Developing Countries: Innovative Procurement Strategies & Challenges

At a recent lecture at the LSE called “Formality Bias: the habits holding Africa back”, Dayo Olopade, Nigerian-American journalist and author, explored some ingenious workarounds that are driving regional progress in Africa.

They included: a data mapping application called Ushahidi (Swahili for witness) that allowed Kenyans that witnessed violence to report its location, to allow for order to be restored and relief services to be provided; informal public transport provision using mutatus and other small vehicles; Dahabshiil money transfer services to Somalia (and the better-known M-Pesa); the construction of toilet and showering facilities using a biodigester in Gatwekera (Kenya), to replace the traditional “flying toilet” (– description available for the robust on Google).

Olopade noted that many of these schemes had grown out of (often justified) distrust in formal institutions and governments, and necessity had indeed been the mother of invention.

These examples show that the potential for enormous innovation is present. The toilet facility example involved a charge of a few pennies per use, and the biogas it provides powers a community centre as well as shower facilities for 400 residents.

A community of practice under the World Bank’s Global Forum on Law, Justice and Development exchanges information on harnessing these services. The essence is that public authorities take over, organize and regulate essential public services or access to infrastructure that have hitherto been provided, at their own initiative, by small private operators, and can operate them as PPPs or using traditional public sector procurement techniques. Examples include providing waste water in Lome and transport services in Brazil. The key is to maximise the quality and efficiency of the services for the benefit of the users, without losing the entrepreneurship and innovation that the initial operators demonstrate.

One potential answer to this question may be found in the Brazilian Social Organizations model that was analyzed by Justice Alfredo Attié in his presentation.

Indeed, Brazil, as he underlined, has two different kinds of statutory laws on PPPs. The first is dedicated to “classical” PPPs used to build and manage important public infrastructures. The second intends to favour the participation of civil society in the administration of public services through the creation of social organizations of public interest.

Thousands of such organizations have been created since the adoption of the federal and local statutes that constitute the ground for this model and, as Justice Attié pointed out, their creation went along with investments in alternative means of transportation, school buses for poor communities and public transportation for persons with disabilities. In other words, one way to develop and to adequately manage PPPs with SPOs in a development perspective may be, in contexts such as the Brazilian one, the creation of an appropriate legal enabling environment.

One solution is the PPP, which effectively contracts out the design to meet an identified need to the private sector. However, rules on these are very heavy. Allowing output specifications can achieve similar results in traditional procurement.

The World Bank’s Doing Business indicators are predicated on the notion that economic activity requires good rules and regulations that are efficient, accessible to all who need to use them and simple to implement” (World Bank, 2014). Hence some indicators give a higher score for more regulation (eg transparency measures) and others for simplified regulations (such as a one-stop shop for business start-up formalities) (ibid).

This is, in fact, a reflection of a main challenge that many procurement policy-makers are grappling with in the West: how can we innovate in procurement (provision of public services is what procurement is for) while still requiring competition, objectivity, transparency etc in our procurement systems? What can we learn from these developing country experiences? How can we (the procurement community) share our experience of policy-making so that we don’t strangle innovation with procurement red tape?

The EU requires the use of its Common Procurement Vocabulary (CPV, adopted by Regulation (EC) No. 213/2008), to standardise specifications and other elements of descriptions of what is to be procured. The UN operates a similar scheme – the United Nations Standard Products and Services Code (“UNSPSC”). These tools are designed to establish “a shared and common understanding of a product domain” (Leukel and Maniatopoulos, 2005).

There is scope for the Bank to move further toward using country systems, on an incremental basis, in line with the approach adopted by global partners, taking into account its own risk assessments, country counterpart views, agency capabilities, and the views of the private sector.

There is a need to consider how assurance could be provided that there would be no change to the Bank’s legal remedies and no change in existing rights and obligations concerning fraud and corruption.

Disconnect in two surveys – health care and protective textiles. They both cite procurement procedures as barriers to innovation - One of the main barriers to innovation in procurement is that there is a “disconnect” between what is required by the end-users of a product and what is being developed by research organisations and suppliers in relation to such products. No-one sitting behind a desk in Nairobi would have been able to design the specifications for the massive cylindrical biodigester that composts the output of a fleet of built-in toilets.

Another barrier to procuring innovation that has been identified by procurers is that public sector organisations have an aversion to risk.

A lack of knowledge about how to procure innovative solutions within the EU legal framework, coupled with an increasingly litigious marketplace means that procurers are tempted to stick with products and processes that they know and understand.

So should we be looking more at the social partnerships model?

 

Author: Caroline Nicholas

Date: 18th March 2015

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