1. 11 PREFTEC: Efficiency and Transparency Program in Public Procurement and Hiring Fiduciary Forum April 29 – May 3, 2008 1300 New York Avenue, Washington, DC 20577 Phone (202) 623-2874 Fax (202) 623-157901 Inter- American Development Bank VPC/PDP

2. 2 1.Introduction: Objectives, components and brief chronology 2.Opinion over accomplished objectives 3.Challenges / Obstacles found 4.Lessons Learned 5.Recommendations and Conclusions Contents PREFTEC Efficiency and Transparency Program in Public Procurement and Hiring

3. 3 Signed in 2000 for US$18m + local counterpart of US$4.5m funded by 7 bilateral donors + contribution of US$100,000 from own resources in 2007. Main Objective: improve the efficiency and transparency of public procurement in Nicaragua. PREFTEC Component 1. Project inspection 2. Management support 3. Training development and execution. Design based on analysis provided by CPAR 2003 Case PREFTEC Efficiency and Transparency Program in Public Procurement and Hiring

4. 4 Cronology At the beginning After Feb. 2005 April 2008 March 2008 Activities in 9 entities representing the public investment 21 institutions and 15 municipalities Dirección General de Contrataciones del Estado manages and is responsible for program execution 97% disbursed with $600,000 available Final report on program impact evaluation was submitted

5. 5 Initial objectiveStatusExplanation/Comments Strengthening of internal control of public sector entities Complied Procurement units modernized, with guidelines, procedures, records and systems subject to audit. Lack of quality control and monitoring. * Source: Final report on PREFTEC performance and impact evaluation. Opinion on achievement of Program objectives (1)

6. 6 Initial objectivesStatusExplanation/Comments Support to Dirección General de Contrataciones del Estado (DGCE) and to 9 prioritized public sector entities[1][1] Complied DGCE has own and defined identity. It is the regulatory authority on administrative hirings recognized in the country. Officials trained. Formalized and equipped entities. Limits in; monitoring and evaluation as well as connectivity in some key entities. [1][1] Number of prioritized entities expanded to 21 centralized institutions and 15 municipalities during the exectuion of the program. Opinion on achievement of Program objectives

7. 7 Document Center: Old vs. New

8. 8 Initial objectiveStatusExplanations/Comments Developemnt and implementation of sustainable capacity P artially complied Specific set of actions like support to PACC fully established every year. Well-received certification. More than 700 officials but unknown future financing. Superior studies in exploratory phase yet. Opinion on achievement of Program objectives

9. 9 Fuente: informe final de evaluación de desempeño y de impacto del PREFTEC. PREFTEC: Before and After PREFTEC: BEFORE AND AFTER 0 0.5 1 1.5 2 2.5 3 Legal Framework Institutional Framework Operations and Markets Integrity and Transparency AFTER PREFTEC BEFORE PREFTEC

10. 10 Problem / Obstacule identifiedRisk / Consequence Mitigation action / correction Adequate responsibility for porgram execution. Execution delays. Dificulties in setting strategic allegiances. Rellocation of the Executing Unit within DGCE in Feb. 2005. Key additional initiatives for modernization of the procurement function, initially programmed, were not carried out. Reduction of PREFTEC impact on National Procurement and Hiring System It was decided that the program will take on some of these initiatives. Problems / Obstacles

11. 11 Problem / Obstacule identified Risk / ConsequenceMitigation action / correction No data and records on procurement and administrative hirings. It is difficult to measure program’s quantitative impact and its contribution to specific improvements in the quality of public hirings. SISCAE development and execution. Current database for hirings available is not fully representative as to formulate conclusions. Lack of systematized use of SISCAE and linked to SIGFA Problems / Obstacles (Cont.)

12. 12 Problem / Obstacule identified Risk / ConsequenceMitigation action / correction High staff turnover in Procurement Units Reduction of capacity in Procurement Units. Decrease of impact from training actions. DGCE notification to Ministers’ highes auhtorities. Alliance between DGCE, MHCP and Public Function. Problems / Obstacle (Cont.)

13. 13 Problem / Obstacule identified Risk / ConsequenceMitigation action / correction Legal framework is: Incomplete and divided There is no obligation on the use of SISCAE. Difficults in setting and monitoring procedures and good practices. Afects efficiency and transparency of public hirings Promote the processing of the Law on Administrative Hirings. Problems / Obstacles (Cont.)

14. 14 Problem / Obstacule identified Risk / ConsequenceMitigation action / correction Financial sustentability to continue reforms of the National System of Procurement and Hiring Currently there is a high number of DGCE staff funded with PREFTEC resources. Some DGCE operational areas are sustainable but others not. Absorbe 24 consultants from PREFTEC as line official. Presentation to the donor community a total of 8 project profiles in order to find resources to fund them. Commitment to carry out CPAR. Problems / Obstacles (Cont.)

15. 15 It is critical to select the institutional arrangements to implement the Modernization and Reform Program to ensure a timely execution. There is a need to set baseline, compliance indicators,and qualitative and quantitative targets that could be systematically measured with available information. The function of monitoring and evaluation is critical to monitor compliance with indicators and objectives as well as to take timely corrective actions. Lessons Learned

16. 16 The issue of anticorruption must have a clear strategy, which assigns targets and priorities to the procurement function. Identify ways to promote trained and permanent human resources within the National System of Public Hirings for which alliances with key institutions are recommended (i.e. Public function, acknowledgement of procurement career, etc.) Complex matters such as quality control and anti-corruption in procurement must be addressed in strong alliance with other key institutions (i.e CGR, PGR, civil society, etc.). Lessons Learned (Cont.)

17. 17 There is a need to disseminate initiatives, results achieved, available systems and tools to interested actors (consultants, offers, contractors, chambers, asociations, etc.) to enhance knowledge, transparency processes as well as empowering them as agents for monitoring/oversight of public hiring processes. Progress in consolidation and structure of Procurement Units (UAs), using systems managed by DGCE, the country in general and some UAs set within Executing Agencies, in particular, are prepared to manage procurement by costs and national public bidding without intervention of projects executing units. Lessons Learned (Cont.)

18. 18 Specific recommendations included in the report Complexity Impact Innovation Certificatión & Trading M&E Restore Software PACC Execution CPAR PGR Alliance Progress with Gaceta Support to Municipalities Publication Excluded Quality Control

19. 19 Volume of public hiring in Nicaragua: US$400m –500m WB estimates: 30% wasted. Corruption: 15% Inefficiency: 15%. Aprox. US$60m in Nicaragua annually Pillar which better reflects efficiency Operations and Market. Improvement of 1.5 to 2.3 SI 3 supone unos ahorros anuales de US$ 60 Mio. Una mejora cualitativa de 0.8 / 3 representará aprox. el 27% Suppose that PREFTEC is responsible for 70% of this improvement: 0.27 * 0.7 = 0.186 * US$60m = US$11.16m in annual improvements of efficiency in procurement and hirings with an investment totaling US$5m annually. Was the investment worth it?