Now that I know the law, now what?

Why public procurement should be important to us?

Public procurement is a huge market that impacts on economic development

World Context• Government procurement of OECD member countries

is 19.6% of GDP or USD 4,733 billion (1998). It is 14.5% of GDP for non-member countries or USD 816 billion

• Total government procurement worldwide is 82.3% of world merchandise and commercial services exports (1998).

Country Context• Around 30% of GDP is circulated in Public procurement

of MONGOLIA

Procurement performance in 2011 (in bln MNT)

NCB - 963.4 88.7 %

Com 49.6 6.1%

DC 56.15.2%

LB -17.21.6%

NCB-National Competitive Bidding, LB-Limited bidding, DC-Direct contracting, Com-Comparison

Inefficiencies in procurement…• Undermines the ability of states to respond to society’s

needs. It compromises the government’s ability to deliver public goods and services, or laws and regulations

• The most vulnerable members of society (e.g. poor) are most affected.– More reliant of public services (health, education, water)– Less capable to pay– Pay higher share of disposable income– Distort relationship with authorities, e.g., lose confidence in

politicians and judicial system– Less capable to fight (knowledge, money, fear)

What procurement inefficiencies do to public services?

• Education– Shortage in school buildings and textbooks for

school children• Public Works– Substandard roads– Unsafe school buildings

• Health– Highly priced medicines

Education

Unfinished school buildingsThis school building cost: MNT/USD

Health

Highly priced medicinesMedicines in this aimag cost: MNT/USD while in anotherAimag, the same medicines cost MNT/USD

Public Works

Poor quality of roadsThis road was built on ? and in just a few months,It looks like this.

PROCUREMENT INEFFICIENCIES

Example of procurement irregularities

• Officials not involved in procurement recommend or insist on a particular agent or consultant (i.e. selection process not followed)

• Unexplained or unusual delays in the procurement process (kickback amounts are negotiated, ways are found to work around project controls)

How close monitoring of the process can detect such practices?

• Officials not involved in procurement recommend or insist on a particular agent or consultant (i.e. selection process not followed)

• Formulation of technical specifications that favor a specific bidder

• Winning bidder is not among those who participated in the process

• Winning bidder did not give the best offer to government

How close monitoring of the process can detect such practices?

• Unexplained or unusual delays in the procurement process (kickback amounts are negotiated, ways are found to work around project controls)

• Procedural rules are not followed (time limits per procurement stage and logical flow)

• Prolonged evaluation even when there is a clear winner based on best bid offer criteria

• Post-qualification of potential winning bidder is pursued on extraneous grounds with clear intent of disqualifying bidder to favor next-ranked bidder

RED FLAGS IN THE DIFFERENT PROCUREMENT STAGES

Procurement Process1. Procurement planning2. Preparation of bid documents3. Public announcement of invitations for

tendering4. Pre-bid meeting and clarification of bids5. Submission of tenders6. Opening of tenders7. Review of tenders8. Evaluation of tenders9. Authorization to enter into a contract

Procurement Planning and Preparation of Bid documents

• Procurement projects identified are not needed• Project specifications are designed to fit a specific

bidder’s profile making bidder sole provider of service/project to be procured (Tailor-fitting)

• Bid specifications are too narrow or too vague• Wrong size/ packaging of contracts• Poor or failure in planning therefore more “urgent/

emergency” purchases than open competitive bidding• Bid documents – evaluation criteria and methodology

results in unlevel playing field

Public Announcements

• Unreasonable pre-qualification requirements

• No proper advertising of the bids

• Unreasonably short time to submit bid

• Incomplete preparation before advertisement – like right-of-way problems

• Wrong medium or low circulation for advertisement

• Ambiguous/unclear eligibility criteria

Submission, Review and Evaluation of Bids

• Unjustified or repeat sole source awards

• Repeated selection of unqualified contractors

• Attempts to reject the low bidder on spurious grounds

• Substantial similarities in the bidding documents when there is no obvious reason for it

• Unqualified contractor selected, or contractor selected who is not the lowest bidder

Submission, Review and Evaluation of Bids

• Use of subjective (not pass/fail) eligibility/evaluation criteria

• Delay between bid submission and bid opening

• Applying evaluation criteria not prescribed in the bid documents

• Manipulating the arithmetic correction of bid

• Declaring an important deviation to be minor, and vice versas

• Questionable disqualification of the winning bidder and re-bidding

• Low bidder is selected and the contract award is followed by a change order increasing the scope or price of the contract

• An extension given on an existing contract rather than re-bidding

• Persistently high prices

• Prices grouped around the Owner’s Estimate

• Few or the same bidders on a range of contracts

• High price awards

Awarding of Contracts/ Contract Implementation

Important to record to establish patterns of behavior indicative of collusion

Contract Implementation

• Works are of poor quality and need frequent repairs/ consultants work product is poor or never used

• The project repeatedly fails tests or inspections

• Tests are delayed by parties to the works or the latter insist on choosing the test sites

• Complaints from users or beneficiaries accumulate

• Modification of specifications, terms, prices, delivery, completion dates, quantities, security requirement during contract preparation

• Apparent connections between the bidders such as common ownerships/Directorships, sharing fax numbers, common addresses etc on bidding documents

External conditions

Civil society and Public procurement

Government-Society Relations

Government

• Sets legal and policy framework for social relations

• Collects taxes from people• Provides public services

Society

• Contributes to government thru taxes for provision of public

services• Elects government

leaders• Ultimate check and

balance through elections and stakeholdership

activities

Government provides public services directly and indirectly

Directly• Government employees

process our registration papers

• Government paid teachers teach our school children

IndirectlyGovernment procures services of private entities to provide public services in their behalf• Contractor A constructs

school building for our school children)

This is where CSOs can help government.

The Different Roles of Civil Society

• May have representation in the Evaluation Committee (Art. 47.4)

• May be selected through competitive bidding to undertake performance monitoring, evaluation, and audit of procurement and contract implementation

• As direct stakeholders, undertake general assessment of public procurement

Procurement Guiding Principles(Article 6)

• Transparency• Equal opportunity to compete• Economy and efficiency• Responsibility

These same principles can inform the monitoring framework of civil society groups evaluating public procurement.

CSO Monitoring Framework

Transparency

Fair competition

Economy/ Efficiency

Responsibility

Questions to ask when monitoring

Tips and notes for monitoring

Final Note/ Summary

• Government provides public services directly and indirectly– Directly: Government people directly service the

citizens (e.g. government employees process our registration papers, government paid teachers teach our school children)

– Indirectly: Government procures services of private entities to provide public services in their behalf (e.g. Contractor A constructs school building for our school children)

This is the part that we are trying to monitor closely so that the private entities hiredby government really do their job as paid for by citizens’ taxes.

Thank you!