Practice Advice on Democratic Institutions and Policy Process
Public Procurement (OECD)
Description: The OECD advises on a set of good practices for governments to follow to enhance transparency and accountability in government procurement.
Commentary: Public procurement presents an opportunity for both public and private actors to misuse public funds for private gains. Bribery by international firms in OECD countries is more pervasive in public procurement than it is in utilities, taxation, judiciary and in cases of state capture (when a small number of firms influence government policy). Public procurement accounts for 15% of the GDP in OECD countries and the volume of international procurement transactions that occur between governments and private parties highlights the potential impact of corruption on the allocation of public funds. To maintain integrity in public procurement, the OECD recommends governments to:
- Identify the risks at each stage of the public procurement process. At the pre-bidding stage, the most common risks are lack of adequate needs assessment, planning and budgeting, irregular choice of procedure as well as inconsistent timeframe for bidding. There is also a high potential for non-governmental actors to influence the needs assessment. Information on the procurement opportunity may not be provided in a consistent manner. At the post-bidding stage, the risks include insufficient monitoring of the contractor, lack of accountability for sub-contractors, unclear separation of financial duties and lack of oversight over implementation.
- Balancing the need for transparency with other government objectives. Governments need to define the level and detail of information that is provided at each level of the procurement cycle. Bidders must have sufficient time to prepare for bids, and no candidate should have an advantage in accessing bid-related information. Awards need to be communicated in an accessible and transparent manner. In addition, when it comes to procurement in industries with minimal competition, the OECD recommends countries to impose strict reporting requirements. Strict information disclosure requirements help eliminate opportunities for collusion between bidders who can identify their competitors early in the process.
- Ensure integrity in granting exceptions to competitive procedures. Procurement laws and regulations should define alternative procedures that can be used in exceptional circumstances, depending on the type of product required and the overall value of the product and service.
- Enhance professionalism to prevent risks to integrity. The OECD also suggests countries to invest in training and development of employees in the procurement sector and equip procurement offices with recent communication technologies (databases, software to organize pricing and quality requirements, etc). Management must provide ethical guidance and inform employees about restrictions and prohibitions that are put in place to prevent conflict of interest situations. Governments must ensure that procurement personnel are accountable on how public funds are managed.
Overall, the OECD highlights the following emerging trends in public procurement:
Shift from process based role of procurement to a management based approach to the entire procurement process; from needs assessment to contract management and payment. Procurement is delegated to specific departments and agencies, while the central procurement agency is responsible for knowledge sharing.
Decision making and the separation of duties and authorisations is becoming more prominent organizational measure.
Public sector is adopting practices from the private sector to enhance professionalism in government procurement practices.
States are using governmental and non-governmental information systems to support decisions on procurement
Source: OECD (2007). “Integrity in Public Procurement: Good Practice from A to Z” at: http://www.oecd.org/development/aideffectiveness/38588964.pdf (accessed 12 October 2012).
Page Created By: Khilola B. Zakhidova on 11 November 2012. Updated by Ian Clark on 2 January 2013. The content presented on this page is drawn directly from the source(s) cited above, and consists of direct quotations or close paraphrases. This material does not necessarily reflect the official view of the publishing organization.