As we sit in our office (or study at home for those of us who don’t do the daily commute), most of us will be in towns or cities with good communications, many facilities at hand, and with many suppliers easily accessible to provide the vast majority of what we want to buy for ourselves or in our professional lives.
But imagine if you lived in the Amazon rainforest, in the depths of Brazil. The state of Amazonas covers an area six times greater than that of the UK, but has a population at just under four million which is less than half that of Belgium’s. 98% of the territory is rainforest accessed only by river or air, and the State represents only 1.5% of the Brazilian economy.
We’ve learnt all this from an article by Laura De Castro Zoratto here on the World Bank website. She’s a senior economist at the Governance Global Practice for Latin America and the Caribbean and has been working for the last 2 years with subnational governments in Brazil and Central America, with a focus on the implementation and evaluation of public sector reforms.
Her article talks about how public procurement has been improved in the Amazonas region. A 2013 study indicated that the state was paying some 27% more than the private sector to buy the same things, often with lower quality too. As we might have guessed, there are inherent challenges for the region, many linked to the geographic situation, but others that could be more feasibly addressed.
As Zoratto says; “This pricey procurement can be attributed to different factors, involving a vicious cycle of slow processes and high transaction costs, wasted efforts on failed bidding processes, and frustrated government officials and suppliers, all leading ultimately to less value for money for citizens”.
To address this, a strategy and policy team committed to reform were assembled – the article is not specific, but we assume included local executives and World Bank support. Other key principles were to harness technology for more efficient processes and data collection; and “targeting interventions enabling line agencies to focus more on their core businesses”.
The use of data was critical to the project. “For example, building on innovations from São Paulo and Rio, Amazonas encourages citizens to request receipts when they buy goods. By adding a unique bar code to each receipt, consumers can swipe with their phones to instantly win prizes and cash. As a result, Amazonas can ensure that vendors pay taxes on those goods, while also gaining valuable information on market prices, used to ensure the State is getting the best deals for similar items. Scaling-up the use of e-procurement, Amazonas also collected data on its own processes to rectify the most timely and costly bottlenecks”.
Reforms such as the introduction of e-procurement, digital signatures and e-invoicing have enabled collection of massive amounts of valuable information. But of course it is not just the data in itself that is needed. Reformers need the ability to make sense of that data, and to leverage it to target reforms.
“For example, we know that competitive bidding yields better prices, but the number of bidders also matters. Drawing on lessons from the State of Bahia, we found that 6 or more bidders were needed to really make a difference in prices”.
So process burdens and issues that reduced the likely number of bidders were also addressed. That might be not allowing enough time for bid preparation, for instance. The process analysis led to strategies such as simplifying low-risk, high-volume purchases, and establishing framework agreements with suppliers in key areas for greater economies of scale – this “resulted in a savings of roughly R$ 28 million”.
Do read the whole article from Laura De Castro Zoratto here – it is a positive story and as she says, it is the outcomes from procurement that really matter; “supporting these kind of reforms can allow line agencies to focus less on procurement and more on achieving their objectives, for improving performance and delivering services to citizens”.