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p. 3 of 16 BACK | NEXT Executive Summary Current ADB Inspection Function Consultations on the Review of the ADB Inspection Function Proposal for a New ADB Accountability Mechanism: A Two-Step Approach of Consultation and Compliance Review Recommendation

ADB Accountability Mechanism

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II. Consultations on the Review of the ADB Inspection Function

A. Internal and External Consultations

18. In the last quarter of 2001, the President set up a steering committee (to oversee the review) and a working group (to carry out the review). From October 2001 to October 2002, the steering committee and the working group regularly met to discuss the direction of the review. In 2002, ADB engaged two staff consultants (Ms. L. Udall and Mr. D. Hunter) to assist in carrying out the review of the Inspection Function, as well as to act as resource persons during the external consultations.¹²

19. In 2002, the first and second draft working papers were extensively discussed at both internal and external consultations during the review of the ADB Inspection Function. These two drafts analyzed the issues raised by the current Inspection Function and offered various options for a future mechanism. In 2002, the Board met twice to discuss on the Inspection Function review. Internal consultations with concerned ADB departments, including the regional departments, the Regional and Sustainable Development Department (RSDD), and the Private Sector Operations Department (PSOD) were also held in late 2002 and early 2003 to discuss the review.¹³

B. Issues during Consultations Relating to the Current Inspection Function

20. As the review of the Inspection Function retains the rationale of the inspection policy adopted in 1995, it focused on several difficult issues relating to structural and procedural problems that emerged in ADB's experiences with the Inspection Function.

21. The ad hoc nature of the panel of experts being selected from the roster of experts on a case-by-case basis will not develop an accumulation of knowledge and expertise as part of institutional memory, nor contribute to the continuity and stability of the panel of experts. BIC, whose members are Board members, also faces the same shortcomings as that of the panel of experts. Since the panel of experts reports to BIC, the relationship between the panel and BIC, on the one hand, and the relationship between BIC and the Board, on the other, have not only affected the independence of the panel, but also the functions of BIC and Management's relations with the Board and BIC, resulting in delays, debates, and potential conflicts of interest in the application of the inspection policy. The perceived lack of the independence of the panel has threatened the credibility and viability of the inspection process.

22. Procedurally, the process is complex and difficult to follow for project-affected people, who have to go through many steps, and the process needs to be streamlined. Regarding transparency and communication, neither the panel of experts nor BIC had, unhappily, clear guidelines dealing with the release of information to the public.

23. Also controversial is the confusion created by the treatment of operational policies and procedures included in the Operations Manual (OM). Some operational policies and procedures have been approved by the Board, but have not yet been incorporated in the OM. Some of the OM provisions are not consistent with the underlying Board-approved policies. As a result, an OM review and updating exercise has been undertaken since March 2002 in parallel with the review of the Inspection Function.

24. In addition, the major issues relating to the current Inspection Function identified during the consultations include the following:

1. the need to establish proactive and preventive steps inside ADB that will keep problems from escalating into controversies that are brought to the accountability mechanism;

2. the scope of the Inspection Function, including the policies and procedures that it should cover, and the 95% disbursement limit in filing a request;

3. the application of the Inspection Function to ADB's private sector operations and related concerns, such as protection of business confidentiality and the differences between the private sector and the public sector project cycles;

4. eligibility and screening requirements and questions relating to who should be able to file a request for inspection, the number of requesters required, and the language and substantive requirements for filing a request;

5. how to ensure that site visits by the panel are accepted by all stakeholders;

6. the cost of the inspection process, particularly in terms of staff time and resources and costs to developing member countries (DMCs);

7. transparency and information dissemination in the inspection process;

8. the potential for real and perceived conflicts of interest and the resulting impact of establishing "firewalls" and outside perceptions of independence;

9. the adversarial nature of inspections; and

10. the need for post-inspection monitoring to ensure that Board recommendations are implemented and that processes exist for learning broader lessons from the accountability mechanism's experiences.

25. Appendix 4 gives an account of the consultations on the review of the ADB Inspection Function, including the four non-exclusive options presented in the first and second draft working papers, which were extensively discussed during the public consultations. From the consultations, and based on ADB's experiences with the Inspection Function, including the Samut Prakarn Inspection case, there is nearly universal agreement that the current system should be replaced. Any change proposed for improvement premises that (i) the accountability mechanism is an important learning tool that will allow ADB, including its Board, Management, and staff, to draw on lessons learned, thereby enhancing development effectiveness and project quality on the ground; and (ii) the mechanism is a productive asset for ADB, building confidence in the credibility of the institution, and is not intended to be a liability for ADB.

C. Outcome of the Consultations

26. The consultations reinforced broad support for (i) an independent accountability mechanism that addresses the complaints of adversely affected people in ADB-assisted projects, and (ii) increased problem-solving efforts and problem prevention measures by ADB. Additionally, there was a strong expectation that the new mechanism should enhance ADB's development effectiveness and project quality on the ground.

27. The combined results of both internal and external consultations indicated, at the minimum, broad support for a compliance review panel that is an improved version of the WB panel. The term "compliance review" has been used, during the review, as well as in the earlier draft working papers, the final working paper, and this paper, instead of "inspection," to avoid any negative associations in the use of the term "inspection."

28. There was a diversity of views of how the consultation phase should be designed and implemented. The design of the consultation phase preceding the compliance review presented the more difficult challenges in terms of consensus building. Key questions presented around this phase included the following: (i) whether consultation should be conducted by ADB operations staff or management, a senior official located in DMCs, or an independent office; (ii) whether the project counselor (the term "project counselor" was used in Option D of the second draft working paper, and the term "special project facilitator" [SPF] is used in subsequent papers, including this one) should be appointed by, and should report to, the President or the Board; (iii) the relationship between the project counselor/SPF and the compliance review panel; and (iv) the sequence or choice of the claimants' initial approach to the two phases.

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