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Public procurement


The significant need for investment in infrastructure throughout the EBRD region means that good public procurement regulations are crucial.

The effectiveness of public procurement is strictly related to the legislation in force, efficiency of the public procurement regulatory bodies and professionalism of procurement officers.

The challenge is to develop a legal regime that will balance the competition and transparency safeguards and efficiency aspects in the public procurement regulations. The public procurement framework forms an essential part of the market economy; purchases by public entities are realised through the market and market mechanisms should be applicable.

When developing such a legal regime, one needs to create a framework that is consistent and easy to enforce in order to ensure that the rules are respected. To comply with this regime, all of the stakeholders – the contracting entities, the suppliers and contractors - and the general public have to be aware of the fundamental values for public contracts. 

Transparency and competition both play an important role to ensure the achievement of the best results while spending public money, but also, the public procurement regulations should maintain efficiency and accountability in the process.

The EBRD’s intention is to support legal and institutional transition in the field of public procurement and ensure that investments in the public sector contribute to the development of a market economy. To enhance the transition impact of the infrastructure projects financed by the Bank, procurement of the supplies, services and works in these projects is conducted in compliance with international public procurement standards and good practice. 

The EBRD is dedicated to sharing its experience as a direct investor and financier of transition projects and helps to develop international standards and guidelines for achieving fairer and better quality procurement. The EBRD also provides technical assistance to authorities that are committed to undertake the reforms needed.

Background

The development of public procurement regulation has been primarily initiated by Western governments who have been concerned with increasing public spending on public services and utilities and the frequency of corruption scandals, while meeting their commitments to the public. 

This should all be achieved while not increasing the expenditure for improved effectiveness and transparency of the management of the public spending.

Since then, international standards on public procurement were prepared to promote transparency in government procurement and enhance world trade competition.

The United Nations Commission on International Trade Law summarised established international principles of public procurement good practice and adopted the Model Law on Procurement of Goods, Construction and Services.

The WTO Agreement on Government Procurement (GPA) - The Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations- was signed in Marrakech on 15 April 1994.

The early 1990s "legislative package on public procurement" by the European Parliament and Council was recently updated in the early 1990s.  These instruments have become a significant reference tool for legal reform. 

Some of them are now under revision to reflect the recent progress in public procurement practice and to meet market challenges and developments in communication technology.

Why reform is needed

Legal reform in the public procurement sector in the EBRD region started about a decade ago and was primarily designed to re-position public sector entities in the new environment of a market economy.

Soon after the EU enlargement process encouraged the Baltic states and countries of central and Eastern Europe to implement the new public procurement regulation, aiming for full compliance with EU public procurement directives on state and utilities procurement.

The countries of south east Europe have also commenced with EU accession negotiations.  As a result they have introduced new laws on public procurement and are now addressing implementation issues and building institutions of the state-funded public procurement sector. 

In these countries, the rules on the public procurement governing the utilities sector are still pending.

The public procurement legislative reform in Turkey and CIS countries, Georgia and Mongolia is under way, but their procurement laws are not currently compliant with international public procurement best practice.

Presently, a major concern for all transition countries is how to adopt a stable and accountable public procurement legal framework that enables both efficiency and integrity.

EBRD involvement

The EBRD offers technical assistance for reform of public procurement laws. The EBRD, as a major regional investor, is particularly interested in promoting international public procurement best practice in the utilities sector and at the municipal level.

Reform of this area of the public procurement framework is very much about how to open the naturally monopolistic utilities market, address the operational needs of enterprises providing public services and foster integrity and transparency at the same time.

The main objective of the EBRD Legal Transition Programme in the field of public procurement is to support legal and institutional reform in the EBRD countries by providing assistance to governments to ensure national public procurement regulations, particularly those relating to municipal and utilities procurement, are in line with international standards and best practice.

To pursue this objective and inspire development of the public procurement legal framework and best practice, the Legal Transition Programme shall conduct a comparative review of public procurement legal frameworks in the Bank’s countries of operations.

The way ahead: Public Procurement Network

In September 2009, the EBRD was invited to participate in the Public Procurement Network (PPN), a forum for the exchange of public procurement information and the discussion of legislative reforms. The EU, OECD and public procurement agencies from European countries are all members of the PPN.

The EBRD will continue to utilise this forum to promote public procurement reform.

Sector assessment

The public procurement sector assessment is planned as part of the EBRD's efforts to promote sound business practices in its countries of operations.

The assessment of public procurement legal frameworks, in line with the mission of the EBRD, intends to address operational issues and offer more insight into “law in practice”. 

Representatives of the national Public Procurement Offices (PPOs), contracting authorities/entities and contractors will be involved. The assessment should allow for an evaluation of the level of development of the public procurement laws and guide the Bank’s policy dialogue in the field of public procurement. 

Through this project, the EBRD aims to influence and inspire the governments and policymakers to increase their efforts in legal reform in the region.

The EBRD sector assessment is scheduled for 2010 and will cover all of the countries of operations.

 

Further reading

The autumn 2010 edition of Law in transition online provides an overview of the major topical issues regarding public procurement legal reform and best practice developments.

 


  • International Standards

    The EBRD refers to standards and good practices that were developed by international organisations.

  • Public procurement sector assessment

    The public procurement sector assessment is being conducted as part of the EBRD's efforts to promote sound business practices in its countries of operations.