it takes significant time and delays the award process. The propensity to push decisions to higher-than-necessary levels continues, which lengthens the time taken for approval. There is a strong sense and recommendations that the delegated financial authority at the agency level need to be improved substantially to expedite procurement process. Bidders often abuse the complaint address mechanism provided in the regulations. They tend to take their complaints to levels of authority that are higher than those prescribed in the regulations. Addressing complaints therefore takes longer than it otherwise would have. Unsuccessful bidders sometimes lodge frivolous complaints – not with the purpose of gaining anything for themselves but to make things difficult for the successful bidder. Time lost due to these factors translates to loss of efficiency. Members of the contracting / supplying community often complained that procuring entities uniformly provide them the minimum time prescribed in the regulations for preparing bidding documents, without any consideration to the complexity or size of the package. Inadequate preparation time increases the risk of reduced competition and mistakes in submitted documents, which ultimately increases the possibility of re-tender – with its concomitant wastages, translating to loss in procurement efficiency. It is also common practice that procuring entities enforce the provision of realizing penalties from contractors / suppliers for execution / supply delays, but rarely use the provision for compensating contractors / suppliers for payment delays. It is common practice in the government to explicitly delete from pro-forma contracts all references to payment of compensation to contractors / suppliers before finalizing those. However, delays in payment are common in government procurement. Refund of security deposit / retention money is also routinely delayed or not made at all. Contractors / suppliers perforce build in apprehended losses due to the above into their bid prices, reducing the value for money in public procurement. There have been occasions when members of some bid evaluation committee could not arrive at a consensus and the procurement had to be re-bid. More commonly, external members of bid evaluation committees are unable to attend scheduled committee meetings – causing those meetings to be reconvened. Both situations lengthen the procurement processing time. One organization has resolved the second problem by having more than the recommended minimum number of external members in its bid evaluation committees, thereby better ensuring that at least the minimum required number of external members will be present in committee meetings. The processes of budget allocation, budget approval, and fund release are commonly found to be out of step with procurement cycles and procurement requirements of

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different government organizations. Non-availability of required funds – at required times and in required quantities – undermine efficiency in public procurement. In conclusion it may be said that PPR 2003, and the subsequent PPA 2006, contain ample provisions for enhancing efficiency in public procurement – both in terms of time and money. Systemic defects persist that take away those efficiency gains. It has been demonstrated that some of the problems can be effectively addressed by the procuring entities themselves, or by their controlling ministries, simply through greater respect for and sincerity towards current procurement rules. A few issues may require some adjustments in the Public Procurement Rules of 2008. Addressing a number of these systemic defects may also require reforms in the Finance Rules and the Rules of Business of the government. Transparency: All respondents agreed that PPR 2003 and its associated rules provided an excellent framework for ensuring transparency in public procurement. The contracting / supplying community expressed their satisfaction that unsuccessful bidders now had the opportunity to know in clear terms why they could not be awarded a contract and, if not satisfied with a decision, knew how to go about trying to get a grievance addressed. The provisions for technical evaluation – on the basis of samples where needed, and for pre- and / or post-shipment inspection – provided the procuring entity with clear information about expected quality and performance of the product, and the opportunity to ensure that received products conformed to what the supplier had promised. Major procuring entities were maintaining their own websites, and notices inviting bids / proposals appeared regularly on their websites in conformity with the requirements of procurement regulations. Clearly defined criteria for advertising invitations for bids / proposals removed a widely abused avenue for non-transparent procurement behavior, where advertisements used to appear in little known regional newspapers with the intent to severely curtail competition. The procurement regulations and rules are not entirely immune from abuse. Technical evaluation remains a weak area, where subjective grading by an evaluator is possible, and proof is not easy. There are instances where a comparatively small and identifiable set of desk officers carry out the actual evaluation of bids / proposals – contrary to the requirement that members of the bid evaluation committee will have to perform this task by themselves. This situation makes it easier to exert improper influence. The regulations clearly mention proscribed procurement behavior such as collusion, coercion, etc and the penalties for the same. One area that received particular attention while framing the rules was that of ‘multiple dropping’ in exceptional circumstances with the permission of the Head of the Procuring Entity– allowing the submission of bids at more than one location that are separated geographically. One group of respondents believed that when multiple dropping is allowed, it increases the scope for collusion.

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Another group believed that when multiple dropping is prohibited, it discourages competition and increases the scope for coercion. A satisfactory solution to this controversy is still being sought. However, for all Bank-financed projects, such submission of bids at more than one location is not acceptable. Respondents were aware that a pre-reform system called ‘enlistment’ offered a formal way to gradually build up the qualifications of contractors in public sector infrastructure work. But most of them were also aware that the system suffered intense abuse, and engendered corruption. Sub-contracting may be an option to consider. The reported experiences appear to confirm that the full benefit of even well-designed laws, regulations, and rules may be obtained only when there is proper enforcement and observance of those laws, and the desk officers change their behavior. Accountability: Respondents felt that the standardized processes prescribed in the regulations and rules ensured that each procurement generated proper documentary trail – which is a fundamental requirement for establishing accountability. They felt that gross irregularity in public procurement was encouraged earlier because lack of adequate or appropriate documentary evidence made it difficult to prosecute perpetrators. They also appreciated the requirement that bid evaluation committee members will have to individually sign a declaration of impartiality; and collectively certify that the respective evaluation report conformed to regulations, was factually complete and accurate, and that material information had not been suppressed. The complaints and appeals process laid down in the rules was generally appreciated as aiding accountability. The effectiveness of the review panel in reversing some inappropriate procurement decisions at the highest levels of government during a particular period drew much public approval. Some respondents however noted the impunity with which the government of the time had ignored some of the decisions of the review panel. Respondents felt that the public procurement law, once effective, would have more teeth than the regulations, and would lead to prosecutions for such violations.

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Annex 6. Stakeholder Workshop Report and Results No plan for holding such workshops on the ICR at this stage. The second phase of reform is expected to take into account many of the lessons learned through this project.

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Annex 7. Summary of Borrower's Comments on Draft ICR

Government of the People's Republic of Bangladesh Ministry of Planning

Implementation Monitoring & Evaluation Division (IMED) Central Procurement Technical Unit (CPTU)

Sher-e-Bangla Nagar, Dhaka-1207 Tel: 9144252-3, Fax: 9144250, E-mail: info@cptu.gov.bd; Website: www.cptu.gov.bd

The draft ICR on Public Procurement Reform Project (PPRP) has been reviewed by the CPTU. The Project outcomes in the Rating Summary have conclusively been termed as 'Moderately Satisfactory'. But, if we go on a comprehensive review of the ICR statements- the indicators based actual value achievement show highly satisfactory in some cases, and satisfactory in many cases with a few exceptions of moderately satisfactory. However, the following are the observations on the DICR: 1. Under PDO indicators of Results Framework Analysis: (i) The sub-indicator 1, referring timeliness of awarding contract, the achievement is

almost 90%. (ii) In case of sub-indicator 2- the competitiveness increased in tendering which is

tending the cost down, but due to the lack of base line data it may not be comparable and judged properly. But, as a whole the trend is satisfactory.

(iii) In case of indicator 3- the number of mis-procurement cases and extent of

corruption reduced. 2. Under the Intermediate outcome indicators: (i) The complains of sub-indicator 1, the satisfaction by the Bank has clearly stated

in ICR for timely preparation of PPR & its effectiveness, preparation & Issue of SBDs, preparation and approval of draft law in July, 2006 and being made it effective in January 2008.

(ii) In case of development of national trainers and training the ICR comments are

very much satisfactory due to fulfillment and even exceeding the numbers. (iii) In case of establishment of MIS at CPTU and making it fully functionalized the

comments in ICR is satisfactory. 3. In case of Disbursement Profile the trend shown in the graph implies the actual expenditure is a bit higher from the revised expenditure estimation which also implies full satisfaction.

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4. Apart from all those positive findings and comments stated in ICR the following observations may be cite to comment the project execution as 'Satisfactory' as follows: (i) In para 30, the first sentence of the ICR stated that the outcome and attainment of

objective as satisfactory. It also agreed to the reduction in corruption index. So, as the statement clearly says that the outcome and attainment of objectives is satisfactory then the actual project achievement should be commented as 'satisfactory'.

(ii) In para 50, regarding the achievement of immediate objectives and related outputs

the ICR stated the full satisfaction (about all 3 components) which also justifies the rating of the project as 'Satisfactory'.

(iii) The para 53, the statement itself agrees that due to very optimistic

indicators/targets of the project the complete achievement was not possible within the project life and also some achievement could not properly judged as some of the indicators were not measurable. So that should not be the reasoning for terming the achievement 'moderately satisfactory' rather than 'satisfactory'.

(iv) In para 63; the statement accused the Banks performance as Moderately

Satisfactory showing the causes of inadequacy of appropriate performance indicators and insufficient baseline relevant information. But, it is clearly understood that in spite of both parties shortcoming in some cases, WB has given tremendous effort to obviate the problem to eliminate all constraints for successful Implementation of the project.

(v) In case of output 2 (Improving transparency), it should correctly mentioned in

ICR that CPTU now publishing 50 lakhs of tender value documents in website as lowest threshold.

(vi) Though the ICR has given a total impression of cost expenditure, but it would be

better if it adds a component wise expenditure statement in ICR. (vii) In case of output 3, the delegation of financial power further enhanced at different

levels in May'2008. This should correctly be stated in the ICR. (viii) During assessment of the project the beneficiary survey is being done on

subjective and selective basis. But for the actual evaluation, it is better to evaluate the whole thing in holistic but summarized/specific manner.

(ix) The undertaking of the 2nd phase project (PPRP-II) itself states the satisfactory

performance of the 1st phase project implementation. This 2nd phase project has been taken for sustainability of the reform process and enhancing the satisfactory level of performance to a highly satisfactory level.

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5. Finally, with the utmost effort of both the parties i,e. WB & GOB this project was executed and both had deployed their all effort knowledge, resources and time. Above all the statement in many areas itself showed satisfaction regarding project execution, objective and outcome achievement. So, for better judgment and inspiration for 2nd phase implementation of the project the performance of the 1st phase execution should better be re-termed as 'Satisfactory'.

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Annex 8. Comments of Cofinanciers and Other Partners / Stakeholders This project did not have cofinanciers or other partners / stakeholders.

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Annex 9. List of Supporting Documents The World Bank 2001: Country Financial Accountability Assessment Report

The World Bank 2002: Bangladesh Country Procurement Assessment Report

The World Bank 2002: Public Procurement Reform Project- Project Appraisal Document

The World Bank 2005: BD: Public Expenditure, FM, and Procurement Review (Draft)

The World Bank 2005: Report on Baseline Indicator System

The World Bank 2005: Benchmark and Procurement Environment Assessment (Draft)

The World Bank 2006: Bangladesh Country Assistance Strategy.

The World Bank 2006: Quality of Supervision Assessment Report (QSA7)

The World Bank 2006 BD: Country Assistance Strategy

The World Bank 2002-2007: Implementation Status Reports

The World Bank 2007: Operational Risk Assessment of RHD

The World Bank 2007: Beneficiary Survey Report

The World Bank 2007: Public Procurement Reform Project II- Appraisal Document

The World Bank 2007 Capacity Assessment of CPTU/ IMED

The World Bank 2007 Operational Risk Assessment of RHD- Draft Report

The World Bank 2007 Behavioral Change Communication & Social Accountability- Draft Policy Note

The World Bank 2007 Strategy for Procurement Capacity Development- Draft Policy Note

The World Bank 2007 Strengthening Monitoring & Evaluation at Sectors- Draft NLTA

C. Other

ADB: Hand Book on Problems in Procurement for Project Financed by ADB. Government of Bangladesh 2005, National Strategy for Accelerated Poverty Reduction RHD, LGED, REB & BWDB: Delegation of Financial Powers for Development Projects. LGED: Quarterly Report on Procurement Risk Mitigation Plan

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