Key Public Procurement Issues and Options
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within one country. Broader budgeting issues and decisions typically require higher-level engagement and discussion, which can be difficult and lengthy. Countries are not advised to seek sweeping changes to budgeting laws without actual experience regarding how ESPCs will work best under local conditions and how local ESP markets will develop. If one is to avoid the risk of adopting ill-suited regulations, it is recommended to actively seek out simpler options in the structuring of the ESPC, to seek special waivers for pilot projects, or to reach some basic agreements with parent budgeting agencies until the ESPC concept can be tested and its benefits demonstrated. As public budgeting systems mature, it is expected that some of the budgeting issues associated with ESPCs, such as the multiyear contracts, will be solved. Further, with increasing decentralization of budgeting to local levels and more decision-making autonomy, public agencies, particularly at the municipal level, may have more authority to adjust the usual procurement and budgeting restrictions to test new ways to lower operating costs, such as ESPCs. Clarification on budgeting issues may be needed with respect to ESPCs over the longer term. Budgeting issues likely will continue to hamper the adoption of ESPCs in many developing countries in the near term. In such cases, the following are recommended: 1. Starting public procurement schemes with more autonomous public entities, such as municipalities, universities, hospitals, and water utilities, to test and refine the ESPC concept. As more experiences are gained and demand throughout the government sector increases, increased pressures to find suitable longer-term budgetary solutions will arise, and precedents will emerge. 2. Selling the concept of ESPCs—that is, reducing operating costs without upfront investment capital and paying for the services from savings—directly to parent budgeting agencies to gain their support. This may require some upfront audits to identify high-return projects that will convince these agencies to join the effort to find solutions, so that these benefits can be realized. The parent agency could be the school district, municipality, provincial department, line ministry, or the ministry of finance or treasury. The parent agency can provide key input on how best to address the budget issues, to allow the project to move forward, even if only on a pilot basis initially. 3. Creating a public energy efficiency financing program (see the Financing section in this chapter) after a few projects have been implemented, to