Preparing for the HLF at Busan and Beyond

Hello, Forum members;

I’m a member of the core working group of the OECD/DAC Task Force on Procurement and a procurement advisor to the OECD/DAC Secretariat. I’d like to make two points concerning some views of the working group of the Task Force as we prepare for our next Task Force meeting and for the 4th High Level Forum (HLF) at Busan and the priority themes that partner countries are proposing for discussion/action at the HLF.

The Task Force will be meeting in Cuzco, Peru, from May 4 – 6 to discuss some key messages we will be sending to Busan, including:

1. The importance of public sector procurement – Public procurement is an essential, strategic government function that is critical to successfully implementing development agendas. A wide variety of economic and social outcomes are influenced, including for example:
• the quality and efficiency of public expenditures and service delivery
• local industry and market development and competitiveness
• the foreign investment climate
The objectives of public procurement are generally consistent among countries and include, in particular, achieving value for money based on the qualitative and quantitative aspects of transparency, economy and efficiency.

2. Significant achievements have been realized, new opportunities have appeared – Task Force member countries and institutions have been active in recent progress in strengthening country systems and progressively relying on parts of these systems to promote developmental effectiveness since the Paris Declaration was accepted. Significant policy dialog on procurement reform and comprehensive action plans have been encouraged by the use of baseline and performance indicators.

Today, there is growing consensus in our working group that the use of country systems is not an “all or nothing” proposition. It needs to be a sequenced and measured effort to increase country procurement capacity. Procurement reform and capacity building is a complex and multidimensional undertaking requiring significant time, commitment, ownership and resources.

While there is an appreciation for first generation reforms in many countries, there is also a strong demand from partner and donor countries to focus on measuring performance, concrete results and outcomes. This will require reaching agreement on an objective methodology to assess how principles, capacity and controls relate to performance.

Another area requiring attention and broad discussion is the relationship between the assessment of fiduciary risk and the willingness of development partners to use country systems. The resolution of this issue is critical to the achievement of the objectives of increased value for money and enhanced developmental effectiveness. The convergence of interests by partner countries and development partners in effectively managing fiduciary risk could be more clearly acknowledged and supported by increasing focus on performance and concrete outcomes of improved systems.

Member countries and institutions of the Task Force are also interested in continuing to work together beyond Busan to promote a second generation of reforms focused specifically on improving value for money. This concept of performance goes beyond compliance to assess a system’s outcomes in a measurable and objective way and increases the focus on aspects such as strategic procurement planning and budgeting and monitoring and evaluation. This requires an approach to procurement as a distinct economic policy with important links with the country’s governance framework eg the public financial management system and anti-corruption strategies.

Regarding what many many partner countries would like discussed at the HLF, the OECD/DAC Secretariat, in collaboration with the African Development bank, the Asian development Bank and the UNDP, polled interested partner countries, donor countries and non-state organizations during the Fall, 2010. Over 60 partner countries responded. More than 25% of partner government respondents identified the following themes as priorities: alignment to policies and strategies, capacity development, managing for results, transparency, using country systems and accountability.

The working group of the Task Force believes that the priority discussion themes of partner countries at Busan and the evolving mandate and accompanying priority work issues of the Task Force beyond the HLF are complementary and long term. Our aim has always been to support the efforts of partner countries and donors to achieve results at the country level and in providing a platform to share knowledge and experience at the global level. We hope to continue this dialog with our constituent partners from partner countries, donor countries and multilateral institutions and with our stakeholder partners from civil society at our upcoming meeting at Cuzco.

Micheal Lawrance
OECD/DAC Task Force on Procurement

The OECD DAC Task Force on Procurement meeting in Cusco Peru 4-6 of May was very successful, with 35 partner countries, 8 donor countries, 10 multi-lateral institutions and 3 civil Society organizations participating. The meeting culminated with the preparation of the Cusco Declaration, which recognizes the importance of good governance of which procurement is a fundamental component. It also recognized that critical elements for procurement reform are country ownership and leadership in the design and implementation.

To progress on the procurement reforms since the Paris Declaration and to accelerate and sustain achievements eight recommendations were made including, strengthen capacity development resulting in well preforming procurement systems.

One of the actions of the Task Force going forward on the ‘Road to Busan’ is to develop a Procurement Capacity Development Guidelines by the OECD/DAC Procurement Task Force. The draft TOR can be found by following this link an annotated table of contents will be shared for information and comment in July.

Please click the following link for further information on the Task Force Meeting and The Cusco Declaration: Strong Procurement Systems for Effective States 

Managing instead of avoiding risk: implications for strengthening and using country systems in fragile states

The idea that taking risk is a vital part of a successful enterprise is true in some parts of the private sector (such as investment banking, emerging markets); it is however, less commonplace in the aid sector.

Over the past years, development partners have shown an increasing strategic interest in fragile states (1) – especially in light of achieving development results, such as the Millennium Development Goals. Due to the fact that „fragility“ has an impact on state capacity – as well as state deficiency - to provide services which match the needs of the population, strengthening and using country systems in fragile states can become a key driver for their development. Despite the growing strategic relevance of fragile states in development cooperation and aid effectiveness, only few development partners have developed approaches to risk that are specifically geared towards working in fragile and transitional contexts. In light of the upcoming High Level Forum on Aid Effectiveness in Busan and its emphasis on providing assistance to countries in fragility and transition, the question arises how risk can be managed instead of avoided – especially when it comes to strengthening and using country systems.

Learning from the experiences of the past decades, risk – including institutional risk, such as corruption, or political risk - has mainly been avoided rather than “managed”. Although donors have proved willing to invest large amounts in high-risk environments of particular strategic concern, such as conflict affected states or post conflict situations, this has been highly selective and hasn’t embraced a fundamental change in development partners’ risk adverse way of engagement. Reasons for their risk aversion include pressure – for instance from taxpayers and audits - to demonstrate narrowly defined, tangible results within a certain timeline, strict accountability requirements (e.g. for public expenditure), growing intolerance of corruption, as well as lack of shared concepts and frameworks for risk analysis which hampers effective collaboration on risk management.(2)

Especially in regard of using and strengthening country systems, risk management becomes more and more relevant: When supporting partner countries‘ efforts and plans to strengthen core institutions and policies, approaches should be applied which aim at managing rather than avoiding risk. However, this may only work in practice if an approach towards risk management is fostered which involves the commitment and responsibility of both programme countries and development partners. Such an approach could include elements such as joint risk management frameworks and developing tools and capacities to conduct joint risk assessments.(3) Also, revising incentive structures and working cultures – in both programme and donor countries – to allow for appropriate risk management when engaging in fragile or transitional settings may be beneficial.(4) In many ways, this requires re-thinking of traditional approaches to capacity development. Also, the flexibility to choose an adequate mix of modes of delivery for a respective situation or political, economic and social context may be a key driver for success in order to provide better services. Such an approach may bring about transformative change at country level, and may allow for achieving a higher degree of scope and scale of development measures. In short, the benefits of engaging in fragile states – despite all risks involved – may outweigh the benefits from holding on to a small-scale, risk adverse approach, e.g. through imposing tight reporting requirements or tough financial controls which narrow the range of achievable goals.

In this regard, two questions become relevant: Should donors accept more risk in the name of capacity development, and how would they explain this to their constituency? And, in practical terms, how can risk management and capacity development be integrated in using and strengthening country systems in order to trigger change in fragile states or countries in transition?

(1)According to OECD, the term „fragile states“ refers to „those failing to provide basic services to poor people because they are unwilling or unable to do so.“ Source: http://stats.oecd.org/glossary/detail.asp?ID=7235 (OECD, 2006, DAC Guidelines and Reference Series Applying Strategic Environmental Assessment: Good Practice Guidance for Development Co-operation, OECD, Paris)
(2)OECD DAC (2010): Aid Risks in Fragile and Transitional Contexts – Improving Donor Behaviour. Website: http://www.oecd.org/dataoecd/0/17/47672264.pdf.
(3)OECD DAC, Working Party on Aid Effectiveness (2011): “Third Draft Outcome Document For the Fourth High Level Forum on Aid Effectiveness, Busan, Korea, 29 November – 1 December 2011
(4) OECD DAC (2010): Aid Risks in Fragile and Transitional Contexts – Improving Donor Behaviour. Website: http://www.oecd.org/dataoecd/0/17/47672264.pdf.

The Strategic Importance of Public Procurement

Strategic Importance of Public Procurement, clearly sets out the opportunities for more effective and efficient public procurement and as an important policy tool.

The HLF-4 is a great place to further develop this discussion and an opportunity to gain greater support and buy-in for a more strategic role for public procurement.

It would be good to hear of examples and experiences where public procurement is becoming more strategic.

Busan‘s implications for using and strengthening country systems:
A question of using potential!

During the Busan HLF-4, the Heads of State, ministers and representatives of developing and developed countries, heads of multilateral and bilateral institutions, and representatives from public, civil society, private, parliamentary, local and regional organizations have acknowledged a new partnership for effective development cooperation which is broader and more inclusive than ever before. The new partnership is based on shared principles - namely ownership, focus on results, inclusive development partnership and transparency and accountability -, common goals, and differential commitments for effective international development.

Further to our considerations on the way to Busan, the outcome document now confirms the central role that strengthening and using country systems plays in this new approach to development and inclusive partnership: using and strengthening developing countries’ systems remains central to our efforts to build effective institutions. All actors in development are encouraged to build on respective commitments which were set out in the Paris Declaration and Accra Agenda for Action. These include two central aspects: (1) the use of country systems as the default approach for development co-operation in support of activities managed by the public sector; (2) joint country system assessments, using mutually agreed diagnostic tools, which serve as a basis for decisions in how far country systems can be used by providers of development co-operation. In case the use of country systems is not possible, joint measures and assistance for strengthening these systems should be provided.

However, the findings from the HLF-4 in Busan take the importance of country systems to a level beyond what was recognized in Paris and Accra: it is stated explicitly in the outcome document that “the use and strengthening of country systems should be placed within the overall context of national capacity development for sustainable outcomes.” Also, it is agreed that by 2013, greater use will be made of country-led co-ordination agreements. Last but not least, the importance of effective institutions and policies are considered essential elements for sustainable development, and should be strengthened further, alongside policies and practices. The aim is to facilitate the leveraging of resources by developing countries. In this regard, the disputed topic of risk management is approached as well: developing countries’ efforts and plans to strengthen core institutions and policies will be supported through approaches that aim to manage – rather than avoid – risk, including through the development of joint risk management frameworks with providers of development co-operation.

These findings constitute a valuable basis for our continued work towards strengthening and using country systems. And while there is now real potential to making the desired progress in a joint approach which includes a broader range of actors from governments, the public and private sector, as well as representatives from the civil society than ever before, it is time to reflect and ask ourselves: How can we bridge the gap between theory and practice? In short: How can we use the potential of this new and inclusive partnership to making a sustainable contribution to achieving our goals in strengthening and using country systems – especially for those countries which need it the most?