ii 40412 v1 CAPE VERDE COUNTRY PROCUREMENT ASSESSMENTREPORT EXECUTIVE SUMMARY Introduction i. Cape Verde is different in that it does not have a national code governing the procurement of goods/equipment or the performance of work, other than the use of consultants' services; it merely has arrangements set forth in decrees that govern procurement in specific sectors. In this regard, the only structured text that exists has been drafted for infrastructure (civil engineering work). ii. Despite the absence of a national document governing procurement, few flawed procurement practices have been identified. This is due in large measure to an environment conducive to a culture of good governance and the frequent use of procedures and standard documents of the World Bank, even in instances where this institution is not involved in financing. Summary of conclusions and recommendations Pillar 1: Legal and Institutional Framework A restructured legal framework iii. There is no single legislative and regulatory framework for all government procurement and other public entities. In fact, only a Decree-Law (31/94) exists for public works procurement. With respect to the procurement of goods and services, Decree-Law 2/97 and the Decree-Laws on annual budget execution contain a number of pointers which cannot be considered true directives. In light of the dearth of legislative provisions on public procurement, particularly in terms of goods and services, and the need to update Decree-Law 31/94, a single legal framework should be established for procurement by all public entities. A single framework would permit better regulation of all procurement (not only of public works), in order to ensure consistency among the different forms of procurement by the different players, with a view to facilitating access to information and fostering transparency in the different public procurement processes. iv. Such a code could also introduce new concepts such as public service concessions, delegated contract management [maîtrise d'ouvrage déléguée (MOD)], and the participation of the private sector in public investment financing such as the BOT (Build Operate Transfer), BT (Build and Transfer), and BOO, Build Operate Own, and others. 3 A restructured institutional framework v. An autonomous regulation function should be introduced into the system, for advisory, training, and information management purposes, in order to regulate public procurement, with a view to guaranteeing the transparency of the system. In order to streamline resources and avoid the establishment of new structures in the administrative system in Cape Verde, the study on the introduction of the regulation function could go hand in hand with the study on the new structure and responsibilities of the General Directorate of State Property (DGPE) [Direction Générale du Patrimoine de l'Etat]. In fact, the DGPE could assume this regulation function, provided it is not involved with the procurement process, either representing the Government or the Ministry of Finance (for example, contract management for the areas for which it is currently responsible). vi. In order to guarantee flexibility, transparency, and savings in public procurement, the initiative for and the management of public procurement processes could be returned to the contracting ministries/institutions. To achieve this, the government offices in the different ministries must have qualified staff to perform these new tasks. During a transitional period (to be determined), the Directorate General for Infrastructure and Basic Sanitation Services [la Direction Générale des Infrastructures et Assainissement de Base, (DGISB)] of the Ministry of Infrastructure and Transport (MIT) could maintain its authority with respect to public procurement related to civil engineering work, with the Cape Verdean Agency for the Promotion of Employment and Local Development [Agence Cap-verdienne de Promotion de l'Emploi et du Développement Local (AGECABO)] and other private enterprises providing similar services being responsible for procurement related to minor works in the communes or acting on behalf of the central government. vii. The current system of administrative recourse and arbitration should be improved, inasmuch as it is cumbersome in the case of long-standing disputes. An independent system of recourse would have to be put in place for bidders who disagree with a contract award decision and/or its execution. Arbitration and mediation centers for commercial disputes, the establishment of which is currently under discussion between the Government and the Chambers of Commerce, could perform this function, in addition to playing an arbitration role. Recourse should have a suspensive effect, with, however, a specific time period being stipulated for this, and a deterrence mechanism should be instituted (for example, deposit of a surety when recourse is sought). Pillar 2: Procurement procedures and practices viii. As a result of the regulatory void, practices differ from one institution to another; a factor that renders procurement unpredictable and consequently lowers the level of participation by the private sector. Moreover, in addition to the updating of the legal framework, it would be helpful if, in addition toreforms,computerized documents that are practical in nature, in particular standard procurement documents (works, goods, and services), similar to those used by donors, along withmanuals on procedure to provide 4 guidance to public procurement entities could be made available. Simplified versions of these documents could be prepared for use at the local level. ix. New laws should also make provisions for the widespread dissemination of information on procurement, based on a requirement to publish invitations to tender (for those with guaranteed financing) in various instruments (the Official Gazette, the Chamber of Commerce and Trade Associations Bulletin, the official government website, newspapers circulated in the country). Also, these print sources should be used to publish the results of these invitations to tender. Pillar 3: Human resources x. With regard to civil engineering work, the DGISB in the Ministry of Infrastructure and Transport, which oversees procurement related to infrastructure and buildings, has developed expertise within its ranks, and in view of the fact that virtually all contracts for works come through this service, overall, the experience and expertise of officials in the MIT is solid. However, a high turnover of officials in the MIT has been noted, because of competition with the private sector for human resources. Scant opportunities for training on an ongoing basis has increased the exodus of experienced staff. Furthermore, the number of DGISB staff is currently considered insufficient in order to respond to all the requests made by the Government. xi. In the other sectors, human resources lack experience, and public procurement officials lack specialized training to manage this area. Pillar 4: Systems for procurement controls and audits Ex-ante controls xii. The State Audit Office, which is currently responsible for controls of this nature, through its approval of certain expenditures up to a certain amount (including the relevant contracts), should be relieved of this responsibility so that it can conduct its ex-post controls in a more effective and objective manner. These controls should not be confused with those done by the Inspectorate General of Finance (IGF), which cover the financial component, in particular financial execution and adherence to the budget law. Taking into account the fact that only a small number of big contracts (for example, those that are equivalent to or more than CVE200 million) should require approval by the Prime Minister, an ad hoc commission, established on a case-by-case basis, depending on the nature of the contract, could be established to review the grounds for award of these contracts. Ex-post controls xiii. Insofar as ex-post controls are concerned, the role of the State Audit Office will have to be strengthened and it will have to be provided with the resources to perform these tasks, which should be more systematically assigned to it. These would be human, financial, and capacity-building resources, which will be identified by the institution itself. These ex-post controls could take the form of annual procurement audits. The IGF 5 would maintain its role of internal control as well as the administrative and financial execution of contracts, in order to ensure that the budget execution process moves forward, and to recommend, in a timely fashion, adjustments that would be required at the end of the fiscal year (cancellation or carry over of credit to the next year). Pillar 5: Anti-corruption measures xiv. The Penal Code (scheduled to take effect on July 1, 2004) provides for a number of corruption-related sanctions. However, although the law does exist, it is not fully enforced, because there is little awareness of its existence and because recourse to the courts in not widespread. Private sector xv. A review of the private sector shows that it does have the resources to respond to bids from public procurement entities. However, private sector involvement in public procurement is stymied by its lack of inclusion in the process, owing to limited access to information. In addition, the training of private sector officials could be an important component of the upcoming reforms, at several levels, the most noteworthy of which are:(i) training related to new legislative and regulatory instruments, (ii) training related to standard procurement documents and (iii) training on researching information, in the appropriate media, provided for by law. Risk analysis xvi. Risk analysis can be consideredfrom two vantage points: (i) the risk of maintaining the current system while most development partners are moving towards budget support, and (ii) the risk inherent in change. Action plan xvii. The action plan (see the end of the report on page 43) could be based largely on a strategy that focuses on updating the existing legal framework by drafting a single code that covers all types of contracts (public works, goods, and services), as well as the institutional framework, through the establishment of a regulatory procurement entity and the strengthening of the decentralization and deconcentration of the procurement process.