Five things you wish you knew about public procurement

Five things you wish you knew about public procurement

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Globally, countries are projected to spend roughly 13% of GDP on public procurement, implying that enhancing the efficiency, effectiveness, integrity, and sustainability of public procurement could free up budgetary headroom. But, in fact, how might these possibilities be realized? Is there a trade-off between increasing efficiency and pursuing public procurement’s other objectives? Below are the five things you wish you knew about public procurement:

Inclusion in public procurement processes- Public procurement can help a company develop. As per Ferraz et al., securing one government contract improves business employee growth by 2.2 percentage points in a quarter in Brazil. These effects last in the long run as winning firms enter and win additional auctions in the future and grow their operations into other areas. While national and local governments are increasingly employing their public procurement systems to target certain market sectors for growth, the evidence for reservation regulations is mixed.

Access via e-procurement- The digitization of procurement processes has the potential to revolutionize public procurement dramatically. Research, e-procurement encourage the admission of higher-quality contractors and improve quality. According to an effective study of e-procurement adoption, e-procurement lowered integrity concerns. E-procurement, on the other hand, is not a panacea for resolving inefficiencies in expenditure and lowering integrity concerns.

Corruption and transparency- Misallocation of public funds is caused by corruption, collusion, and other anti-competitive actions. Political connections skew procurement decisions, according to burgeoning economic literature. In Italy, a mayor’s second term reduces the number of bidders and the winning rebate, while increasing the likelihood of local winners or several contracts handed to the same firm. In Mexico, calls for tenders can notify enterprises about bidding opportunities, thereby expanding the pool of participants and lowering prices.

Corruption and transparency- Misallocation of public funds is caused by corruption, collusion, and other anti-competitive actions. Political connections skew procurement decisions, according to burgeoning economic literature. In Italy, a mayor’s second term reduces the number of bidders and the winning rebate, while increasing the likelihood of local winners or several contracts handed to the same firm.

Competences and discretion- There may be trade-offs between following the regulations and exercising discretion. Stricter regulation can lower the danger of fraud, while discretion allows purchasers to modify the procurement process. In public procurement, the idea of passive waste refers to constraints such as a lack of expertise, incentives, or an excessive regulatory load. The researcher discovers that passive waste accounts for 83 per cent of total estimated waste in Italy, prompting vast literature on public procurement regulations and discretion.

Incentives- The legal framework influences procurement officers’ and other stakeholders’ decisions. Many public procurement portal processes show clustering of contracts just below or over contract criteria that allow for more procedural flexibility. Several factors influence the incentives of parties involved in public procurement.

More evidence on the impact of inclusive policies on SMEs and other under-represented enterprises could help with the design of public procurement policies. By examining the entire procurement cycle and linking existing public procurement data, company data, complaints, and contract implementation data, new research possibilities can be created.

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