RESTRICTED
WORLD TRADE WT/WGTGP/W/2
10July1997
ORGANIZATION(97-2888)
Original: English Working Group onTransparency
inGovernment Procurement
WORLD BANK GUIDELINES ONPROCUREMENT
Statement bytheRepresentative oftheWorld Bank at
theWorking Group 'sMeeting of23May1997
Introduction
Theapparent purpose oftheWorking Group onTransparency inGovernment Procurement
isveryclose totheWorld Bank’sobjectives intheareaofprocurement. TheWorld Bank Guidelines
prescribe rules fortheapplication ofopen, transparent andeconomic procurement procedures toall
procurement under theprojects financed bytheWorld Bank. TheWorld Bank hasclosely cooperated
withtheUNCITRAL overtheyears inthedevelopment oftheUNCITRAL Model LawonProcurement
ofGoods, Construction andServices andisalsocooperating withtheregional development banks,
theOECD andwithother international institutions thathaveaninterest inopenandtransparent public
procurement. TheWorld Bank would behappy tosupport thework oftheWorking Group initsfuture
activities.
TheWorld Bank istheoldest andlargest oftheinternational development finance institutions.
Itwasestablished in1945withthepurpose ofmaking loans todeveloping country members inorder
toimprove theireconomic situation. Today, almost allcountries oftheworld aremembers ofthe
World Bank. TheWorld Bank (officially theInternational Bank forReconstruction andDevelopment
(IBRD)) andtheInternational Development Association (IDA), together finance annually some
40,000 contracts under loans ofsome $20billion thataremostly allocated forspecific development
projects. Loan agreements oftheIBRD andIDAwith Borrower countries incorporate byreference
theWorld Bank’sGuidelines forProcurement ofGoods andWorks andtheGuidelines forSelection
andEmploymentofConsultants.TheGuidelinesarebasedontheprinciplesoftheArticlesofAgreement
establishing theWorld Bank signed in1944, which provide thattheWorld Bank mustmake itsloans
withdueattention toeconomy andefficiency.
Transparency inpublic procurement
Transparency isnotanendinitself. Itsmainpurpose istofoster competition inprocurement.
Inconsidering howthepublic sector should dopurchasing, itbecomes clear thatcompetition isthe
bestwaytogetvalue formoney. Forexample, apublic entity which wants topurchase 100trucks
canchoose between oneofthefollowing twomethods ofprocurement, which areattheextreme end
ofthespectrum. Ontheonehand, itcould choose tonegotiate withonesupplier concerning theprice
ofthetrucks. From thepoint ofviewofthesupplier, itmakes sense toask30to40%more thanwhat
hewould havecharged under conditions ofcompetition andthenreduce theprice bysome 10or20%
inthenegotiations inorder tomake thepurchaser happy, thusobtaining afinalpricethatisstillmuch
more thanwhat hecould obtain inacompetitive situation. Ontheother hand, withtherules of
competitive bidding, every supplier bidding for100trucks must submit hisbidprice byacertain
deadline, andhasonlyonechance ofdoing so(i.e., heisprohibited from subsequently reducing it).
Thefactthatthesupplier cannot change hisprice orconditions afterbidopening isthemostpowerfulWT/WGTGP/W/2
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incentive toeachbidder togivehisbestprice inorder tostand achance ofgetting thecontract. By
using themost transparent procurement method andopen competition, thepublic sector, initsrole
asaconsumer, willgetthebestpossible price from thesupplier.
Another purpose oftransparency istofoster theconfidence ofthetaxpayer inthedecency and
honesty ofthepublic sector purchases. Inthatsense, itisthemostpowerful waytofightcorruption,
which isaserious problem confronting allcountries universally. Totheextent thatcorruption manifests
itselfinpublic procurement, transparency inprocurement andcompetition intheprocurement process
contribute tofightitbecause corruption thrives inthedark. Some ofthemainelements oftransparency
aresetforth below.
Notification andadvertising
Oneimportant aspect oftransparency intheUNCITRAL Model LawandtheWorld Bank
Guidelines ispromoting wideparticipation intheprocurement process through publicity andadvertising.
TheWorldBankGuidelinesrequirethat,whentheloanagreementissigned,theBorrowermustadvertise
aGeneral Procurement Notice intheUnited Nations Development Business (UNDB). Thusinterested
bidders allovertheworld arenotified inadvance about theproject thatisgoing tobefinanced bythe
World Bank, thetypeofcontracts thatareexpected tobeavailable forbidding under theproject, and
where andwhen thebidding documents willbeexpected tobeavailable.
ASpecific Procurement Notice ispublished further intheproject cyclebytheBorrower agency
fortheparticular procurement, either intheUNDB orintheofficial gazette orinother specialized
newspapers intheBorrowing country. TheWorld Bank alsorequires thatallforeign embassies in
theBorrowing country benotified ofanybidding possibilities. Theinformation ispassed onbythe
embassies totheindustries, suppliers, contractors intheircountries. Notification isextremely important
because ifbidders donotknow about thebidding possibility theycannot participate inthebidding
process. Asaresult, theprocurement process willnottakeplace under thebestcompetitive conditions
andtheBorrower agency willnotgetthebestpossible price. Irregularities intheprocurement process
could welloccur evenatthisstage. There wasrecently acasewhere, initsrecommendation foraward
totheWorld Bank, theBorrower agency stated thattheparticular contract wasadvertised andonly
onebidder hadsubmitted abid. Under theWorld Bank rules, theaward istobeapproved evenif
there isonlyonebidder. However, another supplier protested theapproval oftheaward bytheBank
since theyhadnotbeeninformed ofthebidding opportunity. Aninvestigation showed thatthecopy
oftheadvertising intheofficial gazette produced bytheBorrower agency wasafalsification, asthe
advertisinghadnevertakenplace.Thiswasanattempttofraudulentlyinfluencetheawardofthecontract
infavour ofonepreferred bidder, bysuppressing therequired notification.
Predisclosure ofrelevant information
Itisimportant thatthe"rules ofthegame" arepublicly announced sothatallbidders getthe
same chance ofknowing inadvance when andwhere theyhavetosubmit theirbidsand,particularly,
howthebidswillbeevaluated. Itisnotpermissible toapply anybidevaluation criteria thathavenot
beenannounced previously.
Public bidopening
Public bidopening isanimportant feature oftransparency. Afewyears backthiswasnot
agenerally accepted ideabecause some countries hadthetradition ofopening bidsonlyincamera.
Inthisarea, likesooften inlife,perceptions areasimportant aswhat actually happens. Abidder
whohaslosttheaward which isopened andevaluated without thepresence ofthebidders mayhave
theperception thatthecommittee opening thebidsmayhaveallowed oneofthebidders tochangeWT/WGTGP/W/2
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itsbidprice aftertheopening ofthebids. Itisforthisreason thattheWorld Bank’sGuidelines, the
UNCITRAL Model Lawandmostmodern procurement lawsofindividual states emphasize thatbids
mustbeopened inthepresence ofallbidders thathavesubmitted abid;thebidders mustsubmit their
bidsbyadeadline; andthebidsmustbeopened immediately thereafter inthepresence ofallbidders
thatwishtoattend; theprices must bereadout;andminutes must beestablished sothatfactsare
clearly established andcannolonger bechanged.
Accessibility ofapplicable lawsandregulations
Itisveryimportant thatthebidders haveaccess tothelawsandregulations onprocurement
sothattheyareaware oftherules under which procurement processes willtakeplace. TheWorld
Bank Guidelines aremade available toeverybody anddistributed widely because itisimportant for
bidders toknow therules. TheBank’sStandard Bidding Documents setforth clearly therules of
thebidding process, forexample instructions tobidders onhowtosubmit their bids, technical
specifications, evaluation criteria, conditions ofthecontract, etc.Ifthebidding documents arenot
clear, thebidder mayperceive thattheprocurement official mayhavehadachance tointerpret certain
rulesinorder togiveanundue advantage toanother bidder. TheWorld Bankhasdeveloped mandatory
Standard Bidding Documents, e.g., forthepurchase ofequipment, works, consulting services,
pharmaceuticals, textbooks andcomputers, etc.Since theuseofStandard Bidding Documents bythe
Borrowers hasbecome mandatory, protests andcomplaints bysuppliers havesubstantially decreased.
Prior andpostreview
TheUNCITRAL Model Lawprovides amechanism bywhich aggrieved suppliers canseek
areview ofthedecision ofthebidding authority bytheprocuring entity itself, byanadministrative
body orajudicial review body. Asregards thecontracts under theWorld Bank funded projects, the
World Banksupervises theimplementation oftheprocurement process. Important contracts accounting
foraround onefourth ofthetotalnumber ofcontracts aresubject topriorreview where theBankreviews
every stepoftheprocurement process toascertain theconformity oftheprocurement process with
theagreed rules. Forothercontracts, theBank usesapostreview procedure toensure thattheBorrower
hascarried outtheprocurement process inaccordance withtheagreed rules. Inthelatter case,when
theBorrower submits hisapplication forthewithdrawal offunds fromtheloanaccount, hehastogive
theBank alltherelevant information onhowhecarried outtheprocurement. Moreover, under the
Guidelines, uponacomplaint fromabidder, theWorld Bank checks theallegation toascertain whether
theprocurement ruleshavebeenproperly applied bytheBorrower. TheBank doesnotenterintoany
dialogue withthebidders untiltheaward hasbeenmade. If,aftertheaward, abidder wishes toascertain
thegrounds onwhich hisbidwasnotselected, andheisnotsatisfied withtheexplanation given by
theBorrower, hemayseekadebriefing withtheBank, where therelevant staffwillexplain theprocess
tothebidder.
Technical assistance
TheWorldBankconsiderstheUNCITRALModelLawasthebestdocumentavailableatpresent
thatcould beusedasmodel bygovernments thatwanttointroduce transparent procurement codes.
TheWorld Bank hasbeenproviding funds toitsborrowing countries under institutional development
grantstofinancetheservicesoflawyersqualifiedintheareaofprocurementthatcanadvisegovernments
onthedevelopment ofmodern andtransparent procurement laws, mostoftenbased ontheUNCITRAL
Model Law. TheWorld Bank alsogives assistance togovernments forthepreparation ofStandard
Bidding Documents. While ithasbeenmostly countries oftheformer COMECON Agreement and
oftheformer Soviet Union thathavereceived assistance from theWorld Bank fordeveloping new
procurement laws, several African andAsian countries havealsoimproved theirprocurement laws
through technical assistance oftheWorld Bank.