The World Bank is moving toward a new policy that will at least double the number of contract bidding opportunities publicized internationally, according to bank officials and business sector observers.
The change will substantially increase the visibility of bank-financed contracts subject to international competitive bidding, with the aim of reducing costs.
If all goes well at a high-level internal Bank airing of the proposal March 11, the new procedures could be made official by late May.
Under current policies only competitive bidding opportunities worth more than $10 million must be advertised internationally, not just inside the borrowing country. The change being contemplated would require that international notice be given of tender offers above the $350,000 level.
Advertised Offers Could Quintuple
A top World Bank official predicted that this would double the number of offers advertised internationally, but other knowledgeable sources said a five-fold increase was possible. Although precise dollar estimates are lacking, sources agreed that the new policy would involve contracts worth billions of dollars.
“Complete and open publication of internationally competed tenders is long overdue and something many of us have worked for years to achieve,” commented Diane M. Willkens, president and chief executive officer of Development Finance International, Inc. “This will be a very positive improvement, particularly for firms who see development business as a vital source of income in an economic downturn. Improved advertisement will also increase competition-one of the goals for sound procurement at the Bank. We look forward to reviewing all of the changes in the procurement rules, and weighing their cumulative effect.”
Caveats Noted
Although the prospective development is welcomed by potential users of the information, some veteran private sector hands added caveats.
The new exposure should facilitate international knowledge about potential contracts, possibly increasing competition for them, but it may not unleash an immediate flood of new bidding. Companies already serious about pursuing such business have arranged to follow the advertising that governments place in local media. Also, private sector observers noted that just knowing about potential contracts may not be a bonanza for companies that lack a local presence.
Further, although the reform will expand the transparency of many bidding opportunities, international competitive bidding will still not be mandatory for billions of dollars in other contracts supported by the bank.
First, some contracts would still fall below the thresholds that define when international competitive bidding is called for-generally about $350,000 for project-related contracts, and $200,000 for consulting contracts-levels seen as too high by some and too low by others, but in any event not part of the current reform discussions.
The bank is not planning to change the thresholds, but is contemplating related changes intended to build more flexibility into the determinations of when competitive bidding is warranted.
Second, international competitive bidding is not required for about a forty percent portion of World Bank lending, known as structural or sectoral adjustment lending, which aims more at enhancing health care, education, or financial sectors. The new policy would affect project lending, for things like roads, dams, and similar infrastructure projects.
Two Sources for International Notices
The change may draw new attention to a related issue, the cost of information. To satisfy the international advertising requirement, governments publish notices of upcoming contract opportunities in two existing services, both of which charge for the information.
The older service, United Nations Development Business, still publishes a print compendium twice a month and also has an online service. The less expensive alternative, Development Business also provides many complementary copies in libraries and other places in developing world.
The newer service, dgMarket, is totally online and growing fast. Started with seed money from the World Bank and the private sector, dgMarket provides the bank-related notices, but also aims to become the complete source for bidding opportunities from all development banks and countries.
The bank itself does not publicize tender offers. The bank historically preferred to distance itself from this step in order to avoid legal liability problems from problems in the bidding documents, according to nonbank sources. The borrowing countries officially issue the invitations to bid, following bank procurement guidelines. Local newspapers are another source of information about contracts subject the competitive bidding by the World Bank. Interested parties also ask governments to send them the bidding notices.
Those interested in anticipating potential business opportunities before bidding opportunities arise usually follow the progress of potential loans and projects on the bank Web site. For tender offer information, however, general guidance on the bank Web site refers users to both Development Business and dgMarket. Recently however, the bank’s Web pages about individual projects have begun referring users only to dgMarket, which unlike Development Business provides some free information online.
Most businesses following tender offers utilize both services, nonbank sources said, but are finding dgMarket more expensive.
The World Bank is not considering a requirement that countries post the larger bidding specification documents on Development Business or dgMarket, sources said. There is concern that some governments have inadequate Internet access. However, the bank will encourage this on a voluntary basis, one source said.
In a related development, the Inter-American Development Bank has decided to provide contract opportunity information for free on its own Web site. The IDB, which like the World Bank has invitations to bid posted on the two services, will in several months be putting them up on its own Web site for free, although five days after publication in Development Business and dgMarket, according to IDB and other sources.
Bank Action by Late May Possible
The World Bank’s possible reforms, as usual, have not been disclosed officially, or even shared unofficially with outsiders, but some of the basic details were confirmed to BNA in an interview with Armando Araujo, the World Bank director of procurement.
Procedurally, bank staffers will conduct a technical briefing March 11 for assistant executive directors and executive directors who want to participate. If reaction is favorable, the staff will prepare to take the proposals to the executive board, probably in about three weeks. Board consideration usually takes about a month, and a bank official said the changes could be in place near the end of May.
Three years in the making, the proposals have their genesis in part from discussions with other banks about harmonizing procedures. Such discussions were held in February in Rome and last October in Manila among procurement officials. In October, officials reviewed an assessment of policy differences and discussed how to develop common ground of best practices to address these differences.
In general terms, the World Bank is considering changes in three categories: to promote harmonization with the other banks, to simplify procedures, and to allow greater use of new information technology.
More Advertising to Be Mandated
The key change will mandate that more bid opportunities will be advertised through dgMarket and Development Business.
Under current policy at the World Bank, a General Procurement Notice is issued when a project will be covered by international competitive bidding (ICB) requirements. All GPNs go to Development Business and to dgMarket for publication.
Subsequently, the borrowing countries, which handle the procurements under World Bank guidance, issue Specific Procurement Notices for the various parts of the projects. It is these more specific invitations to bid that, depending on the size of the project, may not have to appear in Development Business and to dgMarket.
Currently, borrowing nations must advertise internationally only for contracts above $10 million. Under a 1995 policy on notification and advertising (Sections 2.7 and 2.8 of the bank’s competitive bidding rules), “large, specialized or important contracts shall advertise the invitations in Development Business and/or well-known technical magazines and trade publications of wide international circulation.” This cutoff has been interpreted to mean $10 million. Some countries, however, advertise projects below the threshold, editors of Development Business said. For consulting work, international advertising is required for contracts above $200,000.
For projects subject to international competitive bidding, but below the $10 million level, placing procurement notices places in national papers is considered adequate.
How many more tender officers will be subject to international advertising, meaning publication in dgMarket or Development Business, is difficult to precisely identify, sources said.
The result of the proposed change would be to “more than double” the number of internationally advertised ICBs, according to a Bank official, who commented, “That’s a good thing for transparency and for opportunity.” A Development Business manager who said there are about 2,000 Bank tender offers posted annually, also predicted a doubling.
The number of contract awards is about 6,000 annually, another bank official observed. He stated that the number of internationally advertised contracts may increase by a factor of three to five.
More Threshold Flexibility
The bank will not be changing its thresholds for when contracts must be put out for international competitive bidding, but it will mandate that countries advertise internationally for all contracts put out for international competitive bidding, known as ICBs.
At the moment, the competitive bidding threshold varies from $200,000 to $500,000, according to a bank official, with the levels are set out in each loan agreement. As a general rule, outsiders usually cite $350,000 as the operative cut-off for goods purchases, and $200,000 for consulting service contracts.
To increase the flexibility with which competitive bidding is used another reform is under consideration. The Bank staff would like to require the preparation of a procurement plan for each borrowing country, to be updated annually. The new plan would replace the terms now contained in each loan agreement specifying the negotiated levels at which competitive bidding is required. Under the proposed system, the competitive elements of each loan would be governed by reference to the annually negotiated broader plan.
This procurement plan could incorporate thresholds for competitive bidding that could vary with the type of product or service to be purchased, a bank official said.
One consultant said the levels already vary with the degree of local corruption and other factors. The World Bank does periodic assessments — called country procurement reviews — of borrowing countries’ handling of procurement responsibilities.
The bank official said he could not define the conditions that would indicate the need for higher or lower thresholds. He suggested, however, that the thresholds could vary with the number of potential bidders. The goal, however, will be “basically to adapt the threshold to what you are buying,” according to the official, who said he did not expect much practical change immediately, but did anticipate more efficiency in the long term. “What we want is for this to depend on what you are buying,” according to the official.
Despite the effort to expand transparency, there is no expectation that the Bank will move to lower thresholds. “The pressure now is to raise the thresholds-from borrowers, and from upper management, to get the money out the door,” observed one source.
Print ‘Dinosaur’ Serves Poor Countries
United Nations Development Business, begun in 1978, until recently was the sole central source for procurement notices from the World Bank. By providing many complementary subscriptions, it remains a major source for users in the developing world to get tender offer information for free.
Subscribers receive a thick English language print edition twice a month containing the latest tender offers from the UN, the World Bank, and other major development banks. An online service, also for an annual fee, has been offered since 1995 <http://www.devbusiness.com/>.
“Our primary role is to distribute this information in the development world free of charge,” said Vlad Vitkovski, editor of Development Business, referring to the print version publication, many of which are distributed free of charge in the developing world. He noted that “for least developed countries it is hard to get it through the Internet. “Maybe we could say we are the dinosaur, but what we are doing is carrying this burden on our shoulders and bridging the gap between the rich and the poor,” he said.
Carrying notices advertising the availability of about $30 billion per year in projects worldwide, Development Business is a self-sustaining publication with 12 staff members in New York and Washington, D.C. There are more than 5,000 paid print and online subscribers.
There are a variety of annual subscription options for Development Business, with online access costing $550, paper copies going for $590, and both available for a combined $795. In addition, for the online version, plus a copy of the World Bank’s Monthly Operation Summary (MOS), the charge is $650. A printed version of the MOS costs $295. The summaries are available free of charge on the World Bank Web site.
Development Business receives about 20,000 hits per day, mostly from password-carrying subscribers.
In contrast to dgMarket, nothing of substance about World Bank procurement is available for free on the Development Business Web site.
Complimentary Copies
Development Business‘s services, however, are provided on complimentary basis to about 2,000 subscribers, including development bank libraries and regional offices, where usage is estimated at about 15,000.
Development Business receives countries’ procurement notices from the World Bank directly. Development Business staffers perform modest editorial clean-up work on the notices and supply them to dgMarket.
Development Business will be renewing its memorandum of understanding with the World Bank this summer.
18-Month-Old Newcomer: dgMarket
The other main source for bank procurement news, dgMarket, is “a very interesting way to make markets more transparent,”in the words of Gerhard Pohl, who manages the 18-month-old online marketplace of international contract bidding opportunities <http://www.dgmarket.com/>.
The fast-growing service, that now contains about 30,000 current tender notices for projects in 153 countries, is a creation of the Development Gateway Foundation, whose larger mission is to apply new information technology to development problems. Using computerized translation software, dgMarket translates summaries of notices into 10 languages, will add 20 more within a year, and hopes to become a virtually universally available service.
The $30 million foundation is funded in part by the World Bank, but also gets substantial support from private sources, and from subscription revenues. It has received $7 million in in-kind contributions from the bank. In the past two years, dgMarket has cost about $1 million to develop. Pohl is still an employee of the bank’s informatics group, but for the past several years has supervised the growth of dgMarket.
Of the bank’s impending policy change, Pohl said, “Making electronic publication of all international competitive bidding (ICB) opportunities mandatory is a large step forward in making World Bank-funded procurement even more transparent.”
Universal Source the Goal
dgMarket started posting World Bank bidding notices in March 2001, but it includes bidding notices from virtually all the international development banks, from the European Union, EU countries, and a growing number of other countries.
Pohl anticipates adding the bidding notices of the United States government in several months. On the horizon is participation by Canada, Australia, and Japan. Pohl is working with a many countries to facilitate inclusion of their notices on dgMarket, including Mongolia. Governments hope to save money through the process, he explains, saying, “As far as I can see most countries think this is a good idea.” He envisions eventually moving beyond publication of bidding announcements and into including the longer associated specification materials.
The changes contemplated by the World Bank are welcome for Pohl. In addition to the expansion of notices to be posted, for the first time, dgMarket will be officially listed in the bank’s rules.
Rapid Expansion
Business is booming. By February 2003, 5,000 firms worldwide had set up computerized profiles to receive free “alert” notices, and dgMarket is adding 500 a month, Pohl said. He predicted there will be 10,000 alert recipients by the end of the year.
Traffic to the site is also on the rise. “We were getting about 60,000 user sessions per month, with 30,000 unique visitors [in January 2003],” he said.
Once registered online, a visitor can view short summaries of all tender notices and contract awards, and conduct searches. The key information left out is information about whom to contact in the contracting country for further information and to be notified of the more detailed bidding specification documents. This is the point where fees are charged. “We only charge money when people really need the information,” according to Pohl.
83 Cents to $2 a Document
Regular users access the full notices for about $0.83 to $2 apiece. There are a variety of subscription plans. For $50 per month, a user may access 50 “full” tender notices per month. The charge is $500 for a year to see 50 full tender offers a month. Another option, for major users, is no-expiration access to 100 full tender notices for $200
For users accessing hundreds or thousands of notices the charges can mount up, according to some private sector users. Although using Development Business is cheaper, they said, but occasional differences make the use of both systems advisable. Unlike Development Business, dgMarket offers no complimentary subscriptions.
To increase its availability and build revenues, dgMarket, based in Washington, D.C., is looking to partner with developing countries and others, offering to share revenues for licensees of the system. Pohl is fielding inquiries from corporations seeking additional services.
He declined to discuss dgMarket revenue specifics, but indicated that dgMarket hopes to be self-supporting in several years. “Our major objective is not to make a fast buck,” said Pohl.
Pohl also stressed that dgMarket wants share its software with countries that would like to adapt it for their own purposes. The system “is a little bit more sophisticated than most of the systems of the big countries, in the sense that it does it in many languages and publishes full bidding documents,” he said.
By Toby McIntosh
Copyright©2003 by The Bureau of National Affairs, Inc., Washington D.C.
Filed under: IFTI Watch