I. General Data

Name of the Consultancy

Development of Early Warning Systems for Public Procurement and Contracting

Workplace

Tegucigalpa, Honduras

Type of consultancy

International Business Consulting

It will report to

Leader of Component 1 of USAID’s Program for Democratic Governance

II. Project Background

The Mission of the United States Agency for International Development (USAID) in Honduras, since the end of 2023, began the implementation of the Democratic Governance Program, whose purpose is to develop accountability and systemic response capacity by the Government of Honduras to citizens, while strengthening civil society. In order to increase confidence, safeguard human rights, and incentivize Hondurans to remain in their country and participate in their democracy. The main objectives of the programme are: (i) To improve the capacity for effective governance, transparency and citizen responsiveness of the institutions of the Government of Honduras. (ii) Enhance the GDH’s oversight and accountability capacity to combat corruption and ensure the proper use of public funds. And, iii) Empower civil society, the media and citizens (especially youth) and the private sector to fight corruption, hold government accountable, engage in governance reform, and promote a culture of human rights and integrity. Meeting these goals will strengthen Honduras’ capacity to address its persistent development challenges of lack of economic opportunity, insecurity, corruption, and irregular migration, while improving citizen confidence in democracy.

The latest evaluation of the public procurement system of Honduras (MAPS) presents many challenges to improve its functioning, including: i) Modernization of the regulatory framework, including standards, policies, manuals and methodologies that guide and give confidence to all actors, ii) Strengthening of the governing body of the National Public Procurement System (SNCP) so that it has sufficient regulatory capacities, planning, evaluation and advice for all public institutions, iii) Consolidation of the HonduCompras System so that it becomes the single technological solution that covers the entire procurement cycle transactionally, iv) Professionalization of the public procurement function, v) Improvement of framework contracts, vi) Strengthening the monitoring and evaluation systems of the SNCP, through the incorporation of indicators that generate reliable and timely information for its improvement; and, vi) Strengthening of the internal control system based on a risk management system that could impede the achievement of the objectives of the system, including those related to corruption.

In this regard, the Government of the Republic of Honduras created the Secretary of State in the Offices of Transparency and the Fight against Corruption (STLCC) in 2022, under PCM-05-2022, to prevent and combat the scourge of corruption in the exercise of public and private function in accordance with the guidelines of the Presidency of the Republic. in his government agenda, additionally, in said PCM it is mentioned that “the State Contracting and Procurement Regulatory Office (ONCAE) is attached to this Secretariat of State.” In addition, in 2023 the PCM-23-2023 is carried out where the powers assigned to said Secretariat are delegated, where in article 87-V, numeral 17 which literally says “Promote continuous improvement and the creation of tools that allow the effective implementation of the National System of Contracting and Procurement of the State, in order to guarantee transparency and accountability;” and paragraph 4 “Coordinate, promote and institutionalize with the competent entities in the matter, the implementation of the Open State Policy at all state administrative levels, within the framework of the Constitution, International Treaties or Conventions and Laws in force on the matter;”.

In order to contribute to the SNCP’s regulatory and evaluation capacities, the Program is supporting the institutional strengthening of the Directorate of Transparency and Prevention of Corruption (DTPC), which is responsible for formulating, directing, coordinating, supervising, and evaluating the execution of the Transparency, Prevention of Corruption, and Open State plans; and of the ONCAE, as the governing body of public procurement; both attached to the (STLCC), through the hiring of an expert to design and implement a platform that warns about practices that are carried out in the processes of State procurement and contracting. Additionally, this Early Warning System in Procurement and Contracting is part of the Open State Action Plan Honduras (PAEAH 2023-2025) in commitment number 1: “Establishing the Red Flag System (Early Warnings) to detect and prevent acts of corruption and promote good governance”, in order to identify those that present aspects that deserve immediate assessment for possible non-compliance with current regulations. prevent acts of corruption and promote good governance.

III. Objectives of the Consultancy

3.1 General Objective

Develop an Early Warning System for Public Procurement and Contracting Processes as a support mechanism to improve the efficiency of administrative management, as well as the due diligence process carried out by public institutions.

3.2 Specific Objectives
• Carry out a diagnosis of ONCAE’s information management systems and future implementations of Honducompras.
• Maintenance of the Open Contracting Portal to modernize current technology by applying security updates to the different components of the system.
• Implement early warning dashboards in the Open Contracting Portal.
• Design and implement an Early Warning System that interprets the information available in the Open Contracting Portal from the different data sources existing in it. Develop indicators, algorithms and data intelligence including comparison with minimum criteria established in current regulations.

IV. Scope of Consulting

To achieve the objectives, the consultancy is expected to develop at least the following aspects:
• Context analysis: To carry out a diagnosis and analysis of the information management systems of the public procurement and contracting processes of Honduras. This involves identifying possible critical points, vulnerabilities, and areas of greater risk in the availability of data that feed current systems, especially the open contracting portal and that allow their effective operation. Also carry out an analysis of the new public procurement systems to be implemented.
• Definition of early warning indicators: Identify and define the key indicators that will allow the detection of possible irregularities or risk situations in the procurement and contracting process. These indicators may include suspicious behavior patterns, significant deviations in prices, or any other factor that may indicate potential irregularities.
• Develop a customized early warning system tailored to the specific needs of the ONCAE. This involves establishing the alert thresholds corresponding to each indicator, as well as the protocols for monitoring and escalating the alerts generated.
• Technology Implementation: Evaluate and select the appropriate technology to support the early warning system. This may include implementing specialized software, artificial intelligence tools, or real-time monitoring systems to capture and analyze relevant data.
• Development of policies and procedures: Develop a manual of clear policies and procedures that establish how early warnings should be handled, including the roles and responsibilities of the parties involved, the investigation protocols, and the corrective actions to be taken.
• Training and awareness: Carry out training programs for employees involved in the procurement process, public procurement, DTPC technical team and accompaniment in two training and awareness training in the departments of Francisco Morazán and Cortés. This includes providing training on risk detection, the use of the early warning system, and the promotion of a culture of transparency and compliance.

V. Expected Results:
• Diagnosis of the implementation of an Early Warning System in Public Procurement and Contracting Processes. The source of information must be analyzed, a critical path that leads to timely and quality data.
• Open contracting portal updated to the technologies and versions that ensure its correct operation and growth.
• Early warning dashboards implemented in the open contracting portal.
• Early warning system developed considering the specific needs and requirements of the ONCAE, with appropriate technology. This should include the definition of key risk indicators, alert thresholds, monitoring protocols, and consider the contributions to the design and comments by citizens when the system is in prototype mode.
• Early warning follow-up policies designed with clear procedures related to the management of the early warning system. Establish detailed guidance on how to identify and respond to alerts and establish alert tracking protocols.
• Continuous monitoring mechanisms in place to ensure that the early warning system is functioning properly. This includes dashboards for monitoring the status of early warnings and statistics on the use of the system by the different actors, as well as mechanisms for auditing the use of the system.
• Training and awareness: To train through awareness sessions for employees involved in the process of procurement, public procurement, and the technical team of the DTPC and, accompaniment in two training and awareness sessions in the departments of Francisco Morazán and Cortés. Educate on the associated risks, how to use the early warning system and promote a culture of compliance and transparency.

VI. Consulting Methodology

· Definition of objectives: Clearly define the objectives of the early warning system for public procurement and contracting processes. These can include detecting irregularities, regulatory compliance, optimizing purchasing and contracting processes, among others.

· Requirements Analysis: Perform a thorough analysis of system requirements. Identify the required functionalities, the necessary data, the relevant information sources, the users, and roles involved, and the alert detection criteria.

· System architecture design: Define the architecture of the computer system, including the necessary components, such as databases, servers, user interfaces, alert detection modules, analysis algorithms, among others. Scalability, security, and component interoperability must be considered.

· Data collection and processing: Identify relevant data sources, both internal and external to the organization. Establish the mechanisms to collect and process this data efficiently and accurately.

· Development of detection algorithms: Develop the algorithms and analytical models that can process the data collected and detect patterns or anomalies that indicate possible risks or irregularities. These algorithms can be based on machine learning techniques, data mining, or statistical analysis.

· Implementation of the computer application: Develop the computer application that allows the detection of early warnings. Implement the detection algorithms, business rules, and workflows necessary for the operation of the system.

· Threshold and rule configuration: Set thresholds and detection rules based on identified risk indicators. Adjust thresholds and rules according to needs and risk tolerance.

· Validation and adjustment: Performs tests and validations of the system to verify its accuracy and effectiveness. It uses historical data sets and test scenarios to evaluate the performance of the system and make necessary adjustments to algorithms, detection rules, and consider input into the design and feedback from different sectors of society when the system is in prototype mode.

· Implementation and training: train users, managers, and technical staff of the STLCC on the use and management of the system. Ensure that the personnel in charge understand how to use the system, interpret the alerts generated, and take appropriate action in response to the alerts.

VII. Activities to do:

Phase I: Diagnosis

· Comprehensively analyze the information platforms and databases related to procurement and contracting currently in use in ONCAE (Honducompras 1, Open Contracting, process management database, PACCs database) focused on the necessary requirements for the efficient operation of the early warning system to be designed and the needs of the user.

· Verify the status of existing databases, identify, and propose critical paths for the solution of performance, integrity, and security problems. Analyze alternatives to store and manage large volumes of data efficiently, for example, data warehouses.

· Define the objectives and requirements of the system: Clearly identify the objectives of the early warning computer system. It determines the functional and non-functional requirements of the system, such as real-time monitoring capability, integration with external data sources, scalability, security, and usability.

Phase II: Technology update of the open contracting portal

· Perform a data quality analysis and statistics of the data available in the open contracting portal.