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Public Procurement in Germany

Strategic Dimensions for Well-being and Growth

Governments are increasingly using procurement’s vast potential and economic power (12% of GDP in OCED area) in a strategic way to influence all areas of well-being. While they have to ensure that every cent of public money is efficiently spent, governments also seek to maximise impact on the economy, achieve broader policy objectives and address societal challenges. Tracking this impact and evidencing the outcomes of policy decisions systematically is largely unchartered territory.

As the biggest economy in Europe, Germany boasts one of the largest public procurement markets in the region. Public procurement represents an estimated 15% of German GDP, an immense sum of EUR 500 billion per year. Public procurement has a considerable impact on all areas of well-being, including the economic, human, social and environmental dimensions.

Germany was one of the first countries to recognise the diverse effects of public procurement, acknowledging both its strategic and economic dimensions. Germany asked the OECD to review its federal procurement system, and the aspects that have a critical impact on the effectiveness of policies for inclusive growth and citizen well-being. One major output of this review beyond the German public procurement system is the development of a systematic lens to track the impact of public procurement by applying the OECD Framework for Measuring Well-Being and Progress to public procurement, as presented in the review.

Fast Facts

©Marvdrock/Nounproject 

Country: Germany

©Adrien Coquet/The noun project Timeframe: Spring 2017 – Autumn 2019
©Shashank Singh/ The Noun project

Counterparts:

  • Federal Ministry of Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie, BMWi)
©The Icon Hero/Noun Project

Areas of focus:

List of Deliverables

  • Public Governance Review
  • Workshops and interventions

Timeline

  • April 2017: Launching workshop
  • Summer 2017: Questionnaire circulated with public authorities on federal and Länder level
  • September 2017:  Fact-finding mission
  • October 2018: Policy dialogue in the framework of the meeting of the Leading Practitioners on Public Procurement (LPP)
  • November 2018: Preliminary results discussed at the Federation of German Industries (BDI), Berlin, Germany
  • January 2019: Discussion of results at the economics think tank ZEW, Mannheim, Germany
  • Spring 2019: Final version of the report prepared
  • August 2019: Online advance version published
  • October 2019: Launching seminar at BMWi in Berlin, Germany, with respondents from the European Commission and Academia

Content of the project

The public procurement review of Germany focussed on the following six areas:

  • Impact of public procurement on the economy and well-being: Public procurement accounts for 35% of general government spending in Germany. The impact of this spending is complex, and goes beyond economic effects. Public procurement influences environmental, social and human factors, as well as other issues highlighted in the OECD Framework for Measuring Well-Being and Progress.
  • Legal and governance framework: Germany’s 2016 public procurement reform significantly streamlined the legal framework for procurement, and aligned Germany’s system with the new EU directives on procurement. Given that the system is highly decentralised and segmented, further improvements could focus on increasing co-ordination and further aligning systems at different levels.
  • Centralisation and consolidation: Germany has several centralised procurement initiatives, but this instrument is not used as extensively as it could be. A spending review conducted in 2017 and led by the Ministry of Finance and the Ministry of Interior supports this finding. Stakeholders could be better informed about the benefits of bundled procurement; strategic communication is paramount. Policies could also be more closely aligned with users’ needs.
  • E-procurement: Digitalisation helps increase the productivity of procurers and businesses alike. Germany could expand its use of e-procurement. A market-driven approach has led to the proliferation of privately owned e-procurement systems, creating an increasingly complex environment for businesses. Ensuring that data is systematically collected and analysed through state-of-the art systems is crucial to tracking procurement performance across the system.
  • Strategic procurement: Germany has created initiatives for strategic procurement, such as specialised competence centres to support contracting authorities and suppliers. Initial evidence demonstrates the relevance of these initiatives. More methodological data gathering and evidence-based monitoring could support more effective policy implementation.
  • Human capital: Germany’s procurement workforce is part of the country’s civil service. Education and training, combined with specialised competence centres, provide a solid basis for general public service delivery. A comprehensive capacity-building strategy for public procurers could respond to the increasing need for strategic, centralised and specialised public procurement.

Outputs and resources

 

Public Procurement in Germany: Strategic Dimensions for Well-being and Growth

   

Strategische Ansatzpunkte zum Wohl der Menschen und für wirtschaftliches Wachstum

 Cover Recommendation Public Procurement

OECD Recommendation on Public Procurement