Mission Statement and Principles
USTDA’s Global Procurement Initiative (GPI) educates public officials in emerging markets on how to establish procurement practices and policies that integrate life–cycle cost analysis and best value determination in a fair, transparent manner. The GPI helps countries acquire high-quality, long-lasting technologies, while building smart, sustainable infrastructure with overall savings to their government. These procurement methods also open markets to greater international competition. At the heart of the GPI are six key principles that guide all activities and assistance.
Specifically, the GPI seeks to:
- Amplify the significant role public procurement plays in economic development in emerging economies, and specifically in implementing infrastructure projects to achieve sustainable growth and development and long-term economic stability.
- Promote greater transparency and fairness in the procurement processes of partner countries to achieve high-quality outcomes and greater returns on investment to the government.
- Deepen the use of objective and value-based analytical procurement practices, such as the use of life-cycle cost analysis, in the procurement of high-quality goods, services and critical infrastructure projects.
- Strengthen the technical capacity of public procurement officials in emerging economies to utilize best-value determination for the evaluation and award of tenders.
- Empower public procurement officials through increased delegation of authority and contribute to the professionalization of public procurement officials around the world.
- Promote the adoption of internationally accepted best practices in procurement and the principles for quality infrastructure investment as stated in the G20 Principles for Quality Infrastructure Investment.
Why the GPI is Necessary
Effective public procurement systems require good governance, transparency and accountability. Countries are best served when they have a level playing field to promote international competition and invest in quality infrastructure to sustain their economic growth. With government spending accounting for up to 20 percent of GDP in many emerging markets, sound procurement practices become vital to ensure the cost-effectiveness of public funds.
The GPI helps partner countries achieve these important objectives by demonstrating how high-quality solutions lead to lower overall costs over the entire useful life of a technology or equipment. GPI participants are taught to look beyond higher initial purchase prices and consider comprehensive service, maintenance agreements and other factors.
The GPI also demonstrates the risks associated with low-cost procurement policies, including the acquisition of low-quality solutions that shorten the useful life of an investment, have high ongoing operating costs and lead to a higher long-term total cost of ownership.
By helping partner countries create a level playing field for their public tenders, the GPI consequently promotes more inclusive and competitive international procurements that encourage firms to offer innovative, higher-value goods and services.
Consistent with other USTDA programs supporting early-stage infrastructure project planning, the GPI aims to promote an understanding of the impacts, in terms of project success, of utilizing best practices to obtain value throughout the procurement life cycle and provides training in effectively employing these best practices fairly. The adoption of international best practices in the procurement life cycle focusing on value for money by GPI countries positively affects the procurement environment and encourages international competition. Greater competition means higher quality goods and services provided at a better overall cost to the government. U.S. firms have expressed to USTDA that the increased use of LCCA would positively impact their ability to successfully compete for contracts in developing and middle-income countries. Although the high-quality, high-value equipment and comprehensive service and maintenance agreements provided by U.S. companies sometimes come at a higher initial purchase price, they frequently offer lower overall costs when considering the entire useful life of the technology or equipment.
While cost will always be a consideration in public procurements because public funds are always limited, the focus on value for money produces a winning model for both the government and industry. By utilizing a best-value approach to procurements, using more objective evaluation criteria, such as life–cycle cost analysis, and strengthening the professionalization of the procurement workforce, countries can achieve high-quality, sustainable infrastructure that provides long-term economic benefits to the government.
GPI Is a Unique, Targeted Tool
Since its establishment in 2013, the GPI has helped public procurement officials in partner countries across the world develop value-based procurement practices and policies by deploying custom-tailored solutions that leverage the expertise of USTDA’s institutional partners and collaborators, including universities, multilateral development banks and private sector experts. More specifically, GPI addresses the following four key areas of public procurement:
GPI countries consistently indicate to USTDA that their current policies do not always allow them to get the best value for their money in procurement decisions. By relying on cost as the determining factor for award, government procurement practices fail to consider key factors such as equipment quality, timeliness of delivery, operations, service and maintenance. Acquisition Planning Tender/Procurement Phase Contract Management 10 Activities under the GPI aim to improve procurement methodologies by working with GPI countries within the confines of their current laws to promote an understanding of how to implement and use best value determination in their procurements.
The concept of best value allows governments to move toward the consideration of tradeoffs where the government can determine what factors are the most important considerations for the award of the contract other than price. For example, the government can consider past performance of the contractor as a determinant for the award of tenders and/or potentially use other non-price factors to get greater quality and value on behalf of the government. Using non-price factors can be more subjective rather than objective in nature, and therefore, are much more cumbersome to manage in terms of limiting opportunities for corruption. To switch to a best value approach to procurement, countries must have very strong independent complaint mechanisms to maintain the integrity and transparency of the procurement system, along with a training program with high educational and certification requirements for procurement officials serving in this capacity.
In a system where best value is the focus of each procurement, the buyer is empowered to consider the whole-life costs of project looking specifically at quality, resource allocation, timeliness of delivery and convenience to determine whether these elements as a whole constitute good value and provide economy, efficiency and effectiveness for the government. In the context of procurement decisions, best value implies that bids are not awarded to the lowest cost bidder, but to the most qualified bidder that offers the overall best value for money to the government.
Life-Cycle Cost Analysis (LCCA)
Life-cycle cost analysis (LCCA) is a methodological tool used to assess value and calculate total cost of ownership. LCCA is frequently used by acquisition officials in procurement decisions and is a central focus of the GPI curriculum. LCCA quantifies the “whole-life costs” of a project, taking into account key procurement specifications such as warranties, quality and sustainability, among others and compares them against alternative investment options. More than a simple cost comparison, LCCA offers a formulaic approach to determine and demonstrate the relative economic merits of different purchase alternatives in an analytical and fact-based manner. LCCA utilizes objective metrics, demonstrating that the purchase of high-quality products can lead to better long-term economic outcomes.
Procurement systems vary across the world, and most procurement systems in emerging economies are compliance focused and designed to eliminate any subjective judgement on the part of procurement officials. Focusing on compliance with procurement laws and regulations is very important; however, if procurement officials are only tasked with checking boxes during the procurement process and are not focused on the outcome of the procurement – whether or not it serves the purposes of the government or the constituents it serves – then the process becomes problematic in that it ignores the fiscal responsibility of the government. Thus, moving towards a more value-based procurement system can introduce concepts such as the use of “trade-offs” and the use of non-price factors into the evaluation process. However, many countries do not have the proper safeguards in place such as independent complaint mechanisms or training programs for procurement officials to move to a completely value-based procurement system. Therefore, these countries need more objective mechanisms to evaluate quality through 11 the procurement process that can provide the government the information it needs to make sound procurement decisions.
The GPI facilitates the use of life-cycle cost analyses as a more objective and transparent way for the governments in emerging economies to discern value and understand the total cost of ownership of their investments. Procurement decisions that take a more comprehensive view of life-cycle costs and performance standards result in significant benefits for the host country’s long-term economic development.
Professionalization of the Public Procurement Workforce
A pivotal goal of GPI is to strengthen the professional capacity of procurement officials and to promote knowledge-sharing on efficient, fair and modernized procurement practices. Procurement specialists/officials are key players in the public sector but are often behind the scenes in the workforce or are assigned procurement as a collateral duty. Emerging economies often rely on least-cost procurement decisions in part due to the lack of professional training and/or technical knowledge of the procurement workforce on how to obtain the best quality and value for procurements of the procurement workforce. Procurement specialists need the training and technical expertise required to incorporate total costs of ownership in the valuation of bids and necessary for executing LCCA and best value.
How to be considered for GPI Assistance
Countries interested in being considered for GPI assistance should directly contact USTDA at firstname.lastname@example.org or the US Embassy in country or GPI partner organizations and collaborators.
1. GPI Observer Country
A GPI Observer Country is a country that needs additional help implementing its procurement laws that allow for greater value analysis or developing or strengthening institutions or oversight bodies to prevent against the exploitation of the procurement system. The country must have an existing procurement law already enacted that allows for an evaluated price structure or consideration of quality in tenders and must be open to international competition. The country’s leadership must also demonstrate the political will to implement change in the procurement system and update policies and practices, as well as demonstrate a willingness to train its procurement workforce.
2. GPI Partner Country
GPI Partner Countries have procurement laws already established that allow for the government to consider value for money in government procurements or use other evaluated price structures to quantify value. GPI Partner Countries have demonstrated the political will to reform and implement changes in their procurement systems, have the proper safeguards and oversight bodies established to promote greater transparency and have agreed to the professionalization of the procurement workforce but may need additional assistance to implement these changes. Partner Countries want to increase international competition in their market but lack the knowledge and skill to attract international companies without further assistance implementing value-based procurement mechanisms to encourage companies to compete. For GPI Partner Countries, USTDA may deploy its full suite of tools, but the content of the programs will focus on teaching countries how to fully utilize LCCA in all three stages of the procurement life cycle.
3. GPI Mentor Country
GPI Mentor Countries are those countries that do well in the GPI Partner program, that have successfully transitioned and implemented value-based procurement methodologies. GPI Mentor Countries have successfully created training programs for their procurement workforce and have developed, or are in the process of developing, established career tracks for their procurement officials. As “mentors”, these countries can share their knowledge with GPI Partner Countries and provide their own lessons learned throughout the transition to a best-value approach to procurement. Assistance to a GPI Mentor Country is much more targeted and technical in nature to support more sophisticated use of trade-offs, past performance and other non-price evaluation factors that are indicative of more advanced procurement systems.
The GPI tailors all its programs to meet its countries where they are in their procurement system development.
USTDA’s GPI Toolkit
Under the GPI, USTDA provides customized country programs that include:
- Training: In-country and virtual training led by procurement and infrastructure experts from the GPI’s partner organizations;
- Study Tours: Sponsored visits for partner country delegations to visit key U.S. procurement stakeholders at the federal, state and local levels and receive more in-depth training; and
- Technical Assistance: Technical advisory support services to procuring entities, to assist with the implementation of value-based procurement methods and formulas to ensure the proper utilization and integration of methodologies learned throughout the GPI program.
GPI Organizational Partnerships and Support
The GPI works closely with partner organizations and collaborators to enhance its impact, gain access to new resources and technical expertise and ensure that our partner countries are well exposed to various best practices from around the world.
The GPI was founded in partnership with the Government Procurement Law Program at the George Washington University Law School. Since the GPI’s launch in 2013, professors from the Massachusetts Institute of Technology, Tufts University, and University of Tennessee have carried out various program activities. Given their importance to emerging market infrastructure funding and emphasis on procurement reform in international development assistance, the GPI partners with multilateral development banks including The World Bank Group and African Development Bank. Other global partners include Japan’s Ministry of Economy, Trade and Industry and Australia’s Department of Foreign Affairs and Trade, who also share USTDA’s goal of advancing quality infrastructure in emerging markets through best-value and international best practices in public procurement.
The GPI also collaborates with like-minded organizations and countries that have helped implement GPI programming, including the European Bank for Reconstruction and Development, Asian Development Bank, Inter-American Development Bank and Organization of American States.