This chapter focuses on the capacity of digital governance to address key aspects of reform of traditional procurement, the growing complexity of government, and the governance challenges of many developing countries. The chapter reviews the problems of traditional procurement, the distinction between simple versus complex procurement, and new modalities, and notes that the prevailing procurement model has been built on a framework designed for simple and manual procurement. Modernization efforts to address these issues have often been scoped around the robust governance institutions of advanced economies and are not good matches to the very different realities in many middle income and emerging economies. The chapter discusses how e-Government principles applied in e-procurement can play a critical role in resolving some of the challenges in public procurement.
TopTraditional Management Of Procurement
The traditional management of public procurement had its origins in an era when government procurement focused primarily on basic goods and military equipment: For most of history, public procurement has been only a little more complicated than personal expenditure, and procurement personnel have been warehouse officials and accounts-payable staff, often unqualified in complex procurement. In those earlier times, public procurement was a relatively minor part of national economies.
Modern day reality is quite different. The OECD (2013) has recognized that “public procurement is the government activity most vulnerable to waste, fraud and corruption due to its complexity, the size of the financial flows it generates and the close interaction between the public and the private sectors”. Traditional procurement barely distinguished between simple and high-risk complex procurement. In that environment, many opportunities for improved social and economic outcomes have been invisible because the relevant management and planning information has been inaccessible.
Poor governance in procurement invariably reduces development outcomes and has been shown as likely to reduce foreign direct investment. The International Monetary Fund (IMF) (1998) identified national consequences of poor governance in procurement in terms of:
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Over-spending on capital;
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Under spending on asset maintenance;
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Poor quality infrastructure, and
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Reduced government revenues.
That IMF review concluded that poor governance at the early planning level of procurement can result in infrastructure that reduces national growth - investment becomes a disinvestment. The poor quality and under-spending on maintenance also implies that what infrastructure exists has lower economic productivity.
As public procurement has become more complex and involved greater risks, inherent problems have become more evident including a lack of management information and market knowledge, inefficient procedures, high compliance costs for suppliers and government departments, simplistic and ineffective procurement methodologies, and a profound lack of transparency.