Challenges and Solutions in Public Procurement for Effective Competition

Public procurement plays a significant role in economies worldwide, but it is often plagued by issues like fraud and corruption. MiCRA emphasizes the importance of effective instruments like Competition Law & Policy to combat abuses in sectors prone to corruption. The presentation discusses challenges faced in public procurement and suggests solutions to maximize value for taxpayers and government budgets.

• Public Procurement
• Competition Reforms
• Corruption
• Government
• Challenges

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1. MiCRA Presentation by Rughvir (Shyam) Khemani, PhD (LSE) Email: sk@micradc.com Microeconomic Consulting and Research Associates (www. micradc.com) 3rdBiennial International Conference on: Competition Reforms: Challenges in a Globalizing World New Delhi, India 18-19 November 2013

2. MiCRA Importance of Public Procurement Government/Public and/or services on behalf of a public authority e.g., government department at national, regional or municipal level. Procurement: Purchase of goods Estimates of Public Procurement: 10-15% of GDP in industrialized economies, up to 20% in developing countries. Alsoaccounts substantial partglobal economy. Most countries have laws, regulations and institutions relating to public procurement/tenders. Fraud, waste, corruption, favoritism, protection of local interests among widespread problems. 2

3. MiCRA Sensitive Industries/Markets Prone to Abuses in Public Procurement Public health, energy supply, public transportation, construction .supply of various goods and services to public authorities. Adverse impact on government budget, tax-payers .in developing countries on poorer segments of society. Challenge: Curb abuses and maximize value for taxpayers/government budget 3

4. MiCRA Instruments for Effective, Efficient Public Procurement-1 Competition Law & Policy (CLP) -Provisions relating to collusion (price-fixing), bid-rigging Complements other policies but insufficient: -Focus on competition and not on combatting fraud, corruption, bribery . -Detecting collusion/bid-rigging difficult, evidentiary problems Cogent arguments can be advanced that intense competition can create incentives for engaging in corruption, bribery .especially in opaque public procurement systems, since detection is difficult 4

5. MiCRA Instruments for Effective, Efficient Public Procurement-2 CLP provisions need additional levers e.g.: -Leniency program/whistle blower protection and requisite incentives CLP may be useful instrument in combatting competition related abuses in public procurement ex ante and ex post with above levers . BUT SOEs also participate as bidders/suppliers in public procurement. Raises issues of incumbency advantages , competitive neutrality 5

6. MiCRA Instruments for Effective, Efficient Public Procurement-3 Ex post abuses (project implementation stage) especially re: fraud, corruption, bribery ..need separate instruments. Increasingly, in public procurement shift to ex post abuses: extraction of payments, harassment, inspections, delays in approvals of project stages, kick- backs, by public officials. Require enactment/strengthening existing laws/measures dealing with corruption, bribery, etc 6

7. MiCRA Other Instruments-1 WTO: Plurilateral Agreement on Government Procurement (GPA) Effective 15 December 2011 -Agreed framework of rights and obligations w.r.t. national laws, regulations, procedures & Publication requirements. -Principles of non-discrimination and transparency. - Prohibition of use of off-sets : domestic content, local development, BoP, investment requirements .. --Access to foreign suppliers, national treatment practices. 7

8. MiCRA Other Instruments-2 Public Procurement Law and Institutional Structure -Many countries lack national/general public procurement law. -Public procurement fragmented, different public bodies, different procedures, delegated authority etc. -Lack of prudential controls, accountability, transparency. Recognized need for central public procurement law- policy 8

9. MiCRA Other Instruments-3 E-procurement. Measures e.g.: -Single sign-on, single portal, -on-line access to policies, regulations, tenders/ purchase orders, etc. -Standardized documentation, -pre-registration, qualification of bidders, ensuring minimum number of bidders etc. -Electronic up-loading of bids, on-line acknowledgement of receipts, anonymous evaluation, etc ..among other features 9

10. MiCRA Concluding Remarks Government/Public Procurement is plagued with widespread fraud, corruption, bribery .in both industrialized and developing countries. CLP is but one instrument that can foster a level playing field, competitive neutrality in public procurement in so far as collusive behavior, bid-rigging are common practices . and where SOEs are players but much depends on design of CLP Other policy instruments are required to combat fraud, corruption, bribery confronted in public procurement ..that adversely impact on government budget, tax-payers and various segments of society 10