World Bank Procurement Reform Promotes GPA

Countries that are parties to the WTO Government Procurement Agreement will be able to use national procurement systems in projects financed by the World Bank.

The World Bank is undertaking procurement reforms that will allow a country to use its own national procurement system when the Bank funds a project in that country. The only condition is that the project must be covered by the rules of the WTO Government Procurement Agreement (GPA). This change is one result of the World Bank’s first comprehensive review of its procurement policies and procedures for projects that it finances. The Bank’s new procurement framework represents international practices, for example, with its embrace of value for money. The Bank is seeking comments on its proposed procurement framework through November, after which it will finalize it, with the aim of implementation in 2015.

The World Bank’s historic approach has been to require a country to comply with the Bank’s procurement guidelines when the country conducts procurement for a Bank-financed project. Under the planned reform, a country will not have to use the Bank’s guidelines if it is a party to the GPA and the project is covered by its GPA commitments. For example, the entity conducting the procurement must be covered under the GPA.

Even when a GPA party uses its own procurement system, it must meet several Bank requirements to ensure maximum competition. One requirement is to allow universal eligibility of bids, which means it may not limit eligible bids to GPA parties. However, it must also not accept bids from suppliers that the Bank has prohibited from participating in its projects. The Bank also requires the procurement opportunity to be widely advertised, for example, by posting it on the United Nations Database. Finally, the Bank will retain the right to audit and investigate the procurement.

By accepting use of procurement systems of GPA parties, the Bank is relying on the comprehensive review of a country’s procurement framework that is conducted before a country is permitted to join the GPA. During negotiations to join the GPA, the acceding country must demonstrate to the other GPA parties that it has a legal framework in place that complies with the GPA’s principles and procedural requirements. Those principles and procedures are intended to ensure non-discrimination, transparency and procedural fairness. GPA parties that may benefit from this new approach are Armenia, Bulgaria, Croatia and Romania.

At the center of the Bank’s new framework is its use of value for money as the basis for awarding contracts. This represents a significant departure from the Bank’s traditional award of contracts based on lowest price. With value for money, non-price factors are considered in evaluating bids, along with price. The non-price factors may include training, servicing, maintenance, improved quality, warranty periods and guarantees, and sustainability savings (such as lower fuel consumption, decommissioning and disposal costs). The aim of value for money is to take into account the mix of quality, cost, resource use, fitness for purpose, timeliness and convenience to determine what constitute good value. All criteria that will be used to evaluate bids must be specified in bid documents.

The Bank’s shift to value for money will align it with international agreements and other procurement systems. The GPA applies the same concept but refers to it as the most advantageous tender. The value for money concept is also reflected in U.S. free trade agreements and the U.S. federal government’s use of best value that provides for awarding contracts to bids offering the greatest overall benefit. In addition, the UNCITRAL Model Law on Public Procurement (2011) allows government purchasers to maximize value for money in procurement.

The Bank reform is also advancing another innovation with its introduction of sustainable procurement, albeit as a non-mandatory requirement since it has potential cost implications. This move is a recognition of the relevance of sustainability in such areas as construction and power generation and its application to the use of environmental and socioeconomic factors. The Bank’s introduction of sustainable procurement will advance a concept that is starting to gain traction in international agreements. For example, the GPA provides in its recent revision for the establishment of a work program on sustainable procurement, to facilitate an examination of the objectives of sustainable procurement and its integration into procurement policies and application consistent with best value for money.

The Bank’s new modern procurement framework reflects good international practices and will contribute to the growing convergence of procurement systems based on the GPA.

Jean Heilman Grier

October 27, 2014

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