Halting waste in public procurement

The global economic downturn is restricting the ability of governments to “build back better” in the face of the extraordinary challenges of Covid-19 and climate change. The decline in growth is shrinking nations’ fiscal space as they attempt to reignite their economies while grappling with unprecedented levels of debt, reductions in tax collection, and increasing income inequality.

Yet an untapped source of funds is hiding in plain sight. Governments today spend an estimated $13 trillion each year on public contracts for goods, services and public works . As much as a quarter of that is wasted in inefficient or shortsighted procurement practices. Halting the waste could free up at least $1 trillion a year to put economies on a path toward green, resilient, and inclusive development. 

That potential, unfortunately, has been passed up for far too long. Despite its large role in global economic activity, public procurement is an underdeveloped professional discipline. Little shared global understanding exists of what constitutes best practices, and procurement decisions are seldom made on the basis of hard evidence of what works and what doesn’t. Procurement is often a check-the-box exercise, designed to ensure procedural compliance rather than broad economic benefits. Meanwhile, political influence and connections continue to drive far too many decisions about who gets what contract.

Covid-19, however, has been a wake-up call for governments. The pandemic has fueled growing public demand for more and better services, putting pressure on governments to do more with less , more quickly. It has highlighted the pressing need for governments to ensure that public purchasing decisions deliver “social value” by going beyond fiscal savings to include broader policy goals such as environmental sustainability, support for small enterprises, and protection of vulnerable groups in society.

All of that can be done. Government purchasing should be more than just a transactional business process that helps increase the efficiency of spending and free up fiscal space. Public procurement must be a strategic tool for socioeconomic change that uses government purchasing decisions and technology more strategically—going beyond economic efficiency considerations and accounting to support broader policy goals such as environmental stewardship, resilient and inclusive economic development. and social protection.

A new World Bank report, An International Stocktaking of Developments in Public Procurement- Synthesis Report, offers a way forward. It shows how the current hodgepodge of procurement practices with few common rules could be replaced by an efficient global system that better serves the public’s needs. But it will take a broad international coalition—involving governments as well as private businesses—to seize the full potential of public procurement and set the global economy on a more sustainable path.

World Bank Blog