1. Reforming the Chilean Public Procurement System A public management reform Felipe Goya - RPM South Asia

2. Chile’s basic information OCDE member Transparency International (2012): 21st GDP: USD 250.000.000.000 Per capita (ppp): USD 18.500 Inhabitants: 16.000.000 Public Employees : 250.000 Central Government: 150.000 (health care 70.000) Public Procurement : USD 10.000 MM (goods, services and some works) (approx. figures)

3. Why we reformed procurement? Inefficient public marketplace High transaction costs High asymmetries of information Limited transparency – High risk environment 2003 corruption scandal Reform found it opportunity into the government’s agenda

4. Concept Central Agency’s Role Solution

5. Elements of the reform National scope reaching every procurement process above USD 200 One single and simple procurement law based on a decentralized model One strong and fully independent central procurement agency responsible for the whole system Heavy reliance on outsourcings and private partners Independent dispute resolution mechanism

6. Every process was massively supported by ITCs It is possible to track every transaction, every contracting officer, every vendor, to produce indicators, look for behavioral patterns, integrate with other systems, etc …

7. E procurement Tax authority Labor authority Competition authority Electronic suppliers registry (fully outsourced) BI & reporting E Marketplace Databases Under procurement policy Government agencies

8. Contracting officers are always the most important part of the equation. System deters misbehaviors but they are not human proof. A poorly designed process and badly executed will affect negatively transaction costs and vendors' transparency perception. Contracting officers development

9. Contracting officers’ basic demographics Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra 13.000 contracting officers

10. Training system structure

11. Performance Monitoring Written test + ACREDITATION every 2 years

12. Despite the certification process and the available training, tenders are not always done with the expected quality. Investing in the contracting work force is never enough

13. Lessons learned on capacity building Mistakes in tendering processes are not always because the lack contracting officers knowledge. Tenders involve much more people than the contracting officer. If contracting officers or any other stakeholder have a poor or inappropriate background, training will not solve this problem. Focusing training on decision making is more important than knowing the rules or procedures. Training programs must be open to non contracting officers as well. Including private sector professionals. Training programs should be designed as life learning programs.

14. Results

15. 2.5 2.9 2.8 2.7 Integrity CPAR BID 2009 Metodología OCDE/DAC 16-32 |ChileCompra 2010

16. Increased efficiency Savings 2009 – 2010 USD 3% a 5% Bids per tender 4,3 a 6.4

17. Transactions 2012 USD 10 BB Savings 2012 USD 280 MM

18. Subprime Crisis 103.000 vendors tendering per year

19. SME in the system 18% 23,8% 33,1%37% 38,1%40,1%

20. Net satisfaction Vendors Contracting officials

21. Other relevant indicators  Tenders awarded with more than 3 bids : 70,1%  Non awarded tenders: 12%  Suppliers registered in the suppliers registry: 40.000  1.800.000 purchasing orders per year  350.000 tenders per year

22. Lesson learned: Measuring every relevant variable is fundamental

23. More Lessons learned

24. Cierre 2010 Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra TIC Institutions HR Strategic Management Participation Quality Transparency State reform Procurement reform should be part of a wider reform

25. Politics Solutions Problems Reach the political agenda is fundamental Kingdon (1995) Problem: “Despite the level of development public procurement is risky” (Thai, 2001). Politics: Corruption scandale in 2003. 1998 2003 2008 Solutions www.chilecompra.cl 2010

26. Political support from the Chilean’s President downward Reform under the Ministry of Finance No resources restrictions “Stick and carrots” to bring transactions inside the system Constant, clear and shared objectives Professional teams leading the reform are well paid Leveraging public resources with private’s Top down implementation

27. It is relevant to manage vendors perceptions 2.Perception of transparency 1.Transaction costs Win rate: Proxy for frustration

28. Teaming with others helps a lot

29. Without transaction any reform is meaningless

30. Without a strong central agency, the reform will not work as expected

31. Leaders’ role Waissbluth, 2006, “La Reforma del Estado en Chile 1990-2005”

32. Reforming the Chilean Public Procurement System A public management reform Felipe Goya - RPM South Asia