EBRD procurement director sets out how the bank’s upgraded procurement framework proved extremely timely amid the invasion of Ukraine.
The European Bank for Reconstruction and Development (EBRD) introduced a new procurement policy in early 2022 and its timing could not have been more important.
Its procurement director Jan Jachholt explained that the EBRD is an unusual multilateral development bank because it allocates the majority of its finance to the private sector, be it through lending, equity, rockets to jeans factories. He also said that “the EBRD’s new procurement policy as of 2022, represents the most fundamental revision of the bank’s procurement policy since it founded in 1991.”
The new rules now require market consultation and project delivery strategy as the bank moves to strengthen the focus on well-prepared projects. Jachholt also noted that the new procurement rules have set out firmer requirements on environmental and social considerations as the bank seeks to make all its projects are Paris Agreement aligned.
However, he stressed that as this was being presented internally at the bank on 24 February 2022, the expansion of ‘grounds for exclusion’ from EBRD financing became extremely relevant because, during that very meeting, news arrived that Russia had invaded Ukraine.
How the EBRD deals with sanctions
Jachholt said: “We adhere to one sanctions regime on absolute principle, and that is the UN Chapter VII. But although we do not impose sanctions aligned to other bodies or nations, we do have to reflect the affect of such sanctions. And this means some clients will be unable to contract.”
This made two exclusion grounds very significant very early on in the life of the new procurement framework.
He explained: “One exclusion ground is when it is (or it will become) unlawful under applicable law, for the client to enter into the relevant contract with the participant to perform its obligations under the contract.
“The second is for a circumstance or event that exists outside the clients control, that has or might reasonably be expected to have the effect of prohibiting, impairing or delaying, in any material respect, the performance by either the participant of the client under the contract.”
These measures have proven invaluable for the EBRD in regard to the current conflict. Jachhold said: “Our position now means we can act regarding sanctions that aren’t under the UN Chapter VII – and as we see with the invasion of Ukraine, this comes into force where national and other sanctions make it less and less possible to operate legally.”
Jan Jachhold was speaking at the FIDIC International Contract Users’ Conference held in London on 30 November 2022 in a session examining multilateral development bank procurement.