January 7, 2019

Public procurement in depressed economy: Emerging issues and challenge

By Akintola Benson-Oke

PUBLIC procurement is the use of public funds by the government through its ministries, departments and agencies, on behalf of its citizens, for the acquisition of goods, services and works with the best quality, and/or right quantity, at the best possible price, from the right place or source (contractors, suppliers and service providers), and for the right purpose using the best method(s) and in line with laid down rules and regulations, following due proces.

The essence of public procurement is to achieve value for money, which manifests in enhanced human welfare and improved economic growth. According to Nkinga, strong procurement management in the public sector is a tool for achieving political, economic and social goals. Thus, productive or sustainable public procurement is one that is growth-promoting and welfare-enhancing.

According to Aigheyisi and Edore (2001), good “public procurement practices, according to the IEG World Bank (2014), are a major determinant of the effectiveness of public expenditure, and governments all over the world typically spend 5-20 per cent of their Gross Domestic Product, GDP, on procurement of goods and services. European Network on Debt and Development, Eurodad (2012), indicates that public procurement accounts for at least 15 per cent of global GDP, and it is the largest share of government spending besides wages. Public procurement accounts for an average of 15 per cent of GDP in OECD countries and 25-30 per cent of GDP in developing and emerging market economies (Roos, 2012).

The statistics quoted above thus clearly show that procurement as a public service function, must be given exceptional attention especially when there is paucity of funds and economic depression. Thus, as noted by Angel Gurria, “Public procurement can have a significant impact on policy outcomes. Until only a few years ago, public procurement was perceived as an administrative, back-office function. Today, however, it is seen as a crucial pillar of services delivery for governments and a strategic tool for achieving key policy objectives: from budget accountability, to spending efficiency, to buying green and improving outcomes in health, and promoting socially responsible suppliers into the global value chain.”

“Strategic public procurement can also significantly support a more circular economy and transform supply-chain business models, given the magnitude of its size in government spending and its predominant role in delivering some of the most resource-intensive public services such as infrastructure. This calls for an approach that not only enables efficiency, growth and value for money, but also accomplishes strategic goals linked to a broader understanding of sustainability, cutting across both environmental and social objectives.”

Indeed, there are a number of challenges that are faced when rolling out strategic public procurement. For instance, a lack of understanding of the benefits of sustainable procurement amongst politicians and budget holders is a challenge. Public procurement is subject to many pressures, from cutting costs to meeting the demands of internal users and the public.

In arguing for the pursuit of quality even in the face of a depressed economy, I proceed on the basis that the delivery of value to citizens is the fundamental objective of any democratically-elected government and that, in contemporary times, the delivered value must be delivered to the highest possible standard because citizens have become sophisticated and exposed to the standards of governance in other climes such that their expectations have been conditioned to demand and insist on compliance with global trends in governance and public administration at all levels of governance. Meeting these expectations is the central challenge for governments in contemporary times, even in the face of lean resources.

In essence, procurement decisions would only be regarded as being of acceptable quality when they are made with the end-user in mind. In a recent publication, PwC, United States, asked and answered a germane question as follows: “What does a customer-centered organisation look like? It’s an organisation that considers the customer in everything it does, from procurement to deployment, to the entire customer experience. It also speaks to its customers in their own language and makes it easy for them to align their goals with the mission at hand.” Thus, I dare say that even in procuring items that would be exclusively used by public servants, the sole question should be whether the procured items would help the public service better serve its customer, the citizens.

The third strategy I want to highlight is that of actively soliciting citizens’ input to improve public services, including procurement activities. As noted, “Innovative governments are creating new ways for citizens to make their voices heard, giving them the ability to provide input into regulations, budgets, and the provision of services.” It has been further noted that, “Other governments are going even further to solicit citizen feedback: Iceland in 2010 chose 950 citizens at random to participate in the drafting of a new constitution, a significant example of ‘deliberative democracy’ at work. And the city of Cologne, Germany, has used participatory budgeting: residents helped decide how to allocate a portion of the municipal budget.”

Paying attention to details is an important skill expected of civil servants who will pursue and deliver quality services. As important as it is for officers to see the big picture and think strategically, it is equally important for them to pay attention to the details.

This does not mean that officers have to be involved in every minor decision, or undermine the decisions of subordinates and colleagues; rather, every officer must remain aware of the activities of the other officers and the status of projects, thus allowing autonomy whenever possible.

Effective delegation of responsibilities and duties and collaboration with the private sector. This is also an art and skill that public servants must acquire and master. There is a fine line between delegating tasks to staff and shirking from responsibilities, knowing subordinates and colleagues will take up the slack. The Lagos State Public Service must navigate this distinction by assigning not just tasks, but clearly defined spheres of influence where officers have authority to make procurement decisions and to collaborate with the private sector.