Procurement Reform

Shedding Light on Government Spending

Public procurement sounds like an obscure topic when it comes to reducing poverty. But in the mundane details of how a government contracts to build schools, drill water wells, or buy vehicles, can be found some of the greatest opportunities for saving public resources and promoting a more dynamic private sector in developing countries. Even small efficiency gains can mean freeing up millions of dollars for education, building roads, or social programs to help the poor.

Big Business

Public procurement is big business. On average, 12 to 20 percent of a developing country’s budget is spent through public procurement systems. In some countries it is as much as 70 percent. Part of this is financed through international development aid.

Unfortunately, procurement systems in many developing countries are extremely inefficient. A lack of capacity to process and manage tenders, and a lack of internal and external transparency in the competitive system can be important factors. And in any country at any stage of development, the large amounts of money involved can make procurement systems prone to corruption.

E-procurement Increases Efficiency

Employing information and communications technology is a critical element for procurement reform. The results are immediate and impressive. With an initial investment of $26 million to install an e-procurement system, Korea saved $2.5 billion a year. ICT-based procurement reform in the Philippines education sector saw the price of school textbooks drop in half and the cost of classroom construction fall by 40 percent.

Affordable Options, Dramatic Savings

Not every country is ready for a full e-procurement system. And not every country can spend millions of dollars to get one. But studies show that simply increasing access to information about tender opportunities via the Internet can increase the number of bidders, with dramatic cost-saving results.

For more complex back-office reform, technology equipment costs are falling each year and major improvements can be made in relatively affordable stages thanks to the growing use of license-free open source software. Open source software is dramatically changing the nature and potential for e-government systems to be used in developing countries.

Making it Happen with dgMarket

Development Gateway Foundation’s Online Procurement Program promotes more open and efficient government procurement worldwide, and is actually making this happen through the leading dgMarket tender publishing service. It includes more than $520 billion worth of government procurement notices annually, and growing. We also help developing countries implement national procurement Web sites to publish their tender information, using the dgMarket platform.

Development Gateway Foundation has also provided grants and technical assistance to certain countries to implement new e-procurement systems, in cooperation with the government of Italy and the World Bank. Please click here to make a donation to support the work of the Development Gateway Foundation.