Regulating public procurement in Latin America and the Caribbean
Interview with Ana Cristina Calderon Ramirez from the Maastricht Graduate School of Governance on the regulation of public procurement in Latin America and the Caribbean. Ana is currently studying in-depth the creation and establishment of public procurement regulatory and monitoring entities in Latin America. She co-authored a paper entitled ‘Elements of public procurement reform and their effect on the public sector in Latin America and the Caribbean’, which was selected for a Best Paper Award in the International Public Procurement Conference 7 held in Bali in August 2016.
Hello Ana, welcome to the programme.
Hello. Thank you so much for inviting me.
Let's start by talking about your research in the paper that you’ve published with your colleagues. What is the background behind that paper, so what led you to actually write it?
Well I must say first that the story of the paper started with the research in which I have been working as part of the PhD studies at the School of Governance in Maastricht University as you mentioned before. When I was starting to explore the topics that I wanted to study, it appeared very interesting to analyse the elements of the procurement reform in Latin America and the Caribbean region, including the improvements of regulatory frameworks, the introduction of electronic government procurement tools, and the creation of specialised regulatory and monitoring procurement entities. In doing that I was looking for data, quantitative data to know and to understand a little bit more about the historic patterns of the reform and when that happened one of my colleagues and friends, Jorge Muñoz, who is the other author of the paper, and that happens to be econometrist specialised in public sector, told me about the PRODEV evaluation dataset that is compiled by the Inter-American Development Bank and that compiles the indicators related to the advances in public management in the region. So we started with him to check if there were any patterns or relationships in the reforms that have been happening and improvements with other indicators or variables including public expenditure or in institutional strengthening.
A year ago we found out that the creation of those procurement agencies was very relevant during the period of 2007 and 2013. Then we were talking with the other author, Leslie Harper, who is a well-recognised Fiscal Specialist at the bank, and with Jorge and Leslie we started to have conversations after work thinking what we can do with these indicators to meet the demands of our client countries. We have been asked for more information on these issues and we wanted to fill a gap that is in the literature. So we decided to write a paper for the Procurement Conference number 7, , looking for the relationships or effects that the improvements of public procurement system have in the perception of in our region. So I should say that this is totally a team effort that combined policy and research.
Sure. It makes perfect sense. But you got the idea to do that paper based on your work at the bank or based on your research, academic research that you’re doing for your PhD?
Well it’s a mix, you know, because when I started the PhD as I mentioned it I started to look for these datasets, we found some interesting things and then talking to Leslie who was my supervisor and Jorge, I said “well we have so many clients needing information, policy information, we should do something with this” and she said “great”. So it’s when you find two ways that they meet together, you know, policy and research, so it was the two things.
Talking about the research that you’ve done in a little bit more detail. Why is it important and what aims were you trying to find out once you started working on it?
Pedro I should say that from an academic perspective, as we know much of the research in this field concerns itself with description, others with explanation of public procurement reform process. In Latin American, Caribbean region more than twenty years have passed since the reform began and since then there have been great strides in the modernisation and reform of the public procurement systems. These advances have included, as I mentioned before the creation of e-procurement platforms, the establishment of more comprehensive legal frameworks, the professionalisation of procurement officers, the use of procurement to promote social objectives, and inclusion of the green criteria in tendering opportunities.
Public procurement reform in the region has been analysed in issues of the impetus of the reform, the issues and constraints affecting these reforms, partial evaluations on specific country cases. However, if you look in the literature little has been written to identify and analyse the outcomes of these reforms and the impact that these reforms have had on the perception of public sector performance. So with this paper we wanted to address those gaps in knowledge by providing a conceptual framework for understanding the context under which public procurement reforms have been carried out and examining what we have called the first generation public procurement reform elements and the impact of those elements on public sector performance.
Those are the improvement in regulatory systems, electronic procurement and monitoring entities?
The three of them. The creation of electronic, yeah, the law and the institutional aspect, yes. Going back to the point that you mentioned before about the policy, I think we achieved four main things that are good for our colleagues in the international development field because first we were able to provide a framework that connects public procurement within public sector literature, policy literature, although these things very obvious in the public procurement has been an isolated topic, a ghetto topic. Sometimes we know that it is part of public sector administration but there is a lack of understanding of its importance and the role that it plays. We have seen public procurement reforms as part of huge reforms, public financial management reforms or anticorruption and transparency reforms, but not as a field that has its own space. So now it’s more like it has its own agenda, so we add that into the map of public sector reform and the elements that are included in that.
Second, we made an effort to clarify the effects of these reforms, both in Latin America and the Caribbean because most of the literature and policy literature covers Latin America but not the Caribbean. So here we use the dataset, the complete dataset with Caribbean countries and this is very interesting. And second, we tried to make clear what was first and second generation reforms and effects of these issues in other important sectors. Third, we demonstrated that although there is not much public procurement data as there is in other subjects, we can use real data, especially that information that has been collected by agencies, international development organisations and the countries itself. So sure we need more data and this has been an issue for so many years but now we have data and we have to work with that data so let’s start to use what we have.
And finally, fourth there was something very important to us, this is a research with a policy perspective as well. Because sometimes you heard that research is research, full stop. If it’s used that’s another stuff, however we tried to combine policy and the academic world in this paper. For the people who are listening to this podcast I want to let you know that we have a big network on government procurement in the region that is called the INGP and we have so many conference as part of these network and so many trainings, and there we have heard so many people telling us that the research is very hard to understand and other papers are very light. So we wanted to combine that both academics and policymakers could enjoy and use what we wrote and more important what we found.
I think that’s a very important skill. One of the things I don’t like in academia in general, and I used to be a lawyer before I became an academic, is that so many of our colleagues write for themselves and their colleagues as well and they don’t understand or they don’t make an effort to actually write aiming to generate impact or at least so that their research can be understood and digested outside academia.
That’s great that you say that because that’s what we are doing now and that’s what I’m doing as part of this PhD, that is very different programme because it’s for policy people, so that helps a lot.
So you’re looking at some indicators and the effects and the impact that certain reforms in public procurement had had in the Latin America and also the Caribbean. What were your main findings?
I have here to make a clear point. These findings are for a dataset that was between 2007 and 2013, so let’s make that clear first. On that regard, based on the three main areas of the procurement reform evaluated we find out that the creation of a procurement agency had the largest impact on the development of public procurement systems between those years. Indeed the increase of the scoring of public procurement system in the countries where a public procurement agency was created was about 0.5 points above the scoring of the public procurement system in those countries where an agency was not created.
Second, there is a link between the creation of a public procurement agency and other variables related to the perception of public sector performance and the competiveness of the countries as well.
So bearing in mind that you didn’t analyse in detail the characteristics of each public procurement agency because they may be different in different countries, so that is just a general…?
Yes. But as a part of the dataset you have that, you have the different characteristics so some of them are not agency, some of them are just entities or a department within a ministry. So the dataset includes that.
The effect of creating a new procurement agency were also statistically significant to explain improvements in variables such as favouritism in decisions of government officials and transparency of government policymaking, the government procurement of advanced technological products and their competitive index among others. For example, with the regard to the perception of favouritism in the decisions of government officials, the creation of an agency may have helped to improve this indicator by 2.6% as a consequence of its monitoring role, ensuring that procurement processes are carried out in accordance with the country’s legal and regulatory framework in a fair and impartial manner. Additionally, by lowering the cost for entry, the procurement processes become more competitive and less likely to be perceived as biased towards a particular individual or firm. And the creation of an agency had a gross impact of 9.9% on improving transparency of government policymaking. This effect might be explained by the development and monitoring of technological tools, electronic platforms for example, when public procurement agencies are fully functional and compliant with transparency regulation.
Second, there is a link between the creation of a public procurement agency and other variables relating to the perception of public sector performance, as you can see in the paper, and the competitiveness of the countries as well. We found out that the effects of creating a new procurement agency were also statistically significant to explain improvements in variables such as favouritism in the decisions of government officials, transparency of government policymaking, the government procurement of advanced technological products and the competitive index among others. For example, with regard to the perception of favouritism in the decisions of government officials, the creation of an agency may have helped to improve this indicator by 2.6% as a consequence of its monitoring role, ensuring that procurement processes are carried out in accordance with the country’s legal and regulatory framework in a fair and impartial manner. In addition by lowering the cost for entry, the procurement processes become more competitive and less likely to be perceived as biased towards a particular individual or firm. Additionally the creation of an agency had a gross impact on, let me read this, of 9.9% on improving transparency of government policymaking. This effect might be explained by the development and monitoring of technological tools such as the e-procurement platforms or e-GP systems, when public procurement agencies are fully functional and compliant with transparency regulations. Also the creation of an agency shows an impact on the burden of regulation as it brings more transparency and competition when a procurement process is planned. Because of its strategic vision and understanding of the issues that are happening in the country and the needs that the country has, the procurement regulatory agency is able to develop a clear and appropriate regulation increasing private sector trust in public procurement and generating increased participation in the public procurement marketplace.
And third, the most important part I guess is that having a public procurement agency that is fully functional is absolutely critical for the reform process itself, at least in our region that has been a very important issue because an agency that is responsible for policy and monitoring is needed to balance the competing goals that the country has, whether it’s fighting corruption, promoting transparency or trying to achieve value for money effectiveness and efficiency. An office with just administrative functions and no strategic mandate, focusing only on transactions, is not going to be able or to have the incentives to advocate for deep and sustained reforms. In our region legislative and technological reforms have been very, very important but without an agency that can provide a strategic direction, leadership ambition to leverage those changes in a holistic fashion, the reforms are going to stall or be implemented in a disjointed and piecemeal way.
Can you give us examples of those agencies?
Yes, sure. For example Guyana. Guyana has a great law and you can call Caroline Nicholas about this to ask her. She has been there for a while and she has help us in the region for our regulatory frameworks, you cannot imagine how much. But they had a beautiful law as we said in Spanish, a beautiful law, but the implementation has been very, very hard. They started last year to have a procurement entity to be responsible of the implementation of the law, bringing more transparency by having and monitoring the e-procurement system and this has been helping a lot. The same in Colombia. Colombia’s a great example and now Colombia is very fashionable because, we are trying to modernise the public sector. The agency is new, it was created in 2011 but it started in 2012, and these years have been very important for the country in the public procurement system because this agency has given to the public procurement system impetus, you know what I mean.
Now people recognise this public procurement, they understand, they know that they can take and bring to the public marketplace, they can offer, they can buy, it’s easy to understand. So that helps a lot. The agency helps a lot.
Very well. Still on the main findings part of our conversation, I found interesting in your paper that you think the regulatory regime and the legal framework is not as important to improve practice or to achieve the outcomes that it’s supposed to achieve than in comparison with the procurement agencies?
That’s the reason why when I started to talk and said “please we should be very careful on this, this data is between 2007 and 2013”. Before 2007 I am sure if we go before that we could find that the legislative and the legal framework were very important, were the most important bit among those other factors. The thing is that in 2007 most of the countries already had the legal framework established but not implemented.
Okay, that makes sense.
So 2007 and 2013 was like an explosion of these entities and I explained in more depth in my dissertation that I call “agencification” . I think we should make this point clear.
So in fact you’re saying is that without the law and the regulatory framework already existing it would be hard for the procurement agencies to actually achieve anything?
Of course. Of course. And more in our region that’s very important. No, no, no, we should say that. I mean, you cannot stay forever with a perfect regulatory system but no-one complies with that regulatory framework, you know?
Yes I know. I know the feeling. Very well, okay. So those are the main findings of your paper. You’ve been very cautious saying that okay this is only, you only analysed the data between 2007 and 2013 but can we extract wider application of the main findings? Do you think that they would be valid or would be useful for other areas of the world like Africa or East Asia?
Well I think with a good dataset we could do something with Africa and Asia. And as part of my dissertation, not as part of this paper, I have been having some interviews with a specialist at the African Development Bank and the Asian Development Bank and World Bank. But it seems that they are very different in the form that they are building up their systems, when I say system there’s no electronic system but the complete public procurement, system. For example, isomorphic pressures are different, the way of the path dependency is very different in those regions of the world. However, if we can find good data maybe we can find the same things, agencies will help to boost the efforts of the reform, but I wanted to be very careful on that point.
Your paperwas selected as one of the best papers in the International Public Procurement Conference that happened in Bali and that’s, it’s a great achievement for you to have been able to do that as a PhD student. What else are you doing now at this moment in time in term of research? So you looked at Latin America, what else are you doing for your PhD?
Well I’m not doing anything regarding the Caribbean right now. Maybe I will write a chapter for a book that is going to happen in 2017 with Inter-American Development Bank . Nowadays I’m just focusing on the public procurement agencies, not just the departments or small units but the agencies in Latin America. But I wanted to check the isomorphic pressures and the policy transfer pressures in the process when you establish these type of agencies. So that’s what I have been doing right now. However, I think I want to mention something if you don’t mind?
Because we have been doing some other stuff and I think the wider applications of these main findings could be from different sides. So from the country side I’m sure when the conference of the regional network and public procurement that is going to happen in November in Jamaica I’m sure the countries will talk about these issues and I am really sure that those countries that do not have these type of entities can learn a lot on their benefits and their impact, not just for the procurement system but for the public sector as well so they can sell more easily these type of reforms to their ministers. And others that have the agency on paper will understand the importance of the implementation because sometimes they have it there in the law but they haven’t had the time, the money or the willingness to make it real. For the donors it shows how the reform has succeeded in the region, how much of the money that have been provided for the strengthening of procurement system is having a real effect. Actually in the paper you will see that we found how was improvement related to each dollar that was provided by the Inter-American Development Bank, so that was a good one for us. And it provides us an snapshot on what is happening in the sector, so that’s good for them to know how and where we are right now. So I think that’s the wider application of the paper.
One final quick question to wrap up the interview. What future steps are you going to take in terms of research?
First keep collating data. Yes, because we need to collect data and we are doing this in the countries, donors. Maybe you can have another podcast on the methodology for the assessment of public procurement system that we have been working with the OECD. They have it right now for discussions in its website.
So they are reviewing it at the moment?
Yeah. They’re reviewing it. We were part of a taskforce that reviewed the tool, so that would be very important to us because for developing countries we use that to monitor the reform. The country data as well, the initiative of open contracting and, or open data have been helping a lot in this task, so we will keep collecting data.
Second, more research, more focused research, maybe about each innovation or change, especially e-GPP or green procurement, new entities or so forth. I know right now and. We should have more research on the quantitative impact of the reforms because mostly the literature that we have is anecdotal. Probably the analysis of the second generation reforms in public procurement, green criteria in tendering.
Third future step is to complete my dissertation work, crossing my fingers , I think it’s time.
That should be the first one I would say!
Oh my god! But here I wanted to talk about the paper I mean I was trying to be fair and say “well we’ll be collecting data, we will do more research” but yeah, you are totally right for me, it’s completing my dissertation. And when I finish I will let you know about that for sure.
I think that’s a great way to finish the podcast. Ana thank you very much for coming.
Oh thank you so much for this. I really appreciate it that you inviting us.