Public Procurement Management, the 4 Pillars

12th Public Procurement Knowledge Exchange ForumAstana, May 18th 2016

Prof. Gustavo PigaDirector of the International Master in Public Procurement Management

University of Rome Tor Vergatawww.masterprocurement.eu

… the EC is developing a policy to promoteprofessionalization of public buyers. The policy will includeinter alia professionalisation plans, promotion of definedtraining schemes, capacity building and exchange of bestpractice. Market intelligence, business skills and a focus onskills must become the heart of public purchasing. In short,public procurement needs to become a business skill - ratherthan an inefficient (at best) or corrupt (at worse)administrative endeavour.

Joachim Nunes de Almeida, EC

EU Investing in Procurement

Professionalism

“In times when we can’t borrow anymore, we see procurement as the best revenue stream”

“Investing in the function tasked with delivering these(efficiency) targets is a clear spend to save business

case”

OGC (UK) presentation, Rome, September 2009

Spend to Save in the EU

WORLDWIDE PHENOMENON

How much waste in purchases could be eliminated bybringing “the worse at the level of the best” (Italian case)?

“If all public bodies were to pay the same prices as the one at the10th percentile, sample expenditure would fall by 21% . . . Sincepublic purchases of goods and services are 8% of GDP, if samplepurchases were representative of all public purchases of goodsand services, savings would be between 1.6% and 2.1% of GDP!”

How Much Public Money Is Wasted, and Why? Evidence from a Change in Procurement Law -Oriana Bandiera, Andrea Prat, Tommaso Valletti, American Economic Review

How much waste?

How much of this waste is passive(inefficiency)

vs. active (corruption)?

How Much Public Money Is Wasted, and Why? Evidence from a Change in Procurement Law -Oriana Bandiera, Andrea Prat, Tommaso Valletti, American Economic Review

“On average, at least 82% of estimated waste is passive and that passive waste accounts for the majority of waste in at least 83% of our sample public bodies.”

Why waste?

Pioneers: Professionalism in procurement-UK 1997

• “Procurement professionals will see many inconsistencies asthey look at their job market. Poorly designed or nonexistent career paths and progression opportunities sitalongside a wide range of often confusing titles and jobclassifications. GPS research identified 147 unique job titlesfor just over 1000 respondents”

• “Staff turnover is unacceptably high … Vacancies stood at10% of the work force … with an increase of contingentlabour”.

• “Allowances for professional qualifications and specialistskills are inconsistently applied.”

… the EC is developing a policy to promoteprofessionalization of public buyers. The policy will includeinter alia professionalisation plans, promotion of definedtraining schemes, capacity building and exchange of bestpractice. Market intelligence, business skills and a focus onskills must become the heart of public purchasing. In short,public procurement needs to become a business skill - ratherthan an inefficient (at best) or corrupt (at worse)administrative endeavour.

Joachim Nunes de Almeida, EC

EU Investing in Procurement

Professionalism

The Market for Competences

Demand

Supply

Law Law and …

Law 2000

Law and …2015

IMPPM is borne out of the experience of the Master inProcurement taught in Italian for 10 years. A Masterwith 3 core specializations: private, public and defenseprocurement.

Then times became mature, for the procurement groupof the University of Rome Tor Vergata, to find prestigiouspartnerships for extending internationally the successfulexperience of the Italian Master Program: EBRD, CEI andMEF were the right partners who strongly believed inthis initiative.

IPPM’s history

About our Students and Alumni

I Edition II Edition III Edition IV EditionNumber of Students 30 33 28 28EBRD Scholarships 9 15 20 22MAE Scholarships 19 16 0 0AfDB Scholarship - - - 2AISCAT - - - 1Private Payers 2 2 8 3

Countries involved

Albania, Armenia, Egypt, Italy,

Lebanon, Libya, Moldova,

Montenegro, Romania, Serbia,

Tunisia

Albania, Armenia, Bosnia and

Herzegovina, Bulgaria, Italy,

Jordan, Lebanon, Moldova, Serbia,

United Arab Emirates

Albania, Bosnia and Herzegovina, Bulgaria, Gambia, Georgia, Germany, Italy, Kyrgyzstan, Latvia, Moldova,

Montenegro, Serbia, Taiwan,

Tunisia

Albania, Bosnia and Herzegovina, Croatia, Gambia, Georgia, Hungary

Italy, Jordan, Kazakhstan, Macedonia,

Morocco, NamibiaRepublic of

Belarus, Serbia, Slovakia, Tunisia,

Ukraine

Relevant Figures

• 119 students coming from 31 countries and more than 82 institutions;• Lecturers teaching over the past academic years coming from more than 30 countries

and more than 20 institutions.• Ratio of non-Italian lecturers per edition: I Edition 12/35; II Edition 12/34; III Edition

16/28; IV Edition 20/36.

Interdisciplinarity…

Since 2005Module 1 Negotiation and Team BuildingModule 2 Economics of ProcurementModule 3 Legal BackgroundModule 4 Organisation and StrategyModule 5 Economic Analysis of the MarketModule 6 Contract Complaints and DisputesModule 7 Quality Management and Green ProcurementModule 8 Integrity and Anticorruption in Public ProcurementModule 9 Strategic ProcurementModule 10 Law and Economics of Public and Private PartnershipModule 11 IFI's Procurement ProceduresModule 12 E-procurement

Offered by the Schools of: Economics, Engineering, Law

Intersector

In the Master: private and public procurerstogether.

Why learning what is forbidden?

The rationale: discretionality (more in private) can be good!

?

The Paradox of Trust

The EU Directive: 1 law for all EU MS?

Italy and the UK: the role of trust

The «Good» and «Bad» Discretionality

Pre-conditions

Professionalization, Experience and Rewards:

necessary pre-conditions for virtuous discretionality.

Procurers like diplomats and judges?

Is Professionalism Enough?

Capacity Building is much more than training and includes the following:

Human resource development, the process of equipping individuals with the understanding, skills and access to information, knowledge and training that enables them to perform effectively.

Organizational development, the elaboration of management structures, processes and procedures, not only within organizations but also the management of relationships between the different organizations and sectors (public, private and community).

Institutional and legal framework development, making legal and regulatory changes to enable organizations, institutions and agencies at all levels and in all sectors to enhance their capacities.

The Urban Capacity Building Network

Procurement Revolution

UK 2009

Recommendations:“Attract, Reward, Retain and

Develop”.

Talent Management Issues in Procurement Organizations

Is your organization structured to attract talentedpeople?

How to attract them?

How to make them grow within the organization?

How (and if) to retain them?

From Private to Public Sector

Public Procurement Management - 3 Pillars

Competences-Career

DiscretionalityInterdisciplinarity

Types of Skills Talent Management

Sufficient Conditions?

Switch to discretionality to be exercised properly requires:

a) new additional skillsb) new forms of transparency

c) new forms of accountability.

Discretionality in the new EU Directive

More discretionality allowing to negotiate more frequently(except for standardized goods)

• Negotiation can help because:

a) in the case of complex operations, it has the potential to improve the fine-tuning of contracts by helping the public party to express its needs and by identifying unforeseen competitive and potentially innovative solutions;

b) at the selection stage it reduces the likelihood of the contract being renegotiated at a later date, without necessarily increasing prices;

c) contractors are required to justify the various components of their bids at the negotiation stage, which reduces the risk of collusion and cover bids;

But there are risks: favoritism, raising price anticipating ex-post negotiations, improving (and copying) one’s rival technical offer.

NEW SKILLS, NEW TRANSPARENCY, NEW ACCOUNTABILITY

Saussier-Tirole: make mandatory (and public) 2 reports, analysing alloffers before and after negotiation.

http://www.cae-eco.fr/IMG/pdf/cae-note022-env2.pdf

Discretionality in the new EU Directive

Greater space for renegotiation(with upper limits based on share of value)

• Renegotiation can help: unforeseen events, new advantagesBut:

Renegotiation can reduce the benefits of competition: he whowins is the best renegotiator (with a very low, renegotiable, price) rather than the best quality provider.

Saussier-Tirole: mandatory publication of notice or large renegotiations, with short standstill period for intersted parties

to oppose it.

Big Data rather than Rules

Accountability without Performance Measurement?

Performance without Data?

Data centralization and analysis is essential.(Competent Observatory in the New Governance?)

Public Procurement Management

Competences-Career

DiscretionalityInterdisciplinarity

Types of Skills Talent Management

Types of Transparency-E-searchable data bases

Transparency, Data and Accountability

OECD Public Governance Reviews, The Korean Public Procurement Service -Innovating for Effectiveness, 2016.

Accountability – Korea’s KONEPS e-proc system

Public Procurement Management

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Foster Organizational Change Toward Performance

• Use Data for Internal Improvement• Use Data for Setting Targets, Motivations,

Rewards• Use Data that are oriented toward output-based

measurement of performance• Organize Institution Around Self-Improvement.• The Philippines example stands out as a potential

benchmark:

The Philippines

• The results should not be used to compare theagency’s score against that of other agencies but toprovide a benchmark against which it will measure itsown subsequent performance. The assessors shall thenidentify areas of strength (sub-indicators receiving asatisfactory or Very Satisfactory score) where it cancontinue to improve and weaknesses (sub-indicatorsrated poor or acceptable) where it needs to develop aspecific plan of action.

• A Plan of Action to Improve Procurement Capacity willthen be developed …

Public Procurement Management – The 4 Pillars

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Types of Incentives

Public Procurement Management

?

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Types of Incentives

Public Procurement Management

Goal?

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Types of Incentives

Public Procurement Management

Industrial Policy

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Types of Incentives

Public Procurement Management: an Example

SME

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Types of Incentives

PS: the more so the larger the buyer that you are

Effectiveness

• Use Professionalization coherent with SMEsneeds (SME Ambassador in USA SBA)

• Use Data for Setting Targets for SMEsparticipation and victory rates

• Use Transparency having SMEs in mind (carefulabout cartels by large firms)

• Use Interdisciplinary knowledge to impact on SMEs (analyze carefully set asides impact).

Public Procurement Management -

Long-Term

Growth!

Competences-Career

Discretionality

Accountability

Interdisciplinarity

Types of Skills Talent Management

Types of Transparency

Types of Incentives

Procurement 2.0

Revolution for the Country

“Attract, Reward, Retain and Develop”.

15-20% of GDP

The Country will Too.