“ Modern Approaches and Innovation in Public Procurement”. Good Governance Summit Manila, January 17, 2014. Prof . Gustavo Piga Chair, EBRD-Tor Vergata International Master in Public Procurement Management University of Rome Tor Vergata www.gustavopiga.it.
“ModernApproaches and Innovation in Public Procurement”
Manila, January 17, 2014
Prof. Gustavo Piga
Chair, EBRD-Tor Vergata International Master in Public Procurement Management
University of Rome Tor Vergata
Whereis the spacefor modernization?
“The challenge of modernity is to live without illusions and without becoming disillusioned.”
Identify illusions (erroneous perceptions).
Find credible grounds to keep enthusiasm going.
Some modernillusion-prone procurement fields
Awayfrom E, welcome C
“A feeling of quiet pleasure or security, often while unaware of some potential danger, defect, or the like; self-satisfaction or smug satisfaction with an existing situation, condition, etc.”
Guide to Enactment of the UNCITRAL Model Law on Public Procurement
(Old) data about 82 Russianregions
Doese-proc generate competition or collusion?
The case of reverse auctions (Russia 100%)
ultimi 10 min.
Migliore offerta a 147.500 Euro
Migliore offerta a 137.000 Euro
€ x 1000
a 116.000 Euro
IT and e-procmakecentralizing procurement more natural and lesscostly
[Centralizationisbecoming more and more widespread.]
Think hard beforepushing for e-proconly to centralize. ItmighthurtSMEs.
“We … analyz(e) the transactions - below the European threshold - that took place on the Italian e-marketplace during the period 2005-10. Although micro suppliers are the most represented group of firms in the emarketplace, evidence suggests that the largest suppliers display the highest success rates in getting public contracts. Degree of loyalty with buyers and geographical location of both buyers and suppliers also emerge as relevant factors of success in the e-procurement market, proving, at least to some extent, that some features of “physical” procurement markets are mirrored in the “virtual” markets.”
“Il Public Procurement come stimolo alle PMI: il caso del Mercato Elettronico della Pubblica Amministrazione” by Gian Luigi Albano, Federico Antellini Russo and Roberto Zampino.
Problems faced by EU bidders, (by bidders size relative to large firms)The column of totals displays on average which portion of firms interviewed answered “always” or “often”
Whyprefer (some) firms?
Negative discrimination due tobarriers:
1) corruption :
1.1 via networks (easieramong large firms/dominantrace)
1.2 via collusion (easieramong large firms)
1.3 via politicians (easieramonglargerfirms?)
2.1 via ignorance(according to EUsurvey asking public procurers “what current barriers prevent their organization from undertaking additional activities to favor SMEs”, most CAs mentioned risk –aversion)
2.2 via routines (minimum size of revenues etc.)
2.3 via banks
3.1 via racism
3.2 via politics (no connection with size of the firm?)
- skills assessment and development programs
- business mentoring or coaching
- training in commercial tendering
- small business advice
- simplification of bidding documents and questionnaires
- translation of documents into local language
- lowering or rationalization of pre-qualification criteria
- reduction in costs of bidding, e.g. payment for bidding documents
- lowering of barriers to entry, e.g. compulsory industry registrations
- access to additional or cheaper forms of business financing and investment
- more transparent publication of business opportunities
- communication programs
EC Green Paper
The paradox of the right solution.
Itworks best therewhereneeded the least.
Michela Wrong – ItisOur Turn toEat
firms will not engage in whistleblowing against corruption- related challenges in the
local business climate unless local levels of corruption are considered to be low
Lucio Picci, Reputation-Based Governance, Stanford University Press, 2011
What do weKnowaboutCorruption?
How Much Public Money Is Wasted, and Why? Evidence from a Change in Procurement Law - OrianaBandiera, Andrea Prat, Tommaso Valletti, American Economic Review
How much of this waste is passive (inefficiency) vs. active (corruption)? “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.”
Corruption pushes for low investments in competence. Incompetence drives “capture”, which often coincides with “soft corruption”.
a) Collusion benefits from corruption:
- To makedefectionharder or impossible;
b) Corruption can be facilitated by collusion
IN WHO TO BUY FROM
IN PUBLIC PROCUREMENT
“One idea, for instance, might be to set targets for SME shares in overall procurement”. EC Green Paper
Shouldn’twe at leastdiscussit?
Whatisits impact on Competitiveness and Innovation?
“The essence of the American economic system of private enterprise is free competition … The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed. It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise,to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small business enterprises ….”
The Sba Procurement Center Representative (Pcr).
Theseare representatives of the U.S. Small Business Administration in the variouslarge Procurement Agencies.
Functions and Powers:
E procisnot a sufficientconditionforsolvingSMEsproblems.
Isit a necessaryone?
I wouldarguethatSMEssensitivitymakese-proc a bettertool. Developthatsensitivity!
IN HOW TO BUY
IN PUBLIC PROCUREMENT
Waste arises from:
Incompetence and Corruption.
Keeping in mind that:
Incompetence and Corruption sustain each other;
Cartels and Corruption sustain each other;
Cartels are pervasive in … procurement.
Too hard to do:
Antitrust authorities and availability of CENTRALIZED public procurement data, together with (credible) whistleblowinglegislation are the best instruments to fightit.
Removingbreathingspace for corruption.
Internally, competences and the right procurement strategymightplay the samerole:
makingcartels’ and thuscorruption’slife miserable…
“Since we can’t borrow anymore, we see procurement as the best source of revenue stream… Investing in the function tasked with delivering these (efficiency) targets is a clear spend to save business case”.
(that makes corruption riskier and less palatable)
How to MaximizeCompetenceReturns?
Foster Organizational Change in Procurement Toward Performance
Good Governance in Public Procurement
Relies Fundamentally on the Motto:
“Attract, Reward, Retain and Develop”
The challenge of modernity?
Live without illusions and
organize life around your aspirations.
It can be done, it is not an illusion.