How to stop tender benders: Transparency the only way
World Bank top official Laurence Carter gives lessons on quality bidding
The only way to stop commission payments in the award of tenders was for procurement processes to be transparent with as much disclosure as possible, a World Bank (WB) specialist said this week. Infrastructure was a service offered to the public. “So on the face of it, why should anything be confidential?” asked Laurence Carter, the Senior Director of the WB’s Public-Private Partnerships (PPP). “If one is serious about transparency, then start with the presumption that everything can be disclosed while retaining the right to keep some commercial items confidential.”
Good quality bidders will accept this, said Mr. Carter, who was briefly in Sri Lanka for a seminar with local officials: “Bona fide, serious, good quality bidders recognise the value of transparency.”
Transparency was crucial in warding off commissions that inflated project prices. This meant disclosure around all key stages including the intention to propose a PPP and all stages of the bidding process such as expressions of interest, requests for prequalification and proposals. “You can even sometimes have disclosure around the documents and the final contract that is signed,” Mr. Carter said.
The WB stood for competitive bidding. Unsolicited proposals were to be treated as an exception. However, there were circumstances where unsolicited bids could make sense for a Government--such as when these helped flag ideas or provided access to innovation or preparatory work done by the private sector.
But it was helpful for a Government to define a process by which such proposals would be considered. ‘“In the end, what really matters is getting a good deal for the citizens of the country, making sure that what gets signed is good value for money and that the process is transparent,” Mr. Carter stressed.
Competitive bidding processes had two elements. One was technical while the other looked at prices. It was possible, in dealing with unsolicited proposals, to employ the ‘Swiss Challenge’ option. This is when a Government publicly solicited alternative price offers to implement the concession agreement.
“In general, what one wants to do is a benchmark comparison,” Mr. Carter explained. “For example, if a road is being built, how much is it expected to cost per kilometre? You might benchmark it against other similar roads that have been built in the country. The Government should be doing that to ensure they’re getting a service that is reasonable value for money.”
Resources must be invested in preparing infrastructure projects. OECD countries had an infrastructure strategy with a range of projects. Some were marked priority. It could then be decided which should be implemented through public procurement and which through PPPs.
If a PPP was chosen, an estimate of fiscal implications--of how much it would cost the Government-must be done. Once feasibility was established, Mr. Carter recommended the employment of advisers to market the project, to prepare documentation and to ensure a good number of bidders. “That, in the end, is what protects the country and ensures you get good value,” he said.
Large infrastructure project would (ideally) be marketed internationally. “If a company from a particular country wins, and that country has export credit, it would be up to the company that wins the bid to arrange financing from the export credit agency,” he said.
“Do not let the financing drive the project,” he continued. “You want to advertise the project or the programme. Get the best quality sponsors and the financing will come.” The WB’s experience was that if a project was marketed well and a country had a strong track record of legal protection for investors and financiers, there was likely to be significant interest.
A major challenge in carrying out PPPs in crowded South Asia was land acquisition and land rights. These were risks the private sector was generally unable to absorb.
“In designing a PPP, it is really important for a Government to handle and take on the risk of land acquisition, making sure it addresses this by using eminent domain or buying the land before it puts out a project that requires access to land,” Mr. Carter said. If land acquisition was not completed before a project was advertised, there was a risk of delays.
The WB expert also stressed the need for the Government to communicate with people who would be affected by a particular project. “Just have a proper conversation,” he urged. “It is important to focus on communications, to talk to people, to listen and design the project after listening to those who are being affected.”
Mr. Carter also called for local participation in PPPs. “If you finance a lot of your PPPs with foreign loans, you are always at risk with foreign exchange risk,” he said. “It is much better culturally and economically to draw heavily upon local sources of investment and financing.”
“In general, what one wants to do is a benchmark comparison,” Mr. Carter explained. “For example, if a road is being built, how much is it expected to cost per kilometre? You might benchmark it against other similar roads that have been built in the country. The Government should be doing that to ensure they’re getting a service that is reasonable value for money.”