PROCUREMENT REFORM NOW, ARE WE SHORTCHANGED? by Toix Cerna

Procurement reform and the specific involvement of civil society organizations in ensuring that the reforms take place have attracted much interest and attention from development organizations. The Affiliated Networks for Social Accountability in East Asia and the Pacific, a regional organization that consolidates social accountability learnings in the region, has particularly organized a regional conference on procurement reform, gathering both CSO and government actors for a meaningful exchange of knowledge and experiences related to procurement reform. The conference was held in Hong Kong last November. I was lucky to be one of the Filipino delegates sent there to learn from the experiences of other countries.

I will be honest in saying that I did not go there empty-handed. I had an agenda that I wanted to bring to the table based on my personal learnings.

Procurement reform in the Philippines is heavily anchored on procedural reform with strong emphasis on an open competition policy. It builds on the idea that standardized processes with very little room for discretionary abuses will result in smooth, responsive, and effective procurement. This idea follows the logic that through a highly competitive and transparent process, only the most efficient and effective bid offer at the cheapest price will likely emerge a winner. The logic seems to be robust. But is process all that should drive public procurement?

It’s true that there is a lot of corruption and leakage in public procurement. And indeed, these are serious issues that should be addressed. The leakages should definitely be plugged so that public money does not go to waste and public services reach the people. For these very reasons, the Government Procurement Reform Act (GPRA) was passed into law in 2003. However, much to my disappointment, the reforms have not evolved into real development that I thought these reforms were ultimately for. I ask the question, to what end does public procurement reform really serve? Who benefits (most) from these reform efforts?

The reforms that we push give so much premium to a standard process and to an open competition policy. While this appears to be promotive of a fair and open process, the real world today is not an even playing field as shaped by history. The fairness that this type of process promotes is superficial. It is fairness that favors the developed world with firms that have longer track records and have the operational capacity to produce cheaper products. Of course this sounds a lot like a conspiracy theory; That capitalist countries take advantage of the developing world to further their imperialist objectives.

Literature would show, however, that the development of public procurement policies of advanced countries was very different from what we’re currently doing. Procurement (pre-neoliberalism) in developed countries used to be a social policy instrument. The United Kingdom used government contracting to address disabled workers' needs. Similarly, the United States government (1938) adopted a policy that it would preferably buy products produced by the blind. This preferential policy extended to “other severely handicapped” persons in 1971. In 1998, it established a procurement policy that made the disabled workers direct beneficiaries – procurement was used to improve availability of new technology for disabled workers. In other ways, procurement became an instrument to secure human rights transnationally through pressures in the name of corporate social responsibility. Procurement then had a specific social justice cause. This all changed in the 1980s when neoliberalism took reign of development policy. The state's role in the economy had been reduced and limited. Procurement became primarily a method to deliver public services and a venue for private-public partnerships to take place. “Where procurement contracts were used, as they increasingly were, as the basis for delivering these public services, 'value for money' was proclaimed as the basis on which contracts should be allocated.” (McCrudden, 2007: 11)

Regulation of procurement markets have underlying political and economic objectives. In the last 50 years, procurement “reforms” have targeted to make procurement more efficient, less expensive, and more transparent. In the 1960s (but moreso in 1980s and 1990s), procurement reforms were introduced in the international stage through treaties, which impacted on state procurements. Reforms targeted reducing barriers to international trade. It paved the way for greater market access for foreign firms. Policies such as non-discrimination between foreign and domestic firms were being adopted. “After the Second World War, domestic procurement was often seen, rightly or wrongly, as characterized by corruption, inefficiency, political capture, rent seeking, protectionism, inflated costs, and the development of cartels.” Therefore, these reform efforts seemed justified (wink!)

So again, what is the problem with a limited and reduced state? Procurement is just an instrument for development. Reform in the process does not shape the kind of development we desire. The state should define that development path. Procurement without these overarching policies for social development leads to unbridled development that continues to preserve the status quo – a status quo that will advance the rich further and endow the poor with mere trickle down effects. If we continue to do what we do now, while government services do reach the public at the most advantageous deal for government, those who stand to benefit the most from these procurement activities are the big firms that win government contracts. In the end, the socio-economic structure that we have remains unshaken. The rich become richer. The marginalized remain marginalized.

Our challenge is to be able to develop procurement policies that will promote the type of development we seek. We should not be ashamed to shape our development path and do it through an open competition and transparent procurement process. Development is not the product of a technical process. It is a political decision that requires political will.