This sort of renegotiation creates a risk of breaking the initial commitment, changing rewards and risk allocation. Though theoretical economists would say that “in the long-term” renegotiation of incomplete contracts is unavoidable, PPP practitioners should do their best in order to avoid the need for renegotiation, while simultaneously preparing for renegotiation when it is the best solution in terms of public interest.
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China has experienced substantial economic growth over three decades, with sustained annual GDP growth rates of 8%-10%. In order to maintain the growth, the government seeks to accelerate the process of industrialization and urbanization started in the 12th Five Year Plan (2011-2015).
China has made investment in transport infrastructure a centerpiece of its strategy, with investment in the rail sector specifically increasing, in recognition of lower cost, higher energy efficiency, and lower carbon emission of rail transport compared with road and air transport.
, which includes 16,000 kilometers of rail connecting 160 cities on the mainland. China’s Mid- and Long-term Railway Network Plan (2004-2020), adopted in 2004 and updated in 2008, contains an ambitious program of railway network development, with an aim of increasing the public railway network from 75,000 km to 120,000 km, among which 25,000 route-km will be fast passenger railway routes.
Procurement of high-speed railway projects in China is complex and transaction heavy. The technology is constantly changing due to innovation by designers and manufacturers, and the inclusion of multiple agencies and officials can increase the complexity.
For governments to carry out their day-to-day functions, procurement -- or their ability to purchase goods and services -- is critical. It is both a service function and a strategic policy tool which can help achieve a broad range of social and economic welfare objectives. It cuts across all areas of public administration and builds on cooperation among multiple public and private stakeholders.
. Promoting innovation in procurement means processes that are transparent and efficient, and that facilitate equal access and open competition. to delivering better services with long-term value for money.
When the World Bank investigates and sanctions a major corporation for corruption related to one of its project, the deterrent impact is readily apparent. However, not every case the World Bank investigates is a major corruption case. In the past year, the World Bank Integrity Vice Presidency (INT) received many complaints related to fraud, and it is important to demonstrate responsiveness to complainants who report credible allegations as well as fix the weaknesses identified. Sanctioning cases of fraud also sends a strong message about abiding by high integrity standards in World Bank-financed projects.
Left unchecked, fraud erodes development effectiveness. It often coincides with poor project implementation, which can result in collapsing infrastructure or the distribution of counterfeit drugs. It causes costly delays and can lead to direct financial losses for countries which cannot afford it. Fraud also fosters a negative enabling environment, creating opportunities for more serious and systemic misconduct to occur.
Though the Indian government has steadily increased funding for its health sector, per capita allocation is still low; reform is thus critical to effectively utilize the available budget.
The underlying question is: Given a set of resources, how do you procure goods in a way that achieves value for money and maximum efficiency?
Drugs and medical supplies are not procured and distributed in time, and this interruption in the delivery of services in health facilities affect the general population’s health outcomes.
To maintain current growth rates and meet demands for infrastructure, developing countries will require an additional investment of at least an estimated US$1 trillion a year through 2020. In the Mashreq countries, the required infrastructure investment for electricity alone is estimated at US$ 130 billion by 2020, and an additional US$108 billion by 2030.
Public procurement is not among the most popular topics in development circles. However, consider just these three ways in which procurement is probably one of the most indispensable elements that make up a truly capable state:
First, without effective procurement, hospitals wait for drugs, teachers for textbooks, and cities for roads. Whenever a news item surfaces about drugs shortages in hospitals, schools without textbooks or failing road networks, the reader may be looking at a procurement problem. Without efficient procurement, money gets wasted on a very large scale. Many developing countries channel significant proportions of their budgets through the procurement system – even marginal savings can add up very fast. Third, public procurement is a part of the government that citizens see every day. Lack of transparency and corruption in procurement directly affects citizens, and the losses to corruption are estimated in the billions of dollars every year. Corruption in procurement is a big problem that affects rich countries as well.
It’s difficult to do a background check of a company based in a foreign country with operations overseas.
It’s difficult to check to see whether a document is falsified or not.
It’s difficult to …
I heard a lot of that from the audience of the workshop on World Bank’s Anti-Corruption Framework & Common Integrity Risks in World Bank-Funded Projects in Hanoi recently. Majority of the participants were project managers and procurement staff from Project Management Units managing World Bank-funded projects.
Presentations from the Bank’s Integrity Unit show that corruption increases costs, reduces quality, delays impacts on poverty, creates public disgrace and even generates social instability. For a person who often has to look at results of development projects like me, corruption eats into the meager meal of the ethnic minority people in the northern mountainous areas of Vietnam, takes education away from girls in learning age, and lower the quality of hospitals for old people in Mekong river delta.
ICT-related procurements in the education sector, especially large scale ones, are not easy. A recent World Bank Internal Evaluation Group report noted that "ICT procurement has been highlighted as a major implementation constraint in several country and regional portfolio reviews and is a critical dimension of design." Rapid changes in technology mean that many ministries of education have a hard time keeping up with what's current in the market, let alone what might be coming next.
Even in places where anti-corruption measures are well considered and implemented, government auditors and external watchdog groups may be challenged to identify dodgy practices in some ICT-related areas. (Have you ever read the fine print on large scale bandwidth contracts for schools? Such things are often not for the feint of heart.) It is not unknown to hear whisperings about vendors -- or consultants close to them -- providing 'assistance' of various sorts in writing a request for proposals (or certain technical specs that appear in such RFPS), and of course vendors often hope that their showcase pilot projects may inspire ministries of education to think in certain ways about what is possible, and even desirable. For many ministries of education, the line between 'influence' and 'undue influence' in such cases can be very clear in some circumstances, but rather hazy in others.
As part of a very interesting Q&A period after a presentation at the World Bank a few years ago, mention was made about some of the challenges faced in a state in southern India which was exploring whether so-called thin client solutions might be worth considering in its schools. Essentially, the issue was this: Traditional practice when procuring computers for schools had focused on ensuring that each computer met a defined set of minimum technical specifications. In an alternative, 'thin client' set-up, it was possible to use workstations that had less robust specifications, provided they were connected to a powerful server whose processing power substitutes for that of the client computer. To oversimplify:
[-] 'traditional' approach: lots of pretty powerful computers
[-] 'alternative' approach: lots of relatively underpowered computers, connected to one very powerful computer
The point here is not to imply that one type of arrangement is on its face better or worse. Rather, it is to highlight that, if you write an RFP in a certain way -- in our example here, requiring that *every* computer meet a certain relatively high technical specification (processing speed, hard drive size, etc.) -- you may exclude proposals that feature non-traditional or 'alternative' or new approaches.
One way around this is to put more emphasis on functional specifications, rather than technical specifications, in certain components of your RFP. Not sure what this means in practice? When discussing such issues with ministries of education, I often point to an RFP at the heart of a procurement process in the U.S. state of Maine as a way to highlight an approach to procurement that is, at least in terms of most of the places where the World Bank works helping to advise education leaders, rather rare. While I am certainly no procurement expert -- thankfully we have plenty of very good ones at the World Bank to whom I can refer people -- I offer the comments below based on many discussions with ministries of education about their challenges in this regard, in case doing so might be of any interest.