Public Procurement Reform and Modernization in Sri LANKA

04/17/23

Beijing, China 15 – 16 October, 2010

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Public Procurement Reform and Modernization in Sri Lanka

By.By.Veluppillai MohanVeluppillai Mohan

15-16 October 201015-16 October 2010

Beijing , China Beijing , China

ABSTRACT

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1. This objective of this paper is to contribute to improved capacity in the conceptualization of public procurement reform and modernization in Sri Lanka after Tsunami disaster in 2004 with the implementation of environmental and social considerations in procurement, in line with internationally accepted principles and practices to recover the economy

2.A well functioning procurement system ensures; better value for money, increased efficiency and effectiveness of delivery, reduces the potential for corruption, positive impact on a country’s investment climate, non-discriminatory practices, transparency and accountability. Sustainable procurement is a key indicator of governments’ commitment to sustainable development.

3.Achieving sustainable development in practice requires that economic growth supports social progress as well as respect for the environment, that economic performance reinforces social equity, and that environmental policy is cost- effective without compromising the livelihood of future generations

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Introduction

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Sri Lanka

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Tsunami Disaster In Sri Lanka on 26th December 2004

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• TSUNAMI DISASTER IN SRI LANKA

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8• Tsunami Affected Areas in Sri Lanka

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• Affect of Tsunami Disaster in Sri Lanka

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Types Affect (Number/Cost)•Fatalities •35,322 people•Injured •21,441 people•Widowed, orphaned, affected elderly and disabled

•40,000 people

•Internally displaced people (IDPS) •516,150 people

•People who lost their source of livelihood •150,000 people (75% of the total fishing fleet)

•Value of lost assets •$ 900 million

•Houses destroyed •88,544 No•Schools destroyed or damaged •168 public schools, 4 universities, 18

vocational centers

•Schools used as camps for IDPs •446 No•Schoolchildren affected •200,000 No•Health facilities destroyed or damaged •97 No

•Tourism Infrastructure damaged •53 large hotels, 248 small hotels, 210 small enterprises

•Cultivated arable land affected by salinity •23,449 acres

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DAMAGES CAUSED BY TIDAL WAVE (TSUNAMI) TO ROAD SECTOR

Road Status ID No.Sourthern ProvinceColombo-Galle-Hambantota-Wellawaya Road (A2)

Akurala Bridge Damaged 01Seenigama And Hikkaduwa Section (96-99km) Breached (30-40 m long) 02Magalle Bridge Damaged 03Goiyapana Bridge Damaged 04Weligama Bridges 2 Nos. 145/3 & 145/5 Damaged 05Dondra Bridge (No.166/1) Approaches Damaged 06Talalla Bend Damaged 07 North-East ProvinceAmbepussa-Kurunegala-Trincomalee Road (A6)

197th kmRetaining wall (20m) damaged. The road is passable

08

Trincomalee - Pulmoddai Road

22nd km -Salappawaru BridgeApproach (200m) washed off. The road is impassable

09

Beach Road

1st kmCulvert damaged. Half the carriageway (75m) washed off. The road is passable

10Beijing, China 15 – 16 October, 2010

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Road Status ID No

Batticaloa-Trincomalee Road (A15)

116-121 km Washed off 11

126th kmHalf the carriageway (100m) washed off. The road is passable.

11

Thampalakamam-Kinniya Road

Causeway damaged 12

Colombo-Ratnapura-Wellawaya-Batticaloa Road

334/1 Bridge (Komari Bridge) Collapsed 15


375 km Washed off 14




394 km Damaged 13

394/1 culvert Washed off 13

394/2 Washed off 13

395/1 Washed off 13

396/3- Periyakallar bridge cum causeway Washed off 13

398/1- Koddaikkallar bridge cum causeway Washed off 13

409/5 & 410/1 Culverts Washed off 13

412 & 415 km Part of the carriageway is damaged 13Beijing, China 15 – 16 October, 2010

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Road Status ID No

Batticaloa-Trincomalle Road (A15)

42/1 Bridge Bailey Bridge damaged 16

46-59 km Damaged 17

59/1 Bridge (Pannichchankeni) Washed off 18


Bar Road

4/2 Bridge Washed off 20

5/2 Bridge Damaged 21

3-5 km Damaged 21

Pottuvil-Panama Road


Bridge No:3/4 (Arugambay) Damaged 23

Peradeniya-Badulla-Chenkaladi Road

282/2 Bridge Damaged 33

North -East (North) Province

Paranthan - Mullaitivu Road

48-52 13 km & 50/1 Causeway Damaged 24

Beach Road

0.9 km Washed off & still submerged 25

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Road Status ID No

Mankulam-Mullaitivu Road

42-49 25 km Damaged 26

Soranpattu-Thalayadi Road

6.5-7.2 km Damaged 27

Point Pedro Maruthankerny Road

19-30 km 28

East Coast Road

0-8 - 4.74 km 29

Jaffna-Ponnalai-Point Pedro Road

42.6-55.4 km Damaged 30

Point Pedro Maruthankerny Road

0-8-4 km Damaged 31

Mullaitivu-Kokkilai Road

0-16 km Damaged 32

18/1 Bridge (Nayaru) Beijing, China 15 – 16 October, 2010

Remedial Action by GOSL for the “Plan to Rebuild Sri Lanka”

• Rapid Income Recovery Programme for SL1.Involving Protection for who cannot work2.Comprising Jobs or training for who can work.3. Comprising support for the revival of small

enterprises. All Inter ministerial focus group formed for enhanced

employment initiatives in the infrastructure sector has been established to take forward the 2 and 3 component.

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Remedial Action by GOSL for the “Plan to Rebuild Sri Lanka” (Contd.)

• Income generation within the components for people who can work is justified by: a) the need to provide immediate and longer term employment and enterprise opportunities for the tsunami affected population now out of work; and b) the broader need to contribute to poverty reduction.

• Focus Group is to ensure that all GOSL bodies in infrastructure reconstruction use an optimal mix of local resources during the process so as to maximize opportunities for employment of low income and other affected groups.

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Remedial Action by GOSL for the “Plan to Rebuild Sri Lanka” (Contd.)

The income generation strategy for the RIRP envisions two phases ;1. immediate social protection needs through Short term employment by

means of Labour-Intensive (LI) techniques (labour and hand-tools only) which are essential but restricted to a narrow range of works.

2. comprising work which will be recurrent under regular budgets of the infrastructure Ministries where by shifting wisely and carefully from the current conventional equipment-based work methods to more Labour-Based (LB) techniques (where there is a shift in balance between labour and equipment in the way the work is specified and executed) for selected works components, it will be possible to realize significant numbers of new jobs without compromising on the quality on the works or without affecting the timelines and costs of the works

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LITERATURE REVIEW

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Public Procurement

The acquisition of works, goods and services on the best possible terms - has historically been based on two criteria, price and quality, with a view to maximising benefits for the procuring organisation (Procurement Entity) along with value for Money considerations.

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Public Procurement Objectives (a) Maximizing economy, timeless and quality resulting in least cost together

with the high quality, (b) Adhering to prescribed standards, specification, rules, regulations and good

governance,(c) Providing fair, equal, and maximum opportunity for eligible interested parties to participate in procurement,(d) Expeditious execution of works and delivery of goods and services,(e) Compliance with local laws and regulations and international obligations, (f) Ensuring transparency and consistency in the evaluation and selection procedures; and (g) Retaining confidentiality of information provided by bidders.

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What is sustainable development?

Sustainable development

is about “… meeting the needs of the present without compromising

the ability of future generations to meet their own needs.”

• Source: World Commission on the Environment and Development, Brundtland Report 1983

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Primary Objectives of Sustainable Procurement

• Procurement in the public sector should take place with the minimum of environmental impact and with respect for fundamental workers’ rights and human rights and Environmental and ethical/social considerations in public procurement shall contribute towards an efficient public sector and a competitive business sector

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Sustainable Procurement is procurement that integrates requirements, specifications and criteria that are compatible and in favour of the protection of the environment, of social progress and in support of economic development, namely by seeking resource efficiency, improving the quality of products and services and ultimately optimizing costs. (immediate and life cycle

based).

Definition of SP


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SD wants to bring together:

... respecting the rules of good governance

Social progress:

Human development, rights, education,

reduction of poverty and inequality, security

and social inclusion

Social progress:

Human development, rights, education,

reduction of poverty and inequality, security

and social inclusion

Economic sustainability:

Economic growth, full employment,

effectiveness, integration of social and

environmental costs

Economic sustainability:

Economic growth, full employment,

effectiveness, integration of social and

environmental costs

Environmental balance:

Preservation of natural resources, ecosystems, biodiversity; reduction

of the ecological footprint

Environmental balance:

Preservation of natural resources, ecosystems, biodiversity; reduction

of the ecological footprint

The three pillars of SDThe three pillars of SD

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Criminal Law

Environmental Legislation

Social Legislation

International Legislation

(Env/Social/Proc)

Procurement Legislation

Fiscal LegislationNational Legal

Framework for SP

National Legal Framework for SP

National SD Priorities




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Integrating Sustainability Integrating Sustainability Concerns in the various steps of Concerns in the various steps of

the Procurement Cyclethe Procurement Cycle

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Strategy/Action Plan for SRPP

Presentation issuesMain actions purchasers can undertake to introduce social/

environmental issues at the key stages of the procurement cycle:

Identifying the need and planning the

proc actionMonitoring &

Evaluating

Defining Contract Requirements

Selecting Suppliers Awarding the

contract

Administering contract execution

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Identification of Need

Key stage to consider social/

environmental impacts

Be aware of social/ environmental

agendas/obligations and possible fit

with your procurement

Be aware of legislative

requirements e.g. the Race Relations,

Discrimination Acts, Landfill Tax

Can you:• Rethink?• Eliminate

?• Reduce?• Re-use?• Re-cycle?• Dispose?

Apply the test of

affordability and cost

effectiveness

What are the benefits/cost

s using procurement in this way?

Ensure Procurement practices are open to bodies like SMEs and voluntary organisations

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It is about what the organisation wants to procure

Key stage at which sustainability considerations should take place

… However, need, affordability and efficient and effective use of financial resources must be considered

Normally performed by technical staff and internal customers (budget holders)

Identify the Needs

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Bringing Environmental and Social Factors into Need (cont’d)

• Users knowledge of the market

knowledge of potential environmental/social impacts and relevant regulations and legislation

knowledge of products/services; influence on the development of new products/markets

information on alternative products/services, alternative means of delivering functionality

Those who might be involved in identifying needs include:

• Procurement managers

• First and second tier suppliers

• Environmental/Supply Chain/HR managers

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Role of the Procurement Function

• Procurers need to:

– Be aware of social/environmental policy priorities and legislation

– Appreciate the social/environmental implications of the products they buy

• Sources of information:

1. Environmental/social expertise in the Organisation

2. Suppliers

3. External sources of environmental/social information (Trade Unions, Government Bodies, etc.)

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…….Wider Thinking

Think in terms of solutions to problems not to products

This will allow you to find environmentally/socially preferable solutions to problems rather than using products implying predetermined solutions

Identify the Needs (cont’d)

Some Examples:

1. Purchasing new fax machines or providing users with IT facilities to fax from their computers

2. Negotiating waste management contracts for packaging waste or working with suppliers to introduce returnable packaging for delivery of the products supplied

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Engaging with Suppliers

SMEs, Woman and Disadvantaged-owned business should

be helped to increase their participation in public

contracts

– They operate in key public services

– They are well placed to provide public services in hard to

reach areas How to achieve this?

1. Training programs, workshop and seminars on

how to complete TDs

2. Dissemination of information on procurement

opportunities at local level

3. Include the SME sector when testing the market

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Specification

Ensure that specifications…

Are relevant e.g. contribute to

characteristics of the product or service, and

reflect all applicable social/environmental

requirements

• Respect rules on use of standards

• Are transparent and

non-discriminatory

Could you….

Use performance-

based specifications

?

• Use criteria from eco-labels?

• Use Production Process with less

social risk?

Use variants to encourage innovation?

Is it appropriate to reserve for supported

employment?

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Specifications

Environmental/social issues can be part of the specifications provided they:– Are relevant to the requirement

– Respect the rules on use of standards

– Do not restrict competition and participation of SMEs in the process

– Meet the test of need, affordability and cost-effectiveness

Articulate the user requirements so that suppliers know what is needed

Provide measurable requirements against which offers can be evaluated

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PEs are free to specify in terms of performance

Performance Based Specifications

Ex: Using performance based specs for procuring heating/ventilation systems for office spaces

A performance based approach:– focuses on the outcome/functionality

desired

– gives the opportunity to be more innovative and to find the most cost-effective environmental/social preferable solution

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What a product is made of and how it is made can form part of the specs

Specific Materials and Production Processes

Ex: Specifying renewable energy, sustainable timber

However, specific materials and production processes should link to the subject matter of the product 1. Specific materials: right to specify preferred materials

(recycled materials)2. Production process: right to include requirements on

production method

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Variants to encourage innovation

It is possible to define one/more options with higher environmental/social performance in addition to basic option

At the award stage the purchasing entity can decide which option best meets its needs

This should be based on criteria made clear in the STDs

Acceptance of variants should be disclosed in contract notices

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Tender Evaluation

Social/Environmental award criteria can be used

provided they …

Are relevant to the subject of the

contract

Are consistent with the fundamental

principles of transparency, equal treatment and non

discrimination

Are consistent with criteria allowed by

international regulatory

framework, where they apply

Help identify the bid that

represents BVM from the point of

view of the PE

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At this stage of the process PEs evaluate the quality of the tenders and compare prices on the basis of:

– Lowest price alone

– Best value for money (BVM)

BVM is the “optimum combination of whole-life-costs and quality to meet the user’s requirements”

BVM allows the use of environmental criteria

The extent of use of social criteria depends on the procurement regime and memberships in international/regional agreements

Tender Evaluation

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Award criteria must be:

Award Criteria

2. Do not confer unrestricted freedom of choice on the PE

should be clear, product-related and measurable

1. Relevant to the subject of the contract should relate to the intrinsic qualities of each bid

and not to secondary issues (i.e. local development) should relate to the technical specifications

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Award criteria must:

Award Criteria (cont’d)

3. Be advertised previously in contract notices/STDs should be listed in descending order and relative

weighting should be given

4. Respect Community Law principles of non-discrimination/transparency/equal-

treatment should be respected

5. Be distinct from selection criteria The criteria used for selection and award should be

distinct

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The Life Cycle Costing Approach-three stages1. Purchase and all associated costs

• Purchase

• Delivery

• Installation

• Commissioning, etc.

2. Operating costs• Energy

• Spare Parts

• Maintenance

3. End-of-life costs• Decommissioning

• Removal

Examples of Award Criteria

Purchase & associated cost

Operating costs

End-of-life costs

cost

time

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Use of Life-Cycle Costing to promote Environmental Objectives

Savings on use of water, energy and fossil fuels– Their costs are easy to calculate and have clear

economical aspects

Savings on disposal costs– Can range from the cost of physical removal to paying

for secure disposal– If not taken into consideration, a bargain can turn into

an expensive purchase

Ex: Planning the Disposal Phase - the building sector

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Contract Management and Review

Ensure that contract

conditions are…..

1. Relevant to the performance of the contracts and the

achievement of BVM

2. Not disguised technical

specifications, selection or

award criteria

4. Included in contract

notices or tender

documentation

3. Compatible with international

regulatory framework,

where applicable

Where possible work with supplier for continuous improvement

Where appropriate

pass on public sector

obligation to supplier

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Contract Management and Review

Contract conditions relate to the performance of the

contract

They specify how the contract should be carried out

They provide wide scope for addressing the

environmental and social impacts

Working with the supplier during

contract performance is crucial to the

achievement of sustainability objectives

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Contract Conditions and procurement policy

1. Contract conditions should: Be relevant to the subject of the contract Not add requirements that do not bring a

proportionate benefit Be disclosed in advance (tender notices, STDs) Not be disguised Technical Specs, award

criteria, selection criteria

2. Suppliers must accept the Contract T&C in order to be awarded the contract

3. Contract T&C must be compatible with international/regional legal/ regulatory frameworks for PP

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Contract Conditions: use of disadvantaged people

Contract clauses can stipulate that a successful tenderer must employ:– A certain percentage of long-term unemployed,

apprentices, handicapped people and other disadvantaged groups

… however benefits must be weighed up against additional costs, including restriction of the supplier base

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Ex of Environmental Contract Clauses

Transport of products and tools to the site

• Delivery of products to the site in concentrated form and then dilution on site

• Use of reusable containers to transport products to the site

• Delivery of products in bulk and outside peak traffic times

How the service is performed

• Use of dosage indicators to ensure that appropriated quantities of cleaning products are used

Disposal of used products or packaging from products

• Products or packaging taken away for reuse, recycling or appropriate disposal by the contractor

Training of contractor staff

• Staff trained in the environmental impact of their work and the environmental policy of the authority in whose buildings they will be working

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Ex of Social Contract ClausesEngagement of staff and labour

• Arrangements for the engagement of all staff and labour, their payment, feeding, transport, housing

• Employment of local staff with appropriate skills and experience

Rates of wages and conditions of labour

• Payment of rates of wages and observance of conditions of labour not lower than those prevailing in the trade sector or industry where the work is carried out (ILO Conv. 94)

• Information of Contractor’s personnel about their liability to pay personal income taxes under the laws of the Country, and the performance of Contractor’s duties in relation to deductions thereof imposed by Country Law

Persons in the service of employer

• No recruitment, or attempt to recruit, Employer’s staff

Labour Laws • Abeyance to all labour Laws applicable to the Contractor’s personnel (H&S, immigration, legal rights, welfare, etc.)

WB “Master Document for Procurement of Works” 2006

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Ex of Social Contract ClausesWorking Hours • Prohibition to carry-out work outside the working hours stated in

the contract

• Statement of exceptions in the contract, and consent of the Engineer

Facilities for Staff and Labour

• Provision of accommodation and welfare facilities for the Contractor’s Personnel

Health and Safety

• Precautions for maintenance of Contractor’s personnel H&S

• Appointment of an accident prevention officer at the site and reporting on H&S conditions

• HIV-AIDS prevention

Contractor’s Superintendence

• Provision of superintendence to plan, arrange, direct, manage, inspect and test the work.

Contractor’s Personnel

• Skills, experience and qualification requirements for Contractor’s personnel


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Ex of Social Contract ClausesDisorderly Conduct

• Precautions to prevent any unlawful, riotous or disorderly conduct by among Contractor's personnel and to preserve peace and security of persons and property on and near the site

Foreign Personnel

• Provision of residence visas and work permits to foreign personnel and respect of applicable laws

• Arrangement of return to their domicile or place where recruited

Supply of foodstuffs and water

•Arrangement of a sufficient supply of suitable food at reasonable prices

•Provision of adequate supply of drinking and other water

Measures against insect and pest nuisance

• Provision of superintendence to plan, arrange, direct, manage, inspect and test the work.

Alcoholic liquor or drugs

• No provision, disposal, barter, import of alcohol and drugs, except than if otherwise provided by the Country Law


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Ex of Social Contract Clauses


Arms and Ammunition

• Prohibition to give, barter, dispose of any arms and ammunition of any kind

Festival, Religious Customs

Funerals

• Respect of the Country’s festivals, days of rest and religious or other customs

• Responsibility for arrangements of funerals for local employees who may die while engaged upon the Works

Prohibition of Forced, Compulsory Labour

• Prohibition to employ any forced or compulsory labour

Prohibition of Child Labour

• Prohibition to employ child labour

Employment Records

• Skills, experience and qualification requirements for Contractor’s personnel

• Reporting on Contractor’s personnel and equipment employed

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Monitor and Control

Monitor supplier performance and compliance with contract conditions related to social and environmental objectives

Assess the impact of the procurement action upon the target area over a pre-determined time period

Undertake review of targets/objectives and feed lessons learned back into your SP strategy

Share information on achievements and future targets inside the organization and with the business community and other stakeholders

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EMERGING NEEDS OF TSUNAMI AFFECTED SRI LANKA

The role of Sustainable procurement in implementing the Rapid Income Recovery Programme RIRP .

1) The first priority is the re-construction of houses and related services in the tsunami affected areas and the construction of new houses and related services and the envisaged site clearing operations should the planned 100m “house free” zone from the sea be declared,

2) There a number of employment intensive low volume gravel road projects and

3) There is an increasing demand for surfaced roads

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RESULTS/OUTCOMES THROUGH FOLLOWING AGENCIES FUNDED PROJECTS OF THE TSUNAMI AFFECTED AREAS THROUGH SUSTAINABLE PROCUREMENT

1. World Bank(WB)

2. Rebuilding Community Infrastructure & Shelter Project – Japanese.

3. Spain funded

4. USAID

5. Asian Development Bank (ADB) Project

6. Trincomalee Integrated Infrastructure Projects (TIIP).

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RESULTS/OUTCOMES OF THE TSUNAMI AFFECTED AREA PROJECT THROUGH SUSTAINABLE PROCUREMENT

• WATER SUPPLY SCHEMES

New BRIDGESNew BRIDGES

HOUSING SCHEMES HOUSING SCHEMES

FISHING HARBOUR

FISHING HARBOUR

SCHOOLS SCHOOLS

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RESULTS/OUTCOMES OF THE TSUNAMI AFFECTED AREA PROJECT THROUGH SUSTAINABLE PROCUREMENT

ROADS PROJECTS ROADS PROJECTS

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RECOMMENDED ACTIONSWhen buying products, to reduce the social and

environmental impact of purchasing decision.

• Fit for the purpose and value for money• Biodegradability-• Design for disassembly-• Minimum use of virgin and non-renewable materials• Resource Efficiency-Running• Fault controls to prevent unnecessary• Health and safety standards-• Local production-• Maximum durability, reparability, reusability, recyclability and upgradeability-• Minimum packaging• Maximum use of post-consumer materials -• Non (or reduced) polluting with minimum use of toxic chemicals, CFCs, ozone

and other pollutants-• Ethically sourced

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CONCLUSIONS

• Met Sri Lanka’s Needs Fulfilling the duty requires an integrated approach to pursuing economic, social and environmental well-being and all three components are central to success.

• Progress has been made and there are initiatives which have reduced environmental impact and saved money.

• To achieve value for money, procurement decisions need to be based on a thorough understanding of costs and benefits along with social and environmental impacts.

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Benefits

1. Reduces adverse environmental impacts arising from Government procurement action, waste to landfill, saves water, reduces greenhouse gas emissions, decreases air and water pollution, saves money through re-using materials and products, and reduces consumption of both natural and processed resources. Ensures the health and safety of the community.

2. Makes more efficient use of public resources. Reduces costs through greater energy efficiency, reduced waste disposal, and reduced risk management. Lowers the cost for products over their life cycle

3. Stimulates the local and global markets to innovate and produce more sustainable products and services

4. Demonstrates governments are committed to achieving sustainable development objectives.

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Barriers1.habit and the difficulty in changing procurement

behaviour, 2.lack of suppliers of sustainable assets, suppliers or

services, 3.complexity of comparing costing/value for money

assessments, 4. the difficulty of including factors broader than

environmental considerations, and 5. a perception that the process and outcomes are

more costly or time consuming.

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Drivers• 1. effective organization wide policies to ensure that everyone

is aware of the strategy, • 2.training and guidance to help all of those involved in

procurement to understand sustainable procurement and whole life costing;

• 3.regular audits and monitoring to assess where your organization is in the context of sustainable procurement and where you could make further progress in this area commitment to sustainable development as an organizational policy

• 4.supporting and educating suppliers/creating markets linking up with other organizations to learn from their experience and

• 5.pooling procurement by forming procurement consortium where relevant.


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THANK YOU

THANK YOU

Engineering

Public Procurement Reform and Modernization in Sri LANKA