World Bank proposes new project finance framework

The World Bank’s executive directors have approved a new framework for the way projects are procured. If adopted as policy, this could change the way contracts for Bank-funded construction projects are awarded and administered

The Bank said its vision was, “Procurement in Bank operations supports clients to achieve value for money with integrity in delivering sustainable developments.”

This could signal a change in several aspects of how the Bank awards contracts, and the stance it will take towards fraud and corruption. A key change in that in considering the economic value of bids, the Bank says in its proposal that it will consider initial price along with competitiveness, quality, life-cycle costs and benefits. This implies a move away from ‘lowest price wins’ policies.

The Bank has also signalled a desire to do more on the issues of fraud and corruption. It says it will help the national institutions through which it acts – usually national government departments – to develop better procurement procedures that are open and transparent. It has also said it wants procurement to reflect the scale and risk of projects, which could signal less complicated procedures for smaller contracts.

There are also indications that the Bank will look to introduce harmonised international standards in its procurement work. While national procurement procedures (country systems) seem likely to remain a mainstay, the Bank has acknowledged they are not appropriate for every situation.

The framework document was produced following a consultation process with some 2,000 stakeholders which began in May 2012. The Bank will now develop details of how these principles can be implemented, with a view to securing final approval from its Board next year.

Key construction trade associations European International Contractors (EIC), the Confederation of International Contractors' Associations (CICA) and the International Federation of Consulting Engineers (FIDIC) have said they will prepare a joint position paper on the proposals.

A statement from EIC said, “The three federations will call upon the World Bank to maintain authority on when to use the Bank's documents or national procurement arrangements, to insist on the use of fair and balanced contract conditions even under national procurement arrangements and to consult the private sector continuously as the implementation process progresses.”

According to the Bank, it signed 8,082 contracts in the 2013 fiscal year to the end of June, worth some US$ 9.37 billion. Some 1,051 of these were for civil works, with a total value of US$ 6.15 billion.