Innovative Approaches to Community Based Procurement in South Asia

A.K.Kalesh Kumar & Payal Malik MadanSouth Asia Regional Procurement Services

2010 Fiduciary Forum

Background

Based on a 2009 study sponsoredBy WB-Norwegian GovernanceTrust Fund in 3 CDD Projects and one Local Self Government System in India, and

Outcomes of a South Asia Regional Workshop on “ Community Based Procurement: Learning from Field” organised in New Delhi, India in October 2009

Structure of Presentation

•Part I- Findings on Procurement Performance and Enabling Factors

•Part II- Innovations in Community Based Procurement identified by the study

•Part III- Panel shares experiences and open session for questions

Stages Selection Criteria Sample

Project Projects with CDD component Duration of projects and sib-projects Regional variations State responsiveness to Participate in the study

MPDPIPClosed

(2000-08)

APIKPActive

(2003-09)

TNVKPActive

(2005-11)

Local Self GovernmentsUnder Kerala PRI

(on going)

Districts Distance from the State capital (on the

assumption that distance and development inputs are linked)

ChattarpurRewa

Ananthpur, Medak, Vizag Cuddalore,Thiruvarur

ThiruvananthapuramThrissur

Block Distance from the District head-quarters (based

on the assumption that distance and development inputs are linked)

2 2 2 2

Village Distance from the district head-quarters (based

on the assumption that distance and development inputs are linked)

20 13 16 12

Sub-projects Sub projects that met all Projects Completed and audited sub-projects Distance from district Headquarters; Demonstrated group participation Sub projects

where beneficiaries(i) Participated on all phases of the project cycle;(ii) Had direct control over project funds; and(iii) Received technical and social facilitation

20

Z category sub projects delivering common goods and services

13

Sub projects delivering common goods and services;

leading to income generation,

encouraging livelihood at family and individual level

16

Sub projects delivering common goods and services;

leading to income generation,

encouraging livelihood at family and individual level

12

Sub projects delivering common goods and services;

Study Scope

Coverage limited to 3 livelihoods projects and 1 Local Self Govt. System

Examined only completed sub projects and hence findings, ratings and conclusions influenced by this purposive selection

Limited study sample, difficulty to draw conclusions on larger, project wide scale

Study Limitations

Study Methodology

Qualitative study

Semi Structured Questionnaires used for measuring procurement performance, community participation, need prioritization, capacity enhancement, governance, and sustainability in the subprojects

Rating Scale

On a scale of 1 to 5. on a worst and best case scenario, all performances were rated. The best practice scenario depicts what is envisaged as per the project manual or Legal agreements and Procurement/ Community operation Manuals.

Study Methodology

Models of Community Based Procurement found by Study

www.CDD details www.CBP details

Category I- Family Based Private asset Generating Procurement

Category III- NGO Based Procurement Support Agency Type Procurement for CDD Implementation

Category IV-Third Party Contracted but community monitored Procurement

Category II-Village Organization Based Force Account Type Procurement

Involvement of Community in Procurement Processes

- Designing subprojects

- Decision making for selection of subprojects

- Appointing committees responsible for Procurement and Financial Management

- Managing Funds

- Reviewing results through internal (Social Audit Committee) and external audits.

- Making payments for procured items

- Operation and Maintenance of Subproject

Procurement Performance against Procurement Cycle by Sub projects

Communities excel in identifying needs and in the planning stages

Performance on market search for bidders, tendering, tender opening and evaluation was poor

Participation of stakeholders for ensuring right procurement outcome seen in high rating in Awards and Completion

Despite poor performance in certain stages, outcomes were good and high scores were seen for completion, project implementation quality and VfM, compared to conventional procurement cycle,

Procurement Rating

Savings between 12% - 56% as compared to PWD/RES estimates

Average time taken for completion of subprojects is 6 Months or less, saving 40 – 50% in time

Value for Money Analysis in Sub Projects

For the most part, no contractors were involved- resulted in savings of profits and some of the taxes Savings in costs generated through efficient use of raw material through timely delivery, reducing waste and saving on storage costs, volunteer community labor and labor at lower than market rates Practice of Relationship Based Procurement lead to further saving and post implementation support

How CBP Delivers VfM and Successful Outcomes

Near universal usage of the facilities and assets

Continuous involvement of community groups in O&M of the facilities-user rates and monthly meets

Success and sustainability directly related to the intensity of the need addressed at the

Community’s end

Ownership & Sustainability

Rating on Governance and Accountability

Important indicators of good governance include participation in Decision-making and implementation, accountability, transparency,Responsiveness, efficiency and equity

A Flexible FM arrangement: rating in subprojects

Funds were directly channeled into the hands of communities with a strong emphasis on information disclosure and transparency especially for project budgets, contracting and procurement

Broad categories of funds were made available and communities could use their discretion to make consensual investments

To generate cost savings, improve ownership and accountability communities were expected to contribute a fixed share of the project cost.

Findings on Financial Management Arrangement

Findings on Financial Management Arrangement Funds were disbursed in multiple tranches upon completion of milestones.

Other than external audits, local level finance and audit committees constituting community beneficiaries verified utilization.

These arrangements have instilled confidence and built Community capacity to regulate fund flow, plan, budget and procure to manage Sound credit management and access to credit from banks

Enabling Factors-an effective entry point activity for gaining confidence of the target poor-use of participatory tools in target group identification - use of positive discrimination measures like mandated membership of women in decision making bodies-ensuring most strategic need for the group as a whole is prioritized- choosing a good facilitation team- intensive capacity building of the beneficiaries - ensuring consensual decision making in procurement and financial management - free access to information, documentation and record keeping for the group, families and village

20

PART IIInnovations in

Community Based Procurement

RBP is a recent concept: In RBP, the communities establish a mutually beneficial and accountable commercial relationship with the supplier. RBP Approach argue that risk and crisis can be better managed and resolved through mutual dependability.

In the sub projects reviewed by the study, the community opting for RBP based on trust and inter dependability shown to have ensured quality of materials, Just-in-Time Supply and efficient post delivery servicing.

Relationship Based Procurement (RBP) influencing Procurement Outcomes

RBP in Action…Working with Suppliers to Achieve Innovative and Cost Effective SolutionsSome 100 kms. away from district head quarters, the only available resources available in Obari are the natural resources: the river, land and forest

As part MPDPIP, the income generation activity for SHG planned was:using the river water for irrigation of the surrounding lands. However, the challenges were, fields were at a height of 6 meters and 1.5 km away from the river.

SHG approached vendors with this unique requirement. Among 3 Suppliers approached, Sanjay Agrico, the villagers took the challenge of assembling pump manufactured by Greaves and rail pipes manufactured by Reliance.

RBP in Action… Working with Suppliers to Achieve Innovative and Cost Effective Solutions

The pump failed on the day of inauguration! Supplier through in-house R&D came up with another solution which was a modified auto rickshaw engine which had the capacity to pump the water up to the needed height. Surprisingly, this unconventional solution worked!

The SHG had successfully implemented the work with nearly a 50% cost savings, passed on by Supplier (RBP working!) and the Supplier had created a credible market where private individuals are opting for their innovative solution, not a registered trade mark (again RBP at work!)

RBP in Action… A Buy Back Arrangement Delivering VfM for Silk Weavers

Mahan Laxmi SHG started the livelihoods initiative by extending $100 loans to 15 poor women members of the village depended on their household looms

The next big step was SHG deciding to join Silk Federation Group. “…there was resource mapping done in the village and we decided to federate as group to work for ourselves and not for the Muddalali (Moneylender)…”who first loaned money to the poor to buy raw material from him and then bought back their produce for servicing the interest on the original loan!

As some members wanted the traditional machines, and others the Jacobean ones, SHG did a market survey to get rate estimates to guide the members for these individual purchases. A manufacturer of machinesand yarn was identified through this process.

in Action… A Buy Back Arrangement Delivering VfM for Silk Weavers

RBPOffer to procure yarn in bulk and directing new members for machines were the negotiation points for SHG

A weekly run of service mechanic, free oil and servicing and delivery of yarn at door step were the counter offers from the supplier

A 30% savings on cost of yarn and the good manners of the supplier and service mechanic resulted in an instant establishment of Relationship Based ProcurementSHG has proudly announced that they supply to 2 leading Silk Saree Show Rooms in Chennai- Chennai Silks and Mudra Sons- another spin off from the good business SHG had offered the Supplier…And the Procurement Committee still travels to the city- Trichy every month to verify the rates!!

26

Innovations in Community Procurement:Posters replacing Manual for Community

Entry Point Activity (EPA)Entry Point Activities chosen to generate interest, participation amongst target communities and establish project credibility through addressing dire needs.

-In MPDPIP a ‘Z’ Category of subproject that provided strategic Public Goods and Services;

-In TNERP entry point intervention focused on services for the Disabled

-In APIKP entry point was revival of erstwhile SHGs.

Innovations in Community Procurement“Parity Charts” help Community and Suppliers to engage in

28

The project team organized village and district level meetings with suppliers to establish linkages, understand product specifications and their prices.

Selected community representatives from all villages were invited to identify and shortlist their needs. Local suppliers were identified and listed with the positive and negative aspects of their quality and service

Local suppliers were identified and listed with the positive and negative aspects of their quality and service.

Invitations were sent to the short listed suppliers for a publicdemonstration and negotiations.

The suppliers presented their products, prices, offers, service arrangements etc. Factors like service, guarantee,transportation cost, and payment conditions were noted. A comparative Parity Chart was made after these meetings, to facilitate decision-making bythe community members.

Innovations in Community Procurement

29

“Parity Charts” help Community and Suppliers to engage in

Highly motivated and trained Implementation team Institutionalized through:

- State of art recruitment leading to selection

- Subsequent progressive trainings in areas of attitude, participatory approach to development

- Field exposures

-Incentives for staff retention

Capacity Building, Technical Support & facilitationBuilding an enabling environment through right facilitation team

In all villages in Tamilnadu a multi color poster on whom and how to approach for complaints is placed at important areas

The Problem Tree has name, telephone number of officer and time for response to be received by the complainant. Next escalation point with similar details are Also given up to State Project Director

If the complaint is not addressed even at the SPD level, the Last recourse msited in all villages across the state is mmunshi@worldbank.org!- the TTL with a timeline of 14 days to respond!!

A Problem Tree ensures better Governance and Accountability in TN Villages

Credits