13 August 2023
By Katja Hemmerich
On 17 August 2023, the UNDP/UNFPA/UNOPS Executive Board holds an informal consultation on the 2022 Annual Statistical Report on Procurement in the UN System. This discussion on procurement is an annual event, with UNOPS presenting the latest data on who is procuring What, from whom across the UN system.
As the UN Global Marketplace (UNGM) states:
"With the adoption of the 2030 Agenda for Sustainable Development, the UN system has been called to internalize the Sustainable Development Goals (SDGs), across policy, operational and administrative aspects." – www.ungm.org
Our spotlight therefore explores the extent to which UN procurement can and does contribute to the SDGs. We also provide some potential discussion questions for stakeholders.
Who benefits from UN procurement?
At first glance, the report seems to indicate that UN procurement provides a kind of bonus to donor countries with limited positive contribution to the SDGs. The top three supplying countries, which make up almost 20% of procured goods and services, are the USA, Belgium and the UK. The sustainability section of the report only provides vague indications about plans or efforts to implement sustainability policies and strategies, without providing specific data on the sustainability indicators on the UNGM website related to sustainable resource use, climate change mitigation, human rights and labour protections or inclusion among others.
It is therefore not unreasonable to read the report and assume that the procurement outcomes reflect a certain bias towards donors or Western countries in the UN system, as reflection of the composition of UN leadership. After all, the top three procuring entities are UNICEF, WFP and the UN Secretariat - the first two which are consistently led by Americans and the latter currently by a European.
An interesting new study of UN procurement by the University of Maryland and University of Macau has used procurement data from 20 UN entities from 2013-2018 to analyze and identify potential systemic bias towards suppliers from UN donor countries. While the study finds that UN procurement does favor suppliers from donor countries, there is no evidence that this is because of an Executive Heads’ interference or influence over the procurement process.
"We carefully test the influence of both lower-level staff and the head of IO [international organization] bureaucracy, and uncover a surprising pattern that lower-level staff plays a more important role in our context." – Huangfu, et al., ‘A Multilateral Donation that Boomerangs Home: Analysing the Donor State Advantage in UN Procurement’ (2023)
As highlighted in the graphic, the researchers found a significant correlation between the number of professional level staff from a particular country within a UN organization and higher proportion of suppliers from that country. Interestingly, hosting UN operations does not have the same level of impact, with a 10% increase in activity by the UN correlating with only a 0.01% increase in procurement share by the host country. The fact that Afghanistan is one of the top 10 countries with a share of UN procurement in 2022 is therefore a significant outlier.
How are these patterns arising?
The researchers are quick to point out that there is no evidence of corrupt practices or unethical relationships between operational level UN staff and suppliers. They also highlight that the fact that Executive Heads from donor countries are not able to influence the procurement process demonstrates that rule-based procurement is effective. This also means that procurement rules are a useful tool to mitigate donor interference risks for extra-budgetary funds (including earmarked funds, although this is less significant than for non-earmarked funds).
Nevertheless, staff are clearly influencing the process to create this level of donor country bias. Given the complexity of the procurement process - created to some extent by those same rules - procurement knowledge and informal knowledge networks appear to be an important determinant. Those staff developing the statement of work may be bringing in bias from their home country's market conditions, which they know best. Staff disseminating information about procurement opportunities are likely using their own informal networks, which are likely dominated by people and entities from their home country. Previous suppliers who have already learned the process, and historically have predominantly been from donor countries, have a distinct knowledge advantage over new suppliers. All of these factors likely contribute to procurement outcomes and highlight how the geographic balance of staff can influence outcomes, even unintentionally.
These findings are in line with other recent research from the University of Potsdam about how staff of international organizations influence procurement outcomes. An analysis of 50,000 procurement decisions by the World Bank demonstrated that when national staff are involved in World Bank procurement processes, local suppliers are more likely to be successful - with fewer competitive restrictions in the process. Aside from shedding new light on how staff influence procurement outcomes, these studies also demonstrate the linkage between various aspects of management, namely human resources and procurement.
Change is possible in UN Procurement
Geographic balance amongst staff has been a challenge since the inception of the UN, so it seems unlikely that it will change sufficiently by 2030 to allow for different procurement outcomes. So is it possible for UN procurement to become a tool for SDG implementation?
A separate study of who benefits from procurement financed by multilateral development banks (MDBs) illustrates that things can function differently in complex international organizations. When Banks finance development projects, the borrowing country plays a lead role in procurement under the Bank’s supervision and guidance, and following recent reforms, they can (and do) apply a domestic preference clause favoring firms from less developed borrower countries. So to some extent we are comparing apples and oranges when comparing the Banks’ and UN system’s procurement. Nevertheless, it is important that the researchers have found that:
"the procurement of MDBs disproportionately benefits firms in developing countries and not those of banks' larger shareholders." – Martínez-Galán, E., & Proença, I., 'Who benefits from the procurement financed by Multilateral Development Banks?', Journal of International Development (2023)
Many of the development benefits seen by the Banks have arisen from procurement reforms in the mid-2010s, which explicitly recognized that procurement can be a tool for social policy and set and monitored targets in this regard. The European Union (EU) also underwent similar procurement reforms to actively encourage the use of social policy criteria in procurement so that issues related to protecting the environment, supporting social considerations and fostering innovation are taken into account beyond just price and technical criteria. In 2015, the OECD, to which most donor countries belong, issued recommendations on gender-responsive public procurement from 2015. (OECD Public Governance Policy Papers No. 09, Promoting gender equality through public procurement: Challenges and good practices (Dec. 2021))
Social policy considerations also extend to the World Bank’s corporate procurement, which is more comparable to that of the UN. In 2018 the World Bank set a goal to more than triple the share of their corporate procurement spent on women-owned businesses by 2030, going from 3.1% to 10%. While not a large percentage, this translates into $160 million in 2030, up from approximately $41 million in 2018, and has the power to impact a significant number of women's economic empowerment.
These examples illustrate that change is possible, and UN procurement can be used as a tool to facilitate SDG implementation. The UN has already recognized that it needs to internalize SDG implementation into procurement, and it has developed Sustainable Procurement Indicators and established a Taskforce on Gender-Responsive Procurement. But information and data on targets and progress are noticeably absent from the 2022 Annual Statistical Report on UN Procurement. Studies of how national public procurement processes have positively impacted social policy highlight the importance of alignment between political goals, regulatory compliance, internal controls and departmental strategies. The Board's annual discussions of procurement outcomes is an opportunity for stakeholders to review and guide alignment of these elements in the UN system.
Questions for Discussion
The 17 August 2023 consultation is not about policy change, but it is a possibility for member states to better understand and potentially guide the alignment of the UN's stated aim of contributing to the SDGs through procurement. Based on the research outlined in this article, we suggest the following potential questions for discussants to consider:
What strategy is in place across the UN system to ensure sustainability and greater geographic balance amongst suppliers?
Can further data on the achievement of the Sustainable Procurement Indicators be provided?
What is the outcome of the work of the UN’s Gender-Responsive Procurement Task Force?
What the geographic balance of staff working on procurement in UNDP, UNFPA and UNOPS?
The UNDP/UNFPA/UNOPS Executive Board has an informal briefing on procurement activities of the UN system, and a consultation on joint procurement activities of UNDP, UNFPA and UNOPS on 17 August 2023. On the same day, the Board also holds an information consultation on the UNOPS contract modality review and response plan. On 18 August, the Board has an informal consultation on UNOPS budget estimates for 2024-2025, which includes consideration of the ACABQ report on UNOPS.