A Brief Analysis On the Efficiency And Effectiveness Of Public procurement

Public procurement when managed well to its absolute ethical principles has a positive impact on the economy. It is defined as the acquisition by a government department or any government-owned institution of goods or services from outside suppliers.  The process of procurement is based on principles of fair competition and transparency. This process also affords governments an opportunity to contract the most responsive service provider to the specifications of the procurement.

Public procurement also helps state out regulations in the economy that keep various government projects in check, herein Governments define minimum standards for business performance embedded within the legal framework.

From the functional point of view, procurement is an indispensable activity and its successful achievement is essential to any organization. In the private sector, procurement is considered as a profit center to maximize the firm’s profit in saving material cost.

Public procurement is grounded in a view of ‘best value for money’ that only looks at the bottom line price. Clear to note is even with economic downturn, the pressure to purchase goods at the lowest possible cost has increased and thus the possibilities of thinking more in the use of ‘long term and strategic view’ might have declined. However, despite this pressure, there is reason to believe that more innovative approaches to consider total cost of procurement or life cycle cost when the decision is made.

Procurement activities are very critical to all organizational units from households to organizations and governments. Public and private procurement are quite similar in many ways such as cost savings, quality assurance, supplier relationship, procurement ethics, supply market analysis, green procurement and so on. However, there is a major distinction in public procurement as it draws its funds from tax revenue. Hence, unlike procurement in the private sector, governmental procurement should reflect public concerns as well as efficiency. Therefore with public procurement, the economy is at stake and once there are issues in the procurement processes, then expect the economy to get affected.

Public procurement is also an outstanding tool to promote social responsibility, as governments operate as both regulators of and participants in the market. There are many ways in which public procurement can play a major role in stimulating corporate accountability. The public procurement takes a leading role in linking social responsibility to public procurement, by including social and environmental criteria in public procurement procedures, and providing guidance to national governments on how to include social and environmental concerns in public procurement policies.

The laws on public procurement do provide a standard of ethics that should be followed and this spills down to the economy.  For example, unethical procurement arrangements includes not respecting;

(i) The principles of nondiscrimination, for example by favoring suppliers from a certain region or country

(ii) The equal treatment, for example favoring a certain label

(iii) Principle of transparency. This therefore entails eliminating any form of corruption in the government systems especially when it comes to use of tax payers monies.

When faced with many of the poor procurement practices identified in this report, firms are unable to insure themselves against the additional risks transferred upon them from the public sector.

Public procurement regulations frame procedures to ensure that government spending is conducted fairly and transparently. Many a time it is perceived as a necessary evil; a time-consuming process that does not bring additional value. This perspective, fails to acknowledge that ‘how’ the process is carried out not only determines the efficiency and effectiveness of public spending, but can also influence the behavior of the private sector.

 Poor procurement practices also have an impact on the quality of project deliverables. This flows through in terms of the value for money achieved from procurement of professional services from the private sector. Beyond the price impacts described above, unclear project objectives, duplication of effort in verifying brief information, inappropriate risk allocation and onerous contract terms each affect the capacity of firms to explore and propose innovative ways of delivering on infrastructure requirements.

Conclusively, it is important to emphasize the importance of selection based on the principle of value for money, taking into account project objectives, rather than simply selecting on the basis of lowest cost. This is generally recognized by the public sector on only paper so far, although it can be difficult to apply in practice. However, making improvements in procurement practices is a tangible way in which the public sector can better promote value for money outcomes.