Organization of procurement activities of state-owned enterprises
The concept and types of electronic procurement are considered. The drivers of more active implementation of e-procurement technology have been identified. The organization of procurement processes of state organizations of the Kyrgyz Republic is briefly described. Special attention was paid to the legal aspect of public procurement. The main problems of e-procurement and ways to solve them are also considered.
Key words: procurement logistics, electronic trading platforms, EDS, electronic bidding, procurement department, public procurement portal
Currently, the functioning of both commercial and government organizations cannot be imagined without procurement activities. Any organization, in one way or another, carries out its activities through the procurement of goods, services, raw materials, and consumables: from purchasing office supplies and equipment for administrative work to acquiring high-tech equipment for direct use in production or service provision to clients.
The issue of procurement activities for government or municipal organizations is resolved through the conduct of tenders. Government organizations plan the procurement process for the next year starting from September of the current year. The Procurement Department collects applications or requirements for the procurement of goods or construction of facilities from the respective departments. Before the annual plan is approved, the Procurement Department will include the goods and services in the annual list. The task at hand is to prefer one of two alternative solutions: either produce any product, raw material, or component using our own production facilities or procure the necessary inventory items from reliable suppliers or contractors who specialize in providing them. According to the "Public Procurement Law," government organizations can enter into a framework agreement with suppliers. The essence of a framework agreement is:
- Procurement of goods at previously agreed prices throughout the year.
- In force majeure circumstances, there will be no need for suppliers, as under any circumstances, the second party will fulfill its obligations according to the agreed-upon terms of the contract.
- The main reasons why purchasing from suppliers may be more feasible include:
- Lower costs of acquiring material resources from suppliers compared to the costs of self-procurement of goods and services.
- Higher quality of goods from suppliers.
Procurement by government organizations is conducted based on reasonable norms and regulations regarding the use of goods and services. As a result, the quantitative aspects of procurement have a much lower degree of subjectivity compared to specific cases. Government procurement is carried out to address national tasks, with the priority being the satisfaction of societal needs, achieved through the government's fulfillment of its organizational and economic functions. The mechanism of government procurement is structured in a way that gives the state a dominant role. In government procurement, the state acts as a regulator of economic processes.
By encompassing both the procurement of goods and the execution of works and services, the term "government procurement" highlights its systemic nature, which necessitates the development of a unified mechanism for legal regulation of the relationships arising during the procurement process.
Externally, government procurement, as a procurement itself, does not differ from private procurement. However, as government procurement, it still has its distinctive features that manifest in the nature of the government procurement process:
- Public need for the purchase: Government organization's procurement can be seen as purchases made due to some objective necessity that is inherently present in the activities of the state.
- Rationality of the purchase: In the case of government procurement, everything that is purchased is theoretically only those things and services that are truly necessary for the functioning of the government organization. The state, as a societal consciousness, cannot afford to buy unnecessary, defective, harmful, etc., items that may pose a danger to the entire state as a whole. For example, purchasing low-quality military equipment can result in defeat in a war.
- Quantitative rationality (proportionality) of the purchase: Government organization's procurement is carried out based on reasonable norms and standards of using goods and services. Therefore, the quantitative dimensions of the procurements have a much lower degree of subjectivity compared to specific cases.
Government procurement of goods and services beyond their reasonable physical limits for periodic consumption leads to overspending of government funds, unjustified material losses during storage, and shortages.
At the first stage, which is the stage of forming the government order, a consolidated list of the government order is created based on the volumes and scope of the government order carried out by the government, recipients, and managers of consolidated budgetary funds.
At the second stage, the government order functions as an offer. Government agencies, budgetary institutions, or other authorized recipients of budgetary funds, acting as "state customers," determine the procurement method, set deadlines for bid opening, establish qualification requirements and technical specifications for the procured goods, and announce a tender on the government procurement portal.
At the third stage, the tender commission determines the winner in accordance with the qualification requirements, who is subsequently obliged to fulfill the contract.
In any country, the sphere of public procurement is always under close scrutiny and attention of the prosecutor's office and the audit chamber. Public procurement is not only a tool for meeting public needs but also a powerful and effective instrument of state policy. For example, through the mechanism of government procurement, it is possible to influence economic growth and development, enhance business activity, manage tax policy, and so on.
An important criterion in forecasting and formalizing procurement is the time and delivery schedules of goods. Relatively short delivery times allow for more flexible planning of orders to suppliers, forming smaller but more frequent deliveries. In this case, errors in forecasting the demand for goods can be compensated by fast delivery times. However, for long delivery periods, careful planning of the needs and sizes of orders for goods and materials is necessary, along with determining the delivery schedule. This is because there is a lack of modernized warehousing facilities and equipment for storing goods throughout Kyrgyzstan.
Thus, the procurement of necessary goods and services by state enterprises is more efficient than the traditional method used before 2015. The electronic procurement format has reduced corrupt practices across the republic by threefold. This is due to the publication of procurement notices on the procurement portal, allowing all eligible suppliers who meet the qualification requirements set by the procurement department and the purchasing organization to participate. The results of the evaluation by the tender committee are also publicly disclosed within a specified timeframe. Suppliers who disagree with the committee's decision have the right to appeal it through legal procedures. As a result, the tender committee carefully considers its decisions, relying on the law on public procurement.
However, just like in any sector, there are drawbacks to the previous interpretation in the public sector. In our final decision, the tender committee is guided by the condition that the lowest bid amount is important. Taking advantage of this, unscrupulous suppliers provide the lowest bid and win the positions specified in the tender lot. As a result, they deliver low-quality goods. According to the author of this article, it is necessary to refine the law on public procurement and address the loopholes in the legislation. As practice shows, goods of inadequate quality do not last long, and the purchasing organizations will have to re-tender for the same goods using the budget of the Kyrgyz Republic. Thus, more money from the budget of the Kyrgyz Republic is spent on acquiring the necessary needs of the purchasing organization for the same goods.
The electronic digital signature was implemented nationwide in March 2021. All actions are now verified by an electronic digital signature. The automated processing of electronic documents has reduced the time from creating a request to publishing a purchase to a matter of days and hours. The deep data structure from planning to procurement has allowed for the implementation of a multi-level system of control over incoming information to ensure compliance with legislation.
Thus, competitive procedures for the needs of budgetary institutions and state unitary enterprises are conducted according to the principles outlined in the Law of the Kyrgyz Republic "On Public Procurement" through the government procurement portal. These actions have created conditions for competition to thrive in this market segment. Increasing the share of competitive procurement in the overall volume of concluded contracts will lead to positive effects for the budget, such as cost savings.
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