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Performance- or Output-Based Procurement (PBP): Basics and Applications in Bank Projects. Patricia Baquero [email protected] The National Conference Center Lansdowne, Virginia March 25, 2008. What is PBP?. Addressed in para. 3.14 of Procurement Guidelines

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Performance or output based procurement pbp basics and applications in bank projects

Performance- or Output-Based Procurement (PBP): Basics and Applications in Bank Projects

Patricia Baquero [email protected]

The National Conference Center

Lansdowne, Virginia

March 25, 2008


What is pbp
What is PBP? Applications in Bank Projects

  • Addressed in para. 3.14 of Procurement Guidelines

  • Procurement process resulting in contractual relationship with private service provider where

    • Technical specifications

      • Describe requirements in terms of functionality, quality & standards

      • Define desired results (i.e., CuM of water, KWh, reliability results, etc.), outputs to be measured, and way to measure

      • Do not prescribe inputs nor work methods

    • Bidders free to propose innovative solutions through cost-effective ways to improve outputs

    • Payments tied to measurable outputs meeting pre-set performance standards

    • Payment reductions made or premiums paid, respectively, for achievement of lower or higher quality levels

    • Contractor bears commercial and performance risk


Use of pbp in bank financed projects
Use of PBP in Bank-financed projects Applications in Bank Projects

  • Non-consultant services paid on the basis of outputs (i.e., primary health care)

  • Facilities where contractor is responsible for design, supply, construction (or rehab), & commissioning, & where

    • Employer takes O&M after commissioning, or

    • Contractor takes O&M for some years after commissioning

  • Borrowers’ use of PBP decided after analysis of available options and agreed in advance with the Bank


Pbp processes for bank financed installations

Full payment upon commissioning/ acceptance Applications in Bank Projects(Turn-key approach)

Alt. 1

Scenario 1– O&M by Employer

Selection

Award based on lowest lump sum price for facility

Alt. 2

Prequalification of interested bidders

Advance/milestones payments against substantial security*

Two-Stage Bidding based on functional requirements (one-stage for simpler projects)

Final payment upon commissioning/ acceptance

PBP processes for Bank-financed installations

Payment

Award

Scenario 2– O&M by Contractor

Award based on lowest total life cycle cost (NPV of facility + O&M costs)

Final facility payment upon commissioning/ acceptance

* 30% Service Performance Security suggested

Advance/milestones payments against substantial security*

Performance-based O&M payments


Application of pbp basic concepts
Application of PBP basic concepts Applications in Bank Projects

  • Although PBP firstly referenced in May 2004, Guidelines historically encouraged borrower’s use of performance requirements and allowed results-linked payments

  • Other Bank approaches using PBP concepts:

    • Management contracts

    • Roads rehabilitation, maintenance & management contracts (OPRC)

    • Design-Build-Operate (DBO) contracts

    • Concessions with Output-Based Aid (OBA) schemes

    • Investment lending projects with Output-Based Disbursement (OBD) mechanisms


Similarities between oba and obd
Similarities between OBA and OBD Applications in Bank Projects

  • Aimed to make more efficient use of resources in providing infrastructure and other basic services

  • Bank-financed funds are disbursed/paid against delivered outputs

  • Disbursement/payment associated with the promised outputs based in efficient & reliable unit price/costs

  • Procurement methods for procuring the services or inputs needed to generate the outputs must be fully acceptable to the Bank


Differences between oba and obd
Differences between OBA and OBD Applications in Bank Projects

  • Payments:

  • Made by a government entity to a third party service provider (SP) upon delivery of outputs promised under a service provision contract

  • Consist of pre-agreed subsidy amounts to cover gap in investment or recurrent cost incurred by SP that user fees cannot recoup due to beneficiary constraints

  • Disbursements:

  • Go to the government upon delivery of pre-agreed outputs

  • May involve more than one underlying supply contract or direct government-supplied services; and

  • Need not be linked to a government subsidy element under a contract executed by a third party

Use of Bank-financed funds

Target countries

All countries

MICs and select IDA countries with reliable implementation capacity

Unit price/cost associated with outputs on which basis payment or disbursement is made

  • If SP selected under Bank-acceptable procurement procedures, unit price associated with the output deemed reasonable, economic & efficient

  • If SP not selected competitively, efficient & reliable unit costs to be determined

Efficient & reliable unit costs to be determined for disbursements

Procurement of inputs required to produce outputs

  • SP’s own procedures if SP selected under a Bank-acceptable procedure

  • SP not selected competitively required to use Bank ICB but if certain conditions are met*, Bank may approve SP’s own procedures

Bank–approved government procedures

* See OPCS OM of Nov. 7, 2005


THANK YOU! Applications in Bank Projects


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