Public Procurement in Kazakhstan

Executive summary

Public procurement is crucial for delivering public services, whether in health, education, infrastructure or public safety. In Kazakhstan, public procurement accounts for 6.6% of GDP in Kazakhstan, which is relatively low compared to the OECD average, but it also represents 43% of government expenditures, which is above the OECD average. Kazakhstan is committed to improving its system to maximise its potential, and made significant changes to the public procurement law in recent years.

This review focuses on six topics, which all contribute to the functioning of a public procurement system: 1) the legal and institutional framework, 2) the contract-awarding process, reviewing procedures and increasing administrative efficiency, 3) the e-procurement system, looking at ways to enlarge the scope and improve its functioning, 4) risk management and accountability, analysing internal control procedures and integrity standards in the procurement profession, 5) strategic procurement and capacity, exploring ways to go beyond procurement as an administrative function, and 6) state-owned enterprises (SOEs), comparing their challenges with those of state public procurement.

While the review focuses on the central level, a chapter is dedicated to SOEs (the “quasi-state sector”), which accounts for about 30-40% of Kazakhstan’s GDP. While there are some differences in the legal rules, SOEs overall face challenges similar to those of the central public procurement of the government of Kazakhstan.

Key findings

There have been numerous legal reforms of the public procurement system in Kazakhstan. While this reflects the commitment and eagerness of the government to modernise its system, it also creates difficulties for public procurers who have to adapt to the new laws. Streamlining the system would allow Kazakhstan to fully exploit the potential of procurement and achieve greater value for money.

The awarding system is based on compliance. Recent reforms have reinforced rather than eased this approach. An excessive use of direct procurement from a one single supplier, a high number of failed bids, as well as a lack of integration of the market conditions are among the obstacles to a more efficient system.

The national e-procurement system has been expanded, and now almost all procedures are conducted electronically. This coverage of 6.1 million contracts is exemplary as it represents a large share of the procurement system. Aside from the laudable improvements in terms of process management, more could be done to better collect data and aggregate statistics. The collected data could also be used to a greater extent to strengthen evaluation and performance management.

While integrity measures exist, Kazakhstan has not yet developed a procurement-specific strategy. The country has made efforts to broaden its complaints management system, but it could increase the opportunities for direct involvement of relevant external stakeholders and address the issue of “professional complainers” who slow down the mechanism.

Public procurement in Kazakhstan is still predominantly perceived as an administrative rather than a strategic function. Changing this perception could allow for further development of strategic considerations, which requires an adequately skilled public procurement workforce. However, public procurement is currently not recognised as a profession, and training for procurers is mainly focused on law and compliance.

Many issues that are prevalent in the public procurement system of Kazakhstan also apply to the procurement of state-owned enterprises (SOEs). These include extensive use of single source procurement and low level of competition in procurement procedures. Previously, there were important differences in the legal and regulatory frameworks of SOEs and the government procurement sector. The most recent reform eliminated some discrepancies, but potential for further alignment remains.

Key recommendations

• Setting a strategy with an action plan for the development of the public procurement system can be a way to ensure overall progress and coherence of reforms.

• Procurement planning should not be based on the budget of the previous year, but on a needs analysis and market considerations, including availability. An increased emphasis on strategic planning is crucial to achieve more value for money.

• To allow for better implementation of the ongoing and envisaged public procurement reforms, Kazakhstan should consider increasing the number of people fully dedicated to public procurement activities, especially at the level of the policy makers in the Ministry of Finance, but also at the level of central purchasing units and relevant contracting authorities. Current resources are too limited to allow for an adequate implementation and monitoring of the reforms.

• Reviewing the criteria for single source procurement and cutting down the current list of exceptions can lead to more efficient procedures and more competitive prices. Conducting market analysis and improving technical specifications could help to reduce the number of failed bids and ensure more competition.

• Kazakhstan could enhance the availability of e-procurement data to improve transparency and performance monitoring, enabling efficiency gains. Integrating the e-procurement system Goszakup with other government IT information systems could improve inter-operability and increase the efficiency of procedures. Establishing evaluation and performance management systems can help identify opportunities to improve performance.

• A common procurement-specific integrity strategy across ministries, agencies and quasi-state bodies could be developed. Expanding the current control process to integrate corruption risk assessments across the procurement cycle could further strengthen internal control mechanisms. Tailored standards and training for the public procurement workforce would also contribute to strengthening a culture of integrity. Kazakhstan could also build on existing projects in which members of society have a watchdog function over public governance.

• To go beyond an administrative approach and use public procurement as a strategic tool, a highly skilled and adequately trained public procurement workforce is required. To enable this transition, Kazakhstan could ease the workload of public procurers and provide them with training that goes beyond legal aspects and compliance.

• Kazakhstan could take measures to increase competition in public procurement of all SOEs, by reducing the share of single source procurement. In addition, training procurers can help them to fulfil their tasks to the highest professional standards. The largest SOEs could further consolidate their procurement, for example by centralising purchases in their organisation or using centralised purchasing services of the Government.