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Where does $11 trillion go every year? Uncover the huge money flow of public procurement!
Public procurement is the process by which governments buy goods, services and works from organisations on behalf of taxpayers. According to 2021 World Bank estimates, public procurement accounts for approximately 15% of global GDP. This means that public procurement is not only an important part of government operations, but also a substantial source of income for the global economy. Every year, the government spends as much as $11 trillion in this market, which not only affects the quality of public services but also changes the competitive environment in various industries.
One of the potential advantages of public procurement is its ability to promote economic innovation and growth.
The necessity of public procurement
Governments need to engage in public procurement because they cannot provide all the goods and services they need on their own. Many public services, such as defence and infrastructure, are non-rivalrous and their provision is related to the well-being of society as a whole. Therefore, the government must purchase goods and services from the private sector, such as police vehicles, school buildings and uniforms, to achieve its goal of providing public and quality goods.
Scope and strategy of public procurement
The scope of public procurement covers all contracts undertaken by public bodies, although there are specific exceptions in certain circumstances, such as military procurement. Faced with the challenges of the fiscal crisis, governments have had to work hard to control public spending, which has led to the emergence of various procurement strategies, including e-procurement and centralized procurement, to improve the quality and efficiency of public procurement.
Using e-procurement not only reduces administrative costs, but also increases the competitiveness of small suppliers.
Public procurement and innovation
The strong purchasing power of public institutions has prompted governments to explore how to use public procurement as a tool to stimulate innovation. Governments can design contracts that meet innovation needs and encourage companies to provide breakthrough solutions. In particular, when “innovation” is incorporated into procurement objectives, it can lead to more efficient services and products.
Challenges and Compliance
Despite its potential to promote economic growth and innovation, public procurement faces a number of potential challenges, the most notable of which is corruption. Because of the huge flow of funds and complex procurement processes, interactions between government officials and businesses often become a hotbed for corruption. To reduce the risk of corruption, countries generally have strict supervision over public procurement.
Monitoring public spending and its impact is crucial for reforming public procurement.
Future Outlook
Given the importance of public procurement, governments are working to develop more transparent, fair and effective procurement policies. How to establish an effective supervision mechanism to prevent corruption while ensuring the diversity and competitiveness of suppliers will be an important issue. The government is also exploring new strategies for green procurement and promoting accessibility, which will influence future public procurement models.
Conclusion
As a key part of the global economy, public procurement affects hundreds of millions of lives and promotes countless innovations. With increased competition and the development of procurement strategies, public procurement in the future will be more transparent and accountable. However, behind this huge flow of money, have we fully realized the real impact and significance of the flow of these resources?
