71394 Community Based Procurement Value for Money Analysis Table of Contents Acknowledgement 2 Abbreviations and Acronyms 3 List of Boxes, Tables and Figures 4 Introduction 5 Scope, Methodology and Limitations 7 Procurement Performance 11 Enabling Factors for Producing Good Community Procurement 16 Emerging Practices 20 Conclusions and Way Forward for Developing a Framework for CBP 23 Annexures Annex 1: Models of Community Based Procurement observed in CDD Projects 25 Annex 2: Rating Tool for Procurement Performance 26 Annex 3: Rating Tool for Governance 31 Annex 4: Rating Tool for Performance of Financial Management 33 Annex 5: Selected Case Studies 35 References 38 1 Acknowledgement This activity is supported by the Norwegian Governance Trust Fund on ‘Procurement and Service Delivery: Monitoring Procurement Outcomes’, implemented by the South Asia Agriculture and Rural Development Unit, in collaboration with the South Asia Regional Procurement Services of the World Bank. This working paper is based on �eld research on Community Based Procurement in World Bank assisted Community Driven Development projects in the s tates of Andhra Pradesh, Madhya Pradesh and Tamil Nadu and the Local Self Government project in Kerala in India. The study was implemented by the Procurement Services Unit of the New Delhi of�ce of the World Bank. The study group comprised of A. K. Kalesh Kumar, Shweta Rajwade, Julian Boyle, Payal Malik Madan and Siddharth Dasgupta. Project authorities in the states extended support during the �eldwork. The study was enriched by comments and suggestions by Mr. Ashok Vardhan Shetty, Principal Secretary Rural Development, Tamil Nadu; Mr. Vijayanand, Principal Secretary, Government of Kerala; Mr. Vijay Kumar, Chief Executive Of�cer, Andhra Pradesh Indira Kranthi Pratham; Mr. Muruganandam, Project Director, Tamil Nadu Vazhndhu Kaattuvom Project and Dr. Ravindra Pastor, Project Administrator, Madhya Pradesh District Poverty Initiatives Project. Detailed comments from Mr. Benjamin Powis and Mr. Naushad Khan are gratefully acknowledged. Panelists and participants of the workshop on ‘Community Based Procurement: Learnings from the Field’, held in New Delhi in October 2009, provided further insights into the issues addressed by the study. Ms. Sanchita Ghosh provided editorial support to bring together this version of the paper from background reports and the proceedings of the workshop. The authors would also like to thank Ms. Asmeen Khan, Mr. Joel Turkewitz and Mr. Benjamin Powis who have jointly managed the Trust Fund for overall support and guidance. The study team also thanks Mr. Najib Sefta, Regional Procurement Manager, South Asia Regional Procurement services and Mr. Amadou Tidiane Toure, Head of Procurement, World Bank, New Delhi for their support for the study. Cover photo by Shweta Rajwade Cover design by Colorcom Disclaimer: The �ndings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its af�liated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. 2 Abbreviations and Acronyms AP Andhra Pradesh APIKP Andhra Pradesh Indira Kranthi Pratham (also referred to as the Andhra Pradesh Rural Poverty Reduction Project or APRPRP) BPL Below Poverty Line CBO Community Based Organization CBP Community Based Procurement CDD Community Driven Development DPC District Planning Committee DPMU District Project Management Unit FGD Focus Group Discussion GP Gram Panchayat KDP Kecamatan Development Program MoU Memorandum of Understanding MP Madhya Pradesh MPDPIP Madhya Pradesh District Poverty Initiatives Project NCB National Competitive Bidding NGO Non-Governmental Organization O&M Operation and Maintenance PFT Project Facilitation Team PIP Project Implementation Plan PIP Participatory Identi�cation of the Poor PRI Panchayati Raj Institution PSA Procurement Service Agency PWD Public Works Department RBP Relationship Based Procurement RES Rural Engineering Services TAG Technical Advisory Group TN Tamil Nadu TNVKP Tamil Nadu Vazhndhu Kaattuvom Project (also referred to as Tamil Nadu Empowerment and Poverty Reduction Project or TNEPRP) VfM Value For Money VRP Village Resource Person 3 List of Boxes, Tables and Figures Box 1: Community based procurement in CDD projects 5 Box 2: Relationship Based Procurement 13 Table 1: Performance Indicators Reviewed 10 Table 2: Value for Money in Selected Sub-Projects 14 Table 3: Ratings on Governance 17 Table 4: Financial Management Ratings 18 Figure 1: Selection process 8 Figure 2: Stages in Procurement Cycle 11 Figure 3: U Shaped Curve 12 Figure 4: Ratings on Participation and Inclusion 16 4 Introduction Core premise Community Based Procurement One of the guiding principles underpinning Models in India community driven development initiatives is that In the current World Bank portfolio of projects communities have a comparative advantage in in India, there are 22 CDD projects that have local planning based on their knowledge of their community based procurement built into the own needs and the local context. This raises the project design. Community based procurement important question of whether community based varies in view of the actors involved and assets procurement (CBP) reduces cost and contributes generated within each project. At present four to the long term sustainability of local assets. Has distinct models are seen to be operating in CDD developing direct informal controls signi�cantly implementation with relation to procurement contributed to improved outcomes? While processes (i) Family Based Private Asset ‘standard’ procurement structures view informal Generating Procurement; (ii) Village Organization networks as unreliable, it is also possible to argue Based Force Account Type Procurement; (iii) that a one size �ts all approach does not work and Non-Governmental Organization (NGO) Based ‘informal processes’ can succeed where formal Procurement Service Agency (PSA) Type standards of procurement are not fully met. Procurement for CDD Implementation; and (iv) Third Party Contracted Procurement. A detailed Community Based Procurement account on the main characteristics of these four in CDD projects models is presented in Annex 1 of the report. Community-driven development (CDD) broadly de�nes an approach used in projects that Purpose of the report gives control of decisions and resources to In the India operations of the World Bank, there community groups. It involves the creation is little evidence as yet to substantiate that of community based organizations (CBO) for community based procurement results in value for design, implementation and management of local money in a fair and transparent manner. In order development works. There are unique features of to understand community based procurement in CBP found in CDD projects. Samantha DeSilva relation to value for money (VfM), governance captured these in her research on community and accountability, a study was needed to contracting as presented below. explore these concepts and their dynamics. The Box 1: Community based procurement in CDD projects There are different models of CBP, however due to the very demand driven nature of operations in CDD Projects; all of these share certain key characteristics and goals: • Community members are involved in identifying needs and selecting a sub-project. Control over project investment planning becomes increasingly decentralized and rural communities gain greater voice in planning, implementation and monitoring activities; • Community participation is encouraged throughout sub-project identi�cation, preparation, implementation, operations and maintenance, and is usually done through an elected community project management committee. • Communities provide contributions in the form of labor, cash and/or materials. Their contributions promote community ownership and hopefully eventual sub-project sustainability Source: Community-based Contracting: A Review of Stakeholder Experience, 2001. Samantha De Silva. 5 present study focuses on CBP outcomes across were undertaken by the community on their completed sub-projects with a focus on the own without involving contractors. There following key questions: were savings in actual costs and time on most of the analyzed cases; • Value for Money - Is community based procurement more economical for • A strong sense of local ownership of implementation? the assets resulted in their enhanced sustainability, which could be veri�ed from • Sustainability - Is there evidence of better the near universal usage of the facilities and operation and maintenance of items and assets and the continuous involvement of the services created through CBP? groups in Operation and Maintenance (O&M) • Participation - What is the extent of community of the facilities; participation in CBP? • Compared to the conventional procurement • Enabling factors - What are the facilitating cycle, the sub-projects rated very highly in processes and environmental factors that terms of need identi�cation, procurement positively influence the outcomes in CBP? planning and scheduling, developing speci�cations, award decisions, disclosure The study on Community Based Procurement and contract management. However, these (CBP) was carried out in 84 successful sub- sub-projects scored poorly in terms of market projects from three CDD Projects in India (in the search for bidders, tendering, tender opening states of Andhra Pradesh, Madhya Pradesh and and evaluation. The dichotomy of delivering Tamil Nadu) and local government units (Gram a successful outcome while not following the Panchayats1) in the state of Kerala, to explore conventional procedures can be explained linkages both in terms of enablers and outcomes. by the practice of Relationship Based This �eld study was undertaken in 2009. Procurement1, wherein the communities established a mutually bene�cial and Salient �ndings accountable commercial relationship between the purchaser and the supplier; Results from the study show that, while ensuring that the four basic tenets of Economy (Value • A consciously articulated and implemented for Money), Ef�ciency, Transparency and project design ensured inclusive participation Fairness directed the procurement regime in of the intended target communities through these projects, the community, through various positive discrimination, and community innovative approaches to procurement, followed capacity building. This was facilitated by a highly participatory process that focused on a highly motivated and trained project results and savings. The most salient �ndings of implementation team that focused on the the study are: processes rather than outcomes. • Better Value for Money (VfM) was achieved in the community implemented works, which 1 Local government at the village level 2 Relationship Based Procurement (RBP) is a recent concept in procurement strategies. In RBP, trust plays the most signi�cant role between buyers and suppliers as the willingness to rely upon the actions of others, to be dependent upon them, and thus be vulnerable to their actions and in this manner build collaborative partnerships. 6 Scope and Methodology T he study was carried out between March and August 2009. As part of the study, the community based procurement practices Indira Kranthi Project (APIKP, formerly Andhra Pradesh Rural Poverty Reduction Project) the study focused on sub-projects for income in 84 completed CDD sub-projects and local generating activities (including dairy, sheep rearing, government contracts in India were reviewed. small manufacturing, agricultural inputs, land development), civil works, and service delivery Scope (in education, health and nutrition and insurance). In the Tamil Nadu Empowerment and Poverty Selection of projects Reduction Project (TNEPRP) or locally known The Study identi�ed three projects out of the as Tamil Nadu Vazhndhu Kaattuvom Project current portfolio of 22 CDD projects in India. (TNVKP), the sub-projects examined were civil The projects were selected based on four works undertaken for common goods and services criteria: projects with CDD component, duration delivery and income generating sub-projects of projects and sub-projects, regional variations undertaken by Self Help Groups. In the Kerala and State’s responsiveness in participating in the Local Government project sub-projects delivering study. In addition, sub-projects undertaken as common goods and services were examined. part of the Kerala Local Self Governments were Sample selection included for analysis In each project, the study identi�ed the primary The State project teams selected two districts institutional arrangement in the community that for the study, relatively near and one relatively manages procurement (e.g. Common Interest far from the state capital. This selection criterion Groups and Village Development Committees was based on the assumption that distance in MPDPIP, Self Help Groups and Village and development inputs are linked. Two blocks3 Organizations in APIKP, Self Help Groups and were chosen in each district, and villages within Village Poverty Reduction Committees in TNVKP). those blocks were identi�ed based on the similar The sub-projects supervised by these community- assumption of distance. based organizations were chosen for research. Selection of Sub-projects Limitations of the study The sub-projects within the village that had met all • The limited sample of 84 sub-projects may the requirements of the Project Implementation not be considered statistically signi�cant, but Plan (PIP) were examined on the basis of is an indicative sample. completed and audited sub-projects, distance • The study considers only completed and from district headquarters and demonstrated successful sub-projects to determine group participation. The sub-projects required reasons that led to its success. The �ndings that bene�ciaries: (i) participate in all phases may have been impacted positively by this of the project cycle; (ii) have direct control over purposive selection. Hence, this study does project funds and the right to determine their own not claim to be an evaluation of the project priorities; and (iii) receive technical and social performance or the �ndings and conclusions, facilitation and support. representative or universally applicable for all In the Madhya Pradesh District Poverty Initiatives sub-projects implemented under this project. Project (MPDPIP) only those sub-projects that • Procurement under two projects (TNVKP delivered common goods and services for the and APIKP) largely focused on income use of community at large, known as “Z category� generating activities that represents private projects were considered. In the Andhra Pradesh procurement. 3 Block is a district sub-division, intermediate level governing body for a group of Gram Panchayats 7 Figure 1: Selection process Stages Selection Criteria Sample • Projects with CDD component Local Self • Duration of projects and sub- MPDPIP APIKP TNVKP Governments projects Project Closed Active Active under Kerala • Regional variations (2000-08) (2003-09) (2005-11) PRI • State responsiveness to (On going) participate in the study • Distance from the State capital Thiruvanan- (on the assumption that distance Chattarpur Ananthpur, Cuddalore, Districts thapuram and development inputs are Rewa Medak, Vizag Thiruvarur Thrissur linked) • Distance from the District head-quarters (based on the Block 2 2 2 2 assumption that distance and development inputs are linked) • Distance from the district head-quarters (based on the Village 20 13 16 12 assumption that distance and development inputs are linked) 20 26 26 12 • Sub projects that met all Projects • Z category • Sub • Sub • Sub • Completed and audited sub- sub projects projects projects projects projects delivering delivering delivering delivering • Distance from district common common common common headquarters; goods and goods and foods and goods and Sub- • Demonstrated group participation services services; services; services project • Sub projects where bene�ciaries • leading • leading (i) participated in all phases of to income to income the project cycle; (ii) had direct generation; generation; control over project funds; and • encouraging • envouraging (iii) received technical and social livelihood at livelihood at facilitation. family and family and individual individual level level. • The study is limited to two types of community management, participation and sustainability. procurement in three livelihoods projects and a Panchayati Raj4 initiative, spanning four The study group employed a combination of tools and analytical approaches, using qualitative States. methods to evaluate sub-projects on design, implementation and results, and to determine the Methodology relevance and achievement of objectives. The methodology developed for this study was driven largely by the objective of improving the Semi Structured Interview: A semi-structured understanding of community based procurement by questionnaire was developed to initiate assessing the major components of procurement, discussions on participation, governance, value for money, governance, �nancial sustainability, and procurement in sub-projects. 4 System of governance that has 3 levels i.e. at the village, block and district level in which Gram Panchayats are the basic units of local administration 8 Performance Rating Tool: To map governance, • Governance: The semi structured procurement and �nancial management practices, questionnaires provided data on need performance indicators were used to design a prioritization, decision making, composition of rating scale. The sub-projects were rated on a executive bodies, transparency and openness, scale of 1 to 5, 1 being the worst case scenario monitoring and oversight (including social and 5 the best case scenario. Best practice audits) and complaint redressal. The use of was depicted by the scenario represented in the rating scale helped compare on a standard the project manual for Legal, Procurement and measure of governance and provided insight Community operations while the worst depicted into the CBOs capacity and ability to evolve scenarios were those unacceptable and corrupt. good governance systems and processes See Annex 2, 3 and 4. • Procurement and Financial Management: Focus Group Discussions and In-Depth The rating scale provided a tool to analyze Interviews: These discussions were conducted the community based procurement practices in each village with important stakeholders like as against a standard procurement cycle and members of community based organizations, local further analyze the sub components. Similarly government bodies, project staff, government the �nancial management tool was used to line departments, bene�ciary households, elderly analyze the systems and practices that had community members, suppliers and local traders. been adopted by the communities and how The study team inspected supporting documents they were operating and leading to results. to validate these discussions. • Value for Money: This analysis emerged Secondary Review: The study team also out of the focus group discussions where reviewed available studies and reports on process communities stated the savings that they monitoring, economic analysis, information had achieved while managing civil works systems, internal and statutory audits, along with on their own. To con�rm the veracity, the procurement audit reports. Information pertaining study team undertook a detailed analysis to technical quality was done through relevant of the estimates and costs incurred in documentation review, site visits and Operations the selected sub-projects. The cited and and Maintenance (O&M) arrangements. Levels approved estimates based on Public Works of participation were determined through focus Department5 (PWD) and Rural Engineering group discussions (FGDs) and reviews of records Services (RES) Schedules of Rates were on the sub-projects. reviewed and appraised as described in the The overall performance indicators examined are proposal documents and then a comparison shown in Table 1. was undertaken with the actual costs incurred from �nancial documentation maintained, The following guidelines were used to better including withdrawal details from the Bank, understand the major components of the study voucher details as maintained in the cash • Sustainability and ownership: Sub-projects books, muster rolls on labour costs and audit were analyzed in terms of information reports generated. In addition, the study gathered on users being satis�ed with the team also matched the sub-project estimates goods and services delivered through the with similar civil works project estimates to project. If there were necessary maintenance see if there were any savings between the operations taking place, records were veri�ed works undertaken by the community and on O&M and the number of families that similar works undertaken by government bene�ted. departments like the PWD and the RES. 5 Public Works Department (PWD) is an agency of State Governments engaged in planning, designing, construction and maintenance of Government assets in the �eld of built environment and infrastructure development. 9 Table 1: Performance Indicators Reviewed Factors Indicators Success (i) Age of the structure Sub-projects involving Civil Works (ii) Defects, repair since completion, if any undertaken by community (iii) Use of facility by community (iv) Evidence of O&M plan for sustenance of facility through community action (v) Initiatives undertaken as a direct outcome of the success of the sub- project Success (i) Number of old Self Help Groups revived by group Sub-projects involving Micro�nance (ii) New Self Help Groups initiated related activities undertaken by (iii) Sustainability displayed through regularity of meetings, issues discussed community and funds leveraged (iv) Micro-lending within group and linkages achieved Success Community led innovations in providing access to/creation of service delivery in Social Activities education, healthcare, nutrition, insurance, land access Participation and Inclusion (i) Need prioritization Sources: Minutes Books, FGDs, (ii) Level of community awareness Muster Rolls, mapping of infrastructure (iii) Access and control over resources including power and representation in activities. Gender and inclusion the forums through mandated memberships of SC/ST, etc. captured through the number of (iv) Voice and decision making as reflected in FGD and minute books women participating in the local (v) Match between the perceived bene�ciaries and the actual bene�ciaries decision-making bodies in the targeted (inclusion) communities as evidenced through meeting minutes and FGDs [Rating on (vi) Gender and group relations including wage rates (inclusion) a scale of 1-5] Income, Age and Literacy pro�le Source of income Age pro�ling Literacy pro�ling [The educational quali�cation was coded as per the following scale: 1- Illiterate 2- Class I – V 3- Class VI- VIII 4- Class IX- XII 5- College] Governance (i) Participatory and Consensus Oriented [Rating on worst to best practices on a (ii) Transparency – (Openness, Display) scale of 1-5] (iii) Community/ 3rd Party Oversight (iv) Information and Documentation Management Standards (v) Complaint Redressal System Procurement Performance (i) Need Identi�cation Speci�cations [Rating on worst to best practices on a (ii) Planning and Scheduling Procurement scale of 1-5] (iii) Developing Speci�cations (iv) Market search for Bidders (v) Tendering/Enquiry Process (vi) Tender Opening (vii) Evaluation Process (viii) Award Process (ix) Contract Management/Completion Financial Management (i) Preparation of sub-project budget and making own contribution (ii) Opening, Signatories and O&M of Bank Accounts [Rating on worst to best practices on a (iii) Payment Terms in Contracts scale of 1-5] (iv) Fund Flow Arrangements and Practices (v) Financial Supervision and Oversight Value for Money (i) Comparison of cited and approved estimates as per proposal documents with actual costs incurred as evidenced from �nancial documentation maintained (ii) Cost comparison of sub-project with conventional estimates for similar civil works projects (iii) Time taken 10 Procurement Performance T o measure the performance, the chosen sub- projects were compared with the conventional procurement systems. At this stage, it is useful to Shopping is a method that compares price quotations from a minimum of three suppliers to ensure competitive prices. Low value off-the- consider briefly some of the basic concepts which shelf goods or minor civil works are procured will be central to the analysis of the �ndings. without quotes. The quotation request is made with well-de�ned speci�cations for quality, terms Procurement Standards of delivery and timeframe. Procurement Cycle Direct Contracting at Community Level Organizations is for food grains, seeds, livestock, Figure 2 shows the conventional flow of public seedlings, fodder and feed, or for proprietary procurement from strategic need identi�cation items or in the case of emergencies. Direct to the award process and completion. The set contracting may also be used if urgent delivery is of principles that guide the public procurement required for minor and dispersed works, or works function in the process are: (i) Economy: the right at remote locations where mobilization cost for thing at the right price; (ii) Ef�ciency: economy in contractors is unreasonably high. price and choice of item available at the right time and right place for its intended use. This ensures These two procedures allow for the following Value for Money (VfM); (iii) Transparency: flexibilities: letting everyone know not only facts and �gures - Procured resources satisfy economy and of procurement, but also mechanisms and ef�ciency requirement (lower cost, best processes followed; and (iv) Fairness: the entity quality and timely availability); conforms with rules and standards, free from discrimination and dishonesty. - Project funds pay for the required resources; and World Bank Procurement Guidelines - Suppliers have an equal opportunity to recommend Local Shopping or Direct Contracting compete in a transparent selection process. for Community Procurement in CDD projects. Project Procurement Manual: Community procurement Figure 2: Stages in Procurement Cycle guidelines for the entire lifecycle of the sub-project are developed Need and speci�ed in a separate Completion Identification manual or as a section of the Project Operations Manual. Planning and Outcomes where Award Process Scheduling communities succeed Using the 1-5 scale rating tool of worst to best performance indicators and with the help Tendering/ of documentary evidence, Enquiry Process Developing discussions and FGDs with key Specification stakeholders, each step in the Market Search procurement cycle was rated in for Bidders all sub-projects reviewed. In order to achieve credibility, community 11 procurement needs to measure up at least as 3. Despite poor performance in the technical well as the procurement cycle on these traditional stages, outcomes were good and high performance indicators. scores were seen for completion and project implementation The outcome of the rating is presented below (Figure 3). The U shaped curve emerging from the analysis From this data it is possible to draw the following indicates that despite the failures in technical conclusions: aspects, community based procurement delivered desired outcomes. It is in this dichotomy 1. Communities excel in identifying needs and of delivering a successful outcome while not in the planning stages following the conventional procedures that the 2. Performance in terms of technical procedures study �nds the practice of Relationship Based of conventional procurement cycle, i.e. on Procurement. The communities establish a market search for bidders, tendering, tender mutually bene�cial and accountable commercial opening and evaluation was poor relationship between the purchaser and the Figure 3: U Shaped Curve 6 5 4 3 MP DPIP 2 TN ERP AP IKP 1 Kerala PRI 0 s t ns s s n e n en es es er tio ur io tio et em dd os oc oc ua ca pl cl Bi Pr Pr al ur om ifi is Ev oc r n ir y ec D fo C io Pr d Sp al qu ch at nd an ci g ic En ar ta d er lin tif s le Se m es du en en g ai in m oc t et he em Id ke dl Aw Co D Pr an Sc d ar ag ee g d M d H in an an d ar N op an d M an al el ng ic ct ev g ct hn tra ni rin tra D an c on de Te on Pl C n C Te 12 Box 2: Relationship Based Procurement Relationship Based Procurement (RBP) is a recent concept emerging in procurement strategy. RBP partnering and alliancing was propagated in the construction sector to bring about a fundamental change in the industry traditionally characterized by disputes, �erce competitiveness and fragmentation. W. Derek and H. Keith in their book ‘Procurement Strategies: A Relationship-based Approach’ argue that through a RBP approach, risk and crisis can be better managed and resolved especially in the construction industry. The key to successful implementation of RBP strategies lies in trust. In a paper titled ‘Building on trust: a co-operative approach to construction procurement’ (2001) G. Wood, and P. McDermott de�ned trust as the willingness to rely upon the actions of others, to be dependent upon them, and thus be vulnerable to their actions and in this manner build collaborative partnerships. Complexity of Market RBP corresponds to the top- right quadrant of Strategic Procurement in the Kraljic Matrix of Buyer Supplier Bottleneck Strategic Relationship in limited markets, where the use of RBP can help move the buyers from a bottleneck situation to a strategic situation by using relationships to leverage the importance of the buyer in the limited Competition/ Routine rural market place to the supplier. In return, through Leverage RBP, the supplier also bene�ts from repeat orders from the common goods and services created, which Importance of the Buyer reinforces maintaining the relationship with the buyer on a mutually bene�cial long term perspective. RBP as a method is more than Direct Contracting or Single Source Procurement, as the initial identi�cation happens through a transparent market search among all available suppliers and as it includes vendor retention. Environmental factors like mutual dependence, trust and dependence, sharing of product and market information, and early involvement of suppliers determine the success of RBP on a longer term. An appropriate monitoring mechanism and social audit process in place could ensure that favoritism and complacency do not set in and value for money (VfM) is achieved in every transaction. supplier, even as they compromise on a few rural areas, it is not dif�cult to conclude that the technical aspects of the procurement cycle. bene�ciary lead procurement for public goods, facilities and livelihood activities hinge on their In the present study, the results from the �eld informal relations to the suppliers to arrive at demonstrate trust and faith based relationships cost effective solutions. This relationship based in traditional society. Community representatives procurement improves outcomes through a reported that at times, the market is not prepared signi�cant reduction in costs, and contributes to to supply three competitive quotations i.e. local the sustainability of public assets. shopping. In these situations, the communities work with the sole provider to supply the desired Value for Money (Economy) and goods and services for the common good of Ef�ciency the village. The supplier offers best solutions to build credibility and seek patronage leading to a The prescribed steps of the traditional symbiotic relationship between the buyers and procurement chain are expected to lead to suppliers. Given the faith based social fabric in economy and ef�ciency. The study found 13 that, despite compromising formal controls as of 30-50% when community bene�ciary groups observed in the �gure above, innovative systems have undertaken the construction activities (Wong of procurement and �nancial management by and Guggenheim 2005). the communities are leading to value for money In addition to cost saving, signi�cant time savings and ef�ciency. The informal relations between were found across the three state projects. This the community and the suppliers enable them to can be attributed to the elimination of excess arrive at cost effective solutions through savings supervision and veri�cation of sub-projects, on storage mitigating wastage etc. and the establishment of smooth fund flow Analysis of 47 construction works show that arrangements. The community and the supplier CBP saves cost and time when compared to relied on each other to ensure best choice of conventional PWD/RES estimates and the product, just-in-time inventory system and an savings are higher in labor-intensive sub-projects. ef�cient supply chain, thus ruling out waste both Absolute savings in money is achieved when in terms of material, warehousing costs and time. bene�ciaries carry out the procurement and implementation of works. The savings range from Quality and Sustainability 12% to 56% across the three States (Table 2). Quality and sustainability of completed projects The results of cost ef�ciency and actual savings was analyzed on the basis of: (i) age of the through community based procurement are further structure; (ii) defects, repair or quality issues validated by other research on cost ef�ciency in that surfaced since completion; (iii) community CDD Projects. Studies conducted on community- use of the facility as per plan; (iv) community led works in the Kecamatan Development Program initiatives as a result of successful sub-projects; (KDP) and Urban Poverty Project in Indonesia and (v) Operations and Maintenance (O&M) by have shown that absolute savings in money the community. is achieved when bene�ciaries carry out the procurement and implementation of works. These The results showed that the structures built in studies have shown that infrastructure projects the sub-projects are functional with no reported cost some 25-56% less than similar small-scale flaws or repairs since 3-5 years of construction. works delivered by other public agencies. A case The livelihood focused sub-projects are being study of CDD projects in Indonesia cite savings managed by community groups that have evolved Table 2:Value for Money in Selected Sub-Projects Types of Sub-Project Activities Savings range Average Time in % to original Taken in Months estimate Village Electri�cation Works 16 to 17 4 Lift Irrigation/ Well excavation/ Hand Pumps etc. 48 to 56 3-6 Road Construction 13 to 25 6 Buildings/Walls: Schools, community halls etc. 18 to 48 6 Stop Dams/Cause Way 14 to 33 3-6 Drinking Water Infrastructure 12 to 29 6-8 Drainage System 31 to 33 6 14 over the years to reach high group grading for involvement and community monitoring ensured bank linkages and leveraging funds. Similarly, that the created resources were utilized well; with the service delivery sub-projects were delivering reductions in potential abuse. high quality services in insurance, health and Based on these observations here, it is suggested nutrition and land related legal advocacy. that success and sustainability is directly The completed sub-projects were demand led linked to the intensity of the need of the investments, and included schools, check dams, community. Most of the reported sub-projects drinking water supplies, cattle and insurance. served the critical needs of the community, When vital needs were met by the sub-projects, including the provision of drinking water, drainage the community felt responsible for its upkeep systems, roads and stop-dams for irrigation. and maintenance. The community took pride In many cases the economic activities that the in the completed sub-projects, taking on the community groups had a direct stake in were operation and maintenance of the asset in an supported by these sub-projects, which further organized manner. The consensus approach, contributed to their sustainability. 15 Enabling Factors for Producing Good Community Procurement T his section explores the factors that lead to the creation of an enabling environment for fostering Relationship Based Procurement and Positive targeting of bene�ciaries ensured a more or less cohesive group that worked collectively in planning, decision making. the successful implementation of sub-projects. This �nding is supported by other research In doing so, emphasis is given to the role of (Bardhan and Dayton-Johnson 2001), which project design and governance in community shows that heterogeneity has a negative impact based procurement, which enabled successful on cooperation and commons management. CBP outcomes despite variations from traditional Heterogeneity also weakens the cohesive procedures. potential of social norms and the application of sanctions for violating cooperative behavior Participation and Inclusion and collective agreements. In a rural setting, focusing on creating a homogenous group led to Using the rating tool, documents and FGDs, the a cohesive effort to address common needs. extent of participation of the community in each sub-project was understood speci�cally through: There are a number of factors that affected participation and inclusion in sub-projects. • Community awareness about the project and its implementation; • Positive discrimination: that seeks to redress imbalances by targeting bene�ciaries • Extent of participation in need prioritization; especially women, backward classes, youth and persons with disabilities among • Access and control over resources including communities. The community resource power and representation; persons were selected among the poor to • Voice and decision making; ensure their representation as bookkeepers and local trainers. Fritze’s (2007) case • Match between the perceived bene�ciaries analysis and �eld surveys in 250 Indonesian and the actual bene�ciaries; sub-districts, reports similar �ndings. While CDD projects can help create spaces • Gender and group relations; and for a broader range of elite and non-elite • Wages for women and men. community leaders to emerge, elite control of project decision making is pervasive, and The scores across the projects shown in the project initiated “reservations� can go a long �gure, con�rms that good outcomes from way in mitigating the dangers of elite capture community based procurement is underpinned and effecting a redistribution and change in by high levels of participation and inclusion. the balance of power. • Participatory identi�cation of the poor: Figure 4 : Ratings on Participation and Inclusion Community members collectively participated 5 in social mapping, resource mapping and identi�ed livelihood opportunities within their 4 village. This provided an important foundation for collective sharing of information and 3 prioritizing needs. The village assemblies 2 (Gram Sabha) served as a forum to debate and jointly endorse decisions like 1 participatory identi�cation of the poor (PIP), 0 community facilitator selection and election APIKP MPDPIP TNERP of of�ce bearers. 16 • Leadership selection: In order to circumvent implementation, accountability, transparency, elite capture, project interventions were responsiveness, ef�ciency, and equity. made to reserve leadership positions The 1-5 scale measures the sub-projects on for representatives from marginalized participatory decision-making, free access to communities to have their voices heard in the information, documentation and record keeping, decision making process. supervision in �duciary matters and complaint redressal systems. The high scores suggest • Choice of entry point activities: well-managed, transparent and fair processes Participation is influenced by community’s in sub-project implementation. The study found willingness to accept the project. Entry points that community groups are widely accepted as evoke interest and encourage mobilization reliable in delivering goods, works and services. and capacity building at large. Some works were initiated for common good to meet The rating scale gave emphasis to participation, critical needs of the communities or target use of local language, electing sub-project groups of bene�ciaries. management committees, public announcements, information display and audits of community • Impact of income, age and education: organizations. As an accountability measure, Homogenous and cohesive groups were the Gram Sabhas (village assemblies) served as found with little inter-variation in education or open public forums to authenticate sub-project income. This encouraged interdependence related information. and allowed for weaker groups to articulate their voice in decision making. The village Other than the formal measures of audit, youth and elderly participate equally to lend disclosure and village assemblies, the �eld their vigor and experience respectively in research indicated the emergence of relationship needs prioritization, sub-project planning and based accountability systems. Participatory implementation. identi�cation of common needs, community monitoring and supervision and ownership brings a sense of responsibility to ensure transparency Governance and Accountability and fairness. To enhance local capacity, Social Good governance is premised on well-de�ned Accountability Committees and Procurement processes to describe how community based Committees were established at the local level organizations conduct and manage resources to to further enforce accountability. Many of these guarantee desired outcomes. In the context of CDD governance measures put in place by the sub- projects, important indicators of good governance projects have now been extended to other include participation in decision-making and procurement processes. Table 3: Ratings on Governance Governance Indicators MP AP TN Participatory and Consensus Oriented Decision making 4.35 5 4.1 Transparency – (Free Access, Openness, Display) 4.45 3.23 4.3 rd Community/ 3 Party Oversight 4.25 5 4.7 Info and Documentation Mgmt. Standards 4.2 4.65 4.7 Complaint Redressal System 2.4* 5 4.5 17 Financial Management Funds were disbursed in multiple tranches upon completion of milestones. The project’s appraisal Arrangements team was entrusted with decisions related to Funds were directly channeled into the hands �duciary performance of communities, thus of communities with a strong emphasis on providing them the flexibility to put in place simple information disclosure and transparency, and realistic requirements. When the common especially for project budgets, contracting, and interest groups in MPDPIP failed to present procurement. Broad categories of fund were three quotations, the State project unit revised made available, and communities could use guidelines to facilitate disbursement. Other than their discretion to make consensual investments external audits, local level �nance and audit decisions to meet their needs. For instance committees constituting community bene�ciaries in TNVKP, funds were assigned to categories veri�ed utilization. These arrangements have like livelihood, disabled and youth within which instilled con�dence and built community capacity different activities could be undertaken. to regulate fund flow, plan, budget and procure; to To generate cost savings, improve ownership manage sound credit management and access to and accountability, communities were expected credit from banks. to contribute a �xed share of the project cost. To handle procurement in TNVKP and APIKP, Capacity Building, Technical guidelines were set for a bene�ciary community Support and facilitation to ful�ll. This included assessing the communities’ Decentralized project management involving organizational, �nancial and legal status, grading semi-literate and illiterate groups of people groups, internally evaluating local capacities requires considerable efforts of facilitation and for their ability to carry out micro�nance or nurturing to orient groups towards a common infrastructure works. This ensured that there was purpose and to ensure that they follow systems a certain capacity in place for managing funds and processes that would deliver the results before communities were allowed to handle in an equitable and transparent manner. The procurement activities. facilitative role of the project staff focuses on The sub-projects visited by the study team were capacity enhancement of all stakeholders i.e. rated on a 1-5 scale on key �nancial management both staff, and community members. A highly performance and the �ndings point to the extent of motivated and skilled project implementation flexible arrangements that were put in place and team was institutionalized in all the three projects supported through capacity building oversight whose focus was on the processes that deliver and audit. the desired outcomes. Table 4: Financial Management Ratings Financial Management Functions as Indicators TN AP MP Preparation of sub-project budget and making own contribution 3.9 4.5 4.6 Opening, Signatories and O&M of Bank Accounts 4.8 4.1 4.25 Payment Terms in Contracts 4.45 NA 4.6 Fund Flow Arrangements and Practices 4.55 4.1 4.65 Financial Supervision and Oversight 3.85 4.1 4.1 (1- Poor, 2- Average, 3- Good, 4- Very Good and 5- Excellent) [Rating out of 5] 18 Taking a step-by-step time-bound capacity Convergence in delivering building approach, the continuous improvement successful sub-projects and reflected in the sub-project outcomes. For instance, in Tamil Nadu self-help groups were CBP trained to understand their role and functions While community driven projects have the at the time of formation. Once the Self Help potential to be more sustainable, once completed Groups were able to self-rate and establish bank they appear to suffer from neglect by Government linkages, the next level of training was conducted line departments. Unless communities lobby for to include conflict resolution, refresher courses inputs and training, their ability to sustain such on the roles and responsibilities of of�ce bearers, projects may be limited. Another issue that group planning, budgeting and maintenance of can arise is that of institutional sustainability. records, including bookkeeping and auditing. Often such projects create parallel institutional structures outside the government system, with Staff capacity followed a two pronged approach little or no attention to convergence. From the combining: (i) selection and recruitment practice Andhra Pradesh experience, we concluded (ii) training and development in the areas of attitude that a good institutional mechanism that seeks building, participatory approaches augmented by partnerships with other government departments �eld visits. The study highlighted how the multi- aids implementation and create opportunities to disciplinary teams provide a greater breadth of leverage additional resources. Such a system expertise to address diverse needs. Incentives takes several years to establish to ensure and performance-linked remuneration were acceptance within the community as well as carefully considered to manage performance and government. deal with employee turnover. The study highlights the importance of Institution building empowerment through participation and inclusion; as well as community monitoring Creating strong community based organizations and evaluation through good governance and is one of the pre-requisites for good community social accountability. In such environments, based procurement. Further, these community the communities procure and innovate while organizations should be graded on readiness to subscribing to the basic principles of economy, perform procurement. A system of self imposed ef�ciency, transparency, and fairness. An incentive and penalty can further support effective outcome based linkage that can be drawn is that implementation. Community Operations Manuals the private bene�ts accrued by the individuals prepared by the community, which clearly set from procurement inculcate a sense of ownership out the rules of play in a way that is widely in the process and outcome, in turn contributing understood were also found to be important. to enhanced participation, transparency and A good example of this is the ‘non-negotiable accountability. principles’ and Governance Action Plan in the Tamil Nadu project. 19 Emerging Practices T his section documents some of the best practices and innovations that the study team came across in the �eld. The compilation • GP undertakes a pre-Gram Sabha and Ward Sabha consultation with key stakeholders including farmers, Area Development provides a quick reference for examples that can Societies, school representatives, and be replicated in future community procurement political party representatives to prioritize project designs and development of policies selection of projects that are based on participation principles, transparency, and provide insight into ideal • The information and feedback gathered from procurement conditions. these consultations is then used to prepare Development Report and Vision Document Needs assessment • Working groups undertake the draft plan In TNVKP the need prioritization exercise targeted preparation which details key strategies the most indigent and marginalized groups within along with the priority schemes to be adopted the poor—the disabled. Through participatory for that year need prioritization, the disabled persons in each village were empowered to undertake • GP level Development Seminar is arranged, livelihood activities and provided budgeting and wherein the gist of Development and procurement information. The Self Help Groups Vision Report is circulated, along with plan formed by the disabled community were assisted implementation strategies in planning for income generating activities. Aids, appliances and identity cards enabled their • After Development Seminar, �nalized projects access to existing services letting them become are formulated by the various Standing self-reliant. This case signi�es the need for an Committees effective Entry Point Activity for penetrating the • Technical Advisory Group (TAG) undertake community and demonstrating the commitment the vetting of the Plan of the project to get maximum participation from the community. • The projects vetted by Technical Advisory Group are presented to District Planning Procurement planning and Committee (DPC) which considers the plans scheduling process in detail and gives recommendations for change if needed The planning and scheduling process followed by Local Governments (Gram Panchayats or GP) in Kerala is one of the most advanced in the country. Market search for bidders The State of Kerala has a highly decentralized local In Tamil Nadu, one of the Self Help Groups chose government whereby the elected representatives a livelihood activity that demanded rigorous and bene�ciaries work together in collaboration training and a long duration of stay outside their with the government line departments and their village. Unwilling to stay away from home and technical functionaries to implement projects. The to save cost, the community members chose to planning and implementation guidelines provide bring the trainer to their village at a lower cost, a system for prioritization of needs, allocating using the selection procedures laid out for the resources as per the priorities identi�ed by the project. At this stage the proactive leadership state and meeting the targets as per schedule. by the local Government at the village level and The eight step planning process includes: flexible project functionaries were instrumental • Situation Analysis done by GP with the help in allowing communities to adapt norms and of working groups guidelines to save cost and time. 20 Selection criteria for project The livelihood needs of the poorest of the poor in the self-help groups are prioritized to grant functionaries/staff loans. With the help of community facilitators, The commitment of project staff is essential to SHGs identify and assess the physical, �nancial ensure effective management of CDD projects. and human resources of each of their SHG In Madhya Pradesh, facilitation skills as well as a members and explore improvements. They arrive sound technical background were among the key at individual micro credit plans, integrated into criteria to select project functionaries. The study a group micro credit plan. Funds are limited so team found that a clear vision of the facilitation the �rst tranche of the loan from the project is role of the project staff by the design team granted to the poorest members within the group. resulted in a focus on capacity enhancement at The SHG creates peer pressure on the �rst set of every level. The key initiatives included: prioritized bene�ciaries to utilize the loan suitably for timely repayment. Other group members who • Identifying dedicated individuals with the right are awaiting loans are aware that failure to repay attitude and orientation through thorough would result in no further loans being issued to the assessments, assisted by a specialized and group by the project and the banks. Since funds independent �rm; are conditional, the bene�ciaries closely monitor • Forming multi-disciplinary teams at the �eld and facilitate each other for successful results. level, in order to have a horizontal blend of expertise; Information, Education and • Training and exposure visits for project Communication (IEC) facilitators and managers to reinforce project Information, Education and Communication (IEC) philosophy and approach over two years; Campaigns played a major role in the success of TNVKP. The operation manual was jointly • On-the-job training during implementation, developed by the community and the project staff while classroom training was limited to inputs through a series of workshops. It lists the principles for forming and nurturing Common Interest of the project, explains the livelihood approach to Groups (CIGs) and recordkeeping. poverty reduction and describes the institutions • Performance linked remuneration to check that should be established or strengthened in the employee turnover; high increments and process. Guidelines on procurement, managing promotion for better performing staff. �nances and social accountability are part of the manual. Community involvement in generating These initiatives resulted in a mix of staff members user-friendly guidelines ensured that the community from government, non-governmental organizations knew what and how to do it while maintaining and private sectors; “buy in� from staff; sharing third party oversight. Where empowerment and cross-sector expertise and learning; interpreting socialization is emphasized as part of project theory to real life situations; and making this planning, this can help to build social capital and expertise available to the target bene�ciaries in ensure effective monitoring of the �nancial and the form of a project facilitation team. technical aspects of sub-projects and the social aspects within the implementation groups. Results focused fund flow mechanism Community monitoring The fund flow arrangement in Andhra Pradesh Community monitoring and accountability is an impressive approach using Project funds measures were supported by establishing Social to draw better results with greater accountability. Audit Committees, Financial Management 21 Committees, Procurement Committees, Gender The community members faced dif�culties in Cells, Land Reform Cells which comprised making the right choice for procurement due to of the target bene�ciaries who were trained lack of information and market linkages. The and facilitated to handle the working of these project team organized village and district level committees. In APIKP the Gender cell is managed meetings with suppliers to establish linkages, by paralegals identi�ed and chosen from within understand product speci�cations and their the target group bene�ciaries. These individuals prices. The suppliers were made aware of a were given training and certi�cation to handle large untapped market that the communities social issues and encouraged to develop locally represented and mutual bene�ts of building appropriate solutions to local issues. relationships. A fair and transparent process was followed. Selected community representatives from all villages were invited to identify and short- Parity charts list their needs. Local suppliers were identi�ed The study found innovative efforts in procurement and listed with the positive and negative aspects that have been developed by project teams to of their quality and service. Invitations were facilitate better selection of goods so that value for sent to the short listed suppliers for a public money is achieved. In Madhya Pradesh the district demonstration and negotiations. The suppliers level project team established a new approach to presented their products, prices, offers, service develop a relationship based supply process with arrangements etc. Factors like service, guarantee, leading vendors operating at the district and sub transportation cost, and payment conditions were district levels. A key component of this has been noted. A comparative Parity Chart was made after the ‘parity chart’, which has improved the process these meetings, to facilitate decision-making by of market search, comparison and selection of the community members. products by the project bene�ciaries. 22 Conclusions and the Way Forward for Developing a Framework for Community Based Procurement T he study on community based procurement in CDD projects con�rms that when people are allowed to plan, implement and monitor needs cycle, it was found that need identi�cation, planning and scheduling, developing speci�cations for the items to be procured, making the �nal decision that are close to their livelihoods, there would be on best offer and managing the contracts rate signi�cant savings in cost, improvement in quality very high. Whereas the technical areas of and built-in operation and maintenance. The market search, tendering and evaluation process outcomes are achieved despite deviations from show comparatively lower rating, reflecting the standards of a technically sound procurement inadequacies. The conclusions from reasons cycle. This con�rms one of the core principles of and factors that have led to achieving value CDD, that communities play a self-regulatory role. for money and success despite the technical failure narrated above, points to the need for These positive outcomes are the result of the innovative approaches like Relationship Based capacity development efforts, which were built into Procurement rather than a procedures-led project designs. While there is a need to place trust approach in CDD projects. The focus should in the communities, it is also important to monitor be on the processes itself, especially need their capacity through rating, and evaluation. identi�cation, building participation, open and Efforts are needed in the project preparation phase transparent management, rather than exclusively to create capacity and instill good governance on inflexible procedures. principles among community groups. However, such positive CBP outcomes are feasible only with Conventionally, Relationship Based an enabling environment in which the community Procurement systems based on family and groups federate together, seek and receive kinship arrangements could align with elite technical support, and share the responsibilities in capture and nepotism, however the sub-projects an open and accountable manner. reviewed reflect that, in a rural context, if the institutional structures are in place and the group The study highlighted a number of critical factors that seeks accountability is de�ned by a common for ensuring good community procurement and need this can lead to better outcomes. success in sub-projects. These include choosing a good facilitation team, intensive capacity building of the bene�ciaries through skill training The Way Forward for on bookkeeping, consensual decision making. Developing a Framework for Also important are the use of participatory tools in Community Based Procurement target group identi�cation and need prioritization. Further thinking for developing a Relationship The review of completed sub-projects also shows Based framework for community procurement in that the participation of all target groups and CDD projects, could be based on the following: inclusion of marginalized was institutionalized • Facilitation, training and implementation through the project design, which emphasized should be sequential for social capital to be building community groups for facilitation and built at the group and village level before any implementation. With these provisions in place, procurement activities are initiated. Groups accountability and sustainability was ensured need to be graded on their maturity, trust by multi-stakeholder ownership, and most and inter dependence before procurement importantly social capital, which was built from responsibilities are bestowed on them. within the target communities. Subsequent supervision and monitoring also While reviewing the community groups’ should be based on rating the procurement performance of procurement management in CDD system rather than post review of transactional projects against the conventional procurement procurement activities. 23 • Some processes or standards are imperative • Social Accountability Committees and to protect communities from fraud. These Procurement Committees, as part of the standards should be based on good village level organizations, can help create governance and accountability principles, peer pressure and ensure accountability. The rather than prescribed and overly stringent key to the success of these committees are (i) rules. Processes should not be imposed as who holds various positions, (ii) how are they long as the objectives are met; instead these selected and (iii) what is their acceptability in should be adapted to suit communities. the relationship based model of accountability The communities should be encouraged that operates in the given setting. to �nd means to adopt the four principles • Approaches like Relationship Based of Economy, Ef�ciency, Transparency Procurement would have a high likelihood and Fairness in Public Procurement and of success in rural projects because of the these should be examined carefully before rural family and kinship based social fabric implementation. that allows for a sense of true community • Institution building, to create strong being built and a sense of ownership over the community organizations, is one of the assets generated. They are best undertaken pre-requisites for good CBP. Self imposed in a context-speci�c manner, with a long time incentives and penalties can enable effective horizon and with careful and well-designed implementation within the groups. monitoring and evaluation systems. This study leads to a conclusion that family and • Operational guidelines should be developed kinship networks in the rural setting help by the groups with appropriate facilitation establish better accountability among the of basic principles. The involvement of procurement committees of the groups as the community in generating user friendly well as the local supplier. guidelines helps ensure that it is owned by the group and local social and cultural values are integrated with guidelines for community based procurement. 24 Annexures Annex 1: Models of Community Based Procurement observed in CDD Projects Category I- Family Based Private Asset clinics, after-school centers etc.), agents or change Generating Procurement: Close knit family managers in implementing speci�c activities (like based Common Interest Groups are formed on forming and operating dairy federations) and economic and livelihood considerations and procurement is often carried out for the bene�t of their procurement generates private assets for the community. The NGOs working closely with livelihoods like agricultural implements, cattle, the communities submit proposals on their behalf, etc. In this model, funds are channeled to and and the funds flow into the books of the NGOs or managed entirely by the community. Value of in to a joint account with the community project procurement per capita is often less than $500 management committee through a �nancing and simpli�ed shopping or direct contracting agreement. Value of a single procurement methods are used. A separate Procurement transaction could be from $5000 to $50,000 and Committee undertakes procurement and the shopping or direct contracting methods are used. Social Audit Committee monitors the �duciary NGO undertakes procurement, and community management. Other third party consultants has limited or no responsibility for monitoring the and statutory �nancial auditors are engaged for �duciary management. external assessment; Category IV: Third Party Contracted Category II- Village Organization Based Procurement: Common interest groups or self Force Account Type Procurement: Village help groups outsource sub-projects to contractors level community based organizations manage when the communities cannot manage sub- procurement for community goods and services projects like construction of school buildings, like roads, check dams, community tanks, pipelines, setting up power transformers etc. watersheds, etc. that follow more or less force In this model, the communities participate in account method etc. The funds are channeled to identifying and selecting contractors. The funds and managed entirely by the community. Value are channeled either from the project or the of a single procurement transaction could be community organization to the contractor. Value between $1000 to $15,000 and force account; of a single procurement transaction could be shopping or direct contracting methods are used. between $15000 to $100,000 and shopping or Separate Procurement Committee undertakes National Competitive Bidding (NCB) methods are procurement and the Social Audit Committee generally used. Decentralized Project authorities monitors the �duciary management. Other third or a separate Procurement Committee of the party consultants and statutory �nancial auditors community groups undertakes procurement, are engaged for external assessment; independent Social Audit Committee monitors the �duciary management. Other third party Category III- NGO Based PSA Type consultants and statutory �nancial auditors are Procurement for CDD Implementation: In this engaged by the Project for external assessment; category, NGOs act as service providers (running 25 Annex 2: Rating Tool for Procurement Performance Subject: __________________________________________________________________ Village: Block/Mandal: District: _____________________ ______________________ _____________________ State/Province: Country: _____________________ ____________________________________________ 1.0 Need Identi�cation SOURCE: Focus group discussion comprising of key stakeholders (of�cers, community members and committee members) 1.1 Need generated by village elite/interest groups where none genuinely exists or need exaggerated 1.2 Project reviewed and identi�ed the need with the participation of village elite 1.3 There were other important needs, but majority participated in the identi�ed one 1.4 Need prioritized to meet strategic need, but covering majority habitations and population 1.5 Prioritize budget to meet the most important and strategic need of entire village 2.0 Procurement Planning and Scheduling SOURCE: Implementing/ Executive committee members, Procurement and Financial Committee Members where available 2.1 Inappropriate packaging for favoritism and fraud (in small sizes to keep within locally or larger sizes to avoid local market. Lead to considerable delay and wastage 2.2 Unwanted split or bundle for managing interface by of�cials or village elite causing wastage and delays. With or without F&C intend 2.3 Ad hoc manner of implementing sub-project and making procurement. Lack of scheduling and packaging lead to delays and wastages 2.4 Planned splitting and packaging as needed for the planning schedule for completing tasks, however some delays and wastage happened due to poor market responses 2.5 Planned splitting and packaging as needed for the planning schedule for completing task without delays and wastage happened. Procurement packaging and scheduling took into account the technology aspects. Using innovative approaches like Relationship Based Procurement, Parity Charts, etc. to draw best value from local market by splitting and bundling as per need of timing, package, delivery, etc. 26 3.0 Speci�cations SOURCE: Implementing/ Executive committee members, Procurement and Financial Committee Members where available 3.1 Due to lack of knowledge about items to be procured, the community visiting a single shop, asks for the brochure and copies the con�guration/ speci�cations in the quotation. It is a repeated practice. Unclear and incomplete specs with outdated methodologies. Too speci�c and restrictive with brand names, etc. 3.2 Over speci�cation leading to limited competition. Proposing items and techniques which may not be necessary for outcomes 3.3 Some lack of clarity on specs & standards leading to possibilities of bidders drawing varying conclusions of requirement 3.4 Broad speci�cations are mentioned which could meet performance and delivery. However like with like comparisons dif�cult 3.5 Stating what is required clear and complete. Giving Performance specs that how to do works, using generic details of items with ease of comparisons 4. 0 Market Search for Bidders SOURCE: Focus group discussion comprising of key stakeholders (of�cers, community members and committee members) AND Implementing/ Executive committee members, Procurement and Financial Committee Members where available 4.1 No effort made to identify potential bidders, single source identi�ed or pre decided was used 4.2 Unreliable documentation present as search carried out. Not substantiated and often leading to only 1 or 2 suppliers 4.3 Searched only the market(s) in the proximity mainly due to logistics reasons. But no discrimination among local suppliers seen 4.4 Limited search made from Groups own knowledge. However referred to Rate/ Item Banks thus expanding the market base 4.5 Deciding a list of potential suppliers exactly following the procedures mentioned in the Project legal agreement Annual validation of supplier list, suppliers made aware of ethical practices, for quality issues appropriate steps are taken. 27 5.0 Tendering/Enquiry Process SOURCE: Implementing/ Executive committee members, Procurement and Financial Committee Members where available 5.1 No written invitation, no records of invitees, queries, no speci�cations, no selection and award criteria listed. Only one bid received without any reference to tender number. 5.2 “Sitting tenants� (same few bidders responding every time) only gave formal invitation. Written invitation sent to a select few bidders. No speci�cations, no selection/ award criteria, no uniform response to queries and no single point of contact. 5.3 Written invitation sent to many bidders, weak speci�cations provided but no selection/ award criteria and ITT/RFP sent on different dates and no single point of contact and no uniform response to queries. 5.4 Written invitation sent to many bidders, good speci�cations, selection/ award criteria provided, ITT sent on same date but no single point of interest and uniform response to queries. 5.5 Written invitation sent to many bidders, good speci�cations, selection/ award criteria provided, ITT sent on same date, single point of contact, uniform response in writing to queries shared with all bidders, enquiring with invited bidders reasonably ahead of due date of tender date as to whether they will bid. 5.0 Tendering/Enquiry Process 5.1 No written invitation, no records of invitees, queries. Mostly a single response without any reference to any enquiry made by the group 5.2 “Sitting tenants� CLARIFY write as same few responding each time only gave formal invitation. Selective handling of giving time and answering queries, all with mal intent 5.3 Written or oral information shared with bidders for submitting quotations, all given similar information, adequate time 5.4 Written invitations issued with similar details and no of days for response, but not issued on same date, no uniform responses to queries and no single point of contact. 5.5 Formal written invitations issued to all bidders on same day with adequate time. Queries answered to all and a single point of contact remained through the process 28 6.0 Evaluation Process SOURCE: Implementing/ Executive committee members, Procurement and Financial Committee Members where available 61 No formal comparison, no formal criteria pre-noti�ed, no evaluation note or all quotations not available for post review 6.2 No formal criteria pre noti�ed or comparison tables. However minutes of community groups records receipt of quotations with prices and to whom the contract was awarded at what price 6.3 Bidders guessed the criteria, as the same was not in bid. No separation of functions in evaluation. Minute available of a meeting where bids reviewed and winner decided 6.4 Variations made on noti�ed criteria subsequent to receipt of bids. Combined evaluation note without individual accountability. Bidders contacted for subjective clari�cations during evaluation 6.5 Evaluation carried out as per criteria noti�ed in Bid. Independent members of a committee carried out written evaluation, signed individually. No contacts with bidders during the evaluation process 7.0 Selection and Award Process SOURCE: Implementing/ Executive committee members, Procurement and Financial Committee Members where available 7.1 Selection and Award decision made by authority irrespective of deviations in procedures. No written agreement and No formal acceptance 7.2 Details of selection and award recommendation forwarded are not available, but bids and other reference documents are available. Post dated agreements. No detailed terms and conditions Only receipts of goods available in most cases. 7.3 Incomplete or sketchy minutes in place of recommendations. Approvals do exist. Agreements signed, mostly as offered by Supplier including their terms and conditions 7.4 Selection and Award decision based on proper assessment, recommendations and approval Written agreements/ revenue stamped documents in place.. Inadequate clauses available on delivery, guarantee, defect liability, liquidated damages etc. 7.5 Formal written agreement based on approved recommendations. Signed by both parties with consignee details, security for advances and clauses for liquidated damages and other terms and conditions as per norms 29 8.0 Completion rated SOURCE: Focus group discussion comprising of key stakeholders (of�cers, community members and committee members) AND Implementing/ Executive committee members, Procurement and Financial Committee Members where available 8.1 Delivery details not recorded. Speci�c timelines weren’t met. Post completion services weren’t adequate 8.2 Incomplete delivery/ delivery not as per speci�cation. Complete details of training were there, but there was an evident lack of ownership. 8.3 Except time delays, there were no changes which were to be made during delivery and after completion; the delivery and project completed as required, but O&M not done or details missing. Has requisite documentation 8.4 Irrespective of some delay delivery done with requisite documentation. Properly monitoired and auxiliary variations adhered to for the bene�t of the outcome. O&M details were loud and clear. The project was speaking its success out and ownership was seen everywhere. 8.5 Speci�c timelines were met according to the proposal and evidences of proper monitoring available. Documentation of delivery, completion and hand over perfect. No delay and no extra cost incorporated. Still functional with negligible O&M cost. Universal usage observed. 30 Annex 3: Rating Tool for Governance Subject: __________________________________________________________________ Village: Block/Mandal: District: _____________________ ______________________ _____________________ State/Province: Country: _____________________ ____________________________________________ 1.0 Participatory and consensus oriented 1.1 Elite (of village) capture of decisions, inputs and outcomes or of�cials lead decisions, inputs, and outcomes. 1.2 Selection of sub-project in favor of village majority, sub-projects serving majority, but not entire village. Some habitations left without any details of fund flow, or execution by the sub-project members. 1.3 Challenges expressed over bene�ciary lists, but willingness to revise. Sub- projects divided to “buy in� consensus by habitations. Only respective CIGs know details of sub-projects. 1.4 General consensus on bene�ciary list. Consensus in sub-project selection, planning and execution. Mostly CIG members or villagers in positions of authority (Panchayat) aware of details of execution including fund flow. 1.5 No challenges on bene�ciary list. Consensus in sub-project selection, planning and execution. Majority knows funding and expenditure details. 2.0 Transparency (Openness, Display) 2.1 Lack of awareness or felt need to have a policy for disclosure or openness of the CIG management. Most people unaware of basic project details 2.2 Display boards not located at easily accessible sites. Missing minutes or cash and other registers. Information on basic project details is available with very few. 2.3 CIG has awareness for the need of disclosure policy regarding the project, individual entitlement. However, information available on request basis. Display boards not available for all works undertaken or in all habitations. Minutes and cash and other registers are available but not well maintained. 2.4 CIG aware of disclosure policy for project, individual entitlement. Practices display of bene�ciary details, income and expenditure and procurement details. However, boards are not well maintained and available to all. Minutes and cash and other registers are available but not well maintained. 2.5 CIG aware of disclosure policy for project, individual entitlement. Practices display of bene�ciary details, income and expenditure and procurement details. Minutes and cash and other registers well maintained and accessible. Innovative measures like First Information Report (locally known as Panchanama) introduced. 31 3.0 Community/3rd Party Oversight 3.1 No social or �duciary audit in place. No oversight, maintenance by project staff. Closed meetings held and no sharing of details. 3.2 Project staff oversight present, third party �duciary audit is maintained. However no community oversight. 3.3 Community/3rd party oversight in place, but long gaps displayed in their occurrence. No steps taken to address or make any changes based on suggested recommendations. 3.4 Information on regular community and 3rd party oversight is available. Suggested recommendations followed through. 3.5 Regular process of 3rd party and community oversight. Bene�ciary list known to all. Social auditing through open meetings (Gram Sabha). Details of CIG functioning shared, feedback taken during regular meetings. Sub- project progress, procurement details made publicly available for comment. Recommendations followed through. 4.0 Info and Documentation Management Standards 4.1 Most prescribed documentation missing. No knowledge on ledger maintenance or upkeep of minute book details. No idea regarding required documentation for different procedures. 4.2 Knowledge within the group on the importance of maintaining documentation, however no concrete efforts taken to realise this. Available minutes, registers etc. looks manufactured post facto. 4.3 Project proposal, UC and cash registers are maintained. However, minutes book are not well maintained and there is no data on the functioning of the CIG. Most receipts are handwritten on small scraps of paper. 4.4 Prescribed documentations including minute’s book, cash registers, user group registers, measurement book, utilization certi�cate, proposal document etc. are available. There is no �xed responsibility for maintaining the documentations and updating is done on an as needed basis. 4.5 Prescribed documentations including minute’s book, cash registers, user group registers, measurement book, utilization certi�cate, proposal document etc. are available and well maintained. Each member’s signature available for the days that meetings attended. There is �xed responsibility for one member to ensure all records are updated and stored in a safe manner. Each receipt voucher has a government stamp attestation. 5.0 Complaint Redressal System 5.1 No framework or system for complaint redressal. 5.2 Need expressed for a method. Or the current complaint redressal system is complex- money and time intensive. Involves too many procedures. 5.3 Complaint redressal system present but the stated resolution time frame isn’t followed 5.4 Timely complaint redressal system in place. Documented incidents when this has taken place. No guidelines on escalation. 5.5 Coherent complaint redressal system that indicates the time frame for problem resolution, escalation. Evidence of the system functioning effectively. Various minutes record, conflicts and mechanisms to resolve them. 32 Annex 4: Rating Tool for Performance of Financial Management Subject: __________________________________________________________________ Village: Block/Mandal: District: _____________________ ______________________ _____________________ State/Province: Country: _____________________ ____________________________________________ 1.0 Preparation of sub-project Budget and Own Contribution 1.1 Clear Elite/of�cial capture of planning, preparation etc. Majority members are dormant, bene�ts accrue to them as wage etc. 1.2 Sub-project is an imported idea by some village elite or project of�cials. Developed by limited no of people. Knowledge of funds, estimation, expenses with limited few. Possibly, own contribution was inflated in the budget estimate. 1.3 Sub-project is an imported idea by some village elite or project of�cials. Developed by limited no of people. Knowledge of funds, estimation, expenses with limited few. Possibly, own contribution was inflated in the budget estimate. 1.4 Sub-project is decided within consensus. Some Members were involved in developing detailed activities and budget. Knows sanctioned amount. Own contribution was made by each member as veri�ed 1.5 Sub-project is decided within community in consensus. Members developed the budget based on detailed plans, BOQ and estimates. Everyone is aware of the total proposed cost and sanctioned amount. Own contributions were made by individual members as veri�ed. 2.0 Opening, Signatories & O & M Bank Account 2.1 Signatories are nominated by the elite and of�cials. O & M is carried out by Book keeper or people other than the CIG 2.2 Signatories are aware of the bank nuances and goes for the transaction part; however for O&M one individual overshadows others. Signatories seldom visit the bank for operations and pass book updating. 2.3 Signatories go for the transactions, manages the passbook, knows the whereabouts of the funds, but mostly one elite or Book Keeper is in control of expenditures 2.4 Signatories go for the transactions, manages the passbook, knows the whereabouts of the funds, but mostly one elite or Book Keeper is in control of expenditures 2.5 The bank account is maintained by the unanimously designated signatories from amongst the villagers and performs their job effectively giving no room for any pilferages. Records are maintained well and all back tracking of expenses found required supporting documentation 33 3.0 Payment Terms in Contracts 3.1 Inappropriate method including large advances leading to loss of control and contractual dispute 3.2 On Supplier’s Call and did not use the leverage of the project. Advances without security and delays 3.3 Unclear payment terms and lack of consistency between different suppliers leading to disputes after placing orders 3.4 Payment only on delivery, without any advances or interim payments 3.5 Payment mainly on delivery, however, adopted flexibility to best motivate the supplier to offer and deliver in time 4.0 Fund Flow Arrangements 4.1 Memorandum of Understanding (MoU) was just used for getting the funds. Activities changes without proper re course. Elite might have contributed for everyone on “Own contribution� component. Rampant delays in fund flow. 4.2 Major variations between approved Memorandum of Understanding (MoU) activities, schedules and actual implementation. Flow of own contribution erratic, inadequate and not veri�able. Delays in release and receipt of installments 4.3 Minor variations found between Memorandum of Understanding (MoU) and implementation Bene�ciary contribution was collected into the pool but not timely and individual details are not traceable. Usage of the tranches was late due to delay and unavailability of resources. 4.4 Memorandum of Understanding (MoU) with total cost, installments and milestones used for managing funds; Budget developed by the members was well executed and subsequently. Some delays and minor discrepancies on own contribution observed 4.5 Memorandum of Understanding (MoU) with total cost, installments and milestones used for managing funds. Bene�ciary contributions received in right time. 50% fund received on signing MoU within 7 days. Rest received. All the pre-requisites are met. 5.0 Financial supervision and oversight 5.1 No support, training received from Project Facilitation Team (PFT), District Project Management Unit (DPMU). Gram Sabha Audit not seen. Audit not undertaken or has negative observations pointing to lack of capacity and monitoring. 5.2 Some Support training received by a few members from PFT, DPMU. Gram Sabha audit was not found. Audit was undertaken and has negative observations 5.3 Some Support training received by a few members from PFT, DPMU. Audit done by Gram Sabha and DPMU/PFT. No negative observations noticed. 5.4 Internal auditing and other regular oversight function were undertaken by DPMU/PFT. Expenditure details were placed in GP. Training was imparted to few members. Village Resource Person (VRP) dominated the work in this task. 5.5 Internal auditing and other regular oversight function were undertaken by DPMU/PFT. Expenditure details were placed, discussed and approved as per GP Minutes. Auditing was flawless with no neg. observations. VRP Training and orientation to other CIG members carried out. 34 Annex 5: Selected Case Studies 1. Working with Suppliers to the farmers and encouraged them to approach the vendor for a solution. The proprietor, who by Achieve Innovative and Cost now had established a good relationship with Effective Solutions the villagers and project, did all he could do to resolve the problem. The new pump which was Obari is a sleepy little village some 100 kms away procured as a replacement was a modi�ed auto from the district headquarters of Rewa in Madhya rickshaw engine which had the capacity to pump Pradesh. A remote village nestled on the border the water up to the needed height. Surprisingly, with Uttar Pradesh, the area is notorious for this unconventional solution worked! dacoits (bandits) and its general inaccessibility. There is no market supporting the area and The community had successfully implemented the only available resources are the natural the work with nearly a 50% reduction between the resources: the river, the land and the forest. estimated costs and actual cost. The total amount The challenge faced by the community and calculated initially, including the rail pipes and the MPDPIP was in introducing any kind of income custom made motor, had been INR 6, 00,000 and generating groups in this situation. Brainstorming the amount that was spent thanks to negotiations generated one feasible plan: using the river and meetings with involved marketing personel water for irrigation of the surrounding lands. of both Reliance and Greaves Cotton, was INR However, the implementation generated another 3, 12,600. challenge, since the �elds were at a height of 6 meters and nearly 1600 meters away from the river. Technical guidance bolstered the faith of a 2. Building a Lifeline through few families within the village and they decided Community Based Procurement to form a common interest group (CIG) with the support of the project facilitation team (PFT) to In Chapran village of Chattarpur district, Madhya pursue their goal. Pradesh, India, a habitation of about 90 Backward and Dalit (lower caste) households have used The community members approached vendors community contracting to build a causeway that and detailed their speci�cations: a pump that has brought them not just livelihoods but given could lift the water to the needed height and them a lifeline. distance, and pipes which could convey the water to the �eld. Based on the reliability and quality A few years ago, the inhabitants remained assurances made by Sanjay Agrico, the villagers isolated for most of the year due to flooding chose him as the supplier. The CIG members, from backwaters of a nearby dam. The only with inputs from the PFT, decided to choose a available option was to walk over a railway bridge pump manufactured by Greaves and rail pipes to get across the water surrounding the village. manufactured by Reliance. It being a new entrant Unfortunately, a blind turn along the railway into the rail pipe market, Reliance was able to track made it impossible for the people to get a provide a number of subsidies since it wanted glimpse of the coming disaster in case a goods to get a foot hold in the market and establish a train was headed their way. They often had no relationship with a seemingly successful project. option other than jumping off the 12m high bridge or risking their life. Children were unable to attend Amidst a large group of curious onlookers, the regular school, vegetable produce could not be pump was inaugurated and it failed! The PFT transported to the nearby Mandi (vegetable now had their task cut out. They again rallied market) and no emergency medical aid could be 35 arranged in a timely manner. Lakshmibai, a long- Keeping in mind the limitations and problems term resident shared “It isn’t that we had been expressed by the communities that they were silent about our plight, we told the minister, we working with, the State Project Unit (SPU) decided told the government of�cials but no one helped. on the following solution. They sent letters to the It is only through MP-DPIP that we were able 14 DPMs to organize sequential village, cluster to achieve this feat. The facilitators of MP-DPIP and district level meetings with suppliers. These asked us what we wanted, and helped us make meetings were held with the goal of establishing it come true.� market linkages, understanding pricing and machinery speci�cations and helping the The State project team worked with the community suppliers realize that there was a large untapped to meet the community’s self identi�ed dire and market that the communities represented and that strategic need through the Bank supported establishing a relationship would be pro�table to Poverty Initiatives Project. Initially the community both. was mobilized into an executive group and then the group was guided to bring in local technical The DPM of Chhatarpur wrote to the PFTs in resources for the construction. The group worked Khajuraho, Rajnagar, Bijawar and Naugaon innovatively. They initiated a relationship with the to organize cluster level meetings of suppliers only locally available supplier of building material and villagers. A detailed guideline entailing the who offered to give them good materials at following conditions was provided to the PFTs to whole sale market prices ensuring a Just-in-Time ensure that a fair and transparent process was Supply- leading to further saving on warehousing followed: costs and limiting wastage. The villagers of Chapran built the causeway with a cost saving of • Selected representatives from all villages and nearly 33% compared to the engineer’s estimate farmers that were under the coverage of the based on the state Public Works Department’s particular PFT should be invited to identify (PWD) Schedule of Rates. and short list their needs; • In this meeting, all companies available in the 3. Using “Parity Charts� help local market, including the largely prevailing Community and Suppliers to brands in the area, should be identi�ed and engage in “Relationship Based the positive and negative aspects of their quality and service noted; Procurement� • Based on this, invitations should be sent to During the meeting with the Project team the authorized suppliers of short listed brands at Chhatarpur, the study team learnt of an for a public demonstration of samples and for innovative tool put to use in Madhya Pradesh. allowing negotiations to take place; Project of�cial had found that the villagers faced multiple dif�culties in making the right choices for • A comparative Parity Chart should be made procurement. Rate banks were often useless as based on the meeting; the supplier could always change prices based on demand, and often the villagers felt that if they • Re-negotiation of prices should be undertaken had more knowledge or say in market linkages in the public meeting to arrive at a �nal price; they could have got a better deal. The State team headed by the District Project Managers (DPMs) • Possibilities of bringing suppliers from large of the 14 districts decided to introduce parity cities like Indore and Bhopal should be charts for ease in community procurement. explored. 36 Accordingly, the PFT at Khajuraho organized such Following the cluster level meeting, suppliers a meeting where products were demonstrated and were again invited to the district level for further rates and speci�cations were discussed. Dealers interactions with the DPM of�ce bearers, of all major pump suppliers including Usha, and representatives of Gram Sabha. During Bharat and Kirloskar attended the meeting along the course of this meeting negotiations were with 26 village representatives. During the day- undertaken to enable a mutually bene�cial �x on long demonstration meeting, suppliers presented the minimum price of the most commonly used and demonstrated their products and declared items, such that the villagers and the suppliers their prices, offers, service arrangements etc. would both bene�t. The suppliers were amenable Factors like service, guarantee, transport cost, to negotiating a best price, knowing that they �tting, oil, diesel, test run, payment conditions were linking up with an untapped market full of and procedures were all noted to generate a potential. 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