Despite progress, transparent and efficient government procurement rules remain a global challenge: WBG report

December 5, 2016

WASHINGTON, December 5, 2016 – Public procurement rules and practices remain inefficient in large swathes of the world, despite government efforts towards efficiency in delivering better services to their citizens, says the latest edition of the World Bank Group’s Benchmarking Public Procurement (BPP) report.

Accessibility and transparency of public procurement rules and practices remain limited, depriving many small and medium firms of the opportunity to bid for service contracts for government and other public sector institutions, finds Benchmarking Public Procurement (BPP) 2017, which assesses public procurement regulatory systems in 180 economies.

The worldwide public procurement market is estimated at approximately US$9.5 trillion each year. Of this, developing countries spend an estimated $820 billion a year worth of citizens funds, about 50 percent or more of their total government expenditure, on procuring goods and services that range from food for welfare programs, to wiring for electrical grids that power homes and businesses. Government procurement can average as much as 16 percent of GDP in the European Union to 33 percent in Eritrea.

Public procurement markets, therefore, represent huge opportunities to boost competition and economic growth.

An e-procurement system, for example, benefits the private sector as well as governments by making procurement more transparent and fair. However, the report finds that in 15 percent, or 25, of the economies measured by the report, an electronic portal dedicated to procurement does not even exist. Moreover, in the economies that do have such portal, a wide gap exists between economies that have sophisticated e-procurement platforms offering a range of services and ones that only use the internet to publish basic information such as procurement laws.

Publicizing future procurement opportunities, electronic submission of bids and public announcements of tender awards are other best practices that could be more widely adopted, says the report.

Providing information such as procurement plans during the pre-tendering phase online, can help suppliers when planning their sales strategies and preparing their bids.

Only 74 economies publish procurement plans online. More surprisingly, in only 24 of those does the law expressly mandate that such information be made available electronically.

“As large buyers, governments and the public sector are an important source of business for the private sector, which, in turn, is an important source of jobs for citizens. A fair and open government procurement process can be a vital stimulant for a well-functioning economy in which all stakeholders – governments, private enterprise and citizens – thrive,” said Augusto Lopez-Claros, Director of the World Bank’s Global Indicators Group, which produces the report.

Private sector firms wishing to participate in government contracting also face significant challenges on the financial aspects of the procurement process. Bid security is an essential element of the procurement process as they ensure serious offers. They are required in most economies measured. While there is no clear good practice as to the amount that should be requested, there is agreement that it should not be set so high as to hinder participation or so low as to allow frivolous offers. In 31 economies, the amount of bid security requested from bidding firms is left completely to the discretion of the procuring entity, finds the report.

Payment delays by procuring entities are also common and constitute a major deterrent for small and medium enterprises to take part in the government procurement market. The report finds that payments are timely in only one-third of the economies measured, and delays can range from 30 to more than 180 days.

An efficient procurement system should also include a well-functioning component to address complaints or challenges from bidders on any aspect of the procurement process, including final contract awards. The report finds that bungled complaint mechanisms remain prevalent across economies of all income groups and appeal costs are often prohibitive for bidders.

“As the data shows, governments around the world can do more to improve access to public procurement opportunities,” said Federica Saliola, lead author of the report. “By highlighting good practices as well as areas for improvement, we hope the evidence in this report will galvanize policymakers to effect the needed reforms and, thus, help their economies benefit from private sector growth and get better value for money in the procurement of goods and services.

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