Six Benefits of Public Procurement

Public procurement is the process by which public entities contract for acquisition or supply of goods, services or works. Public procurement often constitutes the largest domestic market in developing countries. There are several benefits that a country or government can benefit from engaging in public procurement.

1) Economic development

Depending on how it is managed, the public procurement system can thus contribute to the economic development of these countries.

2) Helps the Government meet development needs

Indeed, public procurement is the principal means through which governments meet developmental needs such as the provision of physical infrastructure and the supply of essential medicines.

3) Helps the Government achieve development goals

Again, many governments use public procurement to support the development of domestic industries, overcome regional economic imbalances, and support minority or disadvantaged communities. Because the deployment of the public procurement system to pursue these developmental goals entails governmental exercise of enormous discretion, public procurement is often an extremely controversial subject matter. This is especially the case in developing countries where “the ability to exercise discretion in the award of government contracts has been a source of valued political patronage” and procurement has been “a means for the illicit transfer of funds from governmental to private hands.”

4) Encourages international trade

Another important attribute of public procurement in developing countries is that a considerable part of it is financed by the so called development partners, as part of either bilateral or multilateral development assistance. It is estimated that the global pool of development assistance now averages $60 billion annually.

5) Organizational profitability

In the private sector, procurement is viewed as a strategic function working to improve the organisation’s profitability. Procurement is seen as helping to streamline processes, reduce raw material prices and costs, and identifying better sources of supply. In essence, helping reducing the “bottom line”. Indeed, in many organizations the importance of procurement is recognized by having their head of procurement placed at an executive board level.

6) Promotes Openness and Transparency in Public Entities

At higher levels of expenditure, this need for openness, transparency and non-discriminatory action is required by legislation. The European Procurement legislation, implemented in the UK, means that all requirements for supplies/services and works are advertised and tendered in accordance with published rules.

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