OFFICIAL USE ONLY SecM2003-0014

January 13,2003

FROM: Vice President and Corporate Secretary

Procurement in the World Bank: FY02 Annual Report

Attached is a report entitled “Procurement in the World Bank: FY02 Annual Report”.

It is intended to make this document publicly available.

Questions on this document may be addressed to Mr. Hunja (ext. 8 1713).

Distribution:

Executive Directors and Alternates President Bank Group Senior Management Vice Presidents, Bank, IFC and MIGA Directors and Department Heads, Bank, IFC and MIGA

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization.

PROCUREMENTINTHE WORLD BANK: FY02 ANNUAL REPORT

OPERATIONS POLICY AND COUNTRY SERVICES NOVEMBER 6,2002

ABBREVIATIONSANDACRONYMS

ACS -

AfDB

AMS

AsDB BP CARICOM

CAS CDD CDF

CFAA

CIDA

CPAR

DAC DFID

EAP \ EBRD

ECA

ESRP

ESW

FM FY HOP

IBRD

IDA

IDB

IDF IL0 IMF rPR

Administrative and Client Support WV African Development Bank

Africa Region Administrative Manual Statement Asian Development Bank

Bank Procedure Caribbean Community Country Assistance Strategy Community-Driven Development Comprehensive Development Framework Country Financial Accountability Assessment Canadian International Development Agency Country Procurement Assessment Report Development Assistance Committee

Department for International Development (U.K.) East Asia and Pacific Region

European Bank for Reconstruction and Development Europe and Central Asia Region Environmentally and Socially Responsible Procurement Economic and Sector Work

Financial Management Fiscal Year Heads of Procurement

Internal Auditing Department International Bank for Reconstruction and Development

International Development Association

Inter-American Development Bank Institutional Development Fund International Labor Organization International Monetary Fund Independent Procurement Review

IT

LIL LAIDCA

LEGPR LOA

LCR MDB MNA OECD

OECS

OPCPR

OPCS

OPRC

PAD

PAS PCD PEFA

PR PREM

PS PSB

QAG QEA QSR

RPA SAP

SAR SBD SWAp

UNDB

Information Technology

Knowledge Management Learning and Innovation Loan Loan Agreement/Development Credit Agreement Procurement Legal Unit

Loan Department Latin America and Caribbean Region Multilateral Development Bank

MiddIe East and North Atica Region Organization for Economic Co- Operation and Development Qrganization of Eastern Caribbean States Procurement Policy and Services Group Operations Policy and Country Services

Operations Procurement Review Committee

Project Appraisal Document Procurement-Accredited Staff

Project Concept Document Public Expenditure and Financial Accou.r&bility Procurement Poverty Reduction and Economic Management (Network) Procurement Specialist Procurement Sector Board Quality Assurance Group

Quality-at-Entry Assessment Supervision Quality of Projects at Risk

Regional Procurement Adviser Systems Applications Program

South Asia Retion Standard Bidding Document Sectorwide Approach United Nations Development Business

PROCUREMENT INTHE WORLD BANK: FY02 ANNUALREPORT

CONTENTS

Executive Summary .................................................................................................................... VII

I. Introduction ............................................................................................................................. 1

II. NO2 Progress ......................................................................................................................... 3

A .

B .

C .

D l

E .

F .

G .

Fiduciary Oversight and Compliance ........................................................................... 3

Client Capacity Development ....................................................................................... 9

Procurement Policy and Tools .................................................................................... 11

Harmonization . . . ..~...............................~.....~.....*...*~.......*.,~.....*,*.,~~~...~~,,~~~..~,*~,,~...~,.~~*,. 15

Partnerships and Outreach .......................................................................................... 19

Staffing Strategy ......................................................................................................... 20

Professional Development .......................................................................................... 25

Figures

Figure 1. Figure 2.

Bankwide Trends in Prior Review Contracts by Type .................................................. 4 Trend in CPARs ............................................................................................................. 9

Tables

Table 1. Summary of FY02 Post-Review Monitoring by Region ............................................... 5 Table 2. FY02 Independent Procurement Reviews ..................................................................... 5 Table 3. OPRC Cases Concluded, FYOl and FY02 .................................................................... 6 Table 4. Procurement-related Complaints ................................................................................... 6 Table 5. Misprocurement ............................................................................................................. 7 Table 6. Procurement Resources, FY02 ..................................................................................... 20 Table 7. Procurement Resources vs. Requirements, FY02 ........................................................ 21

Annexes

Annex A. Procurement Activities Chart ....................................................................................... 31 Annex B. Bank Guidelines, SBDs, and Capacity Assessment Instruments ................................. 33 Amex C. CPAR Status and Plan as of June 2002 ....................................................................... 35

PROCUREMENT INTFIE WORLD BANK: FY02 ANNUALREPORT

EXWXJTWE SUMMARY

1 The World Bank’s procurement finction aims to (a) ensure that loan proceeds are used as intended, (b) enhance the development impact of the operations financed, and (c) support client countries’ development of sound public sector procurement systems that meet internationally recognized standards of efficiency, economy, equal opportunity, and transparency. In FY02, the procurement network carried out its traditional fiduciary responsibilities for investment projects even as it continued to address the Bank’s new lending environment and strategic orientation. This Annual Report highlights the network’s responses to the recent introduction of new instruments and approaches, the greater concentration on country-level activities and capacity building, and the increased focus on harmonization and partnership efforts within and outside the Bank.

2 Reform Efforts. In FY02, the procurement network (a) improved fiduciary compliance, particularly through increasing the numbers of post reviews and independent procurement reviews (IPRs) carried out; (b) increased its country-level focus, carrying out Country Procurement Assessment Reports (CPARs) and follow-up to public sector procurement reforms, often in conjunction with internal and external partners;’ (c) tither decentralized its operations by creating country procurement hubs; and (d) attracted new external staff attuned to the Bank’s new lending environment and strategic orientation.

3 . Fiduciary Compliance. To help manage the cost of doing business and increase client accountability, in 1998 the Bank reduced the levels of prior review of contracts (by increasing the prior review thresholds in Loan Agreements/Development Credit Agreements) by systematically conducting initial assessments of procurement capacity at the project level, including measurement of the associated risks. This change enabled staff to focus more on country-level procurement activities and post reviews, even though prior reviews still account for the largest portion of procurement staff time.

0 CPARs were carried out in 32 countries in FY02; 17 of these CPARs were completed during the year, with the remainder due in FY03. In FY02, 179 agency capacity assessments for new investment projects were conducted, many involving multiple executing agencies. According to reviews by the Quality Assurance Group, procurement quality at entry was generally good; Bankwide, 89 percent of evaluated projects were ranked satisfactory or better for procurement aspects.

* During FY02, post reviews of procurement transactions were conducted in 95 countries, encompassing 730 projects. This represented 71 percent of the borrower

1 Internally, the procurement network works closely with the financial management (FM) network (particularly by conducting CPARs in conjunction with Country Financial Accountability Assessments [CFAAs]), the Poverty Reduction and Economic Management Network (PRISM), the Loan Department (LOA), and Knowledge Management (KM) units Bankwide; externally, the procurement network plays an important role in the harmonization work undertaken by the Heads of Procurement of the multilateral development banks (MDBs).

. . . VI11

countries in the lending portfolio and 58 percent of the total investment projects subject to post review. Furthermore, a systematic reporting structure was developed to capture post-review activities, making it easier to collect and report fiduciary compliance data.

e In FY02, the Operations Procurement Review Committee (OPRC) reviewed 74 cases, with a total value of $6.3 billion-the largest number of cases reviewed in a fiscal year since OPRC was established, and the highest contract value reviewed since 1994.

4 iPARs

Capacity Development. In FY02, activities to follow up on shortcomings revealed by and other capacity assessments received increased attention through the provision of

Institutional Development Fund (IDF) grants and the preparation of technical assistance projects. Furthermore, 48 country-level workshops and seminars were carried out in 32 countries. Arrangements with 12 academic institutions to provide country-level procurement training continued, and requests for IDF grants were made for building procurement capacity in additional local institutes and universities. Procurement staff placed greater emphasis on collaboration with operations teams, and provided training in different aspects of procurement to task teams and task managers.

5 Procurement Policies and Procedural Instructions. In FY02, the Procurement Policy aid Services Group (OPCPR) issued revised instructions and guidance on the preparation of CPARs and incorporated in CPAR preparation the formal requirements of an economic and sector work product. It revised Guidelines on Selection and Employment of Consultants by World Bunk Borrowers, simplifying the selection process in response to client needs. Other key achievements include the preparation and issuance of (a) a new Consulting Services Manual, (b) updated Technical Notes and Standard Bidding Documents (SBDs) for Procurement of Textbooks and Reading Materials, and Procurement of Health Sector Goods (Pharmaceuticals, Vaccines, and Condoms) in English, French, and Spanish; (c) an SBD for Supply and Installation of Information Systems; and (d) a revised Administrative Manual Statement 15.00, Selection and Use of Consultants by the Wurld Bankfor Operational Purposes.

6 Internal Partnerships. The network actively pursued collaboration and harmonization with partners, both globally and at the Regional and country levels.

l Six CPARsKFAAs were carried out in partnership with the FM network; in two cases, the partnership included PREM, with Public Expenditure Reviews included in the countrywide assessments.

* For the first time, the procurement and financial management networks cosponsored the Fiduciary Forum, held in March 2002 under the theme “Enhancing Fiduciary Capacity in Client Countries” and with the goal of facilitating a better integration of the fiduciary functions and closer collaboratibn of procurement and financial management activities in Bank operations. A total of 430 staff participated in the forum, including 73 procurement staff from Washington and 55 from country offices.

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a Procurement collaborated with FM to issue fiduciary guidelines for operations using sector-wide approaches, and a reference guide for fiduciary management in community-driven development proj ects.

l Regional procurement staff also played an important role in internal partnerships and teamed up with FM, LOA, and KM units to conduct consolidated training programs for clients in country offices.

* Procurement network staff delivered seminars in 15 countries, in cooperation with External Affairs (Europe) and Private Sector liaison officers.

l Other initiatives included partnering with the Environmentally and Socially Sustainable Development Network to launch a joint initiative to promote environmentally and socially responsible procurement as part of the Bank’s broader initiative on corporate social responsibility; advancing the Bank’s e-procurement strategy, with a focus on building up both client and internal capacity; enhancing work on performance-based procurement and issuing model bidding documents for Performance-Based Management and Maintenance of Roads Contracts (piloted in the Africa Region); working together with water sector staff on similar initiatives to develop lease and concession contracts in water and sanitation; and preparing the draft sample SBD for Services (other than consultancy).

7 External Harmonization. FY02 Regional harmonization efforts included partnering with oiher MDBs to conduct 11 CPARs and expanding partnerships with regional MDBs to include training programs carried out for client countries. Furthermore, in FY02, the semiannual Heads of Procurment meetings, held at the European Bank for Reconstruction and Development in October 2001 and the Inter-American Development Bank in March 2002, approved several harmonized documents: (a) SBDs for Goods, Standard Prequalification Documents for Civil Works, and Standard Request for Proposals for Selection of Consultants are now well advanced and will be issued in FY03; (b) SBDs for Civil Works are also well advanced; and (c) Common Instructions on CPARs-our MDB partners endorsed the World Bank’s revised instructions for conducting CPARs, making this a common instrument among the donor community. The group also established a common platform of requirements on local procurement to be accepted by all MDBs, and approved the World Bank’s analysis identifying the policy variations in the procurement guidelines of all the MDBs.

8 Staffing and Decentn&ztion. The procurement network decentralized mrther in FY02, piacing more staff in country offices. Five procurement specialists retired or were identified as redundant, while 24 procurement specialists and analysts were hired (five of whom will start work in FY03). Fourteen of the 24 new hires replace staff who had left the network. As of end- FY02, there are 105 procurement staff at levels F and above, 65 of whom are in country offices.2 With approximately 60 percent of professional procurement staff in country offices, procurement and fi nancial m .anagement are among the most decentralized networks in the Bank. .

2 There are also 146 procurement-accredited staff (PAS) in the Regions. However, these staff are not a part of the procurement network and they spend far less time on procurement than do procurement specialists.

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9 Procurement Stufjng Strategy. A procurement staffing strategy study carried out in FkO2 showed major Regional disparities in the level of available procurement support: the ratio of active projects to procurement staff ranges Tom a satisfactory 12: 1 in the Africa and the Europe and Central Asia Regions to 44:l in the Middle East and North Afkica Region. The shortage of resources in some Regions, together with the policy of decentralization, highlights the need for additional staff. Moreover, the introduction of new ways of doing business-such as performance-based procurement, e-procurement, and public procurement reform-requires the establishment of a central knowledge base in OPCPR. The Procurement Sector Board endorsed the findings of the staffing study in January 2002, and approved the hiring of the new staff over FY02-FY04. These new hire requirements were presented to the Regional management teams by the Regional procurement advisers; in most cases, the staffing plans are being implemented.

PROCUREMENTINTHE WORLDBANK: FY02 ANNUALREPORT

I. INTRODUCTION

1 The World Bank’s procurement fbnction aims to (a) ensure that loan proceeds are used as intended, (b) enhance the development impact of the operations financed, and (c) support client countries’ development of sound public sector procurement systems that meet internationally recognized standards of efficiency, economy, equal opportunity, and transparency.

2 Procurement Trends. From the Bank’s inception, the procurement function focused hkavily on specific project contracts. Confidence in the propriety of each of these contracts arose mainly from prior review of procurement decisions.’ Since then, the fiduciary picture and the Bank’s disbursement profile have grown more complex: Bank lending has evolved from “bricks and mortar” infrastructure projects toward (a) smaller, sectoral (especially social sector) investment projects, which has led to sharply increased numbers of lower-value transactions, and (b) programmatic lending, which has increased the focus on countrywide control systems. In large measure, this evolution has responded to client interest, particularly in simplified systems and a reduced cost of doing business. It also reflects the changing development paradigm, particularly the importance of sound country policies and institutions and the Comprehensive Development Framework goals of country focus, partnerships, and harmonization.2 As a result, the center of gravity of procurement fiduciary work has shifted f?om project-level assessments to institutional ones, and from a portfolio focus to a diagnostic focus3 This increased country and institutional focus, added to continuing project-related fiduciary activities, has placed significant pressures on procurement staff and financial resources.

3 . Procurement Network Response. In response to these new challenges, in late 1997 the procurement network set out a strategy designed to (a) improve fiduciary compliance by placing greater emphasis on up-front project work and strengthening post reviews; (b) increase focus on the development impact of procurement in order to build clients’ capacity and help them

I Certain procurement actions taken by the borrower- for example, issuing and evaluating bidding documents and recommending contract awards- must be reviewed by the Bank and a written “no objection” provided before the borrower may proceed to the next step in the procurement process. This “prior review” process usually applies to procurement actions for contracts involving international competitive bidding and those above a certain dollar amount, or threshold. Most thresholds are set Regionally, but others are set to reflect a specific country’s capacity or project-specific conditions. Prior review thresholds are set as a function of the procurement risk for a given project or country, based on the assessment of the capacity of the executing agency to implement procurement activities per the Procurement Policy and Services Group (OPCPR) instructions issued on August 11, 1998. Prior review is intended to ensure that borrowers’ actions are in compliance with the Loan Agreement.

2 See A Proposal for a Comprehensive DeveZopment Framework- (A Discussion Drafq, Memorandum from the President (R99- 135), January 2 1, 1999, available at http://www.worldbank.org/cdf/cdf-text.htm.

3 This shift in the balance of work, which is projected to intensify, derives more from the rise of program-related tasks and still not fully utilized project-related compliance and quality control tools (such as independent procurement reviews and Regional procurement adviser compliance reviews) than from the decline of traditional, transactional, project-focused responsibilities. Although project-related fiduciary functions are undergoing modifications or transformations (and prior reviews are declining), they remain central to the Bank’s fiduciary obligations. They also remain a critical driver of costs and consumer of staff time and energies, and-as a key component of the balance of fiduciary work-affect the attendant staffing level and skills mix.

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establish sound procurement systems; (c) strengthen the Bank’s internal capacity to manage the procurement function; and (d) enhance partnerships and improve outreach.4 To help manage the cost of doing business and increase client accountability, the Bank reduced the level of prior review of contracts (by raising the threshold at which prior review takes effect) and committed itself to improving the quality of supervision and post review. FY02 procurement activities continued to be guided by this overarching strategy.

4 Recent Accomplishments. Under the leadership of the Procurement Sector Board (PSB) aid with the concerted efforts of the procurement network (the anchor, the Regions, and the procurement legal unit), the Bank has responded to the challenges of the new lending environment and instruments, and clients’ evolving needs. Among the accomplishments since the adoption of the new strategic approach in 1997 have been the following:

Policy: Instructions. New instructions on the Country Procurement Assessment Report (CPAR), issued on June 1,1998, broadened the scope of the report to facilitate identifying and analyzing country system issues and establishing a dialogue with the government on desirable procurement reforms. Regions revamped their procurement processes and guidance to staff, focusing on capacity building, better service to clients, and closer fiduciary oversight. Several instructions were introduced or updated in FYOl, and the Procurement Policy and Services Group (OPCPR) issued a clarification of the policy on accreditation of procurement staff.5 In April 2001, Operations Policy and Country Services (OPCS) issued guidance to staff on simplified and streamlined arrangements, including procurement arrangements, for learning and innovation loans.

* Policy: Instruments. Seven CPA.& were completed during FY99, 16 in FYOO, and 16 in FYOl. Assessments of the implementing agencies’ procurement capacity became mandatory for all new projects, and greater emphasis was placed on improving quality at entry. This resulted in the establishment of a systematic and effective planning and monitoring tool for new projects.

Internal Hurmortization. The Procurement and Financial Management Sector Boards began working closely to promote the incorporation of coordinated fiduciary findings and recommendations into Country Assistance Strategies (CASs). Other partnerships included working with the Community-Driven Development (CDD) Working Group and the financial management (FM) network to adapt fiduciary requirements to CDD projects, including development of training programs for Bank and borrower staff, and working with the infrastructure networks to design appropriate tools and collect best practice for performance-based procurement.

4

5 See 77~ World Bank Procurement Function-Adjusting to Emerging Needs (SecM97-854), October 30, 1997. See Office Memorandum Accreditcztion of Staff to Carry Out Procurement Work, issued by UPCPR on November 21, 2000. Each project must be supported by a procurement specialist (PS) or procurement- accredited staff (PAS), who certifies (a) conformity with the Bank’s applicable rules, policies, and procedures; and (b) completion of all necessary internal reviews and appropriate consultations, including mandatory reviews by the Regional procurement adviser or the Operations Procurement Review Committee (OPRC). PASS must meet the same professional competency standard to discharge fiduciary work as PSs in level G.

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* Etiernai Hbmonizution. Notable gains were made in strengthening harmonization and partnerships, particularly with other multilateral development banks (MDBs), through regular meetings of their Heads of Procurement (HOP). The HOP working group completed a Master Document for Procurement of Goods and made progress on drafting harmonized documents for prequalification and Request for Proposals for consultant services. In addition, the working group initiated policy-convergence activities and agreed on an agenda for continued efforts to harmonize policies for and approaches to sector programs, and to enhance cooperation on procurement reforms in client countries. Several CPARs were prepared jointly by the World Bank, governments, and other MDBs, including the Asian Development Bank (AsDB) and Inter-American Development Bank (IDB). Consultations with the business community fostered greater alignment of the Bank’s practices and documents with the latest market practices, particularly in specialized procurement such as information technology, health sector goods, and education sector materials.

* Stafflngflraifling~ The PSB began recruiting staff firom increasingly diversified sources to bring new skills and experiences into the Bank. Nearly 40 of the 50 targeted new staff were on board by January 2000, with about two-thirds of the new hires recruited in country offices. Internal capacity was enhanced by modernizing training programs and establishing a staff accreditation process, through which about 200 technical specialists have passed.

5 Orgu&ation of the FY02 Annual Repoti Following this introduction, Part II of the Annual Report highlights FY02 progress on (a) fiduciary compliance; (b) capacity-development activities; (c) procurement policy and tools; (d) harmonization activities inside and outside of the Bank; (e) partnerships and outreach activities; (f) procurement staffing strategy a;nd plans; and (g) professional development and training. There are also three annexes. Annex A presents a detailed procurement activities chart. Annex B presents Bank Guidelines, Standard Bidding Documents (SBDs), and capacity assessment instruments. Annex C details the status of CPARs as of June 2002.

II. F’YO2 PROGRESS

A. Fiduciary Oversight and Compliance

6 . Procurement’s fiduciary Eunction covers both project-related activities (monitoring compliance with the procurement requirement set forth in the Loan Agreement for each specific project), and country-related work (preparation of CPARs).

I. Project Preparation and Supervision: Quantity

7 . In FY02, procurement staff carried out 179 agency capacity assessments for new investment projects, many involving multiple executing agencies. These assessments continue to reveal weaknesses in borrowers’ procurement management capacity. Risk associated with lack of capacity is often more frequent in social sector operations, where implementing agencies lack the contracting and project management experience found in infrastructure projects. Regional

4

procurement advisers (RPAs) were actively involved in monitoring the quality of agreed action plans to address identified deficiencies.

8 Contracts Subject to Prior Review. Prior review is intended to ensure that borrowers’ actions are in compliance with the Loan/Credit Agreement. Despite higher thresholds for prior review and lower average values per contract, project supervision and prior review of contracts continue to occupy the greater part of procurement staff time.6 Figure 1 depicts both the absolute decline in prior reviews and the relative decline of (typically higher cost) civil works contracts compared to (typically lower cost) contracts for goods/equipment and consultants.7 During FY02, an estimated 6,400 contracts valued at $5.2 billion were subject to prior review.*

Figure 1. Bankwide Trends in Prior Review Contracts by Type

FY97 FY98 FY99 FYOO FYOl FYO2

9 Procurement Post Review. In FYOO-01, OPCPR reviewed Regional experiences with post reviews and independent procurement reviews (IPRs) and found that compliance with post review requirements was erratic, and that monitoring needed to be strengthened.’ OPCPR issued Office Memorandum Procurement Post Review and Independent Procurement Reviews: Processes and Procedures, July 19, 2001, mandating the use of a recording and monitoring system developed by OPCPR in consultation with the Regions. RPAs actively followed up with sector units and procurement staff to ensure that post reviews were carried out and recorded and their findings followed up. Regional monitoring and reporting systems were improved, and data were collected quarterly on progress made in post reviews. These efforts resulted in an increased

6 Procurement supervision by the Bank remains largely based on the prior review procedure, including mandatory review by RPAs for large value contracts, and reviews by OPRC for contracts above $25 million for goods and works and $10 million for consultants.

7 The procurement network has addressed the shift toward social sectors and goods procurement by issuing new and updated Standard Bidding Documents (SBDs) and Technical Notes to respond to the increased need in specialized procurement (text books, pharmaceuticals), as discussed in more detail in the Procurement Policies and Tools section of this report.

8 The actual numbers are not available because of delayed data entry by the Regions. To arrive at these figures, a percentage increase based on historical data has been added to the FYO2 data that are in the system.

9 Procurement actions that do not require prior review are subject to post review. The Bank uses a sampling technique to conduct post review of completed procurement actions to check the borrower’s compliance with the stipulations in the Loan Agreement. Contracts subject to prior and post review are identified as part of procurement planning during the project development cycle.

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number of post reviews: 62 percent of the total investment lending portfolio (s&j& to post review) was post reviewed and monitored for follow-up in 105 cxxmkies. Table 1 shows the number of post-reviewed projects in the Africa (AFR), Europe and Central Asia @CA), East Asia and Pacific (EAI?), Latin American and Caribbean &CR), Middle East and North Africa (MNA), and South Asia (SAR) Regions.

Table 1. Summary of IWO2 Post Review Monitoring by Region

Item .. .. Projects in portfolio” Projects subject to post reviewb Projects post reviewedC (cumulative) Countries post reviewed . . . . Review percentage (projects post reviewed 1:

divided by projects subject to post review) 50% 75% 80%” 47%: ::56%: +ls-o/, 62%

\ : ‘ : . : i : . : :

Contracts post reviewed 2;2$? .4,@3 I 1,078 1 2,1@o ‘1 400’ : j l,,uJ? 12j166 Projects subiect to 100 percent prior review .4. $0’ j: ‘70 :.I. &j I;-. .$$ : i ‘0 216

a

b

C

10 .

Projects in portfolio are active investment projects as of the end of the fiscal year. Projects that do not have any procurement activities requiring post review are subtracted from projects in the portfolio. Includes projects and contracts reviewed under IPR, and Internal Auditing Department (IAD) reviews for SAR.

Independent Procurement Reviews. As part of monitoring project fiduciary compliance, RPAs hire consultants to conduct IPRs of investment projects in country portfolios. IPRs complement the prior review and regular post-review procedures, and inform Regional management of the quality of the Region’s fiduciary work on procurement. They can be tailored to specific issues and they are coordinated with overall project implementation activities, including general supervision and such other forms of audit as financial and project audits. Typically, each IPR includes between four to six projects in each country under review. During FY02, IPRs were conducted for 94 projects in 15 countries (see Table 2).

Table 2. FY02 Independent Procurement Reviews

I AFR EAP f

j&n .’ j!XA LCT MNA SAR” Bankwide _. l Number of countries in portfolio 41 / 14 29 31 Ii0 ..8 133

Number of countries scheduled to be I

reviewed 5 2 3 4 2 ’ 2 18 : . : Number of countries reviewed 5 0.. 3 4 1.1 15 Number of projects reviewed (cumulative)

I 1 27 f ‘1 0 13 1 7 13

1.2 .g 94

Percentage (number of countries audited 0 divided by number of countries in portfolio) 12% 0% 10% 13% .!O% 25% 9/ 0

a Includes procurement reviews of 34 projects carried out by IAD in two countries, and excludes post-review contracts.

11 . Operations Procurement Review Committee Activities. In accordance with the instruction Staff Review and Clearance Responsibilities fur Wurtd Bank-Financed Procurement, issued in March 1999, OPRC provides clearance for (a) contracts for procurement of goods,

works, and services (other consulting contracts costing consulting services contracts

than consulting services) costing $25 million or more, (b) $10 million or more equivalent, (c) single-source selection of costing $5 million or more equivalent, and (d) other cases at the

request of the RPAs. In addition to informal advice and special meetings on exceptional procurement cases (for example, trust funds), OPRC reviewed 74 cases, with a total value of $6.3 billion-the largest number of cases reviewed in a fiscal year since OPRC was established, and the highest contract value reviewed since 1994. Table 3 provides the FY02 details by Region.

Table 3. OPRC Cases Concluded, FYOl and FY02

(US$b) . ( U S $b) I

AFR @$. 8 : .: : EAP : : : : .(rJ,s ii j.:“ : 15 j . ECA . . . . $4 ,: 75 :

LCR 014 ‘IO : MNA a.&;:.. .:.+;::: :.::i 2 _:.._ i::::,;: 1 Q,!: : :, [ 2. 1 . . . SAR vi: . ; ;. : : .’ ::. ::: :. :,;f: :.:. .i ::,:,: :- ., I.::. .. :13 :;:. . . 1

’ Reional ;~‘~::;:..()..j: R f : ‘&II ‘I :

Total 2.7 I 39 6.3 1 174

a Represents Nile Basin Initiative in AFR and MNA, for total value of $5 million.

12 Compluints. The number of procurement-related complaints reflects wide Regional va&tions over recent years and increased substantially from FYOO and FYOl, though the total figure is influenced by the staggering rise in SAR, whose 243 complaints account for close to half of the total 504 cases (see Table 4). Although staff are required to enter complaint data, they do not do so systematically. With support from OPCPR, RPAs are more actively encouraging and monitoring the use of the complaint database. In FY02, 158 cases were resolved; in 35 percent of the cases the Bank validated the complaint, resulting in cancellation or rebidding of the procurement.

Table 4. Procurement-relatedcomplaints

13 Misprucwement. The Bank finances only expenditures that have been procured in accordance with the procedures set out in the Loan Agreement for the purchase of goods, works, and services; and its policy is to cancel any portion of the loan allocated to goods, works, and

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services that has been misprocured.‘* In recent years, several misprocurement cases have been detected through the post-review and independent procurement review processes, underscoring the risk inherent in post-reviewed procurement activities (which do not benefit f?om the corrections that can be introduced in the course of a prior review) and the importance that post review plays in ensuring compliance with the procurement requirements stipulated in the Loan Agreement. Misprocurement figures vary fiorn year to year as they are related to the actual value of contracts in which failure to comply with Ba& procurement requirements was detected and misprocurement was declared. Table 5 summarizes misprocurement activity by Region for FYOZ and the previous three years.

Table 5. Misprocurement

2. Project Preparation and Superhim: Quality

14 The fourth Quality-at-Entry Assessment (QEA4) prepared by the Quality Assurance Group (QAG) covered procurement as a specialized review area for the first time. The QAG review found that assessing implementing agency capacity facilitated sound project design and identification of action plans to help ensure an adequate level of procurement capacity in the implementing agency(ies). Reviewers found that in the preparation and approval of most investment lending projects, Bank staff followed the policy, procedures, and other instructions that provide guidance and direction on procurement. Regionally, the QEA procurement ratings varied from a low of 74 percent of projects receiving a satisfactory or better rating on procurement aspects in AFR to 100 percent in ECA and h4NA. The Bankwide rating of 89 percent satisfactory or better indicates that procurement quality at entry was generally good. However, the QEA also noted that the requirements of the action plan were sometimes changed during project implementation, often undermining the plan’s value; and that the changes were

lo See Section 6.03 (c), “Cancellation by the Bank” of the General Conditions AppZicabZe to Loan and Guarantee Agreements; paragraph 1.13 of Guidelines: Procurement under IBID Loans and IDA Credits; and paragraph 1. I8 of Guidelines: Selection and Employment of Consultants by World Bank Borrowers.

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not regularly resubmitted to the RPA office for clearance, as they should have been. This failure to adequately address capacity and risk issues identified during assessment was the key deficiency that resulted in “below satisfactory’ ” procurement ratings for some projects.

15 Projects at Risk, In FY02, QAG carried out a targeted assessment of the projects-at-risk segment of the investment lending portfolio-Supervision Quality of Projects at Risk (QSR). The assessment included a random sample of 60 projects fi=om the universe of 252 at-risk projects in the Bank’s portfolio during FYOO-01. Of the sample projects, 84 percent received a rating of satisfactory or better for supervision of procurement aspects, while other fiduciary aspects received an overall QSR rating of 78 percent. The key findings of the report confirmed that projects with a satisfactory or better rating usually had a Procurement Specialist/Procurement-Accredited Staff (PS’PAS) on the team who monitored procurement progress against the procurement plan, had procurement plans updated by the executing agencies as needed, responded to borrowers’ procurement issues promptly, carried out post review of procurement, and reported procurement status in the supervision reports. The report recommended (a) continuous involvement of the PWPAS in project supervision, with inclusion of the PS/PAS in supervision missions at least once a year, (b) better documentation of the supervision process, and (c) preparation of updated procurement plans at least once a year,

16 Project Status Report Ratirtgs. FY02 was the first full year for collection of procurement rating data in Project Status Reports. The records showed an 86 percent satisfactory or better rating for procurement administration and an 83 percent satisfactory or better rating for compliance with agreed procurement schedules- with 6 percent and 5 percent, respectively, of the projects not rated. .

3. Country-Based Work

17 The increasing use of adjustment lending instruments, which by their nature do not have an’output element that contributes to detailed fiduciary planning and oversight, intensifies the need for focused attention on country assessments and follow-up plans to these assessments. More broadly, this change presents different kinds of risks to the use of Bank funds, and management of these risks requires new approaches and skills.

a, Qmntity Trends

18 The CPAR was introduced in the mid-1980s as an internal tool for Bank staff to identify procurement practices that could not be used with Bank--financed projects. The revised CPAR, introduced in 1998, assesses the health of a country’s procurement system and serves to initiate a dialogue with the government on actions to improve that system. It encompasses an assessment of the legal framework, trade practices, the financial framework, procurement organization and procedures, the procurement decisionmaking authority, and anticorruption initiatives undertaken with the cooperation of country governments. The enhanced CPAR continues to identify operational risks in a country and set appropriate Bank supervision standards, and further serves Bank goals by contributing to the design of risk mitigation plans for countries that receive sector and programmatic loans. Staffing, financial constraints, and changing priorities in the country, as determined by the country team, have had an impact on scheduling and completing CPARs. In

9

FY02, 32 CPARs were begun, 17 of which were completed during the year. ‘I It is expected that the remaining 15 will be completed in FY03, and an additional 18 CPARs will be initiated. Annex C lists CPA& planned for FY03 and FY04, and Figure 2 displays CPAR trend data.

Figure 2. Trend in CPAFb

;ji 25 < fL20 u “0 15

0

z 10

I+IINoufmARs - Poly. (NO of CPARS)

33 k

b. Qmlity Trends

19 In July 2000, the CPAR was officially designated as an economic and sector work (ESW) product. This brought a new focus to the instrument, and in FY02 a QAG review was carried out to assess the quality and effectiveness of CPA& and improve them as necessary? The assessments followed the four quality dimensions framework used for mainstream ESW: (a) scope and strategic relevance; (b) internal quality; (c) dialogue and dissemination; and (d) likely impact. A set of judgments on Bank inputs and processes was added to these dimensions. The review rated 70 percent of CPARs as satisfactory or better. The ESW target rating is 90 percent; however, it is important to note that the CPARs were not initiated or carried out as ESW, but were assessed against ESW standards. In FY02, the findings of the QAG review were used in rewriting the 1998 instruction for CPARs to help ensure compliance with the Bank’s ESW guidelines. (A more detailed discussion of this change is presented in the Procurement Policies and Tools section of this report.) Furthermore, following the QAG review, a monitoring system was developed and implemented to ensure that CPAR coverage supports the CAS and other strategic requirements regarding lending, country risk assessment, and capacity building.

B. Client Capacity Development

20 Several converging factors- the impact of the Comprehensive Development Framework, increasing use of adjustment, sector, and nontraditional lending, anticorruption efforts, and increased IDA lending as a share of total Bank lending-have elevated the importance of a structured and systematic approach to capacity development aimed at good governance and public expenditure accountability. At the same time, capacity building within the Bank and

Argentina, Azerbaijan, Bosnia and Herzegovina, Ethiopia, Eritrea, Guinea, Macedonia, Mauritania, Mauritius, Mexico (Country), Mozambique, Lao PDR, the Philippines, South Atiica, Uzbekistan, Vietnam, and Yugoslavia.

** See Qaaltty of Fiduciary ES W (January 2000-June 2001), A QA G Assessment, February 14,2002.

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closer ties with the operations teams is an important element of procurement reform activities in the Bank.

1. Borrowers

21 Country-level capacity development is an integral aspect of the follow-up to CPARs. D&ing FY02, greater attention was given to this area through the provision of Institutional Development Fund (IDF) grants; technical assistance projects; Regional, country, and project- level workshops and seminars; and arrangements with local academic institutions for provision of in-country procurement training. In FY02, the network’s focus on country-level capacity development consisted of the following activities:

l Concentrated discussions with countries in which CPARs have recently been conducted were carried out, and as a result, several agreed action plans and initial reform implementation steps are in progress. In addition to the standard CPAR follow-up activities with countries, 17 IDF grants, one Dutch grant, and seven technical assistance loans relating to public procurement reform were pursued and/or implemented by the Regions, most in IDA countries. Participation by the procurement legal unit (LEGPR) was of paramount importance for the quality of review of the legal framework in all countries for which CPARs were conducted.

l To enhance transparency and efficiency at the agency level, the Regions implemented the project launch procurement training program for all new investment projects. This program has become a part of the Project Procurement Capacity Assessment and risk analyses for project implementing agencies. In FY02, 179 procurement training sessions were conducted for implementing agency personnel.

l Capacity building in client countries continued in the form of seminars and workshops on Bank procurement policies and procedures. In FY02, 48 procurement- related workshops/seminars were held in 32 countries, including Regional workshops (in ECA and LCR), training of trainers (LCR), and training in general and specific procurement topics such as anticorruption and public procurement reform (all Regions). These courses/workshops were attended by staff from borrower agencies in the Regions. In LCR, distance learning materials were developed and a procurement training program was carried out in three countries.

0 Twelve Regional institutions are providing local training for borrower countries at reasonable costs to participants.13 These courses, based on the training developed by the Bank in cooperation with the International Labor Organization’s (ILO’s) International Training Center in Turin, Italy, focus on procurement for projects financed by international financial institutions. The Bank supports the effort by providing the materials and instructors and sharing the costs with the local institutions. During FY02, partnerships with private and public institutions continued-AFR continued its support to various training workshops sponsored by

I3 The partner institutions are located in Bangladesh, Ghana, India, Italy, Pakistan, the Philippines, Senegal, Tanzania, and Vietnam.

11

ESAMI (Tanzania), GIMPA (Ghana), and CESAG and ISADE (Senegal), with each training institution offering at least two courses (on Goods, Works, and Consultant Selection) annually. To expand such partnerships arid increase procurement capacity, IDE; grants to develop and conduct pilot procurement courses were pursued for five universities in China (EAP) and the Regional Procurement Institute in the Kyrgyz Republic (ECA).

22 Integratiun with Public Sector Management Work. Procurement reform and capacity- building activities are most effective if they are integrated with public sector management work. Thus in FY02, the PR network continued to work closely with the FM and Poverty Reduction and Economic Management (PREM) Networks to enhance Bank effectiveness through a more coordinated approach to reform/capacity building in client countries. A further discussion of this cooperation is presented in the Harmonization section of this report.

2. Operations Teams

23 In addition to implementing the Bank’s fiduciary requirements and building country procurement capacity, the procurement network is responsible for providing technical support and services to task managers (TMs) and operations teams. Recognizing the benefits of procurement as a project monitoring tool, in FY02 the Regions conducted several workshops and brown bag lunches for TMs. At some of these workshops, procurement specialists worked together with TMs to present specific procurement-related cases. Building capacity within operations teams will continue to be a critical focus in the coming years.

C. Procurement Policy and Tools

I. Policy and Procedures Instructions

24 While the balance of procurement work has been shifting toward building client capacity, ne, instruments and instructions were issued in FY02 to enhance traditional procurement work and to develop improved instruments for the new lending environment. A summary of the instructions/documents issued in FY02 follows.

25 l Fiduciary Arrangements fur Sectorwide Approaches. Sectorwide approaches (SWAPS) are mechanisms by which development agencies collaborate to support reform programs that are based on a country’s own long-term vision of its development. Since the mid-1990s, an increasing number of Bank operations have supported sector programs, including a few that had features of a SWAP. However, because of the lack of clear guidance on how to apply the Bank’s fiduciary policies in the context of a SWAP operation, it was becoming increasingly difficult for the Bank to participate fully in SWAPS, in particular in those that contained an element of “pooling” of funds by donors and government. A joint paper by the procurement and financial management networks was presented for information to the Audit Committee, suggesting clear rules for Bank engagement in SWAPS.‘” The paper did not propose any changes in procurement policy, but provided guidance on how to adhere to the principles of the Bank’s procurement guidelines for SWAPS. The first projects benefiting Tom the new SWAP instructions are the

l4 See Fiduciary Armngement for Sectorwide Apprmches (SWAPS) (AC2002-0017), April 3,2002.

12

Brazil Family Health Project and Ghana Health Sector Program Support Project. Detailed guidelines to staff on how to apply the fkamework are at an advanced stage of preparation.

26 Revised CPAR Instructions. A new instruction on conducting CPARs, incorporating the findings and recommendations of the FY02 QAG review of CPA& and the recommendations of the PSB, was issued in May 2002. The new instruction clearly designates the CPAR as a core fiduciary ESW product and incorporates the business processes related to ESW, including peer review and monitoring. Other changes include an increased emphasis on coordination with other donors; introduction of a risk assessment for Bank-financed projects, emphasis on the relationship to the CAS and the need to provide information to support poverty reduction support credits, and a clarification of the disclosure policy.

27 Revised Consultant Guidelines. In May 2002, Executive Directors approved revisions to G;idelines: Selection and Employment of Consultants by World Bank Bon-awers. The key changes include:

l streamlining prior reviews by (a) eliminating the “simplified” review process for contracts within the $1 OO,OOO-200,000 range and establishing a single prior review threshold over which all contracts would require the Bank’s “no objection” to the technical evaluation; and (b) eliminating the requirement for the Bank’s “no objection” to the final evaluation report and borrower’s recommendation for award;

l expressly providing for misprocurement in post-review cases in which the Bank determines that the contract award or contract itself is not consistent with the Loan Agreement;

* replacing the $200,000 threshold for use of shortlists of national firms with a country- specific ceiling that will be established in the Project Appraisal Document (PAD) based on the CPAR and reflected in the Loan Agreement;

+ mandating competition for selection of individual consultants (where selection previously could be based on references alone), while providing for sole-sourcing in exceptional cases; and

* removing the threshold for advertising of consultant contracts in the national newspaper, while reducing the minimum time allowed for consultant responses from 30 to 14 days.

28 Consulting Services Manual. Since the first Consulting Services Manual was issued in 1985, the Bank has expanded the scope of its lending and technical assistance to borrowers, and the focus of borrowers’ requests for consultants has gradually shifted from the traditional design of construction works to a wide range of assistance in the fields of poverty reduction, social development, institutional reforms, and other nontraditional sectors. Even though technical quality and independence of advice have remained the key considerations in hiring consultants, cost has also become a factor in the selection process. In December 2001, OPCPR published a new Consulting Services Manual that takes all these aspects into consideration, and provides guidance to Bank staff and borrowers on how to select and use consultants in accordance with current Bank procedures. It also provides detailed guidance on the application of mandatory

13

provisions of the Consultants Guidelines, the Standard Request for Proposals, and related Bank policies.

29 . Community-Driven Development. The Procurement and Financial Management Sector Boards issued a reference guide for Fiduciary Management in Community-Driven Development Projects. The guidance note clarifies, rather than supersedes, prevailing Bank rules and guidelines. The aim of the note is to help Bank staff meet fiduciary requirements while building local management capabilities.

30 . Administrative Manual Statement (AMS) 15.00. An IAD review of consultant trust funds in FY02 showed some shortcomings in the instructions and resulted the recommendation by some donor countries that the Bank should increase the level of competitiveness in the selection of consultants. AMS 15 .OO, Selection and Use of Consultants by the World Bank for Operational Purposes, which identifies the responsibilities of task managers and other Bank staff in procurement of individual consultants or firms, was revised in April 2002 to address donors’ concerns and to better define the scope of its application to Bank internal resources and all Bank-executed trust funds. Among the changes are the following: (a) advertisements for procurement opportunities above $200,000 are to be published in United Nations Development Business, the Development Gateway, and the Bank’s external website; (b) the minimum threshold above which publication of Requests for Expressions of Interest for firms is mandatory has been lowered to US$SO,OOO, and the Requests should be made available on the sites mentioned above; and (c) clearances for contracts of individual consultants above US$50,000 will be provided by the sector manager and by a PS/PAS (other than the TM if the TM is a PAS). For individual consultant contracts below US$50,000, the appointment may be cleared by the sector manager alone.

31 Social Sector Standard Bidding Documents. In April 2002, OPCPR issued a Standard Bidding Document (SBD) and accompanying Technical Note and User’s Guide for textbooks and reading materials. The SBD has been designed to simplify the preparation of bidding documents and to provide more flexibility in textbook procurement. A trial edition of the Standard Prequalification Document for Procurement of Health Sector Goods was also issued in April 2002.

32 Inforrnatiun Technology Procurement, During FY02, OPCPR formalized the Bank’s consultation with the information technology (IT) industry through a web-based pilot system for reseller qualification in Bank-financed international shopping transactions. OPCPR tirther improved IT procurement instruments by (a) releasing for official use the Standard Bidding Document for Supply and Installation of Information Systems; (b) drafting and posting for comment on the Bank’s website guidance notes on evaluation of nonprice factors in IT procurement and on contracting for complex systems engineering; and (c) developing training materials for IT procurement in connection with ILO-sponsored training courses. OPCPR also lent increased support to the Regions on resolving complex IT procurement cases. Its ongoing work on standard bidding documents and staff guidance focused on solving the key problems that increase the complexity of IT procurement, among them (a) the shift from technical to functional specifications and the concomitant rise in bid evaluation complexity, and (b) the difficulty of reconciling the Bank’s concern for full competition with the monopoly/oligopoly

14

characteristics of large segments of the IT market. This work is being reflected in successive improvements to IT SBDs.

2. Institutional Initiutives

33 In FY02, OPCPR built up both client and internal e-procurement capacity, in furtherance of’ the Bank’s e-procurement strategy formulated in FYOl. A knowledge base of country experiences was expanded and made available through the web, and Bank position papers were expanded to reflect deeper understanding of implementation issues gained through active country networking. The first phase of the pilot project with Mexico ended successfully with 124 electronic procurement transactions conducted without major problems, and with impact indicators confirming most project design assumptions about increased competition, system reliability, increased transparency (both during and after the bidding process), and shorter transaction times and lower transaction costs. The second phase of the pilot project, however, has run into policy issues on electronic authentication of foreign bidders, a matter that is still being worked out by the Government of Mexico and the Bank. OPCPR also recruited an e- procurement specialist, who started work in FY03.

34 Environmentally and Socially Responsible Procurement. In September 2001, the Environmentally and Socially Sustainable Development Network (ESSD) and OPCPR launched a joint initiative to promote environmentally and socially responsible procurement (ESRP) as part of the Bank’s broader initiative on corporate social responsibility. The ESRP initiative covers procurement under Bank-financed projects and also the Bank’s own corporate procurement, and seeks to integrate environmental and social issues into procurement decisions and actions. In the short term, the ESRP work program includes (a) extending the existing “negative list” to cover environmentally harmful products, (b) integrating ESRP into the scope of environmental impact assessments, (G) mainstreaming ESRP into the Bank’s procurement practices, and (d) creating environmental awareness among Bank staff, borrowers, and suppliers. In FY02, comprehensive studies were carried out on the Bank’s institutional procurement and on the possibility of adding core labor standards to the Bank’s standard bidding documents and contracts. It is expected that recommendations fkom these studies will be implemented in FY03.

35 . Performance-Based Procurement. Procurement based on desired outputs is considered more efficient than procurement based on detailed technical specifications of the equipment or work components. Although Bank guidelines generally promote performance-based procurement, the practice has been limited because of sector policy issues or technical difficulties in designing procurement specifications. During FY02, the procurement network and the itiastructure sectors worked jointly to develop and finalize the model bidding documents for Performance-Based Management and Maintenance of Roads Contract (PMMR). The model is being piloted in AFR. An exercise is under way with staff in the water sector to develop simiiar approaches for Concession Bidding Documents and Lease Contracts in Water and Sanitation, as well as to identify suitable pilot projects to test new ways of doing business. Other related activities included cross-support to MNA on a scheme of performance-based success fees for a CDD management contract in Lebanon, and preparation of Draft Sample Standard Bidding Document for Services (other than consultancy) with optional performance-based compensation (trial edition, before circulation).

15

36 Procurement Datu Management Issues. The Bank’s Systems Application Program (Sk) Operations Procurement System was implemented two years ago to help task teams facilitate procurement planning and monitoring. During FY02, the system was simplified and enhanced in response to feedback from the Regions. To strengthen accountability for accurate contract data, Form 384 data entries are to be reviewed and cleared by a PAS or procurement analyst before the data entry in SAP is finalized by Administrative and Client Support (ACS) staff. Other systems initiatives in progress include (a) development of the workflow, (b) further development and simplification of the system -including creation of a portal where clients can conduct transactions online, such as submitting e-documents and creating procurement plans, (c) integration of procurement issues into Implementation Completion Reports, and (d) enhancements to the database of bidders’ complaints.

3. Procurement Sector Board Retreat

37 The Procurement Sector Board held a retreat in June 2002 to elicit stakeholder views and to hevelop short- and long-term approaches to address them. During the retreat, James Adams, Vice President OPCS, addressed the PSB and outlined his vision for the future of the Bank’s procurement function, noting that the short-term improvements and long-term reform must be worked in parallel. Mr. Adams stressed the need to adapt procurement procedures to the changing needs of Bank operations, and stated that even though there will always be a place for transaction processing, the Bank is shifting from transaction-based processing to capacity building. This shift in focus will enhance the impact of the procurement function, and will require improved collaboration with operations teams through enhanced flexibility, good judgment, and the identification of simple solutions to clients’ needs.

38 Procurement Sector Board Response. As a result of the retreat discussions, the PSB agreed to (a) carry out a thorough assessment of procurement policies and procedures with the aim of eliminating those that do not add value; (b) simplify processes by identifying where and when thresholds can be raised and the number of clearances reduced; (c) identify possible deficiencies or obstacles in adapting to the changing needs of the procurement function; (d) undertake an aggressive communication and outreach campaign; (e) develop suggestions for Senior Management on how to carry out procurement in programmatic lending; and (f) complete CPARs in all countries and effectively pursue creation of capacity in these countries.

D. Harmonization

1. Internal Partnerships

39 . The Bank’s business environment places a premium on internal harmonization and partnerships, expressed across and between the procurement function and FM, PREM, LOA, and operations teams; and in FY02, the network responded to this imperative. Consistent with the increased focus on procurement quality reviews and a more integrated approach to analytic work, coordinated CPARKountry Financial Accountability Aassessment (CFAA) reviews were conducted in six countries-Egypt, Lao PDR, the Philippines, Sri Lanka, Yugoslavia, and Zambia. In Yugoslavia and Zambia, PREM also participated in the assessment process, and Public Expenditure Reviews were carried out together with CPARs and CFAAs. The Lao PDR, Philippines, and Yugoslavia assessments have been completed and the others are in progress.

16

40 Country Assistunce Strategies. In accordance with the draft Bank Procedure (BP) 2.11 guidelin& (revised in February 2002), CASs should address governance and public financial accountability issues, including procurement. In line with this heightened focus, draft CASs are submitted to OPCPR for review and comments on procurement aspects. The objective going forward is to ensure that timely and adequate feedback f?om procurement diagnostic work is fed into CAS design and implementation, resource deployment at the country program level is informed by fiduciary risk appraisals, and fiduciary diagnostic and capacity-building needs as outlined in CPARs are integrated into rolling CAS programs.

41 Training Partnerships. Partnerships were also reinforced during FY02 in training and capacity-development seminars and workshops. In addition to jointly managing the Fiduciary Forum with FM, the procurement network in the Regions worked closely with FM, KM teams, LOA, country offices, and operations teams to deliver a number of consolidated training workshops/seminars for staff.

42 Partnerships with Country Teams and Task Managers, Partnerships with country offices and TMs continued in FY02 through direct involvement of procurement staff in project teams, f?om preparation and appraisal stages to implementation. Although procurement staff work closely with TMs, complete partnership is hampered because the majotity of TMs do not fully understand how procurement can function as a project monitoring tool and as a factor in successful project implementation. This is an area where there is room for improvement, and the network will work to enhance efforts to build TM procurement capacity.

2. External Partnerships

43 * In FY02, the procurement network actively pursued collaboration and harmonization with partners, both globally and at the Regional and country levels, and achieved notable success in a number of areas.

a. Harmonization with Multilaterals

44 The Heads of Procurement (HOP) of the multilateral development banks and other development agencies meet biannually to discuss their ongoing effort to harmonize procurement documents and policies and to consider joint work on country objectives and procurement reform? In FY02, the HOP meetings were held at the European Bank for Reconstruction and Development (EBRD) in October 2001 and at the Inter-American Development Bank (IDB) in March 2002. Concurrently, specialized working groups met to work on harmonized documents, some of which HOP approved. Among the documents were the following:

l Standard Bidding Documents for Goods---completed, and now used by the World Bank.

I5 The draft guidelines are available at h~://wbwebapps2/wwwopcspo~a~/CAS/cs-n.ht. I6 Participants include the AErican Development Bank, Asian Development Bank, Black Sea Trade and

Development Bank, Caribbean Development Bank, European Bank for Reconstruction and Development, European Commission, Inter-American Development Bank, Nordic Development Fund, North American Development Bank, and the World Bank.

. . . * . ,:- c .-_. ._

17

* Standard Prequalification Documents for Civil Works-completed.

a Standard Request for Proposals for Selection of Consultants-well advanced, will be issued in FY03.

l Standard Bidding Documents for Civil Works-well advanced.

a Common Instructions on CPA&+--MDBs endorsed the World Bank’s revised instructions for conducting CPA& making this a common instrument among the donor community.

In addition, the working groups established a common platform of requirements on local procurement, and approved the World Bank’s assessment comparing and contrasting the procurement guidelines and policies of all MDBs?

45 ESRP. Other areas of HOP concern include issues of sustainability, good governance, procurement and project management on cofinanced projects, ESRP, and e-procurement. During the October 2001 meeting, the HOP group discussed the following options for introducing ESRP: (a) adding environmental considerations to each standard bidding or tender document, (b) introducing a negative list of items barred from use during contract performance, (c) revising the standard terms of reference for consultant assignments with project design or preparation of construction technical specifications to include explicit reference to environmental factors and concerns, and (d) developing practical ways to introduce environmental factors into bid/tender evaluations. A more detailed analysis of these options was prepared and discussed at a December 2001 meeting cosponsored by the World Bank, AsDB, United Nations Environment Program, United Nations Development Program, Consumer’s Choice Council, and Global Ecolabeling Network.

6. Hurmonizati~n with the Organization fir Economic Co-uperatiun and Develupme~t and Bilateral

46 There is enormous need to build public procurement capacity at the country level.” The donor community can support this effort by focusing on results, through the development of common benchmarks, standards, and measurement tools. These can form the baseline for a

17

18

The HOP group has focused primarily on the harmonization of bidding and contract documents, but there is a growing sense that, to meet the development objectives of harmonization, their efforts should transcend the procedural aspects of procurement. Thus, they have begun discussions on policy differences among MDB procurement rules on the basis of a comparative table prepared by the World Bank. However, reaching an agreement among the participants on harmonized policies is a long-term effort. A review of the completed procurement assessments on mure than SO client countries has revealed common issues. Key among these is the need to improve performance of the public procurement system in delivering against the internationally accepted principles of economy, efficiency, transparency, openness, fairness, and competition. The need for capacity building has also been confirmed by a recent study by the Development Assistance Committee of the Organization for Economic Co-operation and Development (OECD-DAC) on procurement capacity in developing countries. Discussions are under way with OECD-DAC to build on the country-level work of DAC and the World Bank by hosting in late 2002 or early 2003 a joint workshop of donors, with participation from client countries. Provisionally, the workshop will focus on (a) mainstreaming procurement in the governance agenda, (b) capacity (d) benchmarks and standards for petiormance measurement.

building, 0 C monitoring and evaIuation, and

18

coordinated approach to country work to help bring country systems into compliance with agreed standards of performance. This requires harmonization with bilaterals and multilaterals.

47 Public Expmditure and Financial Accountability. To address these concerns, the Wbrld Bank, in collaboration with European donors, created the Public Expenditure and Financial Accountability (PEFA) program to enhance coordination, ensure that development assistance is used as intended, and focus resources more effectively on the reform of public expenditure management and financial accountability systems in developing countries. PEFA is financed jointly by the World Bank, the European Union, and the United Kingdom’s Department for International Development (DFID), and it provides support to specific country-level pilot programs that will feed results into the various working groups. One country pilot program, in Uganda, is developing monitoring and evaluation indicators that will help measure the effectiveness and impact of the country’s ongoing procurement reform. Another country pilot is in Zambia, where a coordinated assessment on procurement, financial management, and public expenditure has been initiated.

c. Regional Hurmoni~atiun Activities

48 The harmonization agenda in procurement has moved beyond working on common documents to embrace efforts to harmonize approaches to capacity assessment and capacity building. To this end, the Regions made important contributions in partnering with international development organizations, and they were involved with local and international partners in a wide range of efforts to support legal and institutional reforms in client countries as well as joint activities on capacity assessment and development, including partnering on training programs in client countries. During FY02, CPARs were conducted jointly with other donors in 11 countries,19 and IDB has shared with the World Bank its CPARs for the Dominican Republic, Honduras, and Nicaragua. A procurement specialist from the African Development Bank (AfDB) has joined AFR to work on CPARs, and a joint procurement seminar was carried out in Angola with AfDB. AFR is also working with DFID on the social aspects of contracts. In MNA, a request fkom the Islamic Development Bank has resulted in establishment of a program to build its procurement capacity. This program will be implemented in FY03.

d. Harmonizution Activities at the Country Level

49 Harmonization activities also continued at the country level in FY02. Procurement staff wdrked with in-country donor representatives and participating regional development banks to undertake an intense process of piloting harmonized procedures for aid management and delivery. The pilots are intended to support a government-led harmonization program with concrete and operational harmonized products, drawn principally from areas where a large degree of consensus has already emerged from the bilateral/multilateral work program. So far, work is ongoing in three pilot countries-Ethiopia, Jamaica, and Vietnam-with the goal of attempting to harmonize all safeguards/fiduciary aspects of the country loan portfolios. Draft action plans and issues papers have been prepared and are under discussion with these governments and other donors.

I9 Angola and Guinea with AfDB; Lao PDR, the Philippines, Uzbekistan, and Vietnam with AsDB; Costa Rica, El Salvador, and Paraguay with IDB; Yugoslavia with EBRD; and Azerbaijan with the European Union.

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E. Partnerships and Outreach

50 Business outreach activities were somewhat limited during FY02 because of the scheduled end-fiscal year closure of the Business Partnership and Outreach Group, which was responsible for organizing business briefings and other outreach activities.

51 Procurement Outreach Seminars. In Washington, two general procurement seminars wire held, one in November 2001 and another in June 2002 (a seminar originally scheduled for September 2001 was cancelled). Approximately 120 people attended these seminars.2o Procurement network staff also delivered seminars in 15 countries,2* in cooperation with External Affairs Europe and Private Sector liaison officers.

52 United Al&ions Development Business and Development Gateway’s dgMarket. The United Nations Development Business (UNDB) will continue to be the primary venue for the publication of procurement notices. OPCPR staff worked closely with the Development Gateway Foundation to launch in March 2002 the dgMarket service, an online procurement information service that allows donors and government agencies to submit tender notices via a web browser. Information is submitted through a menu system that reduces errors and drastically reduces the time required for editorial review of tender notices. The system, which collaborates with UNDB, also uses the Common Procurement Vocabulary, which means that each tender notice is coded according to the 8,000+ terms used to classify goods, works, or services. Subscribers to dgMarket can set up user profiles to obtain automated e-mail alerts whenever a tender notice that meets their specific business interests is published. At end-FY02, dgMarket contained about 25,000 tender notices, including about 2,500 development assistance tenders, and some 1,200 firms had set up alert profiles to obtain automatic e-mail alerts. Registration continues at a rate of about 500 fkms per month. About 18 percent of present users are based in the United States, 48 percent in Europe, 8 percent in other OECD countries, and 26 percent in developing countries.

53 International Federatiun of Consulting Engineers. Collaboration with the International Federation of Consulting Engineers (continued during FY02, and consultations were carried out on several matters: best practice examples forming part of the Consulting Services Manual, consultants’ conflicts of interest, and the introduction of integrity management systems in consulting firms. The Bank’s consultant services adviser made a presentation on Bank procedures in the selection of consultants to the organization’s annual conference.

Although the June seminar was held at the Bank’s Washington office, it was organized and sponsored by the International Gateway of the Greater Washington Board of Trade. This arrangement was highly satisfactory and discussions are under way with the Board of Trade to introduce a regular program of seminars in Washington

?-I during FY03. Algeria, Austria, Brazil, Canada, Finland, Ghana, India, Italy, Morocco, Nigeria, Spain, Switzerland, Tunisia, the United Kingdom, and the United States.

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F. Staffing Strategy

1. Staffing, Recruitment, and Decentralizatiun

54 FY02 was a year of transformation for procurement staffing and organization.22 Decentralization continued in till force, per the Strategic Compact. Procurement country hubs were established, and the majority of the new hires were for country offices. Mr. Annando Ribeiro Araujo was appointed Director of OPCPR and Head of the Procurement Sector Board, effective July 2001. Two RPAs (EAP and LCR) were hired, and a senior counsel from outside of the Bank was hired for LEGPR. Some Regions restructured the procurement finction (LCR and SAR), and in some the RPAs prepared to take full control of the function in FY03 (AFR, EAP, ECA, LCR, and MNA). During FY02, five procurement specialists left the Bank (retirement and redundancy), and 24 new specialists and analysts were hired (five of whom will start work in FY03). Of the 24 new hires, 14 replace staff who left the network. Table 6 presents an overview of procurement staff in the Bank as of June 30,2002.

Table 6. Procurement Resources, FYO2 :. ..:. : .:. i:: T;.i.. 1 : ::. ::. i j,;,, ::.: : :.,:... ; :. ;:. :. .:: .:.j..; {. ‘: ,,., :. j .: ::.. . .: ‘.: il.. .: : I.; : i ..::. :.::..i j : : :.-‘i’i--~I’:~~~~~~~~~~.i: f ; .f_. f ;.y$ . . .:..: ‘.:,‘ : .;:i “..:;$&ygli :. ., ; ~g+&$,#~~~

. : .:<y.: _.: . : j . _: . . . . i. : :_ .. : :’ :. . . . . .~....,.c.. :.:.:..: :- . ~. : : i...: ,. . . i .f; : : I_ _, . Washington-based RPA F+ staff

‘t:: 8::” 41 i

Washington-based procurement analyst 15 Washington-based procurement assistants* .21 Total Washington-based procurement staff : 21 :::q 21 19 : 7 i 2, Country office - F+ staff f.: 20 48 10 4 :I: 2 10 .. I

Country office - Procurement analysts :. 2 l-‘3’2 1 9 Country office - Procurement assistants* 2 2:: i 2’ 3 : I 2.. I 11.

Total country office procurement staff :. ; : ‘: : ._ ~ .i4.

ii:... 15 :‘ 9 2 13’ 84 ?

Bankwide procurement staff 1 35.1.. 28 .W 28‘ 9 :‘I15 10. 161 Procurement accredited staff 1 40 41 17: 19 .: 17 12 1 ,146:.

* The numbers do not include other ACS staff who provide procurement support to the procurement network and the Regions.

55 Procuremazt Sector Board Initiatives. To address the shortage of senior staff and to meet the important challenges of procurement reform and the impact of new ways of doing business (including performance-based procurement and e-procurement), the PSB developed and implemented plans to retrain existing staff and to recruit from outside the Bank to bring new skills and experiences into the Bank. A procurement staffing strategy study carried out in FY02 included the budgetary and resource impact for the next three years. The study showed major Regional disparities in the level of available procurement support, with the ratio of active projects to procurement staff ranging from 12: 1 in AFR and ECA to 44: 1 in MNA. The shortage of resources in some Regions, together with the policy of decentralization, highlights the need for additional staff. The PSB endorsed the findings of the study in January 2002, and approved the hiring of the new staff over FYO2-04. The RPAs presented these new hire requirements to the

22 Between FYOO and FYO2, 37 new procurement specialists were recruited, while 24 staff left the procurement network. Fourteen of the departures were level G and above, and their departure created a critical shortage of senior staff

21

Regional management teams, and in some cases, the plans are under implementation. Table 7 shows the results of the staffing study and the additional professional staff requirements in each Region.

Table 7. Procurement Resources vs. Requirements, FY02

I Consultantsa I 6 I 3’._,_ I #j :I 4 .:.. I 2 : I 2 . I.. I 23 I I Total resources available 36 24. 1 29 24. .I 5 i3 139 . 1 1

: : :i . . . . . : : ,:.::: y:.: .: ,, :., : .::: 1 Resources neededb

.i :: :j j:::: i: iti:: .: : .:.::

’ Resource shortage 16 ” : 6 1 g+ -‘14:, 13 ” il: 3 60 . . ..I. Recruitments under way (during FYO2) 6 3 ,, .li :.+. ,i 10 1

1 New hires required

Procurement work to be covered by STCs i I -5 New hires 4lu 3 .:g;, p- - .lf) ~- 2 ’ 45

i &&g ~~~~~~~~~~~~~~~~~~~~~~~~ g@ ‘: : : 1 ii: i I f 8 : “; :+,Yi~~:y:.:: ;, :;?.“1.;6: : :, jl :,._ j:.i’: I. :, : ;,1_-2. ; j i ;:I;, 1.; j :,i.: ;:.: i& ;.:‘. : : Fy&j:‘: _. I :_.I,_j ,i :i I; : :,: : :~ji:::;:; : 1 !+‘;iy ., ; ji i;‘:i;;‘:‘$: :_I G::l~.:.’ . : : “1 3:;;y:

i;i : : 33; ‘1 ;: .I ;.:.i :: : ::.:” :

..:. pi,::: . : : : :. .: ::.. ..:...i : : j .._ . : r : : :, c..,:., i ::., ,: ..:.:..:. i:i:i ,:.i. __... .: ,:.:::::. .. :,.i..: : .-:.:‘.:::‘.‘,“b.. . . _. ,::. i _:_:: 5 :.::.:,;., i.. ::: SyI.;:

..,,, .,. .: ~‘:‘i‘:‘::,.:‘~i!,::i:: .,.j 1. :.; g_ ;:;_:I 1/y: f :+.:~ :c& ~:.,;.. y ::.(;l,_j:~~ :: .:; ;; [;

:. .; j. : . . ...>...:: ,..:.. ,. ; .;.‘;i.:‘i:-. ,,. . :.. : ..: .::::. : . .:,. ,, 1 . ,.. _. ,. ,.. ).. :.A .__ . . ., :, :. _. .., : ._: -: : .: :

y work 190 days annually, the total numbers have been reduced to show the full-time staff equivalent.

b This number was calculated using the current and expected workload for each Region in areas of fiduciary compliance and capacity development plus the Regional decentralization plans.

56 Decentrdi~utitm: Policy. The Bank’s operational policy for procurement distinguishes between service and Jiducimy functions.23 The policy is that the service tin&ion should be delegated to country offices, provided suitably qualified and experienced procurement staff are available. Decentralization of the fiduciary function is considered to be much more sensitive because staff in country offices do not necessarily have access to the same levels of expertise and

23 The service function refers to provision of procurement-related advisory, trouble-shooting, and training services to borrowers, the bidding community, and Bank staff from the planning stage through contract completion. The fiduciary function refers to the conducting of prior reviews of procurement documentation and decisions at key steps in the procurement and contract implementation process as well as to post reviews, to ensure that the process is in compliance with the Bank’s Procurement Guidelines as is legally stipulated in the Loan or Credit Agreements.

22

back-up as Washington-based staff. During FY02, the PSB determined that decentralization would proceed on the following lines: (a) in Washington, the RPA office fiduciary functions would continue as before, including sector work and cross-fertilization of procurement sector organization among countries; (b) the majority of operational work-including procurement services, project-related fiduciary functions, and CPAR follow-up actions-would be delegated to country offices. Field staff oversight would be carried out by internationally recruited procurement staff located in the field and linked to the RPA for quality, work program, Overall Performance Evaluation, and career development. Under this policy none of the fiduciary functions of the RPA or OPRC would be delegated to the field, whereas fiduciary functions not subject to RPA and OPRC review may be decentralized if the capacity conditions stipulated in the policy are met. Decisions to decentralize are made by the Regions, taking into consideration country conditions and local capacity, budget constraints, and the lending portfolio.

57 Decentrdi~ation: Practice. Decentralization and delegation of fiduciary responsibilities to l country offices continued during FY02, and all Regions intensified efforts to build procurement capacity in country offices. Where capacity was established, procurement fiduciary responsibilities were transferred to country offices. By the end of the fiscal year, the procurement network was 60 percent decentralized with respect to staff and 50 percent decentralized with respect to fiduciary delegation. The goal for end-FY04 is 71 percent for both staff and delegation. Given the volatility in the-lending portfolio of some countries, the hub system piloted by SAR is being adopted in other Regions, using either virtual or physical hubs. The PSB and OPRC will continue to monitor the implementation of the decentralization strategy.

2. RegimaVUnit Perspectives

58 . Since each of the Bank’s six Regions have had different procurement structures, staffing levels, and workloads, an individual narrative of each Region follows, along with a summary of the role of two central units.

59 AFR. With the highest number of IDA countries in its portfolio, the Af/rica Region went through major changes and expansion in FY02. Subregional procurement hubs were created in Ciite d’Ivoire, Ghana, Madagascar, and Uganda. (A fifth hub operating from Washington covers countries not affiliated with any of the four subregional hubs.) Internationally recruited senior procurement specialists (two of whom were relocated fkom Washington) were stationed in these hubs as coordinators to provide procurement service to affiliated countries. The services provided from the hubs follow the Region’s established performance indicators and service standards, and are intended to:

* provide timely response to clients on all project-specific procurement matters, specifically on cases below the RPA mandatory review;

assist in building capacity among the country office procurement staff and borrower personnel; and

l assist borrowers to accelerate procurement reform programs by maintaining a more direct dialogue and monitoring progress with the governments.

23

The Region is 82 percent decentralized with respect to staff, and 41 percent of project procurement work is handled from the field. AFR procurement staffing projections and country office staff procurement accreditation programs indicate that the Region will achieve 60 percent delegation of procurement fiduciary responsibilities by end-FY03 and 86 percent by end-FY04. In FY02, two procurement specialists (G and H level) retired; one of the vacant positions was filled in FY02, and the other will be readvertised in FY03. In addition, the Region’s senior management approved plans to hire five procurement analysts and one procurement specialist in FY02 (of whom four will start in FY03). An additional eight country office positions (procurement analysts and specialists) have been approved for recruitment in FY03.

60 &U?, EAP is currently 80 percent decentralized with respect to staff, and 66 percent of project procurement work is carried out from the field, Seven country offices in the Region have at least one PS or PAS. Delegation of full fiduciary authority below the RPA level has been approved for China, Indonesia, the Philippines, and Thailand, and four new positions have been approved for Cambodia, China, Mongolia, and Vietnam. In FY02, the Region had one redundancy position in Washington, and in addition to the RPA, two new PSs (one in Washington) a;nd three procurement analysts for country offices were hired. Another major change was in procurement organization and structure: previously procurement staff were mapped either to the sectors or to country directors in country offices, and with budget resources also controlled by country directors. This changed at the end of FY02, when Regional senior management agreed to consolidate and map all procurement staff to the RPA office.

61 percent

ECA. The Region is currently 42 percent decentralized with respect to staff, and 33 of project procurement work is carried out from the field; plans call for 45 percent

delegation by end-FY03 and 65 percent by end-FY04. Full fiduciary functions below the RPA level have been delegated to the Russia and Turkey country offices, and limited delegation has been approved for the other country offices. Four country offices-Bosnia and Herzegovina, Russian Federation, Turkey, and Ukraine-q out fiduciary responsibilities for selected projects. (The Hungary office was closed in FY02, but procurement staff still provide procurement services in the country.) The Region is working toward further devolution within a multiyear framework. By end-FY03, fully accredited procurement staff in Washington will be reduced from 15 to 13, and country office staff will increase from 9 to 12. Three procurement specialists are being hired for the Bulgaria, Georgia, and Ukraine country offices (and will start in FY03). Plans call for four new hires in FY03, of which three will replace staff who will retire or move out of the Region in FY03. By end-FYO4, four more country office staff will be hired to make up for the current shortfall. In addition to Russia, hubs will be created in Bulgaria, Georgia, Poland, and Ukraine. Another major change for the Region is in procurement organization and structure. ECA was structured in the same manner as EAP; but as of FY03, all procurement staff will be consolidated and mapped to the RPA office.

62 LCR. In FY02, the procurement function and staff were reorganized. All procurement stiff were remapped to the RPA office and a new position was created in the RPA offke to coordinate procurement staff who were grouped in a sector service team. The reorganization follows the Region’s decentralization plan of creating country hubs, and will be carried out in two phases to be implemented within an l&month period. LCR has fully delegated procurement functions below the RPA level in the Brazil, Mexico City, and Peru country offices. Plans are to have 75 percent of project procurement work carried out from field offices by end-FY04. In

24

addition, new recruits include internationally hired PSs who are being reassigned to country offices in Argentina, Dominican Republic, and Guatemala, and all new recruits in FY04 will be field staff. At that point, about 50 percent of the Region’s procurement staff will be located in country offices. As of end-FY02, the Region is conducting 30 percent of project procurement work from the field, and the decentralization efforts will continue through redeployment of Washington-based staff to country offices, in line with the pace of decentralization of the county management units. ln FY02, other than the RPA, two PSs and three senior PSs were hired, to be divided between Washington and country offices. Recruitment plans for FY03 are to hire three PSs for country offices, and to relocate four procurement analysts from Washington to country offices. Further decentralization will be implemented in FY04.

63 M’IVX MNA faces a severe shortage of procurement staff---even with the inclusion of P&s, the Region had 44 projects per procurement staff. The Region has only two analysts and three procurement specialists, including the RPA. Of these, one was hired in FY02-a senior PS in Washington. Apart Corn the fiduciary services provided by the RJ?A office and by one PS in the country office in Beirut, procurement work is carried out by PASS in Washington and in country offices (Egypt, West Bank and Gaza, and Yemen). The Morocco country office lacks even a PAS. The decentralization action plan takes into account the Region’s small size and the attendant critical mass issues, as well as the volatility of work programs. The recruitment plan includes hiring three PSs in FYO3 and one in FY04, with the possibility of transferring one procurement analyst from Washington to a country office. As of end-FYO2, 32 percent of project procurement work was carried out from the field; the end-FY04 goal is 70 percent. The Region’s procurement staff and resources were remapped to the RPA office, effective July 1,2002.

64 SAIL With 98 percent decentralization of staff, and with 98 percent of project procurement handled fi=om the field, the Region is the most decentralized in the Bank. Since 1996, there have been procurement units in each of the five country offices (Bangladesh, India, Nepal, Pakistafl, and Sri Lanka), and since 2000, field procurement staff have been organizationally and administratively mapped directly to the RPA. In FY02, SAR experimented with a procurement hub in India. High-quality local staff are available, and are paid allowances and benefits commensurate with salaries in Delhi. Staff from units in other countries were also transferred to India hub, and the RPA office in Washington was reduced to just the RPA. This has yielded greater efficiency and economies of scale, a more level work load, enhanced quality control and oversight by senior staff, and expanded opportunities for local staff to acquire cross- country experience. As a result of this reorganization, six positions were identified as redundant (five in FYOl, and one in FY02). SAR has decided to continue operations under the new structure. The recruitment plans include hiring two PSs for the India office in FY03.

65 OPCPR. OPCPR continued its central role as anchor to the PSB and as a support function to the Regions for both specialized technical support (e-procurement, public procurement reform, performance-based procurement) and for the development and provision of training seminars and workshops for internal and external clients. Other areas of activity included harmonization efforts, business outreach, and the issuance of new or revised Technical Notes and Standard Bidding Documents and instructions on different procurement-related activities. During FY02, two replacements (director and IT specialist) were hired and three new senior procurement specialist positions were approved (with particular focus on e-procurement,

25

public sector management, and privately provided infrastructure). The candidates have been selected and will start work in FY03.

66 LEGPR. LEGPR support for OPRC and the Regions continued, including in the following areas:

* Investment Lending Activities. As part of OPRC, LEGPR provided legal advice on operational and commercial procurement issues, including reviewing and making recommendations on major SUPPlY? works, and consultants contracts.

e Policy-Related Activities. LEGPR provided legal support to OPRC policy development and interpretation.

l Country Instituthnal and Operatiunal Activities. LEGPR reviewed CPARs and provided support to the development of public procurement laws, including reviews of existing and proposed legal frameworks, and the development of analyti .c/diagnostic tools and a model framework.

8 Network and Sector Board Support. LEGPR participated in network and PSB activities.

l Sanctions Committee Support. As Secretariat to the Sanctions Committee, LEGPR provided substantive and administrative support in debarment proceedings against bidders, contractors, and consultants alleged to have engaged in corrupt or firaudulent activities in connection with Bank-financed projects.

l Training and Knowledge Management. LEGPR provided training to Bank staff and borrowers in legal, institutional, and commercial aspects of procurement.

In view of increased country-level procurement activities, LEGPR may need additional resources in FY03 to accommodate Regional demands.

G. Professional Development

67 For the first time, the procurement and financial management networks partnered to sponsor the annual Fiduciary Forum. The forum was held March 11-14, 2002, under the theme “Enhancing Fiduciary Capacity in Client Countries,” with the goal of facilitating better integration of the fiduciary fUnctions and closer collaboration of procurement and financial management activities in Bank operations. The subjects of the 31 workshops ranged from practical advice on monitoring post review of procurement actions to experiences with procurement reform in client countries. Plenary sessions were held on fiduciary ESW, capacity building, harmonization, and ethical issues. A total of 430 staff participated in the forum, including 73 procurement staff Tom Washington and 55 from country offices.

68 Procurement Family Job Descriptions. The PSB has approved job descriptions (major jod accountabilities, essential requirements of specialized skills, knowledge and competencies, scope, and minimum education and experience required) for all procurement career job titles.

26

The human resources committee of the procurement network has used the descriptions for all recruitments and promotions, providing staff a basis to plan their Careers in the network.

I. KnowIedgeLLearning and Training: Institutional Initiatives

69 Strengthening internal capacity is a critical challenge facing the procurement function. The training strategy must consolidate staff knowledge of current fiduciary obligations, incorporate the evolution of procurement requirements in response to demands for greater transparency and the changing nature of the Bank’s lending program, and benchmark practices outside the Bank. The long-term objective is to provide a broad program of training that will improve the quality and consistency of procurement work and foster the skills of staff in areas where they have had little exposure.

70 Training. The key building block in the procurement training program continues to be the six core curriculum courses that were introduced in a redesigned format in FY98-99.24 In FY02, the practice of charging fees for training was discontinued to avoid the fluctuations in participation created by budget constraints. As a result, 1,542 staff training days were provided for core curriculum courses, and 390 staff training days were provided for specialized procurement courses. In addition, other specialized presentations, workshops, and seminars were conducted by OPCPR during FY02, including the following:

(a) Community-Driven Davetopment. OPCPR coordinated with the Community-Driven Development (CDD) Working Group to deliver training on fiduciary responsibilities in CDD projects: Regional sessions were held in ECA and AFR, and a Bankwide program was held in April, with two one-day sessions and one half-day session that included participants from nongovernmental organizations and borrower implementing agencies.

(b) Procurement Reform/Capacity-Building Course. Jointly developed with the International Development Law Institute, a Rome-based international organization specializing in teaching lawyers from developing countries, this course examines the underlying principles and building blocks of a good procurement system. In partnership with FM, modules on budgeting and auditing as elements that contribute to good public procurement systems were included in the program. In March 2002, in conjunction with the Fiduciary Forum, the course was delivered to Bank staff, most of whom were from country offices. Plans call for delivering the course three or four times in FY03. Two deliveries (one in French, the other in English) are planned for AFR client staff.

(c) Improving CPAR Quality. A one-day training was held with the participation of QAG to cover the findings and lessons learned from the QAG review of the CPARs. The discussions contributed to the development of the revised CPAR instruction that was issued in May. Additional training on CPARs and quality enhancement is planned for FY03 and beyond.

24 The six core courses are Basic Procurement, Advanced Procurement, Procurement of Goods, Procurement of Works, Selection of Consultants, and Procurement/Data Management (for ACS staff).

27

(d) Introduction to Bank Operations. OPCPR participated in the redesign of this course and developed the materials for the procurement module. The course was delivered twice as pilots in FY02.

(e) Trust Fund Accreditation. OPCPR continued participating in the development of online training modules for procurement and a series of questions to be used in the trust funds certification process. The products are expected to be available in FY03.

(f) Pilot Workshop on Implementing the CPAR. OPCPR worked with ECA (Georgia country office) and the World Bank Institute to pilot a workshop to jump-start implementation of the Georgia CPAR. The workshop included presentations by other countries with procurement reform experience (Kazakhstan, the Philippines, and Poland). Jointly sponsored by the Bank and the Georgian government, the workshop led to increased government commitment, development of an implementation plan focused on a few key items taken Tom the CPAR, and renewed interest in Georgia in pursuing procurement reform initiatives. Capacity-building plans include repeating the workshop other countries in the coming years.

(g) Specialized Courses in Health Sector Goods and Textbooks. Through partnerships with the education and health sectors of the Bank and international organizations/agencies, such as the World Health Organization, these courses were piloted in July 2001 and March 2002, respectively.

(h) An Integrated Approach to the Procurement of Health Sector Goods. Following the July 2001 pilot, this course was delivered in March 2002 to familiarize participants with general contemporary procurement issues for health sector goods and the new procurement bidding documents and Technical Note. The course incorporated seven modules: Introduction, Product Selection and Quantification, Quality Assurance in Procurement, Selecting and Monitoring Suppliers, Strategies and Methods for Procurement, Bidding and Contracting, and Country Context (which reviews the fundamental role of national drug policies and of legislation and regulations to foster the supply of high-quality, safe, and effective products). Instructors included practitioners managing nonprofit agencies that supply essential drugs to developing countries, representatives of academia and of United Nations agencies involved in drug procurement, and Bank staff.

(i) Getting the Books to the Kids: New Directions in Tatbook Procurement. Following the March 2002 pilot, the course was delivered again in May to (a) discuss the key changes introduced in the Bank’s new Textbooks and Reading Materials Operational Guidelines; (b) introduce the concept of the Publishing Chain: Functions and Outputs and the country’s institutional capacity required for the chain; (c) introduce the new Technical Note for the Procurement of Textbooks and Reading Material and its companion standard bidding document; and (d) help participants acquire an understanding of how to make use of exceptions in preparing textbook components under Bank-financed projects. The course is presented in nine modules: Introduction, Pedagogy, Textbooks and Publishing Chain, Economics of Textbook

28

. 0)

(k)

Ten Years of Dispute Resolution Board Success at China’s Ert~n Dam Construction. This one-day seminar was conducted in partnership between OPCPR and the Institute of Civil Engineers (Mid-Atlantic States Chapter), and was attended by about 60 people, of whom 30 were Bank staff.

Other Learning and Training Activities. In addition, procurement staff benefited from (a) an Inter-Agency Procurement Services Organization presentation, (b) a General Services Department presentation on web solicitation and proposal submission for consulting services, (c) a Federations of Procurement Specialists Organization presentation on the role of procurement specialists in organizations, with specific reference to emergency relief operations, and (d) a procurement roundtable with LOA on procurement issues.

9 Aa Knowledge/Learning and Training: Regional Initiatives

Publishing, Institutional Capacity, Logistics and Legal Aspects, Policy Options, Procurement Methods, and Bidding Documents.25

71 The Regions also played a major role in internal capacity development and professional development, and in FY02 conducted various Regional staff training programs, including the following:

0 a

09

0 C

69

0 e

Mentoring Program. A country office staff mentoring program has been developed in EAP, ECA, MNA, and SAR, under which country office staff are brought to Washington for four to six weeks of training to familiarize them with the process and procurement activities carried out in Washington and by the RPA office. It is expected that this program will continue in the coming years.

Hub Training. AFR coordinated and conducted a three-day procurement training for all country offices affiliated with the Uganda hub, and a two-week operations quality course for the new country office hires in the Region. Hub training was also offered by EAP.

PAS Training. ECA conducted a two-day seminar for all Regional PASS.

Focus Groups. In ECA, the RPA chaired monthly focus group sessions to discuss procurement issues, especially Region-specific issues, and identify solutions.

Open Forum Sessiuns. EAP conducted periodic open forum sessions for both procurement staff and task managers.

25 Both the health and education courses have been translated into Spanish and French, and have been expanded to three- to five-day sessions. Plans are under way to deliver the courses in various Regions during FY03, starting with EAP in July 2002, when both courses will be delivered jointly with the Asian Institute of Management in Manila, Philippines.

29

(f) Clinic on Trust Fund Fidm&uy Management. LCR conducted a clinic on Trust Fund Fiduciary Management for Regional procurement staff as well as task managers who are using Bank-executed trust fbnds to hire consultants.

(g) ACS Training. MNA organized a training program on general procurement issues and activities for ACS staff in the Jordan country office.

1

OPCPR l

‘PO1 icy

* Procedures

l Advisory Services 0 Capacity Building l Harmonization

t I

LEGPR l Legal support l Investment lending l Policy w Country-based activities l Network and Sector l Sanctions Committee

Training and Knowledge Management +

t 1 Regions R.PA s WlatxIatory Reviews . tO3lY h&Lge CkiLElllCf% l FSW Products .,. . Advisory Services w Warl1101czhm

0 Capacity I32uifdirtg OPRC 0 Quality kvicws l ,NXandatory Reviews of large procurement + Contribution to YB l Delegations of Fiduciary Function to country offices 0 Mimag~rial Responsibilities

t l Handling ofCor@ai.nts 0 AhAS l.S:OQ

ANNEX A

PROCUREMENT ACTIVITIES CHART

ANNEX B

BANK GUIDELINES, SBDs, AND CAPACITY ASSESSMENT INSTRUMENTS

Tile/Language

Guidelines: Procurement under lBRD Loans and IDA Credits English, French, Spanish

Edition Date Lucatiun Guidelines January 1995, revised January InfoShop and August 1996, September Internal/External 1997, and January 1999 Web

Guidelines: Selection and Employment of January 1997, revised InfoShop (English Consultants by World Bank Borrowers September 1997, January only) English, French, Spanish 1999, and May 2002 Internal/External

Web

Procurement of Goods English, French, Spanish

Standard Bidding Documents January 1995; revised March 2000 and January 2001

InfoShop Internal/External Web

Procurement of Works May 2000, revised March 2002 InfoShop English Internal/External

Web Procurement of Works - Smaller January 1995, revised June InfoShop Contracts 2002 (Corrigenda) Internal/External English Web (Trial) Sample Bidding Documents - September 2000 Internal/External Procurement of Simple Works Web English Procurement of Works - Civil Law September 1996 InfoShop French, Spanish Internal/External

Web Sample Bidding Documents - February 2002 Internal/External Procurement of Performance-Based Web Management and Maintenance of Roads English Single-Stage SBD for Supply and June 2002 Internal/External Installation of Information Systems Web English I Supply and Installation of Plant and November 1997, revised InfoShop Equipment January 1999 and March 2002 Internal/External English, French, Spanish Web Standard Prequalification Document - September 1999, revised InfoShop Procurement of Works March 2000 Internal/External English, French, Spanish Web Procurement of Commodities - Fertilizers and Fertilizer Raw Materials English. French

May 1993 InfoShop Internal Web

34 ANNEX B

Edition Date Locution I TitMLartguage (Trial) Procurement of Crude Oil/Petroleum Products English Procurement of Health Sector Goods (Pharmaceuticals, Vaccines and Condoms) English, French, Spanish (Trial) Standard Prequalification Document - Procurement of Health Sector Goods English (Draft Trial) Procurement of Textbooks and User’s Guide English Standard Bid Evaluation Form - Procurement of Goods or Works English, French, Spanish

May 1997 InfoShop Internal Web

InfoShop (English only) Internal/External Web Internal/External Web

May 2000, revised February 2001 and March 2002

April 2002

A

Internal/External December 2001 Web

April 1996 Internal/External

Consultant Documents Standard Request for Proposals English, French, Spanish

July 1997, revised April 1998 InfoShop and July 1999, and March Internal/External 2002 Web October 1999 Sample Form of Evaluation Report -

Selection of Consultants English, French, Spanish

InfoShop Internal/External Web

Master Bidding Documents

Procurement of Goods and User’s Guide English

October 2001, revised July Internal/External 2002 Web

Harmonized Bidding Documents

(Trial) Procurement of Goods and User’s December 2001 Internal/External Guide Web English I

Manuals

Internal/External Web Internal/External Web

Procurement Manual July 2001

Consulting Services Manual 2002

Capacity Assessment

Internal/External Web I

Country Procurement Assessment Report May 2002

Ir$;!bnauExtemal 1 Assessment of Agency’s Capacity to Implement Procurement

July 2002

ANNEX C

CPAR STATUS AND PLAN As OF JULY 2002

I Alwok Jun.94 FY03 --^ --- E;, I - * I Benin

I I

w m AA May-Y Y FY04

1 Botswana I May-88 1 Burkina Faso 1 Burundi

Nov-00 I Apr-86 I

I- - Dee-00 I I I I 1 Cape Verde

I Central African Republic I FY03 (Issues 1 Chad sep-00 IC omoros I T---- ~--- I I

r - -- Congo, Democratic Rep. of Dec.86

1 Congo. Rerwblic of Oct.86 FY03 1 Cete d’Ivoire May-96

Euuatorial Guinea I Jun-02 I I I I Jul-02 I I Eritrea

1 Ethiopia .l. I I

- . _ I I I 1

I Gabon I I I 1 Gambia

-I-- -~ --

1 Gh ana Mar-96 I - -

I Guinea _ ~~~_

Guinea Bissau

I

I - - -

Jun-02

IK enva May-97 Dee-97 I 1 Lesotho

(Lb i eria* I Madagascar I Malawi

I Ott-85 I I I I Ott-95 I FY03 I I

1 - - - - - “ - - - 1 I - - - -

I 1

Mar-8 5 F FY03 1 I 1 Mali Dec.98 7 I I 1 Mauritania Jun.02 1 Mauritius Mozambique Namibia

May-02

1 Niger 1 Nigeria

Now98 Jun-00

Rwanda Sao TomtSs and Principe Senegal Seychelles Sierra Leone Somalia*

Jun-86

Aug-94 FY03 I

Dee-85 1

36 ANNEX C

:. _:‘. _. : :_ ‘, i 1 ..(.. I.’ .; :‘, ,i :,. ;C@atifti : : : . jybre.: : : 1, 1 .::‘:.: _. ..:. ::,;.i i ;,.i.; f .’ __:: ; :

?’ ctl;#nt /iiin :. .‘.i ;: ‘:; ,‘. i -FYe3 Fyid. . .

South Afkica Mar-02 Sudan* Feb-87 Swaziland May-88 FY04 Tanzania Sep-96 FY03 Togo Jun.97 FY03 Uganda May-O 1 Zambia Jun-97 FY03 Zimbabwe 1987 FY04

Total: 38 9 7

Cambodia Mar-97 FY03 China Jul-97 FY03 East Timor 1 FY03 Indonesia Aug-00 Kiribati Korea, Rep. Of Lao PDR May-02 Malaysia Dec.94 I Mongolia FY03 I Myanmar* t Papua New Guinea Apr-93 FY03

1 Philippines Jun-02 Samoa FY03 Solomon Islands I Thailand Nov-99 (OPN) FY03 Tonga FY03 Vanuatu 1 Vietnam Apr-02

Total: 8 8 0 ECA

Albania Jan-01 I Armenia 1997 FY03 1 Azerbaijan Jun-02 Belarus FY04 Bosnia and Herzegovina ; May-02 Bulgaria May-00 Croatia Aug-99 FY04 Georgia Jun-01

1 Hungary Mar-97 Kazakhstan Jun-00 I Kosovo Kyrgyz Republic Jun-98 FY03 Latvia Jan-01 I

37 ANNEX C

‘. .;Count..$ ; ” ;:./:; ; ::::+ ;:;:j;; ;.; :&J&f 1. :

i:. ’ C~*p4&)~:~J&ji&Qp~ ::, +&

:: ‘&04 : ,.... ..: Lithuania 1995 (CPN) Macedonia Jan-02 Moldova 1995 (CPSP) FY03 Poland 3~1-00 Romania Jun-00 FY04 Russian Federation Ott-00 Slovak Republic May-01 Slovenia Tajikistan FY03 Turkey Apr.01 Turkmenistan FY04

: Ukraine May-O 1 Uzbekistan Jun-02 Yugoslavia Jun-02

Total: 20 4 4 I lxx I

Argentina Bahamas”* Barbadosb*

El e ize+ Bolivia Jun-00

Brazil Oct.9 1 Chile Jun.85

Jul-01

I Jul-93 I FY03 I I

FY03 (Federal) FY03

FY04 (States)

Colombia Costa Rica Dominica Dominican Republic

Sep-00

Jun-99 FY03

Update Ecuador

1 El Salvador Apr.00 4

I Jun-9 1 I I FY04 1 I I I I I Grenada

r Guatemala Apr-00 I I I Guyana Haiti* Honduras

Jan-99 Nov-99 FY99

Update

Jamaica* Mexico (state level)

Dec.00 FY03

1 Mexico (Federal) 1 Neth.Antilles

Mar-02 I I I I I

Nicaragua OECS Countries* (St Lucia, St Vincent)

Sep.92 FY03 t

FY03

38 ANNEX C

---- ; ,:. :. : : ;: ::: .. ,.:. : :

..~:I:~~~~tYi~: j:,:. I:/ .: -.’ ;‘: j:, Date :. ;_ :. ‘. . . . . : : ‘. .i:.:. :: ::._: _:: .i : :. :_ _: ._: .:: : 1: .._ ? C*jyt&f .~&i~flI 6’: i ! :’ jqy)3 : . . &?O# _. 1, : Panama Mar-O 1 Paraguay Sep.97 FY03 Peru Jun-00 I Suriname* Trinidad & Tobago* I Now99 UruguaY Jan-00 Venezuela Jul-90 FY04

Total: 21 8 3 - - - r

Algeria - FY03 Djibouti FY03 QvPt 1994 FY04 Iran FY04 Jordan Jun-99 Lebanon 1994 ’ FY04 Morocco Feb-00 Tunisia 1993 FY04 VVBG FY03 Yemen Dee-00 I

Total: 6 3 4 I f SAR

Afghanistan FY04 Bangladesh Now99 Bhutan FY04 India Dec.85 FY03 Maldives FY04 Nepal Jun-0 1 Pakistan Sep-00 Sri Lanka Ott-85 FY03

Total: 5 2 3 Grand Total: 98 33 23

* Inactive borrower

For LCR: (a) Bahamas - no lending (b) Barbados - only one regional project ongoing

* IDBKIDA technical assistance project for the CARICOM (component 1) to carry out studies and prepare or update CPARs on a country basis.