EBRD UNCITRAL Public Procurement Initiative promotes modern procurement rules & tools
Several CIS countries, newly independent in the 1990s, based their public procurement legislation on the 1994 UNCITRAL Model Law on Procurement of Goods, Construction and Services. With their economies making headway, the governments in the region were becoming aware that outdated procurement laws were stopping taxpayers from getting good value public services and were hurting their economies. The starting point of the EBRD and UNCITRAL collaboration was taking note of the CIS governments that wanted to transform their laws (and local procurement practice) by use of electronic procurement tools and realising potential for a combined effect of regulatory upgrade to the new UNCITRAL standard, the 2011 UNCITRAL Model Law on Public Procurement, while paving the way for e-procurement and digital transformation of public procurement processes in the government.
A joint EBRD and UNCITRAL technical cooperation programme supported the development and adoption of new public procurement laws enabling and/or extending use of electronic public procurement systems in Armenia (ARMEPS), the Kyrgyz Republic (National e-Procurement Platform), Tajikistan (National Single Electronic Procurement Portal) and the introduction of electronic framework agreements in Mongolia.
Most recently, the EBRD UNCITRAL Public Procurement Initiative focuses on experimenting with specialised digital purchasing tools for central purchasing bodies, such as framework agreements, electronic auctions and e-catalogues (the Kyrgyz Republic, Moldova, Tunisia, and Ukraine), to help governments to maximise the market impact of sustainable and/or green public procurement.
Unleashing the potential of online bidding for small business in Tunisia
“TUNEPS is helping me to save time and money and is making the entire procurement process more transparent. Today a public tender notice published by the Ministry of Health caught my attention, and I was able to access full technical specifications of the tender online and easily prepare the bid.”
Rachid Dagdoug, manager of Day Machines, a small business that makes medical supplies in the Tunisian city of Sfax.
After Tunisia’s Jasmine Revolution in 2011, officials in the new Tunisian government began reforming public procurement in an effort to give taxpayers better value for money for key public services. Public procurement accounts for 18% of Tunisia’s gross national product. To drive the economy forward and ensure the public has confidence in its officials, it is critical that this huge market is as open, dynamic and fair as possible.
The key innovation was the Tunisia online e-procurement system (TUNEPS), modelled on the very successful Korean KONEPS system and implemented in Tunisia by KOICA, the Korean International Cooperation Agency. However, when TUNEPS was first launched, small value procurements (contracts worth between €17,000 to €69,000) were conducted outside TUNEPS. This meant the bulk of the procurement market was still using the inefficient and opaque direct award system, which favoured face-to-face interaction and existing suppliers. Micro and small firms make up 90% of all companies in Tunisia and employ some 56% of Tunisian workers, so creating new procurement opportunities for SMEs through TUNEPS represented an important economic benefit.
The EBRD Legal Transition Programme (LTP) was tasked with extending the TUNEPS system to provide for online shopping, a simple and easy-to-use online price quotation procedure aimed to create new business opportunities for small and medium-sized enterprises (SMEs) and companies outside the capital area of Tunis.
EBRD technical cooperation with TUNEPS focused on four elements:
• updating the legislation so that TUNEPS covers small value procurements;
• improving the TUNEPS system e-Shopping Mall for processing small value purchases and connecting small suppliers with buyers across the country;
• developing a new TUNEPS Help Desk to assist small businesses trying to get to grips with the online shopping system;
• reaching out to SMEs and public buyers in municipalities all over Tunisia in order to help them to understand the benefits of TUNEPS and how to use it.
The project delivered 46 training workshops throughout Tunisia. Within 12 months these drew almost 1,000 small businesses that had never competed for public contracts and about 800 representatives of contracting authorities, including procurement officers from local schools, hospitals and local public administration in regional towns in Tunisia. It also launched an online campaign publicising the benefits of e-procurement to potential new users.
“Bidding for government contracts is something that was totally new to the small entrepreneurs who attended our workshops,” says Philip Engels, the LTP project officer. “We had to explain to them that, under TUNEPS, they stood a good chance of winning these contracts, which they had previously thought were out of their reach.”
The EBRD GPA Technical Cooperation Facility is a technical cooperation programme assisting governments in the EBRD region committed to joining the World Trade Organisation’s Government Procurement Agreement (GPA).
When the World Trade Organisation launched the GPA in 1994, the recently established EBRD recognised the transition impact of procurement policies promoting transparency, open access to procurement opportunities and fair competition, and adopted the GPA principles to guide procurement conducted under the Bank’s investments. Also today the GPA rules form a basis for the EBRD Procurement Policies and Rules and contribute to the success of the Bank’s investments.
Building on this positive experience, the LTP started to encourage the EBRD countries of operations to align their national public procurement laws with the GPA policy standards with a goal to open the GPA negotiations. The LTP supported breakthrough negotiations of Armenia, Georgia and Montenegro with substantial success. Upon revision of the GPA in 2012, a dedicated technical cooperation programme was set up to promote the GPA accession to the transition countries in the EBRD region. Support provided by the EBRD GPA Technical Cooperation Facility helped most recent GPA accessions to include Armenia, Montenegro, Moldova and Ukraine next to more advanced economies such as New Zealand and Australia. In another development promoted by the LTP, Belarus joined the GPA in an observer capacity before becoming a WTO member. To facilitate further GPA accessions, the LTP’s current work focuses on the Kyrgyz Republic, North Macedonia and Tajikistan.
Supporting Ukraine’s ProZorro revolution
In Ukraine the stakes for taxpayers are huge, with the annual public procurement budget valued at up to US$ 20 billion. Following decades of concealment and corruption, which allowed the country’s ruling elite to exploit the state procurement system in their own interests, the Maidan revolution brought forward two seismic shifts: in 2016 Ukraine joined the World Trade Organisation’s (WTO) Government Procurement Agreement (GPA), and introduced a uniquely innovative electronic procurement system for government purchases of goods, works and services.
The LTP has worked with the government on both initiatives throughout a time of great political turbulence in Ukraine. Since 2012 the LTP has worked with the Ukrainian government to navigate the complicated GPA negotiation process and promote adoption of the WTO public procurement policy standards in Ukrainian public procurement legislation. Upon successful completion of the GPA negotiations in September 2015, the focus of the EBRD support shifted to meeting GPA transparency standards in practice: introducing electronic public procurement and an independent complaints mechanism in local practice.
Recognising innovative ideas of civic activists from Maidan, the EBRD supported the pilot of “ProZorro,” a new concept of the e-procurement system based on Open Contracting Data Standard. ProZorro means “transparent” in Ukrainian, and the system, launched in February 2015, has aimed to achieve full transparency of public procurement decisions by making “everyone see everything” online. To achieve that, the ProZorro system connected a new open source and OCDS-based central database to the existing commercial electronic platforms in Ukraine to ensure online public procurement data exchange and publication in the open data OCDS format in real time. This approach is making procurement information literally open to anyone and reduces corruption risks significantly. At the same time, real-time access to procurement data is very efficient. Procurement officers across Ukraine record information on suppliers and contracts or publish new online tenders in a few minutes, something that would take days in many richer countries. The ProZorro pilot has been very successful. It attracted almost 1,000 contracting entities within the first three months of operation. Local suppliers started to trust the public procurement market for the first time, which means competition has grown and Ukrainian taxpayers have started to get a better value for money. Made mandatory on April 1, 2016, ProZorro has received a number of international awards, including the 2016 World Procurement Award, the 2016 and 2017 Davos Awards, and the 2016 Open Government Award.
ProZorro has saved US$3.8 billion (UAH100 billion) in public funds in 2015-2019, which is substantial given a total public procurement market of €20 billion, according to the Ukrainian Ministry of Economic Development and Trade. Today, ProZorro is used by 157,000 domestic and international businesses and publishes annually about 1 million electronic tenders from about 30,000 public buyers in Ukraine. The share of procured value through competitive procedures has increased from 25% to 70%, the number of new bidders reached 31,000 in 2018, and the number of online platforms participating in ProZorro has increased to 29. And last, but not least, the community created a new monitoring and evaluation (M&E) culture in public procurement. A cohort of CSO watchdogs (25) and individual volunteers (1,000) across all regions of Ukraine are now fluent in the public procurement system and can identify risks and/or corruption cases, report them, and follow enforcement actions. In 2018 alone the network revealed violations in about 12,000 tenders. In 2016-2018 it initiated reviews of 2,000 tenders that resulted in the removal of unfair conditions and the cancellation of dubious procedures.
The LTP continues to work with Transparency International Ukraine on prototyping specialised tools for ETS ProZorro and ProZorro.Sale, exploring opportunities behind open source and open data solutions for digital government.
Changing the face of public procurement in Moldova
A state-of-the-art electronic procurement system is a major element of good governance in the public sector that increases transparency and helps countries to reap economic and social benefits from digital transformation reforms. The case for transparency and accountability of government spending and effective corporate governance in the private sector is clear: worldwide experience demonstrates it boosts economic growth. On the other hand, corruption resulting from a lack of transparency and accountability impoverishes society, increases inequality and hurts the most vulnerable. It also damages citizens and business community trust in the government. A lack of governance of public funds leads to greater corruption risk and lower competitiveness due to an uneven playing field that favours those with links to ruling elites.
The EBRD Legal Transition Programme (LTP) and Open Contracting Partnership (OCP) worked with the Ministry of Finance of Moldova to launch a pilot of a new electronic procurement system, MTender. First tested in April 2017, MTender was launched in October 2018 to serve all public sector buyers in Moldova and reap the benefits of a transparent and accountable e-procurement system.
The MTender digital service is designed as self-funded from fees charged to commercial users in order to operate without state budget exposure. The business model behind MTender is building on the latest policy thinking of collaborative public-private service delivery and funding of digital public services from end-user fees. MTender supports the whole public procurement process, from planning the purchase through to the payment for public contracts. It takes a “zero paper,” “once-only” and “single window” approach and reduces the administrative burden across the whole procurement process. For example, it shortens the tendering time for public bodies and the waiting time for suppliers to be paid. MTender takes on an innovative digital public service model, linking e-government systems and commercial platforms into a real-time, data-sharing network to deliver a continuously improving service and prevent locking in the government with a single IT vendor or specific solution – in other words, all the benefits of blockchain, without a blockchain price tag.
The MTender electronic procedures are developed to comply with the WTO GPA mandatory policy standards and the requirements of the 2014 EU public procurement directives, while being deliberately geared towards minimising corruption and collusion risks and increasing value for money and fiscal efficiency of public procurement for the government.
Within 12 months, MTender has helped Moldova to save 25 million euros in public spending from the state budget owing to the greatly increased transparency and competition in online public tenders (savings represent the difference between the budgeted value of procurement and the actual value paid for contracts awarded in electronic, competitive procedures on MTender). Almost 3,000 public bodies (95% of the market) and almost 5,000 suppliers, contractors and service providers have used MTender, and it represents an important effort to transform the way in which public funds are being spent.
The first 12 months of the MTender pilot, neatly in numbers:
• Six times more contracting authorities using e-procurement and using advanced, not basic, e-procurement functionalities
• Six times more procurement advertised online and subject to competition
• Twenty times more public procurement procedures recorded online on the web portal
• 1,396 new suppliers participated in MTender electronic tenders (30% increase)
• 73% of companies and 65% of contracting authorities reported that MTender significantly saved time and financial resources
• Estimated investment of MTender commercial partners: 200,000 euros
• Total EBRD support: 880,000 euros (2016-2021)
• Moldova state budget savings: 25 million euros within the first 12 months of MTender operation