* 40 percent of contracts last year were no-bid deals
* Government says such deals are needed to speed post-war reconstruction
* Donor warn a lack of transparency could harm investment
By Joe Bavier
ABIDJAN, Aug 14 (Reuters) - Ivory Coast will launch an audit of no-bid public procurement contracts and may cancel those which failed to follow tendering procedures amid donor concern a lack of transparency in government deals may deter investors.
President Alassane Ouattara has won praise for rapidly reviving the economy of the world's top cocoa grower after a decade-long political crisis that ended in a brief 2011 war.
The West African nation posted GDP growth of 9.8 percent last year and is projected to be one of Africa's best economic performers in the years to come.
Ivory Coast has earmarked 1.03 trillion CFA francs ($2.1 billion) - or more than a quarter of this year's budget - for investment spending, up from 620 billion in 2012. But as the country rebuilds, the number of sole source contracts - deals in which only one bidder is solicited - has spiked.
"We're seeing that more deals are done under sole source contracts than through open tender," Non Karna Coulibaly, president of the National Public Procurement Regulating Authority (ANRMP) which is commissioning the audit, said late on Tuesday.
"Right now we're not judging. We just want to see why it has developed this way," he said.
Coulibaly said the agency, which was established in 2009 to independently monitor public procurement, will review sole source contracts awarded from 2011 to 2013 in three yet to be announced sectors.
The audit is due to be completed by the end of the year with results to be published in the first half of 2014.
By value, around 40 percent of all contracts awarded in 2012 were sole source, according to ANRMP statistics.
The figure rose to over 57 percent, or nearly 77 billion CFA francs, in the first three months of this year, according to data presented at a recent cabinet meeting. Open tenders accounted for just 16 percent.
The government has rejected criticism that the large number of untendered deals has led to a lack of transparency in public procurement, saying they are necessary if Ivory Coast is to rapidly implement its reconstruction policy.
Donors however had expected the number of such contracts to decrease with time. Many now worry that the potential for corruption could cause investors stay away from Ivory Coast at a time when it is in desperate need of financing.
"This is damaging investor confidence and Ouattara's international reputation," one western diplomat told Reuters on Wednesday, requesting not to be identified.
"The desire for expediency in post-war reconstruction doesn't explain away the fact that contracts worth hundreds of millions of dollars are being handed out in a very questionable manner," he said.
Coulibaly said the audit will look at various ways to curtail the number of untendered deals and foster transparency, possibly recommending a cap on the number of sole source contracts ministries can award.
He said the agency would also weigh possible sanctions against companies and individuals found to have circumvented proper procedures in order to obtain contracts.
While the presidential order creating the ANRMP provides it with the authority to punish abuse, it is still awaiting a decree from the finance ministry outlining its powers.
A draft version of the decree seen by Reuters would grant the agency the authority to dissolve contracts or withdraw their attribution among other punishments.
Coulibaly said he expects the decree to be signed before the audit is completed.
"If it's found that a contract was attributed with irregularities, we need to be able to go beyond denouncing. We need to be able to punish. Otherwise there is impunity," he said. ($1 = 495.5670 CFA francs) (Reporting By Joe Bavier; editing by Ron Askew)