Reforming and Modernizing the Palestinian Public Procurement System

March 31, 2011

March 2011 - Public procurement refers to acquisitions of goods and services by public institutions in a country. It concerns contracts between the government and the private sector in many different areas such as health services, education, roads, water supply, the police and defense. Public procurement accounts for a substantial share of total government expenditure. The global average is between 12 and 20 percent, and may be even higher in developing countries. Given the significant budgets for public acquisition in developing countries, the efficiency and quality of procurement processes are central for how much citizens will benefit from government spending.

Procurement reforms are efforts to change current procurement practices. They have typically focused on changing the legal and institutional framework, as well as training and capacity building of public procurement officers.  Reforms often aim to enhance efficiency, accountability and transparency to reduce the opportunities for corruption and mismanagement of funds.

In West Bank and Gaza (WB&G), public procurement accounts for about 10 percent of GDP. A number of themes underpin much of the public procurement in WB&G.  Top amongst these are public sector contracts, being an important source of business for many local suppliers, contracting firms and consultants who represent the future prospects for WB&G. Fair access to efficient public sector procurement is another important theme that would give considerable impetus to their growth and would require a domestic marketplace which is healthy, open to free competition and seen as the cornerstone of the Palestinian economy. Public procurement reform is critical for WB&G in view of the cross-cutting role that the procurement system plays in achieving good governance and sustainable development for the Palestinian Authority (PA).

The World Bank has conducted two reviews of the PA procurement system.  The PA and the Bank conducted the first Country Procurement Assessment Report (CPAR) for WB&G in 2004, with the aim of analyzing the public procurement system, including its policies, organization, procedures, and practices.  A follow-up assessment – the Country Procurement Issues Paper (CPIP) - was made in June 2008 and focused on reviewing the CPAR findings.  The assessments identified a number of problems faced by the procurement system, and highlighted principal shortcomings in its legal framework, institutional setup and procedural aspects as well as in the capacity of the civil service procurement workforce.

The CPAR provided recommendations to assist the PA develop its capacity to plan, manage and monitor public procurement effectively; improve accountability, integrity, and transparency; prevent corruption; harmonize the national procurement law and regulations with internationally accepted principles and practices; and increase opportunities for local suppliers, contractors and consultants to grow and prosper.

In response to the CPAR recommendations, the PA launched, with Bank support, the reform of the public procurement system by the drafting of the new national procurement law and detailed implementing regulations in early 2006. However, the changes in the Government since 2006 and the unstable political situation have delayed the ratification and enactment of the law and regulations and prevented successful completion of the other reform activities.  In 2008, the PA confirmed, within the general framework of the Palestinian Reform and Development Plan (2008-2010), its commitment to move forward with the recommended reform in order to make public procurement more efficient and transparent. Until recently, however, progress has been limited on addressing weaknesses in the procurement law and procedures.

In early 2010, the PA made another effort to revise the procurement law and an inter-ministerial group of procurement experts representing major ministries of the PA was mobilized to revise the draft law taking into account with the set of comments provided by the Bank. The draft law is seen to reflect in large part the essence of internationally recognized good practice as embodied in particular in the UNCITRAL Model Law on Procurement  and provides a good starting point and basis for such further work and improvement. The Bank continues its support to the inter-ministerial group to ensure that the best possible procurement law emerges from this process. Once enacted, the new law would form the basis for a more effective and transparent public procurement function.  However, enacting the law is only the first step of a major reform effort as other critical components of the procurement system need to be put into place. These include:

  1. enacting the implementing regulations for the new law;    
  2. establishing an independent Public Procurement Unit, which would assume an oversight role of all public procurement activity and ensure compliance with public procurement law and regulations. This unit would also be responsible for the development of procurement systems, procurement documentation, guidelines and manuals, training courses and public awareness campaigns;
  3. development of national SBDs, to ensure transparency and efficiency, the adoption and promotion of SBD for Goods and Works and a standard request for proposal for consultancy services is strongly recommended as a priority;
  4. development of procurement operations manual of procedures covering the entire procurement cycle, that would explain and bring necessary guidance in the procurement process, from planning to advertisement, bidding, evaluation, contract award, contract management, payments, inventory of delivered assets, etc. and introduce more modern and efficient procedures in contract administration with emphasis on timely resolution of contract implementation disputes and more balanced approaches to price revision issues ;
  5. instituting a training program of the procurement workforce across the PA, in addition to additional measures necessary to make the law effective.

The Bank has secured funds to support the PA to initiate the implementation of priority reform actions. The reforms represent a major institutional change which is closely coordinated with active donors in the WB&G, several of whom confirmed their continued strong support and interest in the enactment of the new procurement law and regulations and expressed their willingness to contribute to the essential technical assistance needed by PA for the successful and complete implementation of procurement reforms.