As ADB is considering Result Based lending there is a need for ADB to further strengthen its efforts in improving institutional capacity in DMCs and address procurement and fiduciary risk within the framework of government owned programs instead of focusing on project specific and transactional risk mitigation. Presently, ADB does not have a solid framework for engaging with EAs and sectors that may be eligible for result-based financing and this R-CDTA provides a methodology for proactively addressing the institutional procurement capacity.
Experience from ADB financed projects across DMCs shows that procurement takes a considerable amount of time and is often a source of delay in project implementation . ADB carries out procurement capacity assessments (PCAs) of EAs and IAs during project processing to identify risk areas and appropriate risk mitigation measures during project implementation. Risk mitigation is essential to safeguard ADB's reputation and ensure that ADB financing is spent as intended. However, these risk mitigation measures do not aim at developing the long-term capacity of the EA/IA. The underlying causes of weak procurement and implementation capacity are not necessarily addressed whether they are internal to the EA or in the environment where the EA operates.
The causes of weak procurement and implementation capacity in DMCs are not uniform, but a number of common challenges can be identified. Procurement is mostly treated as an administrative function and therefore the organizational arrangements are designed to ensure adherence to rules and procedures more than achieving value for money and procurement outcomes. However, following rules and procedures are only the first step in improving procurement outcomes. Good organizational practice includes developing specific targets on the performance of the agency's procurement portfolio and continuously monitoring results to identify areas for improvement. This strategic approach to managing procurement requires the right organizational set-up, the right capabilities of and incentives for procurement staff, and appropriate systems and internal procedures, which to varying degrees are not present in many EAs. An EA functions within a given governance system and often the procurement governance structure is weak. Procurement audit capacity is often low in government audit institutions, competition authorities rarely have the capacity to investigate collusive practices in the private sector and independent complaint mechanisms are either non-existent or not functioning well .
The private sector is a key player in public procurement. However, in many DMCs competition in the private sector for public contracts is limited due to entry barriers, collusive practices, or the lack of capacity to meet all requirements in the bidding procedures. However, both the private sector and civil society can play an important role in improving public procurement by demanding a more level and transparent playing field, with civil society acting as a watchdog in all phases of the procurement process including actual contract implementation. However, the private sector and civil society are rarely mobilized in this manner.
The R-CDTA will be demand driven to ensure ownership and commitment from EAs. For each country and EA supported through the R-CDTA a performance and monitoring framework will be developed.
The R-CDTA is linked to another COSO R-CDTA being processed titled, "Enhancing Procurement Capacity Development for Project Implementation". Both aim at improving the procurement management of executing agencies of ADB-funded projects. However, they intervene at different levels and with different time frames: The CDTA Enhancing Procurement Capacity Development for Project Implementation aims at building the capacity of less experienced EAs implementing or about to implement ADB projects on how to procure goods, works, and services efficiently and in accordance with ADB's guidelines. It is therefore a more short term capacity development intervention at project level and continues past efforts, with a more demand-focused strategy. While this R-CDTA aims to catalyze reform efforts in a selection of progressive and relatively experienced EAs to transform the procurement function in government procurement to allow ADB to rely on their systems for procurement enabling us to move away from prior review. It is therefore a medium to longer term capacity development intervention at policy and EA level and is consistent with international moves to use country systems.