This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide.
In its June 2010 procurement review of Moldova, the World Bank recommended that the government phase out the role of the central Public Procurement Agency (PPA) in reviewing and approving government contract awards under the Public Procurement Law (PPL) so that the decentralized government agencies could more effectively govern their own procurement processes. As noted by the World Bank in its report, maintaining a centralized review and approval process in an otherwise decentralized procurement system undermines the independence of government agencies, creates duplication, increases inherent conflicts, and results in approval bottlenecks:
Since the enactment of the PPL in April 2007, the review and approval of award recommendations and contracts are still centralized and remain with the PPA, even though the conduct of public procurement was decentralized to public entities. The current centralized review and approval process has the following shortcomings:
i. The process results in shifting the responsibility and accountability of public entities to the PPA. In a fully decentralized public procurement systems, public entities are responsible and held accountable for their actions in conducting public procurement. In other words, approval of contracts by an authority like the PPA is not an internationally accepted practice, especially in member states of the EU, which Moldova aspires to be part of. In this practice, the decision is taken out of hands of the purchaser and given to an entity that has no technical expertise in conducting individual procurements and currently is answerable to no one. Complaints are made to the PPA (which now makes the ultimate decision in procurement) against actions taken by public entities that no longer have control of the ultimate decision.
ii. The process is considered a potential conflict of responsibilities because the PPA is also responsible for handling complaints related to those cases which have already been reviewed and approved by the PPA. PPA’s dual responsibility in approving the procurement decisions and also in resolving the complaints related to decision-making process and thus becomes both defendant and judge. Although the complaint review department of the PPA is a functionally independent unit within the PPA, it is not administratively independent from other units, and this apparent conflict in responsibilities may impose constraints in its freedom of action when handling complaints.
iii. The process consumes most of the PPA’s limited staff time and resources. The PPA reviews and approves about 23,000 contracts per year (more than 100 contracts per day), which means that it is simply unable to address the issues required to make a proper decision. The PPA can add very little value to the procurement process. If the public entity responsible for the procurement process is incapable of making the final decision in an informed way over a period of months based on technical input, then the value added by a centralized procurement decision that takes only minutes is uncertain. The approval process sometimes simply causes delays in some of the procurement transactions. It is getting much harder for the PPA to keep up with its current workload and responsibilities with the existing number of staff. The international practice is that the central public procurement agency focuses on preparation of secondary legislation, capacity building and similar functions where it can add more value in improving the whole public procurement system instead of dealing with individual procurement transactions.
In its report, the World Bank recommended that Moldova consider an immediate termination of the PPA’s central review and approval role. This would bring its system in line with more modernized procurement regimes that have decentralized procurement functions and have left the monitoring of bidding activities by government agencies to the supplier community:
What modern systems of procurement have done (even in those civil law countries which originally championed the centralized control approach, such as France, Belgium, Italy, and Germany) is to turn bidders into free policemen. Since they are closest to the procurement process and have a direct financial interest in the outcome, they are in the best position to identify and bring to the attention of the authorities any perceived breaches of the rules. In this way, only cases where wrongdoing is suspected need to be “controlled,” thereby avoiding centralized approval where it is not needed and concentrating the focus and resources on those instances where there is real cause for concern.
The World Bank’s review recommendations serve as useful guidelines for other jurisdictions that are seeking to update the allocation of roles and responsibilities within their procurement systems, while avoiding bureaucratic gridlock.
