Buying power: aid, governance and public procurement

This paper assesses the position of public procurement in relation to aid, governance, and economic development. It particularly focuses on the relationship that donors have with developing countries and how this impacts the three factors. The findings are aimed at donors and organisations involved in running projects to analyse government budgets and monitor expenditure. It is anticipated that this paper will help them consider how far donor support is helping, or hindering them in this work.

Reform of government procurement is one of the most controversial aspects of the good governance agenda. Donors have two goals: greater accountability and transparency, which is limited because of its reliance on a one-size-fits-all approach; and greater efficiency, which is narrowly defined as value for money to be secured through open competition. This not only restricts the flexibility of developing country governments to use procurement as a policy tool for development, it can also have significant consequences for local firms that rely on government contracts. There is clearly an important role for donors here, in supporting governments to use procurement to achieve broader development goals and consider the trade-offs of doing so. However, donors are not playing this role well.

Key recommendations put forward include:

• procurement needs to be recognised as the important economic development policy tool that it is - developing countries to be able to decide how to use this tool to secure their development objectives
•  there seems to be a trend in procurement reform to mixing up the process with the policy - it is important to separate the two and focus entirely on the process, or administrative aspects of reform
  
• while donors should provide long-term technical support to increase accountability, the ‘best practice’ models they promote through conditionality are not appropriate
  
• aid effectiveness commitments need to be reformed to ensure a number of factors, notably, the criteria to evaluate country procurement systems focus only on accountability and transparency.