Study of public procurement practices

28/03/2023
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A.S.Umetaliev
A.K.Karmysheva

This article discusses the issues of improving legislation in the field of public procurement, the possibility of applying international experience. Among the significant changes that may affect the area of public procurement, one can note the simplification of procedures for conducting small purchases, support for the use of e-commerce tools, maintaining a common electronic database (archive) of current and completed purchases, and creating a statistical base for further analysis.

Key words: public procurement, procurement plan, legislation.

Introduction. The public procurement system is an integral part of the domestic trade sector for specific types of goods and services and serves as a mechanism for maintaining competition. The material and technical support for the implementation of government and municipal programs is one of the key factors contributing to the existence and gradual development of the public procurement system in the national economies of many countries.

In the context of limited financial resources, countries pay increased attention to improving the legislative framework in the field of public procurement due to the fact that public procurement is one of the main directions of economic activity for any state. The legislative framework in the field of public procurement, regulating contractual relations between the public and private sectors, determines how the purchasing power of the state is realized in practice and is also intended to promote transparent and fair competition for obtaining government contracts. Thus, the quality of legislation on public procurement directly affects the quality of goods, works, or services delivered under government contracts and can significantly influence the volume of government expenditures. Outdated or ineffective legislation in the field of public procurement can lead to the wastage of limited budgetary resources and hinder fiscal reform implementation.

Main Part. What is the work involved in government procurement? What are the main functions of public procurement? Ensuring compliance with and implementation of legislation on the contract system in the procurement of goods, works, and services to meet government needs, including the determination of suppliers (contractors, performers).

Overall, as demonstrated by advanced international experience in the field of public procurement, it is necessary to eliminate factors that reduce efficiency and increase the costliness of the procurement process. However, we believe that ensuring a balance between the often competing principles of competitiveness, transparency, and efficiency should play a crucial role in the policy-making process in public procurement, taking into account the peculiarities of the local market, legal framework, and entrepreneurial culture. One of the most important factors that continue to influence the field of public procurement is the implementation of anti-corruption measures, particularly in countries with underdeveloped entrepreneurial culture.

In relation to criteria based on advanced practices in developing public procurement models, they were subsequently transformed into indicators and evaluation criteria. The evaluation criteria are based on the idea that the primary function of legislation on public procurement is not to facilitate unhindered international trade or save public funds, but to establish minimum standards for procurement in the public sector.

Legislation on public procurement regulates the processes of acquiring goods, performing works, and providing services for government clients. These processes are part of resource and budget management systems. The procurement process begins with the identification of the needs of government clients, followed by the development of a sourcing strategy, allocation of budgetary funds, and the implementation of tendering procedures, evaluation, and supplier selection. In the interest of a potentially significant number of end-users, after the contract is awarded, monitoring its execution is crucial. In public procurement rules, these processes are often reflected as three main stages: pre-tender stage, competitive bidding, and post-tender stage. In the case of government clients, the complex process of entering into commercial contracts must take into account the principles of the public sector, such as transparency in decision-making processes and accountability of the public sector to taxpayers, who are the ultimate beneficiaries of the goods provided under government contracts.

The content of national legislation on public procurement depends on the goals of the government's procurement policy and the contractual and legal culture within a particular country.

Fig. 1. Key Stages of the Public Procurement Process.

Legislation in the field of public procurement should comply with international standards in order to uphold the principles of good governance. One of the main challenges in modeling the legal framework for public procurement is determining the extent to which advanced international experience is relevant to the socio-economic conditions of a particular country. For any state, the complexity lies in developing national legislation in the field of public procurement that adequately takes into account advanced international experience while also considering:

(a) the specific characteristics of the local market (suppliers and contractors present in the market),/p>

(b) the peculiarities of the country's business culture,

(c) the level of development of communication technologies in the country.

Additionally, the public procurement regulatory system should take into account the differences between government contracts funded from the state/municipal budget (classic government procurement) and contracts in the field of communal services (procurement in the communal sector).

Normative gaps reflect how national legislation in the field of public procurement aligns with benchmark indicators. The greater the coverage of the legal regime of public procurement in a particular country, the smaller the normative gap will be. Therefore, the normative gap is calculated as the difference between the maximum value of a specific benchmark indicator and the scores given for the quality of national legislation in public procurement, including the institutional framework. The normative gap demonstrates the extent to which opportunities for improvement are identified through the evaluation of existing legislation in the country (the "law on paper").

Conclusions and Recommendations. The public procurement system, for example, in Russian practice is a relatively new tool in the relationship between the government and business, and it began to develop shortly after the transition to a market economy. However, public procurement in other countries has a longer history, organically shaped under the influence of historical, economic, political, and other factors. While the institution of public procurement in Russia is based on adapting foreign experience, the process of its organization in the original conditions presents scientific interest. Below are the main provisions of the formation of public procurement in the USA and Europe. Foreign experience. The greatest experience in this field has been accumulated in the USA, where the first law on public procurement was adopted in 1792 [1]. The total volume of procurement is divided into several parts, the main ones being procurement for the needs of federal authorities (with the responsible body being the General Services Administration), as well as procurement for the needs of national defense, where the responsible body is the US Department of Defense. It should be noted that the legislation and organization of the procurement process in the country underwent significant changes in 1994 when a complete revision of public procurement was carried out. Among the most significant changes, the following should be noted:

a) Simplification of procedures for conducting small procurements with a value of less than 100,000 dollars, which facilitated the participation of small and medium-sized businesses.

b) Support for the use of e-commerce tools (email, payment systems, etc.) and parallel facilitation of paper document flow.

c) Support for maintaining a comprehensive electronic database (archive) of current and completed procurements, which has created a statistical foundation for subsequent analysis.

The Federal Contracting System (FCS) in the United States is a crucial element of government regulation and planning, serving both economic functions (such as facilitating the government's connection with the market economy, stimulating scientific and technological development, and supporting military production) and social functions (such as advancing healthcare, education, and other social sectors). This system is built on the principle of professionalism of the contracting authority, represented by the Office of Federal Procurement, established in 1974. It is important to highlight the protectionist policy in the country regarding American manufacturers. According to the package of laws known as the "Buy American" Act, issued by the U.S. Congress in 1933, there was a prohibition on the use of any foreign goods to meet government needs, except in cases where they significantly surpassed domestic goods in terms of quality and cost.

In the European Union countries, the system of public procurement is largely based on the American experience. Firstly, it is worth noting the division of organizational methods into two main types: centralized and decentralized procurement. In the case of centralized procurement, purchases for various departments and agencies are conducted by a single entity, which then resells the goods or services to specific government entities at wholesale prices, minus a small margin. The advantage of this approach is the ability to secure low prices due to the large-scale wholesale nature of the purchases. However, the drawback is the loss of flexibility and the ability to accommodate various nuances and specifications of individual departments. Centralized systems are present in countries such as Bulgaria, Cyprus, the Czech Republic, Estonia, Poland, and others.

In the second case, each department independently conducts procurement for its own needs, usually through a specially organized department. In contrast to the centralized system, the advantage here is the flexibility in procuring goods and services with specific characteristics, while the disadvantage is the significant costs involved in maintaining procurement departments within each department. This system is used in Finland and Portugal.

Finally, among most European countries (such as Austria, Germany, France, Italy, etc.), a popular approach is the combined structure, where there is a single entity responsible for coordinating, planning, and monitoring procurement, while each department directly carries out the procurement process. A unique feature of the European Union is the fact that access to a unified database of orders is available for certain countries. Alongside the obvious advantages of such organization, the protection of domestic suppliers becomes a significant concern. Therefore, in many countries, preferential treatment is granted to local producers.

In conclusion, despite the influence of foreign countries' experience on the formation of the Federal Contract System (ФКС) in our country at the present stage, it is important to take into account both the historical development and, as mentioned earlier, the contractual and legal culture of each individual country, within which fundamental principles of the procurement institution were established. It is worth noting that "Every form of government, once established, contains within itself the material for its own improvement," which implies that young countries have the opportunity to distinguish inherent aspects in the search for research, improve, and keep pace with the times.

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