Public procurement in other countries: why laws need frameworks

Once a government procurement was announced for 330 grams of raisins.



Today I will talk about how public procurement is regulated in different countries. And also about typical libraries of laws and their local forks.



All countries have their own characteristics of public procurement. For example, in Korea, a very advanced KONEPS information system is implemented. It is completely electronic, and participants without fail use biometrics as one of the authentication factors. Without fingerprints, authorization will not work.



In the UK, the competition committee must communicate with all participants who have not won the competition. For greater transparency and objectivity, they report on the criteria by which they chose a winner and find out the opinion of those who left the competition about the past purchase.



Let's take a closer look at how all this beauty is regulated in the world and in individual countries.

What is government procurement?

Even the healthiest state, with its almost unlimited resources and administrative leverage, will always stumble in one way or another on the human factor. I'm talking about corruption and mismanagement of the budget. Formally, competition for contracts should increase efficiency and reduce price. Moreover, it is no secret to anyone that the state does not always spend money effectively. This is partly due to its huge size and bureaucracy. And sometimes, officials and suppliers are not the most conscientious. This is an eternal pain for all countries.



When we talk about some tenders that are financed from the budget of the country, we immediately present something colossal in scale. Well, no less than the acquisition of several dozen aircraft and a couple of dozen top-end MRI scanners to equip hospitals. In fact, a huge number of tenders are held for fairly small purchases. For example, the Krasnogorodsky district hospital tried to buy raisins in the amount of 330 rubles. And the Yurginsky College of Agricultural Technologies and Service really wanted to acquire a “working horse”.



Budget organizations receive the bulk of their funds from the state budget. Even the smallest hospital or kindergarten is funded almost exclusively from our taxes.



Of course, we are all interested in spending them to the maximum benefit. And all these sometimes confusing rules that everyone is forced to obey are a necessary compromise in order to ensure a more or less transparent spending of budget money. Of course, it cannot do without bureaucratic excesses with tenders for the “purchase of a pencil” and many months of waiting for consumables needed yesterday. You need to refactor all this, but carefully and with thorough testing.

Local forks

Law is a code. Let it be very peculiar. Therefore, each specific country is sure to finish something for its own needs, but at the same time it tries not to lose compatibility with upstream. Loss of compatibility and isolation are not beneficial to anyone in the long run. Therefore, everyone is trying to come to optimal regulation in this area.



I must say that in many countries the relations between the state and the private sector are very different. The key difference is a well-functioning judicial system, which allows a civilized settlement of all problems with the quality of delivery. If the supplier is dishonest and disappears into the fog, having failed to fulfill its obligations, then everyone suffers. Especially if it is a large project requiring coordination of many participants. It is completely unpleasant if local legislation allows the nominee founder to evade personal responsibility. In the United States, this option will not work. Lawyers simply took your soul out of you, filling up with lawsuits. At the same time, in the USA, a bridge is being built 10-15% more expensive, but from quality materials. A company chosen for paving the road may not be the cheapest on the market, but it does not lay on the snow, and the asphalt lasts ten years and is not washed off by the first spring rain. All participants clearly understand that for violation of quality standards they may face a very real time.



There are other differences. In Germany, the state acts as an equal participant in the market, on an equal footing with representatives of the private sector. It is subject to the same economic and legal principles as private companies. It is also obliged to publicly inform the market about its needs, creating open tenders for the purchase of services and various goods. All disputes are settled within the framework of civil law. Moreover, the state acts as an ordinary consumer, comparing prices and choosing the most reasonable and economical option. Moreover, the law provides compensation to suppliers if, due to customer errors, they incur losses.



In the USA, the legacy code with the first version, published back in the 18th century, is being stubbornly finished. Current legislation is subject to a set of laws called the “Procurement Rules for Federal Needs” - FAR. Moreover, due to the independence of US territorial units, this legislation applies only at the federal level. Within the framework of individual states, their own legislative acts are being adopted, which nevertheless try to bring into line with federal law.



In Australia and New Zealand there are generally no significant laws that specifically regulate this area. Individual states and territories have great autonomy in organizing procurement and are subject to local acts of the local ministry of finance.



Belgium and France have tighter controls on public procurement. In these countries, special commissions are created to monitor the entire bidding process - from making decisions and budgeting to analyzing the effectiveness of the result. Well, and, accordingly, they react rather harshly to inefficiency and, moreover, corruption.



In Russia, they managed to build one of the most advanced open electronic trading systems in the world. Seriously, compared to other countries, we have the largest share of purchases carried out in this way. Almost 100% of Russia's public procurement is conducted through electronic bidding. The state and large trading floors are making great efforts to create a single ecosystem that will be convenient and transparent for all parties.

Law framework

In all states, there are similar problems of the potential merging of power and business. That is why a good regulatory framework and well-thought out procurement administration can minimize corruption risks and not drown a small customer such as a school or a conditional cultural center in a bureaucratic swamp. The basic principles for procurement and placing orders are formulated in various international documents: the EU Directive, the Multilateral Agreement on Public Procurement within the WTO and several others. Plus, they are necessarily supplemented by local legislative acts that take into account local specifics. The most important postulates that stand out in these documents:

• Transparency and accessibility of procurement information.
• Strict adherence to the standards and procedures described in law.
• Open and fair competition with equal access for all participants.

In view of globalization, the world is becoming smaller and we are growing more and more into each other through our cultural, commercial and technological ties. If the legislation is written in the local version of Brainfuck legal, it will be very difficult to agree on the delivery of even a banal container with fruits. The supplier will study a little strange standards for the average bending of bananas and the concentration of seeds in oranges, and then decides to find a client from a country with more adequate and generally accepted requirements. In short, states are trying to negotiate, including adhering to a single code style in writing laws.



There is such a UN Commission on International Trade Law - UNCITRAL (United Nations Commission on International Trade Law). She has developed many key documents governing honest, fair and effective rules for conducting commercial transactions. We are interested in the document “ UNCITRAL Model Law on Public Procurement ”, which is a kind of best practice in this area. It works as a kind of optimized framework, ensuring the compatibility of local derivatives with important things such as, for example, the UN Convention against Corruption and major international agreements. It does exactly what good frameworks and large standard libraries do - it makes the invention of bicycles unnecessary and improves compatibility. Our 44-FZ, for example, was also written on the basis of the basic principles and rules of UNCITRAL.



Despite all the differences in local legislation, most countries in one way or another strive to come to a single honest standard that does not infringe on the rights of local business and does not impede trade relations between countries and relations between customers and suppliers.