Working around, not with, existing local procurement procedures undermines country ownership. The stipulation that MCC procurement guidelines and not LACAP will govern the compact means MCC specific approval and reporting requirements must be used, which add a layer of complexity to the national procurement process. The Technical Secretary to the President is the chair of the Fomilenio Board of directors, and thus seems ideally suited to ensure that both LACAP and MCC procurement procedures are effectively implemented. The rationale for the selection of an international firm rather than the Ministry Institutional Acquisition Units for procurement was not clearly communicated to Fomilenio as staff expressed frustration that LACAP was insufficient for the MCC. Increased transparency and communication regarding the shortcomings of the national procurement practices could lead to improvement of LACAP as well as increased procurement knowledge, ownership and accountability.[17] This could in turn mitigate the lack of local capacity building, which is a result of using an international agent. This outsourcing may reflect both the limited availability of fluent Spanish speaking procurement resources as well as the staffing cap at the MCC but seems like a natural area to be addressed in light of MCC’s premium on country ownership. Rather than undermine the institutional framework in place by explicitly stating that LACAP will not govern compact procurements, there should be a better way to capture what MCC feels is acceptable in terms of procurement practices.
More technical support from the MCC could spur implementation. Precisely at the time when El Salvador rapidly expanded the number of procurements in the pipeline for implementation, the provision of procurement expertise from MCC headquarters to the field plateaued. While sector areas of the compact such as agriculture and monitoring and evaluation added personnel to the MCC implementation teams, the one procurement director assigned to the team serves on multiple compact implementation teams. This is the case throughout the MCC due to a staffing cap that makes it an institutional challenge to allocate sufficient procurement training and assistance. Since the time of the visit for this report, the MCC has begun to address this resource need through plans to provide increased training to Regional Country Directors (RCDs) during the pre-EIF stage of a compact, and by outsourcing procurement consulting services. This trend should continue so as to avoid the situation which Fomilenio faced in March— waiting (for sometimes more than a month) for confirmation that procurement requirements had been met before disbursement could proceed.
The MCC is introducing new management efficiencies to facilitate implementation. Two new MCC technologies may help ease the need for hands-on procurement and disbursement oversight: the roll out of the Common Payments System[18] (CPS) was completed in June 2008 and the first phase of the Business Intelligence and Data Storage System (BIDS) will likely be rolled out in late 2008 or early 2009. The former is a MCC system that uses the U.S. Treasury department's payment system that enables direct payment to vendors based on fiscal agent approval of invoices and provides a means for real-time disbursement tracking. The latter is an automated reporting system where accountable entities will be able to directly submit reports, streamlining collection of reports and consolidating information in one central MCC system for ease of reference as well as documentation of administrative requirement completion. It remains to be seen if these tools will enable the small footprint model to function well and maintain flexibility in response to the needs of accountable entities like Fomilenio.
Unrealistic disbursement targets set up program for unnecessary criticism. It is not clear how the disbursement targets for FY 2008 are to be met based on historical trends.[19] As of the latest Country Status Report in June, compact countries disbursed on average 32 percent of their disbursement targets for Year 1. El Salvador has disbursed approximately 13 percent in the nine months since entry-into-force of the compact.[20] The finalization of sizeable construction contracts may lead to a large swell in flowing funds, however, it is hard to envision given the shortage of procurement resources assigned to El Salvador and new procurement guidelines just beginning to take effect. Beyond public statements by Ambassador Danilovich of disbursement targets by the end of FY 2008[21] and publication of updated procurement guidelines, there has been little additional information provided by the agency as to the details of how these targets will be met other than through infrastructure project contract finalization.
Next Section: Recommendations
17. According to MCC, additional procurement training for Fomilenio staff is also being planned and undertaken this fiscal year by MCC staff and contractors.
18. See MCC’s website for more information on the Common Payments System: http://www.mcc.gov/documents/factsheet-102408-cpsforbidders.pdf
19. According to MCC staff, all MCC countries are performing a comprehensive review of previous projection estimates for publication in the first quarter of FY 2009.
20. As of January 2008, the MCC had removed estimated disbursements from its quarterly reports, making it impossible to track actual disbursements against original targets. While this change may reduce the emphasis on disbursements as a key metric, it obscures the picture of progress in a given country. Perhaps the revision of projections to be released in the first quarter of FY 2009 will be illustrative.
21. See Ambassador Danilovich’s testimony before the U.S. House Appropriations Subcommittee on State and Foreign Operations: http://www.mcc.gov/documents/testimony-022608-houseappropssubcmte.pdf, February 26, 2008, p.8.