Given its size, the public procurement market has the potential to improve public sector performance, promote national competitiveness and drive domestic economic growth. However, with such vast sums and interests in jeopardy, public procurement is the government activity most open to corruption and fraud. It provides numerous occasions for all involved to divert public funds for private gain.
To understand the size and frequency of these ‘diversions of public funds’, the World Bank’s Benchmarking Public Procurement report analyses 77 economies on issues relating to value and the promotion of transparency, accountability and efficiency in public procurement.
Tania Ghossein, Senior Private Sector Development Specialist and Programme Co-ordinator of the Benchmarking Public Procurement project, World Bank Group, discusses the significance of the report in this month’s SmartProcurement.
Public procurement accounts for around one-fifth of global gross domestic product (GDP). In most high-income economies the purchase of goods and services accounts for a third of total public spending, and in developing economies about half. However, the benefits of the public procurement market go beyond value for money and other monetary goals.
Contemporary public procurement addresses policy objectives such as promoting sustainable and green procurement and social objectives to support enterprises owned by disadvantaged groups and promote small and medium enterprises.
Therefore, there is a lot at stake.
Transparency International estimates that “damage from corruption can represent on average 10-25% – and in the worst cases as much as 50% – of a contract’s value” (Transparency International, 2006).
Launched at the request of the G20 Anti-Corruption Working Group, Benchmarking Public Procurement provides comparable data on regulatory environments that affect the ability of private companies to do business with governments in 77 economies.
Benchmarking Public Procurement builds on internationally accepted good practices and principles and targets the most critical issues deterring the participation of private firms, especially small and medium enterprises.
Benchmarking Public Procurement captures elements that matter to private suppliers around two thematic areas:
First, the public procurement lifecycle indicator covers the four phases of public procurement, from preparing and submitting a bid to the systems for managing contracts.
• Preparing bids captures elements of the procurement lifecycle that take place before a supplier submits a bid.
• Submitting and evaluating bids measures the ease of the bid submission process as well as whether the bid evaluation is an open and fair process.
• Awarding and executing contracts assesses whether, once the best bid has been identified, the contract is awarded transparently and the losing bidders are informed of the procuring entity’s decision.
Second, the compliance and reporting mechanisms indicator covers the ease of challenging a public procurement tendering process tender through a complaint system and reporting misconduct and conflicts of interest.
• Availability of complaint and reporting mechanisms assesses whether suppliers have sufficient means to raise a problem to a relevant review body and whether they have access to sufficient information to evaluate the opportunity to file a complaint.
• First-tier review process explores the overall procedure for a complaining party to obtain a decision from the first-tier review body as well as the characteristics of filing a complaint before the first-tier review body.
• Second-tier review process assesses whether the complaining party can appeal a decision before a second-tier review body and, if so, the cost and time spent for such a process, as well as some characteristics of the second-tier review.
Benchmarking Public Procurement offers an objective basis for understanding and improving the regulatory environment for public procurement around the world. By doing so, it aims to promote evidence-based decision making by governments and to shed light over areas where few empirical data have been presented so far.
Benchmarking Public Procurement follows the approach of the World Bank Group’s Doing Business report, which has a recognised track record in measuring an economy’s laws and regulations and leveraging reform. By replicating the Doing Business approach and applying it to public procurement, Benchmarking Public Procurement offers data to fuel academic research, help governments assess the performance of their procurement systems and deliver a unique information tool to the private sector and civil society.