Business worry about World Bank bidding rules

Washington, (Reuters) U.S. business groups and a top Republican Senator have written to new World Bank President Paul Wolfowitz asking him to suspend a proposal they say would alter the bidding system on projects funded by the lender.

World Bank projects in developing countries generate billions of dollars a year in business for private companies, which bid on contracts under bank rules. But according to 11 business organisations that wrote to Wolfowitz, a draft paper now open for public comment proposes changes that would let countries that receive World Bank loans use their own bidding systems to award contracts. The proposal should be put on hold for further discussion, the groups said.

The May 25 letter, which also went to senior Bush administration officials, was signed by the heads of the National Foreign Trade Council, U.S. Council for International Business, Computing Technology Industry Association, U.S. Chamber of Commerce, the National Electrical Manufacturers Association and the American Council of Engineering Companies. Eliminating an overarching bidding structure would sow confusion, reduce competition, raise costs and undermine the bank's anti-corruption efforts, the letter argues.

"The proposal would decentralise the procurement process for World Bank-funded contracts and would be inconsistent with World Bank goals of promoting fair and transparent procurement systems in the developing world," the groups wrote.

For its part, the bank argues that allowing countries to set their bidding systems would encourage them to set high standards for all contracts, not just for bank projects.

Diane Willkens, President and Chief Executive of the Development Finance group of corporate and government consultants, said the changes would deal a setback to World Bank efforts to promote best bidding practices. She also argued it could lead to misuse of bank money.

Republican Sen. Richard Lugar of Indiana, Chairman of the Committee on Foreign Relations, raised similar issues in a separate letter to Wolfowitz, the former Pentagon No. 2 who is now in his second week as World Bank chief.

"A number of businesses and non governmental organisations have contacted Senate Foreign Relations Committee staff, arguing that the proposal fails the important measures of fiduciary responsibility, transparency and capacity building," Lugar wrote.