Why should you care about public procurement reform?
15 Dec 2016 by Doyeun Kim, Communications Focal Point, UN Development Business
Public procurement reforms have been rolling out since the 1990s in Africa. Targeting better efficiency – but also more accountability and integrity – in the management of public resources, these reforms can shape procurement into a powerful agent for development.
In the past year, Cote d’Ivoire, Uganda, Somalia, Malawi and Zimbabwe have benefited from projects financed by the World Bank and the African Development Bank in which procurement reforms were part and parcel of larger public sector management goals.
Internal efforts, as well as assistance from international development agencies, are focusing on professionalizing and building capacity in national procurement systems. These efforts are consistent with the goals of good governance and prevention of corruption in the use of public funds, and they are also increasingly being linked to the Sustainable Development Goals, because public procurement can be used as a tool for achieving and sharing prosperity.
What is public procurement?
Public procurement, or the purchase of goods, works or services by public institutions, accounts for more than 30 percent of GDP in developing countries and 10 percent to 15 percent in developed countries, according to the International Trade Centre. It also accounts for a large percentage of government expenditures, in some countries covering more than half of government spending. Its economic significance is evident.
The processes involved in procurement can reveal more about its significance as a means of economic empowerment and an agent for development.
Procurement starts with the assessment of needs and identification of projects. Once the planning and budgeting is done, the tendering phase opens opportunities for companies and individuals to submit bids to supply the needed goods, works or services. Bids are evaluated, and contracts are awarded. Contracts must then be executed and payments are made.
As winning a government contract can be an enormous opportunity for any business, every step of this process is vulnerable to integrity risks where undue influence, conflicts of interest and fraud may occur. The volume of financial flows involved makes this system one of the most important places to watch for those integrity risks.
For this reason, institutions like the World Bank set procurement requirements as a condition for development aid. Transparency in the tendering and contract award process is crucial to ensure efficient and accountable use of taxpayers’ money. Equally, it paves the way toward fair and better competition, which ultimately contributes to the best value for money for public projects.
Procurement reform in Africa
Prior to reforms, many governments lacked thorough codes by which decisions surrounding contract awards could be regulated and accounted for. This provided opportunities for abuse and inefficiencies, and weakened trust in public institutions.
A 1998 conference in Abidjan on public procurement in Africa was a key moment of recognition, and institutions like the African Development Bank have been leading procurement reform projects in the continent. Its technical assistance projects cover different stages ranging from procurement system assessments to identification of reform measures, training of procurement professionals and evaluation of outcomes.
In 2013, the Government of Kenya began to use procurement as a tool for the economic empowerment of women, youth and persons with disabilities, instituting legal provisions for a 30 percent allocation of public contracts to businesses led by those groups. Still in its earliest years of implementation, however, lack of capacity and training, as well as inadequate information for target groups, hindered progress around the well-intentioned initiative.
Those challenges echo the voices of companies around the world that compete in public procurement markets. Access to timely information on opportunities and organisational capacity to participate in cumbersome and costly bidding processes are major obstacles, according to a 2014 survey by UN Development Business.
These are some of the hurdles that e-procurement, or electronic procurement, may be able to address. E-procurement simplifies information exchange and transactions through streamlined communications on the Internet and other networking systems, and can facilitate timely and equitable access to tenders. Mauritania and Uganda, among others, are moving to implement this in their national procurement systems.
As reforms continue, lessons such as those learned in Kenya become important in shaping public procurement as an effective mechanism for sustainable and inclusive growth. Ongoing impact assessments can show the way toward wider and more effective participation of individuals and businesses in public contracts, and this would hold great promise for public trust and investment.