The State of Procurement in the World Bank

In July 2016, the World Bank adopted a new procurement framework for projects that are funded by the Bank. This new framework evidenced a sea change from the manner in which the Bank has traditionally regulated procurement that relies on Bank funds. The changes to the Bank’s procurement framework are far reaching and will have several implications for developing countries that are recipients of Bank funds.

To clarify, Bank procurement in this context, refers to the procurement for infrastructure and other goods and services (i.e. project procurement) that are funded through loans and grants by the Bank in developing countries. It does not refer to Bank operational procurement, also known as corporate procurement (i.e. the procurement for the Bank’s internal operations and administration).

The way in which project procurements are implemented is that they are conducted and managed by the Borrower country (through a public agency/government department), whilst the Bank merely takes a supervisory role to ensure that Bank funds are properly spent. However, the Bank itself does not conduct or manage the procurement process. This raised some difficulty for the Bank in ensuring that its funds were not lost or misapplied by Borrowers, especially in countries with weak public administration systems or corruption problems. To address this, the Bank developed several kinds of intervention points during the procurement process, where it conducts reviews of the Borrower’s procurement actions to ensure that these actions are in compliance with Bank prescripts and regulations on procurement.

It is important to note that the Bank does not permit Borrowers to rely on their domestic procurement regulations or methods and project procurements are required to comply with detailed Bank regulations on procurement.

The 2016 changes to the Bank’s framework have placed more of an emphasis on sustainable procurement and empowering Borrowers by permitting increased reliance on Borrower domestic procurement procedures and methods. There are several reasons for this change. First, the Bank’s development role has changed significantly in the decades after the Bretton Woods Agreement, whilst its procurement system remained more or less static. Procurement itself has changed significantly and the Bank realized the need to modernize its procurement framework. Second, the changes addressed the challenges and innovations that now dominate Bank operations, especially in relation to environmental issues. Third, the Bank desires to improve development effectiveness by encouraging the use of country systems, strengthening public sector management, improving governance and anticorruption, promoting sustainability, accelerating investment in infrastructure, and deepening international trade.

The main changes that resulted from the Bank’s overhaul of its procurement framework include the rationalization of the Bank’s procurement regulations and the articulation of a vision statement for Bank project procurement. The vision statement is to the effect that: “Procurement in Bank Operations supports clients to achieve value for money with integrity in delivering sustainable development”. An important aspect of the vision statement is that it seeks to ensure sustainable development. According to the Bank, procurement is both a development instrument and a strategic policy tool that can support a broad range of economic and social development objectives. The new procurement framework also developed a value-proposition for the Bank, which is focused on “achieving value for money, supporting clients in pursuing sustainable procurement goals, integration, and exercising adaptability and leadership.” This is also a paradigm shift for the Bank as prior to this, Bank procurement policy was seen as a tool to standardize procurement practices and ensure the appropriate use of Bank funds.

The changes to the procurement framework will require changes by the Bank in relation to its procurement policy, approach, organisation and arrangements and will have implications for the way the Bank organizes and conducts its procurement. Some of the areas of organization that will be most affected include the Bank’s approach to risk assessment and Bank understanding of capacity development in Borrowers in relation to the use of country systems.

Author: Dr. Sope Williams-Elegbe

Date: December 2016

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