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Value for Money in Public Procurement: Beyond Rules to Measurement

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Strong public procurement systems are central to well-functioning public financial management institutions and good public sector governance. But how can governments ensure public procurement is efficient? Traditionally, the recommended approach has emphasized the importance of adequate rules that encourage competitive bidding. This involves transparent tender documents and processes with as little discrimination as possible, an independent procurement agency that would set standards and monitor their enforcement, and an independent appeals body to hear complaints of participating bidders. In addition, to ensure the smooth functioning of a rules-based system, governments have invested in significant capacity building and in new technologies, such as e-procurement systems to reduce transaction costs.
A rules-based approach has the great advantage that it limits the discretion of public officials. And - as the experience of countries such as Albania, Croatia, the Philippines or Turkey with procurement reform indicates - the move towards a rules based system can save a lot of money if it introduces genuine competition.
However, a rigid application of rules also has costs in terms of reduced flexibility, complicated processes and risks of delays. Governments have thus sometimes resorted to exceptions from the legal framework to regain some room for discretion. Turkey is a good example, where numerous amendments have been passed in recent years because the existing law was found to be too rigid or impractical. While understandable, a return to greater discretion risks undermining the principles of competition and transparency without any guarantee that improved outcomes will justify a laxer application of the rules. So when should we insist on compliance, and when might greater flexibility be justified? 
The answer to this question lies in improved measurement. That's why performance measurement in public procurement is the major discussion topic at the 10th Public Procurement Knowledge Exchange Platform organized by the Asian Development Bank, EBRD, Islamic Development Bank and the World Bank in cooperation with SIGMA, and EIB, and hosted by Government of Turkey in Istanbul. Participants will exchange experiences and hear about advances in performance assessments of public procurement along three main dimensions: (i) National, system-level assessments of the legal framework for public procurement and the strength of institutions and processes that govern its implementation; (ii) assessments of the capacity of procuring entities, such as line ministries, local governments or state owned enterprises to manage risks, deploy complex procurement methods to ensure quality and efficiency, and (iii) contract level assessments that determine whether the results of a tender and subsequent contract implementation has delivered value for money.
New indicators are being developed along all three dimensions. For instance, the World Bank Group's Doing Business team is piloting a national procurement system assessment tool that will allow countries to benchmark themselves against international best practices. Assessment of procurement entities are emerging as critical components of a move towards more results-oriented development finance. Thus, when a procuring entity is seen to have "good enough" systems and processes in place, the development partnership can shift from a focus on fiduciary controls and the financing of inputs, to support for a government program targeting specific outputs. But, perhaps the most exciting development in procurement reform is the move beyond rules and towards greater emphasis on value for money in the assessment of individual contracts. This implies a shift from ex ante controls to ex post audits. It also implies a shift in the focus of accountability from compliance to performance.
These are all exciting developments, but they should not blind us to the challenges of a move beyond rules to performance measurement. Performance measurement implies that there are well defined and consistent goals and objectives at the level of policy as well as at the project level, and that governments and procuring entities are willing to undertake the necessary investment in data gathering and monitoring and evaluation systems. The shift from compliance to performance requires a change in culture and a change in the way oversight bodies exercise their roles. And perhaps most importantly, it requires the active participation of non-government stakeholders - businesses and citizens - to ensure public entities are held to account not only for doing things right, but also for doing the right thing.

It is good and appropriate that Turkey is hosting the 10th Public Procurement Knowledge Exchange Platform this year. While more remains to be done to strengthen Turkey's procurement rules, a move beyond rules to performance measurement offers the promise to refocus the public debate and reform efforts on the issue that really matters - is the country getting value for money from the procurements carried out by the public sector? Let's join forces to ensure this question does not remain unanswered in Turkey and elsewhere.


Martin Raiser

Vice President for the South Asia Region, World Bank Group

Salih Kemal Kalyoncu

Senior Procurement Specialist

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