Strategic Sourcing- Can it work in Developing Countries

For Discussion: Do you think it can work in developing countries? Or would it lead to more corruption?

Increasing the use of strategic sourcing by agencies, where agencies band together to use their purchasing power to buy commodities – such as paper, copiers, and printers — at a discount.

Why the Conservatives should win in UK!

I liked Cameron's promise of putting all government contracts online, and putting details of all government expenditures above 25k online.

Key Words: Post-Bureaucratic Age, Behavioral Economics, Politics and Human Nature, Transparency, Accountability, Choice Architecture, Missouri Accountability Portal,

Recently from GAO

International Monetary Fund: Lending Programs Allow for Negotiations and Are Consistent with Economic Literature;

IMF-supported programs in the four countries GAO reviewed--Liberia, Zambia, Hungary, and Iceland--include different sets of objectives, targets, and conditions that reflect country circumstances, based on negotiations between the IMF staff and country officials. In postconflict Liberia, the program focuses on rebuilding capacity and contains a target for maintaining a balanced budget with no borrowing. In Zambia--a country negatively affected by the recent economic crisis--the IMF-supported program is designed to increase economic growth, reduce poverty, and improve governance. Hungary, which faced a rising risk of default, has a program that focuses on restoring investor confidence while reducing debt and expenditures. A banking and currency collapse in Iceland precipitated the IMF-supported program, which contains some controversial approaches to monetary policy and banking reform. All four countries are making progress but face challenges in implementing conditions or achieving targets in their IMF-supported programs. The macroeconomic policies in IMF-supported programs are broadly consistent with the findings of the empirical literature GAO reviewed, although this literature lacks precise guidance for setting policy targets. For low-income countries, empirical evidence generally suggests inflation is detrimental to economic growth after it exceeds a critical threshold, which is broadly consistent with the inflation targets included in the IMF-supported programs we reviewed. For middle- and high-income countries, the literature identified specific policy weaknesses in advance of crises, including high inflation, high public indebtedness, and low international reserves. These weaknesses are consistent with the policies upon which the IMF focuses in the 13 programs in middle- to high-income countries GAO reviewed.

2010 Census: Census Bureau Has Made Progress on Schedule and Operational Control Tools, but Needs to Prioritize Remaining System Requirements

Operation Iraqi Freedom: Preliminary Observations on DOD Planning for the Drawdown of U.S. Forces from Iraq;

DOD has yet to fully determine its future needs for contracted services. Second, the potential costs and other concerns of transitioning key contracts may outweigh potential benefits. Third, DOD lacks sufficient numbers of contract oversight personnel. Fourth, key decisions about the disposition of some equipment have yet to be made. Fifth, there are longstanding incompatibility issues among the information technology systems that may undermine the equipment retrograde process. And sixth, DOD lacks precise visibility over its inventory of some equipment and shipping containers.

Millennium Challenge Corporation: MCC Has Addressed a Number of Implementation Challenges, but Needs to Improve Financial Controls and Infrastructure Planning

Industry best practices and past GAO work have shown that conducting design reviews and updating cost estimates prior to contract solicitation help to ensure that projects can be successfully bid and constructed.

Bureau of Prisons: Methods for Cost Estimation Largely Reflect Best Practices, but Quantifying Risks Would Enhance Decision Making;

BOP uses three general steps to estimate costs for its annual budget submission: (1) estimating cost increases to maintain service levels, such as inmate medical care and utilities; (2) projecting inmate population changes for the budget year and for several years into the future using a modeling program that incorporates data on the current inmate population and estimated incoming population and associated sentences; and (3) estimating costs to both provide additional capacity to house projected inmate population growth and implement new programs, such as activating new prisons. BOP's methods for cost estimation largely reflect best practices outlined in GAO's Cost Estimating and Assessment Guide

Troubled Asset Relief Program: Continued Stewardship Needed as Treasury Develops Strategies for Monitoring and Divesting Financial Interests in Chrysler and GM

U.S. Government Accountability Office: Performance and Accountability Report Fiscal Year 2009

The Better Buy Project

The Better Buy Project is an experiment dedicated to the belief that there’s a lot of room for improvement in the way government buys products and services. We’re testing this hypothesis by asking for your ideas on how to make acquisition process more open, transparent and collaborative.

Have you heard about the CoST Initiative?

The Construction Sector Transparency Initiative (CoST) Criteria represent seven core requirements that will form the Pilot Phase. These criteria will be reviewed during the Pilot Phase, and will be amended, if necessary, before the design of CoST is finalised. The Criteria are:

1. For public-sector construction projects above an agreed threshold, there is regular disclosure of material project information to a wide audience in a publicly accessible, comprehensive and comprehensible manner.
2. Procuring bodies are subject to a credible audit process and, as far as possible, projects are subject to credible, independent financial and technical audits.
3. The adequacy of material project disclosures and audits are assessed by an independent, objective and technically competent Assurance Team, and reports published. The membership, terms of reference and activities of this team must be publicly disclosed.
4. The application of this approach is extended to the main procuring bodies responsible for public-sector procurement, and related contractors.
5. A Multi-Stakeholder Group (MSG) representing the interests of stakeholders has oversight of the implementation of CoST. The membership, terms of reference and activities of the MSG must be publicly disclosed.
6. Civil society is actively engaged as a participant in the design, monitoring and evaluation of this process.
7. A public, financially sustainable work plan for all the above is developed by the host government, including measurable targets, a timetable for implementation, and an assessment of potential capacity constraints.

Assorted

Time for a change at the Fed

Dueling outlooks

My Understanding of TIPS

Competitive Sourcing Continues to Fail


Inflation Should Be Just Around the Corner

But let us be honest. Attempting to increase inflation may not work, particularly if private-sector spending does not respond. The policy response that is in the works is likely to be massive. But what we have already seen over the past 12 months is unprecedented and, to date, not very effective.

So what do markets think? Last week they weren't sure. At the close on Friday, inflation-linked bonds priced in only 0.2 percent average inflation for the next ten years; this sounds like a deflationary spiral. However, the world's oldest inflation hedge, gold, rose sharply, suggesting that some investors think we will soon be successfully inflating. Let's hope the gold market is right.

Balance sheets and income statements: breaking the downward spiral

Addressing the Economic Crisis while Renewing Our Commitment to Fight Climate Change

The Ideal Central Finance Agency?

Estonia Ministry of Finance Organization Chart;


Source: Budgeting in Estonia

Related;
Budgeting and Fiscal Management in Transitional Economies

Estonia: Fiscal Management and the Budget Process

Fiscal Transparency -ROSC 2001, update in 2002


2008 Article IV Consultation for Estonia: Conclusions of the Mission;

To correct for past policy slippages, the fiscal position should be strengthened over the medium term. In this context, the government's proposal to freeze the state budget wage bill for the next two years is a welcome first step and should be extended to other levels of government. The freeze would create incentives to eliminate inefficiencies in government. It would also send a strong signal for wage moderation in the private sector. More broadly, the mission welcomes the authorities' intention to review expenditure and revenue policies in the medium term budget framework with an eye to identifying savings. Priority should be given to savings that lead to a more efficient allocation of resources.

Republic of Estonia: Selected Issues- 2007

Estonia - Report on the Observance of Standards and Codes (ROSC) - accounting and auditing

Estonia - Public expenditure review update

Estonia - Living standards during the transition : a poverty assessment

Public Procurement Policy

Estonia - Public expenditure review

US learns Privatizations

As many as six bidders are expected to ante up more than $2 billion for Chicago's Midway Airport. In contrast to public facilities in the United States much of the infrastructure in Great Britain, including its airports and railways, has been privatized.

Francois Michel should blog more often

Reading for the Day- Extending Research on Corruption to Specific Features of PFM Systems

How Government Accountants almost killed one of the greatest innovations in Macroeconomics

Leontief believed that the economy could be broken down into sectors, like farming, steel manufacturing, retailing, and so forth. Each sector uses material and services from other sectors to produce material or a service, which it supplies to those other sectors. This interrelationship can be described in the form of a mathematical matrix. It is often called an “input-output analysis.” When he first began investigating this model at the end of World War II, Leontief went to the Bureau of Labor Statistics to help gather the data he needed. To assist him, the bureau assigned a young analyst who was working there at the time, Jerome Cornfield.

Leontief could break the economy down into a few broad sectors, such as putting all manufacturing in one sector, or he could subdivide the sectors into more specific ones. The mathematical theory of input-output analysis requires that the matrix that describes the economy have a unique inverse. That meant that the matrix, once assembled, had to be subjected to a mathematical procedure called “inverting the matrix.” At that time, before the widespread availability of computers, inverting a matrix was a difficult and tedious procedure on a calculator. When I was in graduate school, each of us had to invert a matrix- I suspect as a kind of rite of passage “for the good of our souls.” I remember trying to invert 5 x 5 matrix and taking several days, most of which I spent locating my mistakes and redoing what I had done wrong.

Leontief’s initial set of sectors led to a 12 x 12 matrix, and Jerry Cornfield proceeded to invert that 12 x 12 matrix to see if there was a unique solution. It took him about a week, and the end result was the conclusion that the number of sectors had to be expanded. So, with trepidation, Cornfield and Leontief began subdividing the sectors until they ended with the simplest matrix they thought would be feasible, a 24 x 24 matrix. They both knew this was beyond capacity of a single human being. Cornfield estimated that it would take him several hundred years of seven-day work weeks to invert a 24 x 24 matrix.

During World War II, Harvard University had developed one of the first, very primitive computers. It used mechanical relay switches and would often jam. There was no longer any war work for it, and Harvard was looking for applications for its monstrous machine. Cornfield and Leontief decided to send their 24 x 24 matrix to Harvard where its Mark I computer would go through the tedious calculations and compute the inverse. When they sought to pay for this project, the process was stopped by the accounting office of the Bureau of Labor Statistics. The government had a policy at the time; it would pay for goods but not for services. The theory was that the government had all kinds of experts working for it. If something had to be done, there should be someone in government who could do it.

They explained to the government accountant that, while this was theoretically something that a person could do, no one would be able to live long enough to do it. The accountant was sympathetic, but he could not see a way around the regulation. Cornfield then made a suggestion. As a result, the bureau issues a purchase order for capital goods. What capital goods? The invoice called for the bureau from Harvard “one matrix, inverted.”

Source: The Lady Tasting Tea: How Statistics Revolutionized Science In The Twentieth Century, By David Salsburg, pp.177-78

Assorted Technical Assistance- ADB

Nepal: Knowledge Transfer for Public Procurement

Bhutan- Strengthening the Debt Management Capacity of the Department of Aid and Debt Management-Undisbursed $6,672;

• A debt policy. The TA final report produced a “borrowing policy and strategy.” It includes a framework for government borrowing, recommended borrowing ceiling and parameters, an on-lend policy, and guidelines on the use of guarantees. Despite the delivered output, it took additional Government efforts to finalize the debt policy, which was drafted independently by the Government after the TA completion. Nonetheless, the exposure from the consultants’ preparation of the “borrowing policy and strategy” was helpful to the DADM staff in finalizing the debt policy. In 2008, the debt policy is in the process of being mainstreamed into the decision-making process. This TA output was therefore relevant but not sufficient, as well as less effective.

A loan procedures and regulations manual. A brief loan manual was prepared under the TA. The manual described government borrowing cycle and the responsible agency functions. MOF used such information to produce the Standards Operating Procedures (SOP). SOP is in use and effective. However, this TA component did not contribute to the more comprehensive “Aid and Debt Management Manual” because of government reorganization that separated aid and debt management functions. Therefore, the Government was unable to produce a combined manual. Under such a circumstance, this TA output was still relevant, effective, and sustainable.

• A complete and consolidated database on all loans and grants. Procurement and installation of the database were the largest TA component. In early 2006, the CS-DRMS for loan and grant recording was procured. Significant efforts were made by ADB to reduce the price for a non-Commonwealth member. As a result, the system procured was cost effective and suitable in the Bhutanese context. The system has been essential for the country’s debt policy management and formulation. This TA output was highly relevant, highly effective, and most likely sustainable.

• Strengthened debt management capacity of public debt management staff. Continuous ADB TA support from 2003 to DADM delivered concrete results in strengthened debt management capacity. Six DADM staff members have been trained and are now proficient in using the CS-DRMS. All six are still with DMD, and the developed capacity is retained. Because of the complex nature of the software system, DMD staff requires continuous support to use the new database. This TA output was highly relevant, highly effective, efficient, and most likely sustainable.

• Timely feedback provided in the form of descriptive and analytical reports to other user departments of the Government and aid agencies. The information generated by CS-DRMS provides descriptive and analytical reports to line ministries. Such reports helped MOF formulate critical decisions in macroeconomic management and development planning. This TA output was highly relevant, effective, efficient, and sustainable.

Major Lessons
The TA completion was delayed because the TA design did not foresee the extended time required for software procurement and launch. The selection of a suitable system, especially fitting the Bhutanese context was time consuming. The Government conducted exhaustive reviews, including country site visits, and extensive negotiation of the price. Database conversation from original Excel sheets to the CS-DRMS also took longer time than originally planned. The extensive time on software procurement and launch therefore affected some remaining TA outputs. These issues need to be taken into consideration for the subsequent TA design and implementation.

Capacity Building for Fiscal Reforms in Sikkim- Undisbursed-$183,889;

Overall Assessment and Rating: The TA was successful in introducing VAT in the State, and designing a fiscal consolidation program in conjunction with capacity building trainings in several areas (see the previous section). The consulting firm was selected under the Quality and Cost Based Selection Process (QCBS) at a significantly lower cost than anticipated during TA processing. Thus, the objective of the TA was accomplished without utilizing the entire amount of the original TA budget. The proposed overall rating of the TA is successful

Major Lessons: Sustaining the capacity building effort in a small state like Sikkim is a difficult challenge. The follow-up actions are often not pursued after the period of assistance. In such a situation, designs of the capacity building initiatives become very crucial. The capacity building process needs to be completed within the TA period so that the desired sector outputs could be achieved without immediate follow-up actions. For example, the VAT manual and the VAT rules were designed under the TA, and adequate training was provided to the concerned staff. In other words, the desired output was not exposed to exogenous risks in terms of Government’s commitment for training.