Why Integrity in Public Procurement is Important

 

Public procurement accounts for 16% of GDP, on average, in OECD member countries. This is channelled through public sector organisations purchasing goods, services and works from contractors.


In some circumstances, public procurement is made complex because procurement specification are difficult to define, competition is restricted by market factors or the bundling and transfer of procurement risks (e.g. public-private partnerships).

 

Value for money

 

Fraud and theft, bribery, conflict of interest, abuse of information

 

Tensions over use of procurement for additional policy goals

 

Accelerated procedures

 

Value for money

 

Value for money in public procurement is achieved through pursing the lowest “whole of life” cost, clearly defining relevant benefits and delivering on time. Preventing waste and fostering competition, transparency and accountability during the tendering process are key conditions to achieving value for money.

 

Strong competition between suppliers generally pushes down prices and provides variety in the types of solutions that can be matched to the identified needs of contract authorities. Transparency and accountability must be balanced with other good governance imperatives, such as administrative efficiency. At all times, however, public sector organisations must be diligent to protect confidential information, particularly relating to suppliers trade secrets.

 

However, supporting value for money requires attention throughout the entire procurement cycle. During the pre-tendering phase, for example, understanding is required of the needs of contract authorities, the lessons learned from previous procurements and suppliers’ capabilities to maximise benefits. During the post-award phase, effective contract management is essential to ensuring that contractors deliver on time, within budget and according to the needs and specifications identified by the contract authority.

 

Fraud and theft, bribery, conflict of interest, abuse of information

 

Public procurement is the government active more 'at risk' to waste, mismanagement and corruption. The volume and regularity of transactions, close interaction between the public and private sectors and complexity of the procedures makes public procurement particularly vulnerable to abuse.

 

Risks to public procurement include, among others:

  • fraud and theft of resources, for example through product substitution in the delivery which results in lower quality materials;
  • corruption including bribery, “kickbacks”, nepotism, cronyism and clientelism, collusion and bid rigging;
  • conflict of interest in the public service and in post-public employment; and
  • abuse and manipulation of information and the discriminatory treatment in the public procurement process.

 

For more information on OECD work see Integrity in Public Procurement

 

Tensions over use of procurement for additional policy goals

 

Tensions are also created by introducing other policy goals such as economic, social and environmental criteria.

These may relate to an evolving legislative framework, closer interface between the public and private sectors, balance risk transfers between the procuring/contract authority and the contractor, as well as equip procurement practitioners with the necessary skills to successfully manage the process.


Enhancing integrity in public procurement recognises these risks and moves to use public funds, resources, assets and authority efficiently, in accordance to the intended official purpose and in line with the public interest.

 

Accelerated procedures

 

The importance of integrity in public procurement has received renewed attention particularly in the current global economic and financial crisis: greater flows and accelerated tender procedures for government procurement under countries’ fiscal stimulus programmes raise additional risks.

 

A clean recovery needs to proactively promote a level playing field and fair competition in government contracting. Actions taken today will have a lasting impact as public funds are used to renew public infrastructure and invest in new technologies for the future.

 

Mitigating vulnerabilities and enhancing integrity in public procurement should not constitute a separate institutional and legislative framework. It must be considered in the context of the broader frameworks within which procurement policy operates in each country.

 

Fore more information see Accelerated public procurement procedures in the context of the financial crisis

 

 

 

Related Documents

 

Procurement Toolbox

Background documents