PUBLIC PROCUREMENT AS PART OF PUBLIC FINANCIAL MANAGEMENT

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PUBLIC PROCUREMENT AS PART OF PUBLIC FINANCIAL
MANAGEMENT

• Budget Execution
• Public Expenditure and Financial Accountability

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Topics to be Covered

• Define objectives of procurement system as a
  public sector management system
• Identify key elements of a system
• Establish linkages to public sector financial
  management
• Procurement as part of the budget formulation and
  execution
• A country-based example
• QAs

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Procurement as a Governance System

• Objectives of a public procurement system
• Efficiency and effectiveness
• Value for money
• Timeliness
• Fair and open system
• Competition
• Open to outside participants
• Provides for remedies
• Transparency
• Accountability

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Key Aspects of a Developed System

• Legal framework
• Oversight
• Cadre of qualified professionals
• Defined role/responsibilities consistent with
  degree of decentralization
• Record keeping and data management to provide
  feedback
• Control systems Internal and External

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Why Procurement is an Integral Part of Public
Financial Management

• The basic objectives are to obtain goods and
  services needed to deliver government programs at
  the appropriate quantity, quality and price
  (value for money)
• Procurement expenditures are often a significant
  component of public expenditure and GDP (10-15)
  and significantly higher in developing countries.
• Many procurement projects involve multi-year
  expenditures
• Procurement is therefore a financial management
  issue not just adhering to legal requirements
  or obtaining goods and services that meet
  technical requirements
• Inappropriate procurement will reduce both
  strategic resource allocation and operational
  efficiency, through inappropriate goods and
  services and higher than necessary costs. It may
  also threaten aggregate fiscal control through
  cost blowouts in major projects.

Procurement
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How Procurement Fits with Key Themes of Budget
Design Reform

• 1. Greater Performance Focus in the Budget
• Provides actual cost data for budget formulation

• 2. Strengthening Internal Control Audit
• Procurement is a key element of internal control
  and internal audit systems
• The procurement audit function in Supreme Audit
  Institutions (SAIs) is important

• 3. Accrual Accounting and Budgeting
• Focuses on accountability of total costs,
  including maintenance and depreciation
• Part of the issue of improving the management of
  public assets

• 5. Medium-Term Approach to Budgeting
• Does not require multi-year appropriations,
  rather a forward look to provide indicative
  figures for planning purposes
• Planning of capital investment programs and
  projects an integral part of multi-year budgets

• 6. Transparency
• Fiscal transparency, as with transparency of
  procurement transactions, may improve overall
  fiscal performance and counter corruption

• 7. Other Applications
• E-Procurement
• Public-private partnerships (PPI)

• 4. Budget Design
• Integrating capital and recurrent budget
  preparation and execution involves procurement
  issues

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Mainstreaming Procurement as a Financial
Management Activity An Example

• In South Africa, procurement as a technical and
  peripheral function has been put aside and is
  being integrated into the overall public
  expenditure management process
• The term procurement is no longer used.
  Procurement officers are called financial
  management officers
• Under the name of Supply Chain Management
  traditional budget management in line ministries
  is being restructured from

Budget Planning
Reporting Execution
Execution
Monitoring
To
Demand Planning
Budget planning
Acquisition management
Disposal Management
Logistics Management

• Even though Acquisitions Management deals with
  most functions of traditional procurement, each
  stage of the process engages financial officers,
  including procurement experts.
• By doing so, officers in charge of demand
  planning are better able to prepare a more
  practical and feasible plan for the logistics and
  procurement stages later on
• (N.B. the concept of supply-chain management bas
  been popular in private companies since the early
  1980s)

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QA Discussion