11 AfDB New Procurement Policy: Training Program for the Bank s Procurement Staff Risk-based design of Procurement Arrangements - Introduction
2 Bank's new Approach to Procurement New Vision of the Procurement Policy Procurement Framework Strengthening and relying on Regional Member Countries (RMCs) institutions and procurement systems for the execution of Bank Operations, while ensuring compliance with Bank s fiduciary policy. Adopting a strategic risk-based approach to procurement execution and oversight, advocating a risk assessment and management approach supporting achievement of Value for Money through a Fit for Purpose management of project cycle activities. Relying on a range of procurement options depending on country, agency, sector, and transactional risk profiles, environment and circumstances.
3 Bank's new Approach to Procurement New vision of the Procurement Policy- Procurement Framework Dynamic approach requiring a solid procurement risk assessment and management system. Greater consideration for RMCs needs in capacity development (at country, sector or project level). Need for Task Managers, Procurement Specialists and Procurement Accredited Staff to understand their respective roles in risk assessment and management.
4 Bank's new Approach to Procurement New vision of the Procurement Policy- Procurement Framework Three key interventions in project cycle: Project Preparation: Assessment of procurement risks and capacity, at country, sector, project and executing agency level; Project Appraisal and Negotiations: agreement on risks mitigation measures; and Project Execution: monitoring and evaluating compliance and performance.
5 Bank's new Approach to Procurement New vision of the Procurement Policy-Risk Assessment and Management
6 Bank's new Approach to Procurement New vision of the Procurement Policy- Procurement Framework The Bank s Procurement Risk Assessment and Management (PROCRAM) integrated approach is to strengthen the connection between various assessments conducted for the purpose of: (i) project preparation/appraisal; (ii) reviewing readiness (Readiness Review); (iii) declaring credit/loan effectiveness; (iv) reviewing mechanisms and procurement activities during project implementation; (v) conducting mid-term review; and (vi) preparing the Project Completion Report (PCR).
7 Bank's new Approach to Procurement New vision of the Procurement Policy- Procurement Framework Assessing and Managing risks in a dynamic and efficient way requires: Conducting procurement risk and capacity assessments; Setting-up risk mitigation measures; Verifying and analysing effectiveness and compliance of implementation through prior and post-reviews, as well as various procurement audits; and Monitoring action plan for improving performance, compliance and RMCs procurement capacity.
8 Bank's new Approach to Procurement New vision of the Procurement Policy- Procurement Framework Assessing and Managing risks in a dynamic and efficient way will inform: Risk Rating of the project Detailed procurement arrangements (choice of applicable rules, detailed Procurement Plan ) Bank supervision modality (prior review or post review) Action Plans (improvements) Mitigating measures
9 Risk definition Risk definition: exposure to loss as a consequence of uncertainty A variety of risks can be faced throughout the procurement process Understanding the main categories of risks assists in: Risk assessment Planning practical management, operation, training and technical assistance measures for risk mitigation
10 Risk impact Risk impact can be measured by: The likelihood of an unwanted event occurring The relevant consequences Small damages resulting from highly probable recurring event Large damages resulting from rare event Mitigation measures: Improved procedures Improved institutions Professional practice Training
11 Risk analysis Conducted at planning stage Identifies risks origin, probability and magnitude in order to: Define which risk warrants close attention Increase the potential for reducing exposure Shall be part of each procurement planning stage and be regularly updated
12 Risk management Purpose: mitigation of risk impact by Reducing the likelihood of occurrence Reducing avoidable consequences Procurement Specialists in charge of: Identification and analysis of all risk factors Decide on better management response for each risk or combination of risks
13 Risk management cont. Such responses may include the following actions: Ignore Reduce Transfer Manage
14 Risk management cont. Risks cannot be completely avoided, but can be managed to some extent Measures to manage risks are based on the adequacy (Fit for Purpose) and quality of the procurement process applied across all activities A useful tool to analyse risk and focus management is the risk analysis and management matrix
Risk analysis and management matrix 15 Impact Major Critical Minor Major Probability
16 Benefits of risk management Greater confidence of right supply at right time, to further specific activity goal Better control of uncertainty Reduced impact of risk Improved decision making (adequacy and quality) Realistic estimates less likely to be exceeded Stronger team communication Lower probability of damage to the image of the organization (reputational risk).
17 Sources of risks External factors Project complexity Project planning Procurement process Fraud, corruption and unprofessional conduct
INTOSAI Risk assessment matrix 18 INTOSAI: International Organisation of Supreme Audit Institutions LIKELIHOOD 1 Insignificant 2 Minor CONSEQUENCE 3 Moderate 4 Major 5 Catastrophic Is expected to occur in most circumstances Will probably occur Might occur at sometime in future Could occur but doubtful May occur but only in exceptional cases 5 Almost certain M H H E E 4 Likely M M H H E 3 Possible L M M H E 2 Unlikely L M M H H 1 Rare L L M M H
19 INTOSAI Risk assessment matrix - Legend 1. E Extreme Risk Detailed action plan required Top Priority 2. H High Risk Needs senior management attention High Priority 3. M Medium Risk Specify management responsibility Low Priority 4. L Low Risk Manage by routine procedures - Tolerable
20 Source of information The United Nations Global Marketplace (www.ungm.org) The United Nations Procurement Practitioners Handbook INTOSAI ASOSAI