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Friday, May 22, 2009

Public Procurement during Financial Crisis

Pamela Bigart from the World Bank is passionate about public procurement. Ms. Bigart described the trends of public procurement during the financial crisis at the 23rd Annual ICGFM Conference.

Ms. Bigart stated that public procurement represents 10% to 15% of GDP in many countries. Procurement can range as high as 70% of government budgets. She indicated that governments are trying to invest more in infrastructure and to stretch budgets to do more with the current financial crisis. Making procurement more efficient translates to obtaining more value for money.

Ms. Bigart indicated that most public procurement systems focus on rule compliance. She noted that the purpose of procurement is to achieve a net service delivery.

Ms. Bigat described how public procurement increases business confidence and acts as a vehicle for foreign investment. These companies often partner with local companies to help build capacity. However, many countries are developing trade restrictions. She noted that the United States has been using a "buy American" program. Some countries are not following trade agreements. Although trade preferences sounds like a good idea, it is not sustainable in the long term. Companies that have an advantage within a country are often unable to compete globally.

Ms. Bigart described the difficulties in calculating value for money. The World Bank has had difficulty finding appropriate measurements. Most public procurement tends to focus on the initial cost and whether the cost is competitive.

Procurement officers are often viewed as clerical staff who insist on running to the rules. This can often result in delays to important and critical services. Emergency situations mean that organizations like the World Bank needs to lend more quickly and be much more flexible in rules in order to achieve service results.

Many systems are focusing less on the input side such paying for goods, works or services, to a focus on the service delivery side, according to Ms. Bigart. Focusing on results often brings in the community to determine the quality of service delivery.

Ms. Bigart says that the private sector capacity needs to be built in order to support public procurement. Many countries have transitioned from a command to a market economy. In these economies there was no notion of procurement, only public investment. Governments can help the private sector to develop. She emphasized that competition creates efficiencies and enables companies to complete globally.

Ms. Bigart described how Public Private Partnerships (PPPs) can enable building private sector capacity. She believes that this reduces the burden on the government to raise money. Many countries do not have an appropriate legal structure to handle PPPs.

A fair, open, and transparent public procurement environment is required to achieve competitive proposals, according to Ms. Bigart. Good governance encourages more companies to bid on public tenders. She advocates publishing procurement information and procurement rules as a quick win. This information should be user friendly.

Many countries are opening up their budget information that helps the private sector to understand future procurement opportunities, according to Ms. Bigart. It is a good and early source of information for the private sector.

Ms. Bigart says that investments in procurement technology such as publishing tenders has resulted in better service delivery, even in countries under stress. Data collected with procurement technology can provide analytical insight to improve procurement processes. Management and automated controls assist in providing sound and efficient systems. She advocates the integration of procurement and government financial management technology. Controls enable governments to manage to the budget and be able to pay vendors on a timely basis.

Lessons learned from public procurement include:
  • Procurement is linked as part of Public Financial Management reform
  • Procurement reform costs money and takes time
  • Some reforms can deliver results in the short term
    Reform cannot be effective if isolated from broader public sector management and financial management reform
  • Reforms require long term commitment to achieve sustainable results

Ms. Bigart described "pork barrel politics", earmarks and "road to nowhere" as examples of politicians resisting procurement reform in the United States. She completed her discussion about how procurement has improved in countries under stress like Liberia and Sierra Leone. Public procurement systems can contribute to recovering faster from the global economic crisis.

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