3. Contracting out and capacity development
81 pdg Partnership for Democratic Governance
themselves will be likely to need capacity development, the contractor will have (or will perceive) a greater performance risk and quality could suffer. Requirements to contract local providers can also slow or stop procurements if the required local goods or services are not available, and can cause inflation by taxing limited local productive capacity. Before deciding to require local content, the government should have a good understanding of the current capacity of domestic service providers. An alternative approach is to include contractual provisions stating that local products and services will be sourced in preference to international products and services unless it is not practical, prices are higher or the requirements cannot be met. Nations that are considering domestic preferences and related requirements should be aware that an array of international agreements – including the
World Trade Organisation’s Agreement on Government Procurement and a multitude of regional and bilateral agreements – strongly discourage domestic preferences in procurement. If domestic preferences are put in place, and a political constituency pdg develops over time to protect those domestic prefPartnership erences, it may prove difficult to join those broader for Democratic Governance international agreements, which offer reciprocal access to other nations’ procurement markets. Once the decision to require (or to favour) local providers is made, this should be clearly stated in the contract. While it is good to encourage bidders to seek local input, care must be taken to ensure that they follow through and deliver this under the contract. Contract terms relating to local providers could include requirements to employ local workers and to provide domestic organisations with a fair opportunity to compete in the supply of goods and/or services.
Box 3.5. Capacity development in Sierra Leone’s National Revenue Authority
During the country’s recovery from 11 years of conflict, the Sierra Leone National Revenue Authority (NRA) was set up in 2003 as a unified authority to improve revenue collection. In late 2005 an overseas contractor was hired by the UK’s Department for International Development (DFID) to help the NRA to implement a value added tax, increase government revenues, and strengthen administration and procedures. In 2006 it became clear to donors and NRA management that the NRA was
Factors which could undermine sustainable capacity development Without proper planning and agreement between partners, sustainable capacity development can be undermined by a number of factors: • Failure by government to recruit or allocate staff and other resources will limit the amount
underperforming and a comprehensive nine-month modernisation programme was developed. DFID amended the contract to concentrate less on theoretical training and advice and more on the transfer of skills and changes in processes and attitudes. The contract provided for expatriate consultants to work in the field alongside NRA staff. It also provided for weekly interactive classroom training on practical tax collection issues for select NRA staff.
of capacity that can be built, even if the right tools for capacity development are available. • Failure by donor partners to align technical assistance with government’s priorities and needs; the parts of government which receive technical assistance may be driven by donor interests and priorities.
OECD PDG HANDBOOK ON CONTRACTING OUT GOVERNMENT FUNCTIONS AND SERVICES IN POST-CONFLICT AND FRAGILE SITUATIONS © OECD 2010