Streamlining Public Works Procurement

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In the inaugural Doing Business 2004 study, our team found that it took as few as 18 procedures to start a business in Algeria, Bolivia, and Paraguay, or 19 in Belarus, Chad, and Colombia. The same process required as many as 152 days in Brazil, 168 days in Indonesia, or 215 days in the Democratic Republic of Congo. We argued that it should be possible to reduce the number of procedures and the time required to start a business.

We suggested at the time that this could be done in one step on line, from anywhere. Today, this is exactly what entrepreneurs in Tbilisi, Georgia or Auckland, New Zealand, can do.

Some interactions with the government are more complicated, however, and the process for procuring public works is an example. In ongoing research conducted with professors Edward Glaeser and Andrei Shleifer of Harvard University, we show that a public works procurement can be accomplished in as few as nine administrative steps.

At a minimum, governments need to take the following six steps to award a public contract:
•    Communicate the opportunity to the private sector;
•    Collect the bids;
•    Open all bids received;
•    Evaluate the bids and award the contract;
•    Sign the contract; and
•    Authorize the beginning of the work.
 
Depending on how efficiently these measures are carried out, and whether any additional steps are required, delays and overruns can occur. For example, bids received may be opened immediately after the submission deadline, as occurs in Belgium and South Africa, or take 20 days, as it does in Tunisia. Evaluating all of the bids and choosing a winner can take 30 days in China, Georgia, or Norway, but last more than six months in the Kyrgyz Republic or Lebanon.
 
Once the public works begin, three further steps are necessary:
•    The contractor lets the procuring entity know that the works are complete;
•    The procuring entity confirms that they are indeed complete;
•    The contractor receives payment.

Here, too, the time it takes to carry out these steps varies from one country to another. Issuing a certificate of completion report takes two weeks or less in Australia, Canada, Denmark, Finland, Hungary, the Netherlands or Malaysia, but contractors are left waiting for more than six months in Italy. Disagreements between the procuring entity and the contractor on whether the works were properly performed or not may significantly delay this approval (it can do so by as much as 320 days in Mongolia or 455 days in Venezuela, for example). The process does not end there. Even though there may be agreement among parties that the project has been satisfactorily completed, contractors may have to wait months to get paid. In Lebanon, Mali, or Panama, for example, obtaining payment takes more than six months on average.

Beyond these nine steps, additional procedures are associated with delays (figure 1), just as they are in starting a business.

Figure 1: A higher number of procedures is associated with delays and overruns

Source: Doing Business database.

In practice, no government has cut public procurement requirements to as few as nine steps. Singapore currently requires the fewest procedures to complete a public procurement: 12, three more than the hypothetical minimum. Australia (13) and France (14) are next most-streamlined. Iran and Hungary, among others, call for the most procedures – 21.

High-income countries and high-accountability countries have only one less procedure than low-income and low-accountability countries on average, 17 vs. 18 procedures respectively. While statistically significant, this difference is very small, meaning that all countries have room for improvement. New technology can help expedite the process since much can be done online nowadays. Let’s not wait for another fifteen years to get this right.

Authors

Erica Bosio

Program Manager of the Growth Analytics, Development Economics Vice Presidency at the World Bank

Simeon Djankov

Director, World Development Report 2019

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