Most people rarely think about how governments spend public money. However, these amounts amount to a fortune. Governments are by far the largest purchasers of labour, goods and services from the private sector. The value of public procurement in 2019 amounted to 11 thousand billion dollars. This amount is equivalent to about 12% of global GDP.
In countries where the poorest half of the world’s population lives, public procurement represents a huge share of total government spending, about half.
Electronic procurement or “e-procurement” accelerates the use of these important funds, which is crucial in crises such as the Covid pandemic.
- With the introduction of the e-procurement system in South Korea, the processing time for public procurement bids has been reduced from an average of 30 hours to just two hours.
- While in Argentina, the duration of public procurement procedures has become shorter by more than 11 days.
However, e-procurement has much more positive effects from the fact that governments can conduct public procurement procedures more quickly. E-procurement makes government spending less burdened by corruption and more efficient. This is a particularly important impact, as corruption occurs around the world annually Trillion dollar problem Methods for which there are very few answers.
a Transparency International According to him, the level of global corruption is as bad as it was a decade ago.
a Copenhagen Consensus Centre The think tank (headed by the author-editor) described the implementation of e-procurement as a key action for the governments of four of the ten low-income countries that have not yet implemented it. this research Part of that perennial For our projectWithin which we are trying, in cooperation with dozens of the world’s leading economists, to identify the best political measures that can accelerate the pace of economic growth. Sustainable development goals Reaching These goals run from 2016 to 2030, so this year we’re halfway there – but almost all of them appear to be lagging behind.
There has been no progress at all on the sustainable development goal of eliminating corruption.
Due to its size, public procurement is one of the major sources of corruption in every country The introduction of an electronic procurement system can be a very effective way to combat corruption. Moreover, it could save countries billions.
Our research shows that During the first 12 years of planning, building and maintaining the e-procurement system, costs averaged $16.7 million regardless of country size.. This is a relatively small amount compared to the budgets of most states.
E-purchasing has many advantages, as proven during the Covid pandemic. Not only does it accelerate governments’ ability to act, it also increases the number of bidders. In the Indian state of Karnataka, the number of suppliers rose from 130 to 4,800 in the first three years of e-procurement, while in South Korea, the number of bidders doubled from 70,000 to 147,000 in the same period.
Transparent and widely accessible systems mean just that Governments should spend less on advertising tenders. Estimates of the Indian state of Andhra Pradesh indicate that it can save half a million dollars annually in spending on advertising, while the Philippine government has saved nine million dollars annually in spending on newspaper advertisements.
There are also experiences of that Digitization of public procurement means improved supervision and more advanced service provision. A good example of this is India, where the road quality rating improved by 12% after switching to an e-procurement system. Paraguay’s reforms also reduced the proportion of contract operations requiring amendment to just 3% by 2016 from 19% in 2013.
The most obvious, immediate and well-documented conclusion is that e-procurement simply saves the public money.
According to our research, the average cost reduction for public procurement is 6.75%. For an average low-income country, this means saving more than $600 million over the first 12 years. For every dollar spent, a low-income country achieves savings of $38. For lower middle-income countries, average savings over the first 12 years are more than $5 billion, meaning that Every dollar spent generates more than $300 in social benefits.
This makes the introduction of e-procurement an exceptionally effective policy measure.
Not only can the e-procurement system show its value during a pandemic like Covid, which also helped the Ukrainian government to continue to function when Russia attacked it. Transparency International reported in March 2022 that “the procurement system and all platforms continue to function every day,” even as much of the country is under attack.
As many countries face new threats in the future that may require large amounts of spending in a short period of time, e-procurement could enable governments to do this more quickly and efficiently – and with much less corruption. The introduction of e-procurement is not only a proven way to reduce waste and corruption when spending public funds, but also to increase resilience and be better prepared for the challenges ahead. This is a great standard that every country must live by.
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