The future of public procurement in the era of digitalization

Photo: World Bank

Why digitize public procurement?

Many countries have an opportunity to digitally transform public procurement systems to achieve enhanced efficiency, accountability, transparency, and participation of small and medium enterprises (SMEs). Digitally transforming public procurement would also accelerate national development objectives, such as enhancing public service delivery, developing human capital and the private sector, and gender empowerment.

For example, the digitalization of public procurement may yield benefits and savings due to streamlining administrative processes and increasing competition, up to 20 percent in cost and 80 percent in time. Digitalization may reduce barriers for participation of SMEs (including those owned by women and disadvantaged groups) in public contracting, supporting their development and job growth. Use of Mexico’s e-procurement system helped increase SMEs’ winning of public contracts by 19.2 percent relative to the annual goal in 2017.

However, we see a digital gap between countries around the world, particularly in public procurement. While some countries lack even a portal to post information about government contracts, other countries, such as those in the OECD, are employing artificial intelligence and blockchain. For countries that use these new technologies, their public procurement processes become more  efficient and they have more business opportunities. This growing gap stresses the fact that other countries have a lot of catching up to do.

So how do countries address the technological and digital gap?

The World Bank Group organized a conference co-hosted by the Government of Tunisia called the “Future of Public Procurement in the Era of Digitalization” on June 18-20, 2018 in Tunis, Tunisia.
Serving as a knowledge exchange between countries with advanced procurement systems (Scotland, Chile, Brazil, Mexico, the United States, and Portugal/European Commission) with participants from Middle East and North Africa, and Sub-Saharan African countries, the conference highlighted key lessons for countries around the world on addressing the digital gap in their procurement systems:  

• Implementation may be gradual: It is possible to start small in digitalizing public procurement in a way that is not as expensive and grow from there—but this is only possible if governments plan.
• Leadership and political will are critical: Strong political will from top leadership is needed to establish and mainstream a digital procurement system. It is important to take advantage of the windows of opportunity for such support. However, without these opportunities, civil servants can also take initiative to explain the technical elements of e-procurement and the real benefits to the government, whether it be improved investment climate, fiscal benefits, or economic growth, and form a coalition for change.
• Leapfrogging is possible, but only after the basics are in place: There are opportunities for countries, particularly those in initial stages of digital development, to “leapfrog” through learning from the lessons of other countries’ e-procurement experiences and take advantage of the latest technology that exists. However, basic building blocks have to be in place first, including legal, institutional, capacity building, and related arrangements.  
• E-procurement is a key tool to combat corruption, and recognition of corruption is essential: The digital transformation of public procurement can help curb corruption by increasing transparency and accountability of public procurement processes and empowering civil society monitoring and effective feedback loops like ChileCompra’s reporting platform.