Reforming the Chilean Public Procurement System A public management reform

Felipe Goya - RPM South Asia

Chile’s basic information

OCDE memberTransparency International (2012) : 21stGDP : USD 250.000.000.000Per capita (ppp) : USD 18.500 Inhabitants : 16.000.000Public Employees : 250.000 Central Government : 150.000 (health care 70.000)Public Procurement : USD 10.000 MM (goods, services and some works)

(approx. figures)

Why we reformed procurement?

Inefficient public marketplace• High transaction costs• High asymmetries of information

Limited transparency – High risk environment

2003 corruption

scandal

Reform found it opportunity into the

government’s agenda

Concept

Central Agency’s Role

Solution

Elements of the reform

• National scope reaching every procurement process above USD 200• One single and simple procurement law based on a decentralized model• One strong and fully independent central procurement agency responsible

for the whole system• Heavy reliance on outsourcings and private partners• Independent dispute resolution mechanism

Every process was massively supported by ITCs

It is possible to track every transaction, every contracting officer, every vendor, to produce indicators, look for behavioral patterns, integrate with other systems, etc …

E procurement

Tax authority

Labor authority

Competition authority

Electronic suppliers registry (fully outsourced)

BI & reporting

E Marketplace

Databases

Under procurement policyGovernment agencies

Contracting officers are always the most important part of the equation. System deters misbehaviors but they are not human proof. A poorly designed process and badly executed will affect negatively transaction costs and

vendors' transparency perception.

Contracting officers development

Contracting officers’ basic demographics

Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra

13.000 contracting officers

Training system structure

Performance Monitoring

Written test

+ ACREDITATION every 2 years

Despite the certification process and the available training, tenders are not always done with the expected quality.

Investing in the contracting work force is never enough

Lessons learned on capacity building

• Mistakes in tendering processes are not always because the lack contracting officers knowledge. Tenders involve much more people than the contracting officer.

• If contracting officers or any other stakeholder have a poor or inappropriate background, training will not solve this problem.

• Focusing training on decision making is more important than knowing the rules or procedures.

• Training programs must be open to non contracting officers as well. Including private sector professionals.

• Training programs should be designed as life learning programs.

Results

2.5

2.9

2.8

2.7

2.7

Integrity CPAR BID 2009Metodología OCDE/DAC

16-32 |ChileCompra 2010

Increased efficiency

Savings2009 – 2010

USD 3% a 5%

Bids per tender

4,3 a 6.4

1.0381.381

2.8773.466

4.4585.046

6.2806.577

7.791

92,4 96,7

41,8

91,8

118,1140

180

230

280

0

50

100

150

200

250

300

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Monto transado Mercado Público (MM USD) Ahorros (MM USD)

Transactions 2012

USD 10 BB

Savings 2012 USD

280 MM

Subprime Crisis

103.000 vendors

tendering per year

Net satisfaction

59%64%

28%

51%56%

60%

39% 38%

21%

37%

50% 49%

2006 2007 2008 2009 2010 2011

Satisfacción de Usuarios (Neta)Compradores Proveedores

Vendors

Contracting officials

Other relevant

indicators

Tenders awarded with more than 3 bids : 70,1%

Non awarded tenders: 12%

Suppliers registered in the suppliers registry: 40.000

1.800.000 purchasing orders per year

350.000 tenders per year

Lesson learned: Measuring every relevant variable is fundamental

More Lessons learned

Cierre 2010

Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra

TIC

Institutions

HR Strategic Management

Participation

Quality

Transparency

State reform

Procurement reform should be part of a wider reform

PoliticsSolutions

Problems

Reach the political agenda is fundamental

Kingdon (1995)

Problem: “Despite the level of development public procurement is risky” (Thai, 2001).

Politics: Corruption scandale in 2003.

1998 2003 2008

Solutions www.chilecompra.cl2010

• Political support from the Chilean’s President downward• Reform under the Ministry of Finance• No resources restrictions• “Stick and carrots” to bring transactions inside the system• Constant, clear and shared objectives• Professional teams leading the reform are well paid• Leveraging public resources with private’s

Top down implementation

It is relevant to manage vendors perceptions

2. Perception of transparency

1. Transaction costs

Win rate: Proxy for frustration

Teaming with others helps a lot

Without transaction any reform is meaningless

Without a strong central agency, the reform will not

work as expected

Lead

ers’

role

Waissbluth, 2006, “La Reforma del Estado en Chile 1990-2005”

Reforming the Chilean Public Procurement System A public management reform

Felipe Goya - RPM South Asia