Business The hidden $1 trillion: Halting waste in public procurement https://blogs.worldbank.org |By: INDERMIT GILL
The global economic downturn is restricting the ability of governments to “build back better” in the face of the extraordinary challenges of COVID-19 and climate change. The decline in growth is shrinking nations’ fiscal space as they attempt to reignite their economies while grappling with unprecedented levels of debt, reductions in tax collection, and increasing income inequality. The World Bank is proposing the creation of a Global Procurement Partnership (GPP) for just that purpose. The GPP’s overarching goal will be Yet an untapped source of funds is hiding in plain sight. Governments to establish a global network to promote the strategic use of public protoday spend an estimated $13 trillion each year on public contracts for curement as a critical economic planning and development tool. The GPP goods, services and public works . As much as a quarter of that is wasted in will collect best practices from around the world to strengthen knowledge inefficient or shortsighted procurement practices. Halting the waste could sharing and collaboration. It will also establish globally recognized princifree up at least $1 trillion a year to put economies on a path toward green, ples or benchmarks. resilient, and inclusive development. Governments have many ways to pursue social value in procurement—inThat potential, unfortunately, has been passed up for far too long. De- cluding in their use of contracts to promote innovation or strengthen key spite its large role in global economic activity, public procurement is an industries or sectors of the national economy. Policies that enable micro, underdeveloped professional discipline. Little shared global understand- small and medium enterprises to flourish can also boost a country’s loning exists of what constitutes best practices, and procurement decisions ger-term competitiveness. are seldom made on the basis of hard evidence of what works and what doesn’t. Procurement is often a check-the-box exercise, designed to ensure Contracts can also be a way for governments to promote environmental procedural compliance rather than broad economic benefits. Meanwhile, policies. “Green” procurement focuses on responsible and sustainable political influence and connections continue to drive far too many deci- goods, services and works. The label also refers to work methods that minsions about who gets what contract. imize environmental damage or degradation and build resilience in addressing the impacts of climate change. In addition, procurement policies COVID, however, has been a wake-up call for governments. The pandem- need to start paying attention to the planning and management of conic has fueled growing public demand for more and better services, put- tracts—instead of just the call for competition or the selection of a winner. ting pressure on governments to do more with less , more quickly. It has highlighted the pressing need for governments to ensure that public pur- COVID-19, moreover, has demonstrated how new technologies open up chasing decisions deliver “social value” by going beyond fiscal savings to important avenues for enhancing security, information access, and citizen include broader policy goals such as environmental sustainability, support engagement. By moving procurement processes online, it has eliminated for small enterprises, and protection of vulnerable groups in society. the need for physical interaction and will soon make hard-copy document submissions a strange quirk of the past. As governments ramp up the use All of that can be done. Government purchasing should be more than just of Electronic Government Procurement Systems (e-GP), more oppora transactional business process that helps increase the efficiency of spend- tunities will emerge for information sharing, evaluation of procurement ing and free up fiscal space. Public procurement must be a strategic tool options, and cost management. This will enable governments to respond for socioeconomic change that uses government purchasing decisions and faster to crises. technology more strategically—going beyond economic efficiency considerations and accounting to support broader policy goals such as environ- The GPP is a timely proposal. It can help ensure that national procurement mental stewardship, resilient and inclusive economic development. and policies are evidence-based and resistant to political influence and privisocial protection. lege. It can spark innovation in crucial areas by encouraging tighter collaboration between governments and private enterprises. It can help improve “Halting the waste could free up at least $1 trillion a year to put economies public trust by increasing citizen empowerment and engagement. on a path toward green, resilient, and inclusive development.” A new World Bank report, An International Stocktaking of Developments In the aftermath of COVID-19, governments will be under justifiable presin Public Procurement- Synthesis Report, offers a way forward. It shows sure to make sure that every dollar of expenditure goes as far as it possibly how the current hodgepodge of procurement practices with few common can. Citizens are within their rights to demand that their money be spent rules could be replaced by an efficient global system that better serves the as wisely as possible. Smarter public procurement is central to a green, public’s needs. But it will take a broad international coalition—involving resilient, and inclusive recovery from the pandemic : governments, private governments as well as private businesses—to seize the full potential of enterprises, and development institutions should do everything in their public procurement and set the global economy on a more sustainable power to seize the $1 trillion opportunity it represents. path.
6 TT 137 | JAN 24th -30th| 2022
