Procurement delay leads to slow performance in large ADB projects
Procurement delay is among the key factors for slow performance in large projects, leading to a backlog of projects uncontracted and undisbursed, the Asian Development Bank says.
As of 31 August 2022, the uncontracted balance as a percentage of total portfolio is 32% ($3.14 billion), whereas the undisbursed balance stands at 45% ($4.38 billion), the Manila-based lender says in a document that assessed the status of its portfolio in Bangladesh.
Since transport and energy sectors comprise more than half of the ADB's total portfolio for a few large sectors, their share in uncontracted and undisbursed portfolio is higher than other sectors, the global lender said in its background paper presented on Thursday at the second tripartite portfolio review meeting for ADB-funded projects in Bangladesh.
While energy falls behind with 7% achievement in annual target of contract awards, the education and health sector is among the lowest performers in disbursement targets, it finds.
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About two-thirds of the ADB's portfolio are infrastructure projects, which involve a large procurement component. This is why delays in the procurement have adversely impacted the project performance, the ADB's document says.
Improving the procurement activities is a major challenge, it points out and calls for significant improvement in procurement and project implementation.
The review meeting in Dhaka was attended by the Economic Relations Division (ERD) Secretary Sharifa Khan, ADB's South Asia Department Director General Kenichi Yokoyama and Country Director for Bangladesh Edimon Ginting. Officials from the relevant line ministries and implementing agencies were also present.
Comparing project performance of the ongoing 48 projects during the second quarter of this calendar year with the same period last year, the ADB rated five projects "at risk". These are Bangladesh Power System Enhancement and Efficiency Improvement Project, Flood and Riverbank Erosion Risk Management Investment Programme, Transport Connectivity Improvement Preparatory Facility, Covid-19 Response Emergency Assistance Project and Supporting Post-Covid-19 Small-Scale Employment Creation Project.
The analysis shows nearly 43% of the ongoing projects in Bangladesh have been extended at least once.
Reducing the procurement end-to-end time by 20% compared to 2021 and increasing the number of projects to close on time are among the key priorities of ADB in the remaining months of 2022, it says.
The ADB's portfolio in Bangladesh stood at $11.3 billion from $6.5 billion in 2015 for 49 projects in six sectors.
Projects worth $2 billion were committed in 2021, and disbursed $2,569 million, the highest among the ADB's developing member countries, the meeting was told.
August this year, contracts worth $374 million were awarded, which was 43% of the target, and the disbursement was $698 million or 58% of the target. During the same period in 2021, the achievements were lower, the ADB says.
Despite some improvement in transport, and education and health and urban service sectors compared to the previous year, the end-to-end procurement time in 2022 for the overall Bangladesh portfolio is 341 days, it says, blaming mainly on capacity limitation and delays in approval process.
The ADB finds six reasons behind delays in procurement and recruitment of consultants. These include poor quality of design and specification, poor quality of bid documents due to lack of up-to-date cost estimate and poor quality of bids submitted by the contractors and consultants.
Other reasons are inadequate bid evaluation reports by implementing agencies, requiring several clarifications during the ADB's review process, lack of capacity and procurement experience, long approval time within the government and absence of strategic procurement planning often leading to procurement failure and rebidding.
To reduce procurement lead time by 20% in 2022, the ADB has assigned a procurement officer for monitoring the implementing agencies and project team for all procurement packages of ≥$1 million.
To improve the performance during the remaining months of the year, the development lender has already put into force an advance alert mechanism, which works with the project team monthly. In addition, a mid-term review mission has been fielded to correct the baseline projection and bring one of the projects, rated as "at risk" on track, while some other projects are being closely monitored to expedite them.
