Reforming the Chilean Public Procurement System A public management reform

1. Reforming the Chilean Public Procurement System A public management reform Felipe Goya - RPM South Asia

2. Chile’s basic information OCDE member Transparency International (2012) : 21st GDP : USD 250.000.000.000 Per capita (ppp) : USD 18.500 Inhabitants : 16.000.000 Public Employees : 250.000 Central Government : 150.000 (health care 70.000) Public Procurement : USD 10.000 MM (goods, services and some works) (approx. figures)

3. Why we reformed procurement? 2003 corruption scandal • Inefficient public marketplace • High transaction costs • High asymmetries of information Reform found it opportunity into the government’s agenda Limited transparency – High risk environment

4. Concept Solution Central Agency’s Role

5. Elements of the reform • National scope reaching every procurement process above USD 200 • One single and simple procurement law based on a decentralized model • One strong and fully independent central procurement agency responsible for the whole system • Heavy reliance on outsourcings and private partners • Independent dispute resolution mechanism

6. Every process was massively supported by ITCs It is possible to track every transaction, every contracting officer, every vendor, to produce indicators, look for behavioral patterns, integrate with other systems, etc …

7. Government agencies E procurement Under procurement policy Tax authority BI & reporting Electronic suppliers registry (fully outsourced) E Marketplace Labor authority Databases Competition authority

8. Contracting officers development Contracting officers are always the most important part of the equation. System deters misbehaviors but they are not human proof. A poorly designed process and badly executed will affect negatively transaction costs and vendors' transparency perception.

9. Contracting officers’ basic demographics 13.000 contracting officers Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra

10. Training system structure

11. Performance Monitoring + ACREDITATION every 2 years Written test

12. Despite the certification process and the available training, tenders are not always done with the expected quality. Investing in the contracting work force is never enough

13. Lessons learned on capacity building Mistakes in tendering processes are not always because the lack contracting officers knowledge. Tenders involve much more people than the contracting officer. If contracting officers or any other stakeholder have a poor or inappropriate background, training will not solve this problem. Focusing training on decision making is more important than knowing the rules or procedures. Training programs must be open to non contracting officers as well. Including private sector professionals. Training programs should be designed as life learning programs.

14. Results

15. 16-32 |ChileCompra 2010 Integrity CPAR BID 2009 Metodología OCDE/DAC 2.5 2.9 2.8 2.7 2.7

16. Increased efficiency Savings 2009 – 2010 USD 3% a 5% Bids per tender 4,3 a 6.4

17. Transactions2012 USD 10 BB Savings 2012 USD 280 MM

18. 103.000 vendors tendering per year Subprime Crisis

19. Net satisfaction Contracting officials Vendors

20. Tenders awarded with more than 3 bids : 70,1% • Non awarded tenders: 12% • Suppliers registered in the suppliers registry: 40.000 • 1.800.000 purchasing orders per year • 350.000 tenders per year Other relevant indicators

21. Lesson learned: Measuring every relevant variable is fundamental

22. More Lessons learned

23. Transparency TIC Quality State reform Participation Institutions Strategic Management HR Cierre 2010 Procurement reform should be part of a wider reform Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra

24. Reach the political agenda is fundamental Problem: “Despite the level of development public procurement is risky” (Thai, 2001). Problems Politics: Corruption scandale in 2003. Solutions www.chilecompra.cl 2010 2003 1998 2008 Solutions Politics Kingdon (1995)

25. Top down implementation • Political support from the Chilean’s President downward • Reform under the Ministry of Finance • No resources restrictions • “Stick and carrots” to bring transactions inside the system • Constant, clear and shared objectives • Professional teams leading the reform are well paid • Leveraging public resources with private’s

26. It is relevant to manage vendors perceptions Transaction costs Perception of transparency Win rate: Proxy for frustration

27. Teaming with others helps a lot

28. Without transaction any reform is meaningless

29. Without a strong central agency, the reform will not work as expected

30. Leaders’ role Waissbluth, 2006, “La Reforma del Estado en Chile 1990-2005”

31. Reforming the Chilean Public Procurement System A public management reform Felipe Goya - RPM South Asia