ADB is transitioning its procurement approach from “one size fits all” to “fit for purpose” to save time and bring private sector and hi-tech solutions into more projects.
The Asian Development Bank (ADB) recently approved a new procurement framework that will reduce processing times and improve the quality of procurement decisions. The new framework marks a transition from a “one size fits all” to a “fit for purpose” approach to procurement. It will be applied to all contracts awarded under ADB projects. In 2016, the value of contracts awarded rose almost 40% to $9.5 billion. Ramesh Subramaniam, Director General of ADB’s Operations Services and Financial Management Department, outlines some of the thinking behind the new approach.
Why is ADB updating this framework now?
We did a survey before the policy was approved by the Board. We went to a number of stakeholders and they asked us three things. Can you help increase the quality of procurement outcomes? Can you do it in a shorter timeframe? And can the delivery systems be improved?
The new policy and the implementation framework approved by the Board will be precisely helping on those three fronts.
What are the key changes in the new approach?
We have looked at our principles and we have expanded the suite of principles. Particularly, we’ve added “value for money” to make sure that our countries get the most optimal value for money. And second is “quality”: Quality in the inputs that countries procure for projects as well as the procurement outcomes, leading to good project outcomes.
“The modernized policy will help us achieve three things: Improved quality, reduced overall time, and better procurement delivery systems.”
The second change that we have put in place it to go more for a principles-based and a risk-based approach. Now, what do these things mean? Instead of adopting a stringent rules-based type of a system, we are saying, as long as the procurement principles are met how can we tailor procurement arrangements that are most suited for a particular project.
Together, the modernized policy, as well as the principles and risk-based approach, will help us in achieving three things: Improved quality, reduced overall time, and better procurement delivery systems.
How will the risk-based approach work?
ADB every year deals with about 8,000 contracts and many of these contracts are smaller in value. Many countries have been strengthening their own procurement systems for many years.
What we are proposing, which is subject to countries wanting to take up the risk-based approach, is not to do prior review of all contracts. We will be doing post-review. This will enable ADB as well as the countries to focus a lot more on complex contracts, more risky contracts, contracts where more specialized expertise will be needed. And the more routine or smaller contracts which countries have capability to look at, they can go on their own and process and have them put into motion.
Does the new framework include e-procurement approaches?
Many countries are moving ahead in this direction. ADB has also taken steps over the last couple of years and we want to do more.
Once you have electronic procurement you will improve transparency considerably. Quality of procurement decisions will go up and time taken will go down.
How will the new policy change the way businesses interact with ADB?
There are quite a few things that we have added looking at it from the private sector perspective, whether it is civil works contractors or suppliers of goods and equipment or providers of consulting services.
For instance, ADB will be doing a lot more market assessments as part of the new procurement framework. This is partly also to accommodate the larger projects we have been doing. We now anticipate the number of such projects as well as the volume of lending will be going up with the merger of ADB’s Asian Development Fund and our market based operations. Market assessment will enable the countries as well as ADB to understand what is on the offer.
The new policy will also facilitate the adoption of high-level technology solutions. Here particularly the providers of innovative solutions and innovative ideas will certainly find it quite appealing. Of course, the countries would welcome it, but it would also provide significant opportunities for the private sector.
A third area that will be of appeal to the private sector is the new, very comprehensive complaints handling process. In procurement actions, all bidders will be looking at whether the decisions were fair and transparent, and once contracts are awarded to make sure that there is a good mechanism to resolve disputes or contractual problems.
Are there special approaches related to public-private partnerships, or PPPs?
Based on our experience over the last five to eight years or so, in projects— particularly in some sectors, take transport, urban transport, or water supply—more PPP structures are emerging. Even if financing may not be on a PPP basis, certainly countries do want to go to the private sector, be it in the form of management contracts or in some cases funded participation by the private sector.
The new policy has got provisions for facilitating the use of PPP solutions. For example, design-build-operate contracts are becoming predominant in the water sector. So in preparing this new policy, we worked to have a new framework approved for DBO contracts.Stay up to date Subscribe to our newsletter and get the latest issues, news, events, jobs and data in your e-mail inbox.