Public procurement

Public procurement refers to the purchase by governments and state-owned enterprises of goods, services and works. It is a crucial pillar of services delivery for governments. As it accounts for a large share of the taxpayers’ money, governments are expected to carry it out efficiently and with high standards of integrity to ensure the quality-of-service delivery and safeguard the public interest.

As a key activity for governments, well governed public procurement can and must play a major role in fostering public sector efficiency, establishing citizens’ trust and contributing to key governmental agenda’s like the digital transformation and green growth.

Policy issue

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Key messages

The delivery of any public service relies on public procurement processes from health to environmental protection, public order and economic affairs (comprising infrastructure, transport, communication, energy and R&D). At the same time, the well-being of citizens depends highly on the quantity and quality of public services received. Existing estimates suggest that some public services account for a significant share of public procurement spending such as health that represents alone around 1/3 of public procurement spending.

Large sums of taxpayers' money are spent on public procurement, requiring not only sound stewardship but also efficiency. In the pursuit of efficiency gains, governments continuously develop, implement and revise their procurement systems and various mechanisms and tools.

Public procurement represents a large sum of public spending. To ensure best value for taxpayer’s money, it is key to ensure public procurement systems and tools are efficient.

Public procurement is a high-risk area due to several factors, including the high financial interests at stake, the volume of transactions and the close interaction between public and private sectors, the linkages with complex value chains.

Public procurement can be impacted by a wide range of risks that can affect the procurement process itself, as well as broader risks to projects or service delivery. Risks do not occur only during the tendering process, but over the life of the contract or the life of the procured asset. Initially focusing on integrity threats, in recent years countries have paid increasing attention to other risks to public procurement outcomes, including information technology (IT), financial, reputational, social and environmental risks. Many of these risks impact the fundamental purpose of procurement, ensuring that goods, services or works are delivered to the right place at the right time.

However, integrity risks remain significant, that’s why countries are putting in place tools, systems, and standards to preserve the integrity of the public procurement system.

For all categories of risk countries are increasingly using a data driven risk-based approach to better identify and manage risks.

By using their purchasing power to procure goods, services and works, governments can achieve other objectives, whether it is sustainability (by choosing goods with lower environmental impact, for instance), innovation (by encouraging innovative solutions) or social responsibility (by incorporating responsible business standards in their purchasing policies), or the promotion of small and medium sized enterprises. Policy objectives like the protection of the environment and ensuring social conditions (gender human rights, labour rights), extend beyond direct suppliers as they can cascade throughout supply chains. This concept is closely linked to the concept of value for money which is increasingly used across the globe. Different terminologies are used to capture the concept of the use of public procurement strategically to achieve broader policy goals such as sustainable public procurement, strategic procurement, responsible public procurement, or ethical procurement.

Context

Governments procure large amounts of goods and services to help them implement policies and deliver public services. 

Public procurement expenditure as a share of GDP increased significantly across the OECD over the last decade, from 11.8% of GDP in 2007 to 12.9% of GDP in 2021. On the other hand, public procurement relative to total government expenditures fell by 1.9 percentage points across OECD countries between 2019 and 2021. This could be explained by the overall increase on spending due to the economic support measures introduced during the COVID-19 pandemic. A large share of OECD countries’ procurement spending remains at the sub-national level (61.2% in 2021).