Let’s start with definitions.
The Oxford Dictionary defines oversight as the action of overseeing something, with inspection, care, direction, control and custody being among the synonyms most closely associated with the type of oversight exercised by donors in international development programmes.
Clarity of definitions is important. In this context, procurement covers the processes of planning, purchasing and contracting goods, works and services.
International development is not an easy term to define. It is most commonly associated with the efforts of donors (donor countries and development agencies) to improve the quality of life in developing countries, that is, the recipients of different forms of aid, and to support their economic growth towards eventual self-sufficiency.
1. What is procurement oversight in international development?
Procurement oversight is one of the key strategies employed by donors to mitigate the fiduciary risk associated with their aid programmes.
Programme oversight, whether local or remote, and fiscal oversight are complementary mechanisms that go hand in hand with procurement oversight. The release of funds is conditional upon the approval of both the procurement oversight agent and the fiscal agent, while programmes require sound management to remain on track towards achieving their objectives. Programme success, the disbursement of funds and compliance with national procurement legislation do not depend on any one of these mechanisms in isolation.
2. Why does fiduciary risk occur?
From a procurement perspective, the risk that aid funds entrusted to other parties may fail to achieve their intended objectives exists whenever the donors’ own procurement systems are not used. Procurement systems belong either to the Recipient country, as part of its public financial management (PFM) system, or they are parallel systems entrusted to third parties (e.g. private organisations). Donors channel financial assistance through one or the other of these two systems, and this choice follows the analysis required for non-budget support. The identification, assessment and management of fiduciary risk are central throughout the programme life cycle.
3. How can procurement oversight mitigate such a risk?
When the Recipient country’s procurement system is used for donor-funded procurement, the need for procurement oversight arises from weaknesses in the implementation of the Recipient’s system, even where the system itself is robust by design. Challenges relating to transparency, capacity to make full use of the available systems, and exposure to manipulation by less committed parties can all create a gap between system design and implementation.
Procurement oversight brings together the typical milestones of the procurement process for compliance and performance review under the authority of a single entity. This entity, commonly referred to as the Procurement Oversight Agent (POA), monitors procurement activities, reports to donors, and acts as the guardian of quality standards within the national public procurement system. The POA also provides policy and technical advice, makes recommendations for sustainable improvements, and offers continuous support.
Compared with the Recipient country’s own national public procurement oversight body, the POA has a less extensive mandate, limited to the scope of the programme. The national oversight body has broader authority to monitor procurement activities, initiate wider policy measures, assess and implement public procurement regulations, and oversee the procurement system at country level.
4. Why use the Recipient country’s procurement system instead of a parallel Donor system?
It is common practice, and indeed preferable, to determine which procurement system is most appropriate for the programme during its design and planning phase. The decision depends on factors such as the programme’s objectives, the results of the assessment of the national procurement system, the proportion of aid that will use the national system, the predictability of that system, and the extent to which it must be adapted to meet specific donor requirements. Benefits such as reduced transaction costs, long-term sustainability for the Recipient, and increased transparency for donors are weighed against the identified risks.
Bringing it all together
Arrangements between donors and partner governments receiving financial assistance in the form of non-budget support typically include a degree of donor involvement in the management and oversight of the expenditure of funds. Clarity regarding the extent of this involvement helps mitigate the risk of conflicts of authority between local and remote programme oversight on the one hand, and between oversight exercised by donors and by other parties on the other.
If the decision is taken to use the Recipient country’s procurement system, the presence of a Procurement Oversight Agent (POA) becomes both a condition and a safeguard against fiduciary risk. It helps ensure that the procurement process remains transparent and aligned with international procurement standards and good practice. At the strategic level, donors also consider additional risk mitigation mechanisms, such as derogations, a portfolio of different aid modalities, or support for capacity development. At the operational level, due diligence assessments, annual reviews and independent audits also play an important role.
The procurement oversight safeguarding mechanism also brings longer-term benefits to the Recipient country that are less immediately apparent. These benefits go beyond the short-term effects of learning and beyond what is often perceived as the burden of maintaining open, fair and transparent procurement procedures. The presence and actions of the POA act as a catalyst, encouraging Recipient countries to strengthen their own capabilities. Efforts to improve national systems in order to meet donors’ reporting and oversight requirements ultimately lead to stronger systems than improvements designed solely for self-monitoring.
Procurement oversight, regardless of the sector, is a dual-purpose mechanism. It can be used to strengthen the Recipient country’s procurement system, to mitigate the donor’s fiduciary risk, or to achieve both objectives simultaneously.
A person acting as a Procurement Oversight Agent is characterised by extensive procurement experience, experience in international development, professional assertiveness, and ethical, incorruptible conduct.
And often, grey hair.