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This document is the outcome of the UNDP working group on “Procurement in cities”, which convened throughout year 2024.
The group brought together international experts to explore how municipalities procure services and goods in their respective cities, learn from past experiences, identify emerging trends, and develop specific solutions for more inclusive and efficient local procurement.
This guideline outlines some DOs and DON’Ts to be considered for effective procurement in cities, focusing on procurement preparation and planning, selecting the right counterpart, managing contracts, and incorporating sustainability into the procurement process. This document aims to enhance procurement efficiency, reduce costs, and ensure the acquisition of high-quality goods and services.
Local governments are responsible for a significant portion of the services that residents need in cities. For example, in some countries like Brazil, up to 80% of all public contracting is done by local or regional governments (~40 percent of this by cities/municipalities governments). These include waste collection, providing clean water, maintaining clean streets and lighting, managing green spaces, schools, health centres, and increasing range of digital services that must adapt to rapidly evolving technological advancements.
Municipalities/local governments often need to outsource many of their services to the private sector, regardless of their location or capacity. Managing public contracts is inherently challenging. The level of decentralization in a country can be beneficial if the city has the necessary legal framework and human resources to procure goods and services effectively.
However, national procurement legislation might be outdated, or it does not respond to the changing needs of local governments. For instance, national procurement laws and regulations are often crafted for ministries or national departments, focusing on large companies and substantial contracts. In contrast, local government processes are typically much smaller in scale and may lack adequate local competition. Other challenges lie in the rapid evolution of technology, the types of construction materials, and the management of services through digital means etc.
Many procurement regulations have been designed primarily for “buying” or “building” and are not suited for more complex management systems that must take into account energy efficiency, environmental impact, inclusion of those who need it the most, and the future maintenance costs of services and infrastructure.
This procurement guidelines serve as a roadmap to the UNDP vision, laying the groundwork for equitable practices that uplift every voice. By actively engaging diverse businesses, cities can tap into a wealth of perspectives and ideas that reflect the needs and aspirations of their community.
Over the past five decades, UNDP has gained extensive experience procuring goods and services for municipalities, assisting local governments worldwide in delivering essential services to their citizens. In many countries, UNDP procures services on their behalf, sometimes in fragile and post-conflict contexts where procuring services such as food or health supplies can be urgent, as well as day-to-day essential services.
Public procurement is vital for sustainable development, the way contracts are established significantly affects the quality of life of the people, and often have severe consequences on elected officials if they go wrong.
Public procurement can also be used to promote sustainable development policies, by utilizing criteria that looks beyond lowest price. For example, promoting women owned businesses, climate neutral companies, social enterprises, etc.
Contracts are also very important in terms of transparency and prevention of corruption. Increasingly, open local government initiatives are being utilized to enhance citizen participation in the negotiation of contracts for essential public services, fostering transparency while also considering the perspectives of end users.
Procurement offers a significant opportunity to address the needs of those who require support the most. The procurement of public services, construction, or goods can also be a political process.
Cities may make decisions not only based on the principle of “value for money” but also to allocate resources to specific groups that have historically been marginalized / left behind and require additional support to catch up.
In today’s increasingly diverse society, fostering an inclusive culture is essential for the success of our city. Promoting a city-wide commitment to diversity and inclusion in all business dealings not only enhances economic opportunities but also enriches our community fabric.
Encouraging joint ventures and subcontracting between larger contractors and small, minority-owned businesses is not just beneficial it is essential. As we navigate the complexities of our city’s development and procurement processes, fostering these partnerships opens doors to new opportunities and strengthens our economic fabric.
Joint ventures and subcontracting also promote equitable economic growth, helping to level the playing field for businesses that may have historically faced barriers. This approach fosters a more inclusive economy, where every business regardless of size or ownership has the opportunity to thrive and contribute to our city’s prosperity.
Public procurement IS a KEY ELEMENT OF PROJECT PLANNING
IT can be used to promote sustainable development policies
PUBLIC SERVICE criteria NEEDS TO LOOK beyond THE lowest price
SOUND PROCUREMENT PROMOTES transparency and preventS corruption
WORKSTREAMS
During 2024, the working group discussed the following issues TO BE considerED FOR public services procurement processES:
1.
What do the citizens need? Preparation and planning
The first question to address is “what do we need”. In the case of cities, most procurement processes start with a Data-Driven Analysis. Conduct assessments to identify community needs based on demographic data, surveys, and local trends not of the local government per se, but the need of the people living in it. Understanding the needs of the community is the first thing that we need to get right here.
The following issues were discussed:
- Planning for procurement: identifying and assessing the needs that the contract will be addressing. What is the problem that needs to be solved?
- Establishing feasible deadlines, most procurement process run late, plan for a timeline that includes possible delays and set a realistic calendar.
- Writing proper and complete Terms of reference where the provider can clearly understand the requirements.
- Define specific deliverables in detail.
- Think ahead about the evaluation criteria.
- Calculating an estimated budget and a reliable cost-analysis, including the number of items, the breakdown of elements or units that needs to be budgeted. What are going to be the maintenance implications?
- The Christmas tree budget, how to foresee costs that go beyond estimations and prepare for it.
- Participation, including consultations with the final users in contract negotiations and design.
- Managing conflict of interest and due diligence.
PREPARATION AND PLANNING
Effective procurement begins with thorough preparation and planning, laying the foundation for successful sourcing and supplier relationships. Investing time in these initial stages, ensures the alignment with strategic goals and the mitigation of risks to achieve optimal value.
Developing a comprehensive procurement plan
do
The procurement plan should begin with a clear determination of the financial resources available for procurement. Establishing a realistic budget is key for prioritizing needs and ensuring that procurement aligns with the municipality’s goals and financial capabilities.
- The procurement plan should also include a well-defined timeline, outlining key milestones in the procurement process. This timeline will help manage expectations and will ensure that all parties involved are aware of deadlines and deliverables. Ample time should be allocated for the procurement process.
don`t
Don’t proceed without clear, measurable objectives. A lack of defined goals can lead to an ineffective procurement strategy.
Don’t establish unrealistic timelines, this can lead to hasty decisions and compromised quality.
Needs assessment
do
- Identify and engage all relevant stakeholders and end-users, such as municipalities and decision-makers, from the outset to understand their needs and concerns. This approach ensures that the goods or services procured will meet the actual requirements of those who will utilize them.
- Validate any assumptions made during the needs assessment with data and stakeholder feedback to ensure accuracy.
- Clearly define needs by outlining precise specifications, detailed quality standards, quantities, and requirements for the items or services to be procured.
- Consider future growth and potential changes in requirements to ensure that the procurement can accommodate evolving needs.
- Identify / consider adjacent policy goals that can be achieved through the procurement process.
don`t
- Don’t rush through the needs assessment stage, taking the time to thoroughly understand requirements is crucial for successful procurement.
Don’t neglect the input and feedback from stakeholders, as this can lead to incomplete or inaccurate needs assessment.
2.
Looking for the perfect counterpart
The following issues were discussed:
- Looking for the perfect counterpart: researching the market (local and international), open competition vs. direct contracting (pros and cons), when the private sector does not exist, identifying providers in special circumstances. Partnerships vs Procurement.
- Negotiating contracts: what happens when the parties have different capacities and power.
- Debriefing partners after selection, how debriefing can help providers improving their offers and build local capacity.
LOOKING FOR THE PERFECT COUNTERPART
Selecting the right supplier is essential for building strong relationships and achieving your procurement objectives. A strategic relationship with the supplier will contribute to increase value, improve quality, and ensure a long-term organizational success.
Supplier/Vendor selection
do
Conduct a comprehensive market research to identify potential suppliers and understand market trends and pricing.
- Advertise effectively to raise awareness among local providers by utilizing local advertising channels, social media channels and forming partnerships with the city council to reach a wider audience and attract the right provider.
- Simplify the procurement process by creating a user-friendly application portal.
Simplify required documentation and make application requirements more inclusive of small providers.
- Ensure all procurement activities are well-documented to minimize risks, maintain transparency and accountability.
- Consider multiple suppliers, compare their offerings, prices, and terms, to make an informed decision.
- Maintain transparency in all procurement activities to build trust and ensure fairness.
- Assess suppliers based on multiple criteria such as quality, cost, reliability, and compliance with regulations.
- Encourage socially responsible suppliers and consortia working.
don`t
Never skip the due diligence process when selecting suppliers, as it can lead to poor quality and higher risks of financial loss.
Don’t overlook Total Cost of Ownership* by focusing solely on the initial purchase price. Consider the total cost of ownership which, includes maintenance, operation, and disposal costs; neglecting hidden costs can lead to budget overruns.
*Total cost of ownership is the purchase price of an asset plus the costs of operation, representing the complete cost through its entire life cycle.
Do not compromise on quality to save costs, as it can lead to higher expenses in the long run due to failures and replacements.
Don’t make decisions based solely on the lowest price, consider quality and reliability.
Do not allow one person to have sole responsibility for contracting a high-value product or service.
3.
Contract management and sustainability
Once the provider is selected, the procurement teams’ hand over responsibilities to the programme managers. However, the work is far from over; it has only just begun. Both the selection of the provider and the implementation must go hand in hand. A successful selection must be complemented by effective implementation to ensure that the process meets the initial goal of addressing citizens’ needs.
Contract management, structuring deliverables and payments, controlling outcomes through the contract financial management.
The following issues were discussed:
- Changing/ adding needs, implementing contracts in the long-term when new services are required.
- The impact of digital in public procurement, procuring for digital services and using digital platforms to procure for services, copyrights and intellectual property.
- Sustainability considerations, incorporate sustainability into procurement planning, considering economic, environmental, and social impacts both to the buyer and the provider. Focus on projects that enhance community resilience and adaptability to future challenges.
CONTRACT MANAGEMENT AND SUSTAINABILITY
Contract negotiation is a critical phase in the procurement process, where terms and conditions are finalized to ensure mutual agreement and understanding between the buyer and the supplier.
Contract negotiation
do
Ensure that all key terms and conditions of the contract are clearly defined and understood by both parties. Thoroughly review and understand all key terms and conditions of the contract. Missing critical details can lead to disputes.
Ensure compatibility with local and national regulations.
Agree on clear payment terms which include payment schedules, amounts to be paid, and methods of payments. Also agree on mechanisms for resolving disputes to avoid future conflicts. Failing to do so can result in conflicts and legal battles.
Ensure that the supplier offers adequate warranties that provide adequate protection. Make sure the terms are practical and enforceable.
Assess potential risks and liabilities and include provisions to mitigate them.
Ensure compliance by adhering to all relevant laws, regulations, and organizational policies throughout the procurement process. Consult with legal and procurement experts to ensure that the contract terms are fair and compliant.
- Keep detailed records of all discussions, agreements, and changes made during the negotiation process.
don`t
Don’t overlook contract details. Read things twice. Ask your colleagues to check.
Review and understand all contract terms and conditions to avoid future disputes.
Don’t fail to involve key stakeholders in the negotiation process. Their input and approval are essential.
Don’t accept warranties that are too short or too limited in scope.
Don’t fail to clarify the process for claiming warranties and guarantees.
Do not permit contract changes that substantially exceed the scope of your original requirements.
Contract sustainability
do
Define metrics, indicators and baselines thinking on Agenda 2030 as a guide for sustainability
Establish key performance indicators (KPIs) to measure sustainability outcomes, such as carbon footprint reduction or waste diversion rates.
Use more circular approaches and reduce reliance on natural resources
Aim to reduce transportation distances for goods.
Implement reporting mechanisms to track progress toward sustainability goals and share results with stakeholders.
don`t
Do not forget to communicate about the contract implementation. The users will understand better if things go wrong.
Do not forget that your suppliers also need guidance. Keep constant communication during the contract duration.
Prevent any potential issue: If you see that something may be a problem, intervene sooner rather than later.
Do not forget that the contract needs to serve the local population needs. Go back to the needs assessment and review the performance on regular basis.
Conclusion
The do’s and don’ts in this guideline highlight essential practices that can enhance efficiency, transparency, and accountability in procurement. While this list is not exhaustive, it serves as a foundational guide for effective procurement strategies. For further insights, we recommend referring to best practices and policy documents, such as the United Nations Procurement Manual and the World Bank’s Procurement Guidelines, OECD’s recommendations on public procurement which provide comprehensive frameworks for enhancing procurement processes.
CASE STUDIES
Two cities redefine public procurement for sustainability and inclusion
LEARN MORE
These guidelines were elaborated with the contributions from the members of the ‘Procurement in Cities’ working group, who met throughout 2024. We want to thank the following individuals and their organizations:
- Carlos Freitas, Executive Director, FMDV – Global Fund for the Development of Cities
- Jose Marin, Senior Program Officer for the Local Program, Open Government Partnership
- Claire Frost, Policy Officer, Commonwealth Local Government Forum
- Matthew Kwatinetz, Director, NYU Urban Lab
- Glenn Crafts, Head of Commercial, Stats New Zealand
- Bernadine Fernz, Head of Sustainability & Infrastructure, Open Contracting Partnership
- Daniel Platz, Development Economist and Urban Finance Specialist, Infrastructure Asset Management, United Nations Department of Social and Economic Affairs
- Biljana Cvetanovska Gugoska, Programme Officer, Head of Democratic Governance Unit and Green Portfolio, UNDP
- Calum Handforth, Digital Programmes Strategic Manager, UNDP
- Louise Skarvall, Accelerator Lead, Regional Innovation Team, Istanbul, UNDP
- Suzana Paz, Head of support services, LCR MCO, Panama, United Nations Office for Project Services
- Nicodemus Mbwika, Lead for Urban Areas and Housing Committee, Kenyan Council of Governors
- Carles Barnés Garcia, Head of contracting services, Barcelona Province, Spain
- José Navarro Gavilán, Technical Advisor, Contracting Service Department, Barcelona Province, Spain
- Carina Cruz, Procurement Managment officer, Government Procurement Policy Board, Philippines
- Camilla Holm Nilsen, Procurement Specialist, Arendal Municipality, representing the Norwegian Association of Local Governments (KS).
- Veronica Hitosis, Executive Director, League of Cities of the Philippines
- Clarissa Augustine, South Africa Association of Local Governments (SALGA)