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Lamia Moubayed Bissat and Basma Abdul Khalek, respectively the President of the Institut des Finances Basil Fuleihan, and an Economist at the Institut des Finances Basil Fuleihan.

The Institut des Finances Basil Fuleihan is an autonomous public institution working under the tutelage of the Lebanese Minister of Finance.


November 2021
Transforming Public Procurement: Lebanon’s Path to Efficiency, Social Value, and Transparency

July 29, 2021 marked the publication of Public Procurement Law 244/2021 in the Official Gazette. After more than two years of drafting, review, consultation, and parliamentary debate, Lebanon now has a unified public procurement law. With this accomplishment, the country has ticked the first box in a list of structural reforms that are necessary to ensure sound financial governance, foster economic recovery, and improve transparency and accountability. The Constitutional Council’s decision (issued on September 16, 2021) to reject a petition against the law further validated this important reform and the rationale behind it.
 
The promulgation of Public Procurement Law 244/2021 comes at a time when Lebanon is facing what the World Bank described as the third most severe crisis in the world since the mid-19th century.[1]
 
The international community has always insisted that public procurement reform is one of the most critical structural reforms to strengthen financial governance, improve the quality of public services, attract investments, and enhance transparency. Procurement reform is thus highlighted in the Reform, Recovery and Reconstruction Framework, jointly developed by the World Bank, the United Nations, and the European Union in response to the August 4, 2020 Beirut port blast.[2] The Lebanese government committed to procurement reform at the CEDRE Conference in Paris in 2018, while Lebanese civil society has been advocating for corruption-free public procurement and the respect of principles, such as integrity, transparency, accountability, justice, fairness, and equality.
 
After two consecutive governments (Saad Hariri, 2019 and Hassan Diab, 2020) committed to procurement reform, the current Najib Mikati government[3] maintains that commitment. In its ministerial statement, the new government pledged to “issue the implementation texts of the laws in force and follow up on the implementation of the relevant texts, especially those related to the public procurement law, as soon as it enters into force.”
 
While public procurement accounts for an average of 20% of the central government’s expenditures and 6.5% of GDP (around USD 3.4 billion in 2019),[4] Lebanon’s procurement system lags behind developing countries like Tunisia, Egypt, and Jordan, according to international reports. Lebanon’s MAPS Assessment Report (Methodology for Assessment of Procurement System - MAPS II) pointed out the weaknesses of the public procurement system, including waste of public money, lack of competitiveness, minimal compliance with international standards, insufficient institutional capacity, fraud and corruption, high costs to the economy and society, inequalities and lost opportunities.
 
According to the UN, the cost of corruption in Lebanon is estimated at 10 billion US dollars a year—$5 billion, due to misallocation of public funds and limited returns on investments, and another $5 billion, as a loss in economic opportunities related to capital flight and the reluctance of potential investors. The OECD has indicated that 57% of corruption cases worldwide are linked directly to procurement transactions.[5] Finally, it is estimated that for every one billion US dollars invested in infrastructure in Lebanon, the country has the potential of generating about 43,000 jobs.[6]
 
The MAPS report—the result of a large national consultative process to which more than 200 people contributed—pointed out substantive gaps at four levels:
 
  • The legal framework, deemed to be opaque, contradictory, and non-compliant with international principles.
  • Weak institutional capacities, with notable gaps in capacities and technology infrastructure, inefficiency of information management systems, and increasing corruption risks.
  • Non-standardized procurement operations, and uncompetitive practices, with excessive recourse to “mutual agreements” that limit fair competition.
  • Weak transparency and accountability, including spotty access to data and poor monitoring and oversight.
 
Law 244/2021: A transformative and evidence-based policy approach
A complex and long policy process lead by the Institut des Finances Basil Fuleihan - Ministry of Finance[7] between March 2019 and June 2021 resulted in the enactment of the first Public Procurement Law 244/2021 in Lebanon. The approach was based on three pillars:
 
1- Evidence-based: The new approach was based on an extensive diagnostic using an internationally recognized methodology (MAPSII), which produced convincing gap analysis and evidence-grounded recommendations. It was also substantiated by comparative analysis and a benchmarking exercise with other laws adopted in several countries in the region, like Jordan, Palestine, Egypt, Morocco, and Tunis. The UNCITRAL Model Law (2011)[8] and the OECD Recommendation (2016)[9] were chosen as founding texts with adequate contextualization to fit the Lebanese legal framework. Technical assistance and support from international partners, namely the World Bank and the EU-OECD SIGMA Joint Initiative,[10] helped ensure that the draft was compliant with international requirements.
 
2- Setting the guiding principles: The new law was based on eight guiding principles[11] that were intended to change the behavior of the procuring entities at both the central and local levels of government. They include:
 
  • Comprehensiveness: The law applies to all entities, at the central and local levels,[12] that procure goods, works, and services, whether they are financed by the government budget, the state treasury, or internal and external loans.
  • Planning and budgeting: The law encourages medium-term planning in preparing budgets, improves the design and planning of the procurement cycle, and allows for better budget integration and cash flow management.
  • Accountability: The application of clear control and oversight mechanisms, including the creation of a regulatory authority and an effective independent and responsive complaints framework.
  • Efficiency and competition: The law sets competitive procedures as the general rule, and introduces framework contracts and other new procurement methods.
  • Integrity: The law clearly defines terms like “integrity” and “conflict of interest,” and identifies such cases, in addition to designating the types and degrees of penalties that apply to both private sector employees and civil servants who are convicted of violations.
  • Transparency: It renders mandatory and automatic the publication and access to information and data to all stakeholders on the central electronic platform.
  • Professionalization: The law stipulates the creation of a “procurement profession” within the civil service architecture of jobs as well as the allocation of highly professional human resources with continuous mandatory training.
  • Sustainability: It encourages procurement operations to take into account sustainable development in a balanced manner.
 
3- A transformative social approach: During the various phases leading up to the vote on the law, public procurement was viewed as a key enabler of social transformation. A stakeholders mapping was conducted to guide and prioritize action on this front. The role of responsible businesses, media, and community groups was heighted throughout the process, by way of continued structured consultations and the solicitation of reviews and comments on legislative texts. Exchange sessions and continuous briefings kept all stakeholders abreast of progress and the challenges faced by similar countries and informed the process with data and evidence.
 
Such an approach helped transform the way stakeholders viewed public procurement: Spending strategically while linking the procurement and budgeting exercise to planning and desired outcomes slowly emerged as the preferable path, replacing an old school of thought which centered on purely administrative and legal compliance. From the outset, such “cross-sector partnerships” were considered as key to improving social outcomes.
 
A transformative process at parliament
The change in policymakers’ behavior, namely the members of the parliamentary committee that studied and debated the law over the course of 45 sessions,[13] was also observed at three levels:
 
  • Openness to stakeholders’ views and concerns: Government entities, the business community, and civil society organizations were invited to parliament to express their views and concerns. They were asked to provide written feedback to enhance the first draft of the law, thus mitigating the risks of non-constructive feedback and resistance to change. They were also consulted over more than 50 meetings on specific themes, such as governance of the procurement system and professionalization of the procurement function, among others.
 
  • Engagement with subject-matter experts: Give that the ability of policymakers to ‘objectively’ carry out the necessary reforms is under question, they were open to a specialized, non-partisan team of experts from the Institut des Finances Basil Fuleihan to play the role of “bridge builder.” While this approach is new to Lebanon, parliamentarians have since publicly stated that political commitment coupled with a highly competent and specialized technical capacity and input is a key ingredient of success that needs to be applied to the formulation of other types of legislation.
 
  • Bringing civil society to the level of action: Beyond the traditional approach of simply engaging non-governmental actors, they were actively encouraged to level-up their contribution to the policy process. CSOs were connected to the process through their contribution to the MAPS diagnostic, and then during the draft law discussions. Training, awareness-raising, and dialogue sessions were regularly conducted by the Institut des Finances, directed at activists, media, and civil society organizations as part of the technical guidance provided to parliament. “Public procurement” went from a topic that rarely made the news, to one that was continuously on the news, reflecting an increased interest in understanding how public funds are being spent.
 
A results-driven procurement law
Public Procurement Law 244/2021 prepares the ground for sound financial governance by setting the foundation for an integrated and coherent financial management system. The law mandates all procuring entities to plan and budget their projects in a way that ensures the best value for money and the sustainability of economic, environmental, and social resources, as well as the effective systems and frameworks for accountability.
 
To better integrate procurement into the budget process, the relevant procuring entities, of all sizes and at all levels, will be asked to determine their needs in advance and prepare annual plans for the following year based on standardized forms and procedures. The law also offers the possibility of establishing an annual or multi-annual procurement plan, where the implementation of projects requires scheduling of obligations within a medium or long-term framework. Procurement plans will be collected by the regulatory authority to be published on the central electronic platform for interested parties to be aware of the procurement opportunities available and have adequate time to prepare for the bidding process.
 
With the Lebanese economy suffering from a steady decline in competitiveness—falling from 80th place in 2018 to 88th in 2019 (out of 141 countries)—the law includes provisions guaranteeing equal and fair opportunities to all potential suppliers on a competitive basis, limiting recourse to mutual agreements through clear, integrated, and standardized procedures.
 
Small and medium-sized enterprises (SMEs) in Lebanon account for more than 90% of total businesses, nevertheless they are unable to participate effectively in government contracts. The new law provides incentives for economic development by ensuring SMEs the right to fair and transparent participation, and by directing the state’s procurement capacity towards sustainable development.
 
In light of Lebanon’s declining position on the Corruption Perception Index (149th out of 180 countries in 2020), the law aims at fulfilling Lebanon’s international obligations to fighting corruption and ensuring transparent financial management processes. It emphasizes open, systematic, and free access to procurement information and data through a central electronic platform, similar to platforms applied in Tunisia (Tuneps), Ukraine (ProZorro), Chile (Mercados Publicos) and Mexico (CompraNet). It also provides the legal basis to introduce e-procurement and data management.
 
Towards full alignment with international standards
In an effort to transform the way procurement is planned, implemented, and monitored, the law abolishes the classification of contractors,[14] who have obstructed new entrants and monopolized the procurement market, thus limiting competition. The classification was replaced by an internationally applied, detailed, and clear “pre-qualification procedure” that bidders/contractors must complete before they can submit their proposals. In addition, the law provides both the Government and the supplier/contractor access to arbitration.
 
Following good practice, the law stipulates a governance model that sends a strong positive signal to investors and the public, by creating these two bodies:
 
  • The Public Procurement Authority (PPA), a new regulatory body whose mission is to set procurement policies, provide guidance and corrective measures, and operate the e-platform. The law upgrades the Central Tender Board’s role to become the PPA, with monitoring, regulatory, and supervisory roles. PPA members are appointed by the Council of Ministers based on a meritocratic recruitment process detailed in the law, to ensure an adequate level of professionalism, specialization, and integrity.
 
  • The Review and Complaints Authority (RCA), a new body in charge of complaints that allows potential bidders and active suppliers to regain trust by accessing fair, transparent, and speedy processes to file complaints in the pre-contractual stage, similar to successful models adopted in Croatia, Denmark, Georgia, Norway, Poland, and Romania. The RCA is also appointed by the Council of Ministers, based on a meritocratic recruitment process detailed in the law, and allows for soliciting private sector expert advice in the reviewing of complaints.
 
Lessons learned
Going forward, Lebanon will have to undertake many difficult and complex financial and structural reforms. Lessons learned highlight the importance of having the process championed by the concerned body in government. In the case of public procurement, it is the Ministry of Finance, whose mission is to ensure sound public financial management and to oversee the efficient disbursement of public funds. In addition, the role of a national coordinator is instrumental in leveling the field, developing a common understanding of complex issues among stakeholders, and establishing cooperation among various actors, while maintaining an impartial stand vis-a-vis all parties, and without compromising on international norms and standards.
 
Having the procurement reform process led by an external, non-partisan, highly specialized team—in this case the Institut des Finances team—was key. The institute was able to bridge the gap between the political players and civil society, while providing substantive support and advice. It was also able to mobilize its extensive network of partners (local, regional, and international) to supplement the policy dialogue with independent and comparative expertise, particularly by informing policymakers on how reforms were conducted in similar contexts.
 
The way forward
Beyond legislation, the successful implementation of public procurement reform requires nurturing a common national vision. The political momentum needs to be maintained, while ensuring efficient coordination on reform actions and a continuous dialogue around critical issues. There are many challenges that still remain, therefore prioritization and synchronization of efforts should be reflected in a national strategy for procurement reform to be owned by all and endorsed by the Council of Ministers. Such a strategy would identify and prioritize all legal, institutional, and operational actions needed to ensure that the law comes into force as scheduled in July 2022, with quick actions directed at:
 
  • Issuing the necessary secondary legislation to organize and structure the two new bodies (PPA and RCA) cited in the law
  • Making available guidance tools and standard forms for practitioners
  • Adopting and disseminating standard bidding documents
  • Conducting awareness-raising and across-the-board capacity-building programs
  • Developing and operationalizing the central electronic platform
 
Contrary to what has become common practice in Lebanon of legislation being passed without being fully implemented, and given the whole-of-government, whole-of-economy and whole-of society nature of the Public Procurement Law, its sound implementation will rely on: 1) continuous support of both the government and parliament, and their commitment to nurturing cross-sector partnerships to advance the reform, based on the approved Ministerial Declaration; 2) willingness of business, media, and community groups to voice their support and partner with the public sector; 3) ability of intersecting layers of government to work together, namely the overlapping roles of the central ministries and sub-central and local authorities; 4) curbing the talent drain in both the public and private sectors to preserve the available expertise; and 5) sustaining international, technical cooperation and policy guidance to support the reform process.
 
It is worth noting that the Public Procurement Law is important, yet insufficient on its own to have the desired long-term impact. It is unclear, for example, to what extent incorporating social value into this law, in a context of extreme inequality,[15] would succeed in capturing opportunities for economic recovery and prosperity. There is also uncertainty as to how open and free access to data will be, or how much of an impact the law will have on deeply entrenched political capture.
 
Nevertheless, decision makers, civil servants, the business community, civil society organizations, and international partners are called upon to join forces to take up the challenge and sustain a unique, inclusive, and participatory model for policymaking that has yielded tangible results, and is now showing excellent prospects.
 

[1] World Bank, Lebanon Economic Monitor, Spring 2021: Lebanon Sinking (to the Top 3).
[2] World Bank, Lebanon Reform, Recovery and Reconstruction Framework (3RF), November 2020.
[3] Government formed by Decree no. 8376, dated September 10, 2021.
[4] The estimated volume of public procurement does not include procurement by public institutions and municipalities, due to absence of structured published data.
[5] OECD, Foreign Bribery Report, 2014.
[6] World Bank, “Infrastructure and employment creation in the Middle East and North Africa.” World Bank Directions in Development Infrastructure 74918, 2013.
[7] The Minister of Finance mandated the Institut des Finances Basil Fuleihan to lead on the public procurement reform process (Decision no. 109/1 of March 4, 2019, and Decision no. 199/1 of June 9, 2020).
[8] The UNCITRAL Model Law on Public Procurement of 2011 contains procedures and principles aimed at achieving value for money and avoiding abuses in the procurement process. The 2011 Model Law allows the enacting State to develop a procurement system that will both achieve value for money and avoid abuse.
[9] The OECD Recommendation of the Council on Public Procurement ensures the strategic and holistic use of public procurement. It provides a 21st-century reference for modernizing procurement systems and can be applied across all levels of government and state-owned enterprises.
[10] SIGMA (Support for Improvement in Governance and Management) is a joint initiative of the European Union and the OECD, which works with countries on strengthening public governance systems and public administration capacities.
[11] The eight principles ensure compliance with the international principles defined by the Organization for Economic Cooperation and Development (OECD).
[12] This includes public administrations, municipalities, unions of municipalities, public institutions (including the Council for Development and Reconstruction), security and military forces, regulatory bodies, state-owned enterprises, public utilities, legal persons, diplomatic missions, and other public bodies.
[13] The Parliamentary Committee was chaired by MP Yassin Jaber and was composed of 10 members representing all parliamentary blocks and political affiliations.
[14] Abolition of Decree 9333 of 26/12/2002 on the classification of contractors and study offices to participate in the execution of public works contracts, and of Decree 3688 of 25/1/1966 on the determination of conditions for participation in the execution of certain public contracts.
[15] “The country has been ranked among the ten most unequal countries in the world in terms of wealth distribution (wealth being defined in a study published by the Credit Suisse Group as the trade value of assets, financial ones, and others, minus debt, excluding figures related to Syrian refugees).” The Worrisome Growth of Inequality and Poverty by Bruno Dewailly in Atlas of Lebanon, Presses de l’Ifpo, 2019.








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