Public Sector Procurement

Efficient public procurement comes to the rescue

Bosio_Galiano_Reyes_200.jpgBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency, World Bank, and
Emilia Galiano, Private Sector Development Specialist, and
Nathalie Reyes, Operations Analyst: Private Sector Development, World Bank

Governments around the world are wondering how to save their small- and medium-sized enterprises during the economic downturn caused by the coronavirus (COVID-19). Look no further: just pay your bills on time. Public procurement represents approximately 12% of global gross domestic product (GDP). If governments paid all receipts due to their contractors within 45 days, between $1 trillion to $4.65 trillion in fresh liquidity would enter the private sector, supporting firms' cash-flow needs and preventing them from accessing credit. This is not trivial. It is of the same order of magnitude that G20 countries have so far committed ($6.3 trillion) for fiscal support measures to alleviate the effects of the pandemic.

Emergency purchasing cited for non-competitive procurement

StephenBauld_100.jpgBy Stephen Bauld

Emergency procurements are one of the most common reasons cited for non-competitive procurement

Very often there are pressing needs that make more conventional procurement methods unrealistic. Emergency purchasing procedures are followed in unforeseen situations because immediate procurement of materials or services is necessary to continue operations of an essential department, or for the preservation of the health, safety and welfare of people, or the protection of property when there is present, immediate and existing danger.

Depletion of stock through normal routine usage is not considered an emergency for the purpose of invoking such procedures, nor is poor planning.

Unfortunately, the abuse of emergency procurement is not only notorious but extensive, and it seems to be omnipresent in all municipalities in North America.

Streamlining public works procurement

BosioDjankov.pngBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency at the World Bank, and
Simeon Djankov, Director, World Development Report 2019

Seventeen years ago, in the inaugural Doing Business 2004 study, our team found that it took as few as 18 procedures to start a business in Algeria, Bolivia and Paraguay, or 19 in Belarus, Chad and Colombia. The same process required as many as 152 days in Brazil, 168 days in Indonesia, or 215 days in the Democratic Republic of the Congo. We argued that it should be possible to reduce the number of procedures and the time required to start a business.

We suggested at the time that this could be done in one step online, from anywhere. Today, this is exactly what entrepreneurs in Tbilisi, Georgia, or Auckland, New Zealand, can do.

Global GDP: How large is public procurement?

BosioDjankov.pngBy Erica Bosio (Program Manager of the Growth Analytics, Development Economics Vice Presidency at the World Bank) and Simeon Djankov (Director, World Development Report 2019)

Public procurement -- the process by which governments purchase goods, services and works from the private sector -- amounted to $11 trillion out of global GDP of nearly $90 trillion in 2018. In other words, 12 percent of global GDP is spent following procurement regulation.

Rules vs. discretion in public procurement

EricaBosio_90.jpgBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency, World Bank

The trade-off between rules and discretion has been a central topic of research in public procurement. Kelman's (1990) early work stressed the costs of rigid regulation in United States government procurement and made the case for discretion. Since then, research on the benefits of discretion has progressed rapidly in Europe. New research confirms that politicians do not trust the bureaucracy, even in countries with high human capital and efficient institutions.

My new paper (joint with Simeon Djankov at the London School of Economics and Professors Ed Glaeser and Andrei Shleifer at Harvard) adds to these studies with a broader geographic and theoretical focus. We cover 187 countries and the complete path of the procurement process.

The theory delivers a basic prediction: that procurement regulation is more valuable when the incentives of the bureaucrats are not closely aligned with support for social welfare. Properly motivated bureaucrats require fewer rules. Countries with weak bureaucracies need strict laws to regulate them; countries with strong bureaucracies can allow the regulator more discretion.

The Public Procurement Bill: an opportunity for reshaping socio-economic transformation through procurement

FaithMashela_100.jpgNational Treasury has highlighted that an important aim of the Public Procurement Bill is to use the procurement system to advance economic opportunities for previously-disadvantaged people, women, the youth and people with disabilities, and their business enterprises.

While this is the case, Dr Faith Mashele (FCIPS, MBA, PhD) suggests that there is an opportunity to improve and reshape the existing South African procurement landscape, in this month's SmartProcurement.

Which region regulates procurement the most?

Regulating_procurement_100.jpgBy Marko Grujicic, Analyst, Growth Analytics;
Joseph Lemoine, Analyst - Growth Analytics, Development Economics Vice Presidency; and
Greta Polo, Private Sector Development Analyst, World Bank

It might be assumed that public procurement is most heavily regulated in high-income countries, given that they have greater public sector capacity, more efficient institutions and longer traditions of regulation. This assumption is further supported by the fact that weaker institutions, informality and business activities outside of the scope of law are prevalent among low- and middle-income countries.

However, an analysis by the World Bank shows that this assumption is not true: high-income countries regulate public procurement less than low- and middle-income countries do.

COVID-19 drives sole-source purchases

StephenBauld_100.jpgBy Stephen Bauld

During these difficult times of the COVID-19 pandemic, it is critical to order specific items that are in high demand. This type of situation will often cause a sole-source purchase that needs to be negotiated directly with the different suppliers that have the required products.

To ensure that you are not led down a garden path by suppliers that will mostly likely have 'the power', we must rely on the basic principles of procurement, such as engaging in price negotiation and contract monitoring.

The Public Procurement Bill would get more muscle by supporting whistle-blowing

Whistleblower.jpgBy Ryan Brunette and Jonathan Klaaren

South African public procurement law needs a tougher approach to enforcement. It will have one if it empowers and incentivises whistle-blowers.

Public procurement needs strategic foresight

StephenBauld_100.jpgBy Stephen Bauld

The reason why a shift towards a more strategic procurement approach is necessary at municipal level and, indeed, across the public sector in general, is clear. As I have noted in several of my columns over the years, governments tend to pay more than private-sector firms for comparable type, quality and quantity of supply.

When does directing a company become Board interference?

SOEs_100.jpgPerformance of SOEs remains a top priority for the president and by extension the minister of public enterprises. The question remains, to what extent will these changes affect procurement and supply chain? What is the proper way of governing SOEs?

At the recent 13th Annual Smart Procurement World Indaba, discussions centred around the restructuring of state-owned enterprises, focusing on methods to increase economic impact and development. Further discussions showed the danger of executive influence on procurement and performance of SOEs.

So, when does directing a company become Board interference?

Oxymoron: Ethical policies and public procurement?

StephenBauld_100.jpgWe would all agree that government procurement should be held to the highest level of ethical standards.

It is very important to the entire system that everyone working with or for a municipality be of the same mind set. The whole idea of the importance of adherence to an appropriate standard of ethics in the conduct of the procurement function is self-evident.

Yet in historic terms, concern with respect to ethics is a fairly recent phenomenon, particularly at the local government level, says Stephen Bauld, a government procurement expert.

State capture: a supply chain created problem?

Mediacy_.jpgBy Mediacy Mudekwa

The cost of state capture is estimated to be around R1.5-trillion over the last approximate four years. To put this into perspective, R1.8-trillion is the national budget for 2019. According to the Daily Maverick, state capture has wiped out "a third of South Africa's R4.9-trillion gross domestic product, or effectively annihilated four months of all labour and productivity of all South Africans, from hawkers selling sweets outside schools to boardroom jockeys".

Of course, there is no way we can quantify the true cost and real extent of state capture. One can only guess what this has done to state-owned enterprises (SOEs) and the influence that it has had on their balance sheets and service delivery. The question is: what role has procurement and the supply chain played in this? And what procurement/supply chain management (SCM) lessons can we learn from state capture?

The unenviable task of the Chief Restructuring Officer (CRO)

CRO_125.jpgBy Matodzi Ratshimbilani

President Cyril Ramaphosa and the Minister of Finance have, on several occasions in the recent past, informed South Africa that mega state-owned enterprises (SOEs) will soon be under the helm of chief restructuring officers (CROs), of whom a lot is expected to turn around the fortunes of beleaguered SOEs.

On 30 July 2019, the appointment of Freeman Nomvalo as CRO of Eskom was announced. However, previous announcements were scant on the details around the role of CROs at SOEs. The nomenclature of CROs seem to be borrowed from the United States where the practice was abound after the 2008 financial crisis.

Join us at Smart Procurement World in September, where we will look at what procurement functions can do to build more confidence in SOEs and how procurement should be positioned to protect and strengthen SA's core institutions.

Brexit can right the wrongs of public procurement

brexit_100.jpgBrexit has delivered some issues, no doubt about that. It has also presented a massive opportunity to put right a lot of what is wrong with public procurement.

"This is, indeed, a chance to establish the foundations of public procurement policy and to enable contracting authorities to drive real value for money, cost effectiveness, continuous development and innovation into the public services for the communities they serve", writes David Salters, Director of Procurement, Greenview Group.

Policy changes pin hopes of economic transformation on government procurement

AndrewMolver_100.jpgChanges made to South Africa's government procurement policy are aimed at relying more heavily on public procurement as a tool for increasing the pace of economic transformation and urgently addressing socio-economic imbalances owing to South Africa's pre-democratic past.

This was largely performed through the implementation of the Preferential Procurement Regulations of 2017, which introduced a number of significant changes.

Join us at Smart Procurement World for insight into supply chain management (SCM) in a municipal environment. Andrew Molver, Partner at Adams & Adams, will be looking at the Promotion of Administrative Justice Act (PAJA) and whistle blowers as well as discuss the joint and several liability protections that exist for SCM role players.

Procurement perspectives: corruption thrives on secrecy in government procurement

StephenBauld_100.jpgInconsistency in procurement processes is prevalent. In many published articles on a variety of topics, corruption is much like a mushroom, it thrives in the dark.

The benefit of competition is well-recognised by economists but, to a large extent, concern around public procurement processes is based more on the concerns of political science rather than on those of economics.

"The goal is to avoid corrupt practices", says Stephen Bauld, a government procurement expert.

Free State welcomes Smart Procurement World

SPW_FS_100.jpgSmart Procurement World is bringing its regional conference to the Free State.

Partnering with the Free State Department of Economic, Small Business Development, Tourism and Environmental Affairs (DESTEA) has enabled Smart Procurement World to take its procurement and supply chain indaba into its fourth South African province.

Since beginning in Gauteng in 2009, Smart Procurement World has extended into the Western Cape, KwaZulu-Natal and, on 19 March 2019, into the Free State.


 

 

Career opportunites

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Procurement Director

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GROUP PROCUREMENT MANAGER

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Operating out of Johannesburg, this is a key

Tutor and Coordinator

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Supply Chain Professional

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