E- Procurement: Asian Development Bank’s Policy and Practice

A paper1 prepared for the National e-Procurement Forum on 27 April 2009 in Beijing, China
By Yinguo Huang, Principal Procurement Specialist, Asian Development Bank

I. Introduction

1. This paper briefly describes Asian Development Bank (ADB), its mission and its
partnership with the People's Republic of China; highlights ADB's procurement principles;
discusses e-procurement requirements for ADB financed projects; and provides some updates
on ADB's current practice and the way forward in e-procurement. The scope of this paper
covers mainly procurement of goods, works and consulting services required by the public
sector and e-Government Procurement (e-GP) is defined as the use of information technology
systems and networks by governments in conducting their procurement relationships with
suppliers and contractors for such procurement.

II. ADB's Partnership with the People's Republic of China (PRC)

2. ADB is an international development finance institution whose mission is to help its

developing member countries reduce poverty and improve the quality of life of their people.
Headquartered in Manila, and established in 1966, ADB is owned and financed by its 67
member countries/regions. The PRC has received $19.25 billion loans in total assistance since
joining the Asian Development Bank (ADB) in 1986. ADB’s Country Partnership Strategy (CPS)
for 2008–2010 supports the PRC's people-centered outlook on development by focusing on
inclusive, environmentally-friendly, private sector-led development, and by assisting the
Government’s participation in and contribution to public goods, regional cooperation and
integration, knowledge sharing, and regional infrastructure initiatives. The 2008–2010 lending
pipeline totals about $5.06 billion.

3. The implementation of ADB's projects in PRC generates an annual average of over $1

billion of contract awards for goods, works and consulting services and this figure will continue
to grow. Although ADB's finance assistance to PRC accounts for a very small portion of PRC's
more than $1 trillion fixed assets investment, ADB sees its partnership with PRC as an
opportunity to work together with the Chinese Government and the ADB project executing
agencies on strengthening governance on development projects. Building up a legal framework
and capacity for government procurement has been a part of ADB's efforts. For example, the
area of government procurement, ADB provided two technical assistances, in 1999 and 2001
respectively, to help the PRC Government draft the Tendering and Bidding Law and the
Procurement Law. The former was adopted by the National People's Congress (NPC) in 1999
and the latter adopted by PNC in 2002.

4. ADB's projects provide opportunities to Chinese companies to bid for procurement of

goods and works not only domestically but also overseas in other developing member countries
of ADB. In the past three years, PRC has been ranked among the top two winners of ADB's
contract awards for procurement.

1
A large part of this paper is based on the following ADB documents:
 Country Partnership Strategy for P. R. China (2008-2010)
 ADB Facts Sheet, China
 ADB Procurement Guidelines
 ADB Project Administration Instructions
 E-Bidding Requirements for MDB Financed Procurement
III. ADB's Procurement Principles

5. ADB's Charter (Agreement Establishing the Asian Development Bank, of which PRC is a
signatory) states ADB's operating principles. Those relating to procurement are:

 Source of Procurement - Proceeds of a loan can be used only for procurement of goods
and works supplied from, and produced in, member countries of ADB.

 Economy and Efficiency - To achieve economy and efficiency, contracts are to be

procured through international competition unless other forms of procurement are more
suitable and have been agreed upon between ADB and the borrower.

 Fairness - Procurement procedures must give member countries adequate, fair, and
equal opportunity to compete for contracts.

 Transparency - Transparency is essential in the procurement process to achieve

economy and efficiency and to combat fraud and corruption.

6. E-Procurement for ADB Financed projects are also guided by the above principles.

IV. E- Procurement requirements for ADB Financed Projects

7. ADB's borrowers are increasingly inclined to use electronic procurement systems and
means for processing and managing procurement activities. This trend is also observed in the
borrowing countries of other Multilateral Development Banks (MDBs). MDBs noted the need of
the individual governments for finding their own paths in the development and implementation of
e-procurement, and that for each government, there is no single 'right' solution. However, in
recognizing these individualities the MDBs also have responsibilities to their donors, other
borrower countries and their own governance rules. These responsibilities mean that the MDBs
have some minimum standards and qualities that must be met if such electronic systems are to
be applied to the activities that they fund. For this reason, ADB, in cooperation with the World
Bank and the Inter-American Bank, has prepared specific guides on e-procurement, which can
be accessed at www.mdb-egp.org. The key principles and requirements are highlighted below.

 transparency,
 non-discrimination,
 equality of access,
 open competition,
 accountability and
 security of process

8. The following requirements are designed to support these principles for MDB related
activities.

a. System Access

9. Access to e-GP system should be free, open, equal and unrestricted to all prospective
bidders/consultants to the public. The system shall be an Internet based approach accessible by
users through commonly used browser software. Downloaded documents shall be readable
through open standard office software.

b. Advertising

10. Electronic advertising of procurement opportunities should be posted on a publicly

accessible web site that is well known nationally, well maintained, functional, and affords free
and unrestricted access. There shall be no material difference between the paper documents
and those advertised online.

c. Correspondence, Amendments, Substitutions and Clarifications

11. Correspondence with bidders during bid preparation may be done electronically so long
as print correspondence is used for bidders who request it. All clarifications and amendments or
substitutions of the bidding documents, as well as any pre-bid conference minutes, shall be
posted simultaneously onto a bid tracking page of the bid advertising website that is freely
accessible to all. Amendments or substitutions by any official will be tracked and recorded for
audit. Systems shall ensure that only authorized changes can be made.

12. Correspondence during bid evaluation for the purpose of clarification may also be done
electronically with the normal restrictions against modification of the substance and price of the
bid. Any correspondence of this type shall be directed through the Chairperson of the evaluation
committee. Confidentiality of the bid evaluation process shall be maintained.

d. Bidding Documents

13. Contracting Authorities may distribute Bidding Documents/RFPs by using electronic

systems (download from website). The use of ADB's Standard Bidding Documents/RFPs is
required. There shall be no difference between electronic and print versions of the Bidding
Documents/RFPs. Contracting Authorities shall ensure the integrity of Bidding Documents in
electronic format and their online publication and bidders/ consultants should have access to the
legally binding Bidding Documents/RFPs.

e. Submission of Bids/Proposals

14. Contracting Authorities may offer enrolled bidders/consultants the use of electronic
systems to submit bids/proposals conditional on the following:

 There shall be security arrangements to ensure confidentiality and integrity of

bids/proposals in electronic format.

 Bids/proposals submitted online shall be virus scanned by the Contracting Authority

before being uploaded into the online bid box, and where this causes a bid to be rejected
the bidder/consultant shall be notified immediately.

 Online submissions shall be received into an electronic bid box and maintained to high
standards of security for record-keeping and audit. At no time shall bids/proposals be in
unencrypted format. Copies taken and decrypted for bid evaluation purposes shall not
affect the integrity of the original record.

f. Public Bid Opening

15. Electronic and or print bids if submitted shall be opened in a public opening at a location
and time (deadline) designated in the bidding documents. Bids/proposals in electronic format
shall be protected against access by unauthorized persons until the publication of the contract
award. Contracting Authorities shall open bids/proposals in electronic format first followed by
the bids/proposals submitted on paper.

g. Bid Evaluation and Contract Award

16. The Contracting Authority may use pre-approved automated evaluation processes so
long as the evaluation aligns with the criteria established in the bidding documents; is consistent
with the principles of economy, efficiency, equal opportunity, and transparency and results in
contract award to the lowest-evaluated, responsive bidder/consultant. A bid evaluation report
(BER) shall be prepared and transmitted electronically for review if ADB requests. Contract
awards shall be published online consistent with bid advertising.

h. Information Security Management

17. For any e-GP processes engaged internally or through third parties, the Contracting
Authority shall develop, maintain and implement an information security management system
that conforms with international standards2 for information management and takes account of
recognized best practice, including but not limited to asset security, access security, human
resource security, operations management and business application controls, documentation
and script sufficiency and security, physical and online security, business continuity, record
keeping and compliance.

i. Authentication

18. Where a Digital Certification/Signature is required, the certification process shall certify
bidders for a reasonable period of time (at least one year) and bidders shall not be required to
request a certification for each bidding process. The certification process shall be kept open
permanently allowing bidders to submit the request for certification at any time in order to allow
them to register in advance for future bidding processes. The certification process shall accept
an electronic signature or a digital certification/signature issued by certifying authorities within
the country of the bidder, or the process shall accept submission of online or offline
documentation for certifying the authenticity of the bidder representative, accepting such
documentation that can be obtained under commonly used procedures in the country of the
bidder.

V. ADB's Current Practices and the Way Forward

a. Current Practices

19. To ensure transparency and equal opportunity, ADB requires its borrowers to advertise
all procurement activities that require competitive bidding. Disseminating information on
procurement contracts subject to international competitive bidding (ICB) is done by posting
invitations for prequalification or bids in adb.org in addition to advertising through either an
English language newspaper of general circulation in the country of the executing agency (EA),
or an internationally known and freely accessible web site in English.

2
such as ISO/IEC 17799:2001, AS/NZS 7799.2:2003, HB 231:2000.
20. The www.adb.org online advertisement contains general procurement notices (GPNs)
and specific notices (SNs). A GPN contains general information about a project that is approved
or is being considered for financing. The GPN for a project appears in adb.org for at least one
month, but preferably three months, before the first prequalification (where prequalification is to
be carried out) or bidding documents are made available for issue. An SN refers to the
advertisement for prequalification (where prequalification is to be carried out) or bidding for an
individual contract. A minimum period of 6 weeks is allowed for the submission of
prequalification applications. For ICB procurement, invitations for bids require a minimum
bidding periods of 6 weeks. This period is counted from the publication date of the relevant
invitation in the Business Opportunities section of adb.org, or locally in English (locally known
website or local newspaper), or the date when documents are available for issue, whichever is
the latest, up to the date for submission of bids.

21. ADB also advertises Consulting Services Recruitment Notices (CSRN) on its website.
For loan projects, the Executing Agency (EA) of the borrower is required to post CSRN on
adb.org for consulting services financed by the loan. For technical assistance (TA) projects,
ADB is responsible for advertising the CSRN. The minimum posting time of CSRN for
recruitment of firms is 30 days and for individual consultants is 7 days. Connected to the CSRN,
ADB's website provides an online facility to allow firms and individuals to send an electronic
Expression of Interest (EOI). Short-listing of consultants or firms will be based on the EOIs
received. The shortlists are posted on adb.org. The adb.org also provides an online facility for
consulting firms and individuals to register in ADB's database for consulting services.

22. For recruiting individual consultants financed by internal administrative budget and TA
funds, ADB has successfully developed and implemented a web-based Individual Consultant
Recruitment System (ICS). Since 2005, more than 9000 contracts have been processed by ICS
with an average processing time of 4 working days. The ICS is a highly transparent and efficient
system as everything, from posting CSRN, preparing TOR, cost estimate, short-listing,
processing the contract to sending out notice-to-proceed and consultant mobilization, is
processed electronically with minimal paperwork.

b. The Way Forward

23. Drawing the successful experience of ICS, ADB is developing a full scale web-based
Consultant Management System (CMS) which will process the entire consulting services
recruitment process for ADB administered contracts electronically online. Scheduled to be
launched in late 2009, CMS will have the following benefits:

 Efficiency - CMS II will shorten consulting firm recruitment time (taking ADB's standard
procedure Quality and Cost-Based Selection as an example) by approximately 5 weeks
(from the current average of 4 months for recruiting TA consultants). This mainly
because (i) Request For Proposals (RFP) will be issued electronically through internet,
shortening the process by approximately one week; (ii) public opening will be done
electronically through internet, saving another week; (iii) proposals will be submitted
electronically through internet, saving one more one week; (iv) financial evaluation
procedure will be simplified or eliminated as the technical proposal (personnel schedule)
will be linked to the financial proposal and the proposals are prepared on-line by the
consultants through an interactive program which helps them to avoid mistakes. This will
save one more week; (v) financial proposals will be prepared and submitted
 electronically in contract format. This will minimize contract processing work and reduce
contract negotiation time by another week. In total, 4-5 weeks will be saved by CMS.

 Quality - As CMS is an electronically integrated system, human errors by both ADB staff
in processing recruitment and by consultants in preparing proposals will be reduced.
Problematic cases involving late proposal, misplaced proposal, miscalculation of
noncompetitive components, wrong exchange rates, vagueness in price escalation, and
discrepancies in proposals will be prevented by the system.

 Resource saving – the automated process will save a substantial amount of staff
resources. Professional staff will be relieved from tedious and non-analytical works and
focus on more meaningful tasks for adding values to ADB operations.

 Transparency - CMS will be a web-based system accessible by all ADB user

departments as well as consulting firms, and in the future, EAs, providing transparency
in the recruitment process from advertising, collecting EOIs, short-listing, to the contract
award. The system, although currently designed for use by ADB only for Bank-
administered-consultant-contracts, can be eventually extended (with additional IT
funding) to borrowers for loan projects, further improving the efficiency in recruiting loan
consultants and enhance good governance in DMCs in the recruitment of consulting
services.

VI. Conclusion

24. As information and communications technology (ICT) advances at a fast pace, internet
has become a more commonly used commercial tool for e-business transactions in the private
sectors. Government agencies responsible for procurement in public sector will sooner or later
have to decide whether or to what extent e-procurement will be used for government
procurement activities. ADB will continue to work with other MDBs on updating and refining
MDBs' on e-procurement policies and practices taking account of the latest development of ICT
and other factors. ADB will also share its experiences in e-procurement with its member country
governments to promote good governance in procurement.