Why it matters?

Worldwide, public procurement accounts for between 10% and 25% of GDP on average.¹ Up to one fifth of the value of government contracts may be lost to corruption.² Developing countries spend over USD 820 billion annually on public procurement.³ A recent study from the European Parliament showed that corruption costs the EU between EUR 5bn in GDP terms on an annual basis.⁴

As such, efficient public procurement is crucial to supporting governments achieve inclusive and sustainable development goals. On many national markets, the public sector is the biggest buyer, so when used strategically, public procurement can act as a catalyst for economic growth and social inclusion. Governments can significantly impact national employment and growth through legislation promoting the development and participation of SMEs in public procurement markets.⁵ SMEs contribute up to 33% of GDP and 45% of employment in developing countries, and about 64% of GDP and 62% of employment in developed countries.⁶ Examples of preferential provisions include allocations of quotas, divisions of large public contracts into smaller lots, restrictions on bid securities, and provisions of targeted technical assistance and trainings to SMEs bidding for public tenders.⁷

Other policy goals can be promoted through public procurement.⁸ Governments have the opportunity to foster innovation by purchasing products and services that require investments in research and development, and/or having preferential rules.⁹ Provisions to promote the development of innovative goods and services include set-asides, bid preferences, and waived fees and quotas.¹⁰ Equal employment, social inclusion and respect of social rights are among the policy objectives that can be promoted through rules on the criteria for the eligibility and qualification of contractors, criteria for the award of contracts, and contract awards contingent to certain conditions being met.¹¹

Finally, the area of construction, the one on which the topic’s case study focuses, was chosen because of the crucial role infrastructure plays on the productivity and social inclusiveness of an economy. There is a robust correlation between income inequality and infrastructure quantity and quality. While the private sector depends on a wide and efficient infrastructure network to remain competitive, citizens depend on such a network to access services and have equal opportunity.

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1. European Commission, DG Enterprise and Industry. 2014. "Evaluation of SMEs’ access to public procurement markets in the EU: final report." European Commission, Brussels.

2. World Bank. 2012. "Why Reform Public Procurement?". 

3. World Bank. 2012. "Why Reform Public Procurement?". 

4. European Parliamentary Research Service. 2016. "The Cost of Non-Europe in the area of Organized Crime and Corruption."

5.  Asian Development Bank. 2012. "SME Development Government Procurement and Inclusive Growth." Manila: ADB.

6. European Bank for Reconstruction and Development (EBRD). 2017. "Public Procurement Is open competition good for small and medium enterprises?" London: EBRD.

7. Appelt, S., Galindo-Rueda, F. 2016. "Measuring the Link between Public Procurement and Innovation." OECD Science, Technology and Industry Working Papers, No. 2016/03.

8. Rolfstam, M. 2012. "Understanding Public Procurement of Innovation: Definitions, Innovation Types and Interaction Modes."Available at http://dx.doi.org/10.2139/ssrn.2011488.

9. Handler, H. 2015. "Strategic Public Procurement. An Overview." Policy Paper No 28. WIFO.

10. Calderón, C., Servén, L. 2004. "The Effects of Infrastructure Development on Growth and Income Distribution." Policy Research Working Paper; No. 3400. Washington, DC: World Bank.

11. Organisation for Economic Co-operation and Development (OECD). 2017. "Getting Infrastructure Right. A framework for better governance." Paris: OECD.

Frequently asked questions

-What is the status of the topic?

-Will the topic be part of the ease of doing business score in the Doing Business 2021 report?

-What kind of professionals contribute to the Contracting with the Government topic?

What is the status of the topic?

In parallel with the Doing Business 2018 report, the team conducted a pilot of the Contracting with the Government topic for 18 countries. Through this pilot, and through extensive engagements with external experts, the team refined its questionnaire and conducted a much larger data collection exercise in parallel with the Doing Business 2019 report. Data was finalized for over 90 countries, though input was received for all 190 economies benchmarked by the larger Doing Business dataset. As of May 1, 2019 and in parallel with Doing Business 2020, the team finalized the data for all the 190 economies.

Will the topic be part of the ease of doing business score in the Doing Business 2021 report?

No. The Doing Business 2021 report will include a chapter describing the development of the topic and overall methodology, as well as a brief analysis of the data collected and examples of initiatives introduced by governments to promote transparency and innovation in public procurement system. The team will also include the topic's data in an Annex to the Doing Business 2021 report. The topic will be considered for inclusion in the ease of doing business score in future editions of the report.

What kind of professionals contribute to the contracting with the government topic?

The data is collected from 2 major sources:

1.       Lawyers with experience in administrative and procurement law – these experts are pivotal in directing the team to the right laws and regulations, in providing a clear understanding of administrative powers, as well as in providing insights on their practical interactions with the procuring entity and the contractors.

2.       Construction/engineering firms – these experts are key to helping the team understand how regulations are applied in practice, especially in some phases of the project in which lawyers might be less involved (such as quality controls and payments).

The above contributions are complemented, where relevant and appropriate, by insights provided directly by the procuring entity, for example on budgeting or internal needs assessment procedures. WBG colleagues also provide useful insights on the practices and regulations of countries within their portfolios.