Improving public procurement in the EBRD region
Everyday expenses of governments and major public infrastructure projects are commissioned as public contracts. The significant need for investment in public infrastructure throughout the EBRD region means that good public procurement regulations are crucial.
The efficiency of public procurement is strictly related to the public procurement legislation in force, capacity of the regulatory and enforcement authorities and professionalism of individual procurement officers. The challenge for governments is to develop a legal regime that will balance the transparency safeguards and efficiency instruments in the public procurement process and train and retain qualified procurement officers. All of the stakeholders – the public sector contracting entities, the suppliers and contractors and the general public - have to be aware of the fundamental principles of transparency and fair competition in public procurement. Transparency and competition play an important role in ensuring the achievement of the best results while spending public money.
Why reform is needed
Amounts involved in public procurement
10-20 % of GDP, 45% government spending (World Bank, OECD) Systemic corruption = 20-30% of budget for public contract is wasted (World Bank) Capacity problems = 80% of waste is inefficiency, not corruption (research on the Italian public procurement system) Procurement reform could yield 10% efficiency benefits – i.e. 1-2% of GDP.
Strategic government activity involved
Public contracts are a basis for major & expensive public sector projects (infrastructure, education, health) Public procurement has a significant impact on economic performance and national economic development Public contracts are a basis for provision of essential everyday services to the public (electricity, transport, communication).
Since its establishment 20 years ago, the EBRD has fostered the transition to the market economy in the countries of Central and Eastern Europe and Central Asia. As a major investor in the region, the Bank understands that robust public procurement legislation encourages investment. It engenders confidence in the transparency of public procurement and stimulates private sector bidding for government contracts. Greater competition means governments receive better value for money.
The EBRD promotes reform of public procurement and seeks to lead by example. The Bank requires that all goods, works and services procured under Bank-financed projects adhere to the Bank’s Procurement Policies and Rules, aligned with the Government Procurement Agreement of the World Trade Organisation. We are proud of the fact that the Bank’s operations over the past 20 years have been without significant procurement problems. We are persuaded that this is the outcome of sound procurement policies based on international best practice. The EBRD procurement policies engendered confidence in the transparency of decision-making and stimulated private sector bidding for public contracts. In the regions where we work, it has also increased cross border trade opportunities. Greater competition in public procurement ensures governments receive better value for money and this is what we advocate.
The EBRD’s intention is to support legal and institutional transition in public procurement and ensure that investments in the public sector contribute to the development of a market economy. The EBRD is dedicated to developing international procurement standards and guidelines for achieving fairer and better quality procurement. The EBRD also provides technical assistance to governments that are committed to undertake the reforms.
Core Principles for Public Procurement
The EBRD Core Principles for Public Procurement have been prepared based on a review of the international public procurement standards relating to the procurement cycle.
The Core Principles reflect the standards generally regarded as international best practice in the public procurement process. The principles also draw on the practical experience of the EBRD as a direct investor and financier in the region.
The Core Principles are based on the assumption that the primary role of a public procurement law is to accommodate a business process of negotiating a contract in a public governance context. As public procurement constitutes a major economic activity for all governments, the regulation is a sensitive component of a country’s legal framework, and an essential supplement to public finance legislation.
Since power dynamics within the public procurement process are inherently unequal, regulatory and enforcement institutions are of immense importance. Consequently, the Core Principles focus in particular on the issues of objectivity, consistency and enforceability of public procurement regulation.
The principles apply not only to the tendering phase, but also to the pre- and post-tendering phases. The contracting entity launching the public procurement needs to ensure that the fundamental principles of public procurement are maintained throughout the entire process.
Modelling the content of a national public procurement framework will depend on the contractual traditions of individual countries of operations. At the same time, public procurement legislation needs to comply with international standards to ensure that key internationally recognised public governance values are respected.
The Core Principles therefore may serve as an aide-mémoire and a checklist for the drafting process.