How to Reduce Fear of Discretion in Public Procurement

Lessons Learnt from Procurement and Contracts Management of Large and Complex Contracts
Financed by Multilateral Development Banks (MDBs): A Procurement Practitioner’s Perspective

Devesh C. Mishra and Belita Manka*

1. Introduction: This paper seeks to analyze the impact of fear of discretion in procurement and contracts management of large and complex contracts in MDB financed projects. “Fear of discretion” is a term originally penned by Steven Kelman in early 1990s2, and as this paper shows, is still a pertinent topic nowadays. The “fear of discretion” displays itself in different forms and contexts, including in procurement contracts financed by governments or international development organizations, and in different geographical regions where MDBs finance investment projects. The paper identifies various aspects in all phases of project implementation and analyses how lack of exercising good judgment and healthy discretion impact the overall project quality and delivery. First and foremost, these aspects relate to situations of lack of professional judgement where compliance with the applicable rules, or non-economic influences and considerations, prevail over the development outcomes. The paper further explores how within the boundaries of rules, there is room for the procurement officials (both within the borrowing government and by reviewers in MDBs, where applicable) and how to work with flexibility to obtain quality goods, works and services for a better outcome and effective use of public money and, finally few suggestions are given as to how to reduce fear in exercising discretion.

2. Background: Procurement is an integral part of any country’s budget execution process. As reported by numerous sources, procurement represents from 15-30 % of GDP3. MDBs, for their part, finance billions of dollars each year in developing countries in the form of loans, credits or grants. The World Bank finances on average between US$ 14 to 20 billion worth of procurement contracts each year4. The financing is spent through procurement of activities ranging from textbooks, vaccines, feasibility studies, project management to construction of highways, rural roads, and power plants. Procurement as part of project implementation and service delivery starts from the time the need for goods, works or services is identified till the need is satisfied meeting the quality, economy and efficiency criteria. Throughout these stages, there is undoubtedly a need and scope for professional judgment and discretionary decision-making on behalf of the government, at all levels.

Public procurement systems, directives and model procurement rules, guidelines and regulations by international institutions like the European Commission (EC), UNCITRAL and MDBs have matured over the last two decades, in many respects by constant interaction among these institutions and consequent harmonization. Either implicitly or explicitly these instruments have increasingly provided for the procurement officials to exercise proper discretion for a better procurement outcome. In particular, the World Bank procurement rules have evolved over the years to reflect changes to the World Bank’s approach to lending and to accommodate the needs and nature of procurement activities financed by its projects.

The public officials responsible for procurement need to be adequately trained and empowered to exercise discretion and professional judgement as necessary to ensure the successful outcome of the project, while ensuring that all such decisions are transparent, fully documented and justified. Development of skills to exercise professional judgment (or discretion) without fear becomes more relevant for public officials (as also by MDB staff responsible for review) when procurement rules and regulations are guided by procurement principles of: value for money, economy, integrity, fit for purpose, efficiency, transparency and fairness.

To read more