Introduction
Free trade as proponed in the economic theory, ideally, requires that the market should only be subject to its means and ends as is with demand and supply[1]. However this emphasis is downplayed and at times disregarded particularly when governments and their agencies purchase from private entities services and goods[2]. Whilst dispensing the mandate of service delivery to the people, governments have been confronted with the challenge of being a neutral regulator in a free market and its principles thereto and also using the leverage of being the largest buyer of goods and services in their economic markets to pursue socio-political objectives.[3]
Public procurement policy therefore reflects the socio-political challenges a particular government contends with and how by policy it seeks to solve them in an economic and trade context. The challenge however is that in so doing, not only is public procurement subject to abuse; particularly in professionalism discretion, but it also hinders free trade and consequently international trade due to the protectionist orientation of socio-political objectives[4].
Nonetheless, the trend has been that developed countries have prioritized the economic model of public procurement while developing countries have prioritized the social model given their lack of technology, insufficient technical labor and developing infrastructure and hence subject to discrimination and in-equality in international trade that the GPA and WTO agreements have sought to address.[5]
- Complexity and Contradictions in Public Procurement Models; Challenges
The economic model of public procurement is premised on the theories of perfect competition and comparative advantage.[6] This follows that many individual buyers in a free market are motivated by self-interest and utility maximization and sellers act on self-interest and profit maximization. Given also that public procurement accounts for a significant portion of the GDP of most countries–30% developing and 15% developed countries respectively—there is need to regulate public procurement due to its effects and influence on the economy.[7]
However the regulations should not seek to frustrate economic development, a context in which public procurement is rationalized and operationalized and hence making it an economic activity as opposed to a socio-political one.[8]
Generating the most demand in services and goods in an economy through public utility companies and government agencies, governments finds it necessary to rationalize public procurement laws in the context and existence of political and collegial interests; hence the social model. This in effect affect and contravene principles of an optimally functioning market due to lack of perfect competition. The neutrality of governments, in using public procurement as a socio-political tool, is therefore compromised in the free market mechanism that its policy should be supporting[9].
Given public interest and sustainable- development are recognized by government from a socio-political perspective, inevitably, the socio-political interests find their reasonable accommodation in public procurement policy and law. This may as a result influence market pricing that is a critical guidepost as to scarcity in the market hence affecting the demand supply mechanism and cost of production. This therefore means pricing is an indicative of public procurement policies and laws and as a result, implicitly, affirming that such policies and laws as adopted and enforced by governments not only affect economic efficiency but also the flexibility of the market and hence impacting on the cost-benefit analysis.
Having established that public procurement is an economic activity[10] and that governments are mandated to not only to facilitate for sustainable economic development but also to act with public interest in so doing, laws and policies on public procurement should not seek to impair free trade and hence international trade benefits. However given the disparity in technology and labor productivity, being considerations upon which the Ricardo’s comparative advantage theory as applicable in international free trade agreements is based, countries cannot compete fairly, particularly as of developed and developing countries despite specialization.[11] Developing countries therefore have tended to protect their national markets from being developed and influenced to be largely consumer markets and hence imbalance of trade.
Inevitably therefore, public procurement policy should reflect both economic and socio-political models. While emphasis should be prioritized in the economic model, it is prudent for the social model to feature in order to address the social and political aspects in the market. However, the challenge, in so doing, is that procurement professionals discretion may be abused and thus further impacting detrimentally not only on economic efficiency but also resulting in socio-political problems particularly corruption given that this discretion affects control over market prices, product standardization, flow of goods, services and information and hence possibly leading to market failures or stagnation due to inefficiency[12]. In this regard public procurement law and policy could fail as a means; policy tool, to the end of realising social-political objectives.
The resulting conflict of objectives requires justification, in the economic context, for prioritizing one set over the other while seeking to regulate public procurement particularly with an aim of ensuring and facilitating for sustainable economic efficiency.
- Public Procurement and Sustainable Development; Objectives
Economics influences the social dynamics of any given society. In accounting to the public on this interplay through service delivery, governments tend to seek a balance between their own efficiency and that of economics. This is manifested in form of economic objectives of public procurement seeking to address economic efficiency and social-political objectives in line with government efficiency.[13]
Normatively therefore, the socio-political objectives reflect the aims of government efficiency in regulating against the economic market practices that are detrimental to social dynamics and hence sustainable economic development. Not only does this seek to mainstream social policy across all sectors of government but also facilitate for strategic protection of public interest particularly on standards of governance in addressing challenges of natural resources distribution, an inherent flaw of the free market, which often leads to exclusion and marginalization of segments of society from procurement markets, hence precipitating a governance problem as regards Discretion, Corruption, Patronage & Other Forms of Misfeasance.[14]
The economic objectives therefore rationalize economic efficiency and free trade whilst the socio-political objectives seek to address reasonably the shortcomings and practicality of the economic objectives in public procurement regulation. This means that socio-political objectives ought to be secondary to economic objectives given that public procurement is an economic activity and also that governments have alternative avenues of pursuing social-political objectives.[15]
The Social-Political
objectives, in seeking government efficiency, ought therefore to be exact and discernible in limits or form to sustainable economic efficiency
in public procurement law and policy while addressing socio-political and
economic challenges particularly corruption; discrimination and inequality in
an inefficient bureaucracy. This ensures market resilience due to
predictability and constancy in performance that is not subject to government
transitions whose socio-political agenda variance may result in market
instability hence impacting on growth which this very objectives seek to
achieve.
[1] McCrudden C, Buying Social Justice: Equality, Government Procurement, & Legal Change (OUP 2007), esp. 114-128
[2] ibid
[3] …government attempts to combine the three functions of government distinguished up to now: participating in the market but regulating it at the same time, by using its purchasing power to advance conceptions of social justice, particularly equality and non-discrimination. McCrudden C, Buying Social Justice: Equality, Government Procurement, & Legal Change (OUP 2007), esp. 114-128
[4] Trepte P, Regulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (OUP 2004).
[5] Mosoti V, ’The WTO Agreement on Government Procurement: A necessary Evil in the Legal strategy for Development in the poor World?’ (2004)25(2) University of Pennsylvania Journal of International Economic Law 593.
[6] …..which are contained in Table 4, show that economics has been the most prominent discipline informing public procurement research. It accounts for over half of theory-based articles. Twenty eight of the fifty theoretically grounded articles (56%) have their antecedents in economic theory. Examples include theory of auctions and competitive bidding, principal-agent theory, transaction cost economic theory and contract theory. The sociology discipline accounts for nine of the theoretically grounded articles (18%), with examples including general systems theory, institutional theory and social constructivism. The management discipline also accounts for nine articles (18%), with organization behaviour theory, theory of innovation and theory of lean relevant here. Lastly, theories with a psychological basis were found in four articles (8%), and include theory of self-determination and leadership theory. Flynn A and Davis P, ‘Theory in Public Procurement Research’ (2014) 14 (21) Journal of Public Procurement 139.
[7] Accounting for 15-20% of global GDP, public procurement represents a substantial portion of the EU economy and the economies of many countries around the world. Public procurement commitments under the World Trade Organization’s Agreement on Public Procurement (GPA) have been estimated at around EUR 1.3 trillion.
[8] McCrudden C, ‘International Economic Law and the Pursuit of Human Rights: A Framework for Discussion of the Legality of ‘Selective Purchasing’ Laws under the WTO Government Procurement Agreement’ (1999) 2 (1) Journal of International Economic Law 3.
[9] McCrudden C, Buying Social Justice: Equality, Government Procurement, & Legal Change (OUP 2007), esp. 114-128
[10] . Flynn A and Davis P, ‘Theory in Public Procurement Research’ (2014) 14 (21) Journal of Public Procurement 139.
[11] Mosoti V, ’The WTO Agreement on Government Procurement: A necessary Evil in the Legal strategy for Development in the poor World?’ (2004)25(2) University of Pennsylvania Journal of International Economic Law 593.
[12] ….”The procurement function is not a cause of corruption; it merely provides an opportunity which the potentially corrupt may seize upon to engage in corrupt practices. Procurement regulation is able to close off a number of those opportunities but it cannot address the wider causes or prevalence of corruption. There is a built in limitation to what it can achieve…”
Trepte P, Transparency And Accountability As Tools For Promoting Integrity And Preventing Corruption In Procurement: Possibilities And Limitation, 2005, Organization for Economic Co-operation and Development.
[13] Arrowsmith S, ’Public Procurement as an Instrument of Policy and the Impact Market Liberalisation ‘(1995) 111 Law Quarterly Review 235.
[14] Kelman S, Procurement and Public Management: The Fear of Discretion and the Quality of Government Performance (American Enterprise Institute Studies 1990)
[15] Weber R H, ’Development Promotion as a Secondary Policy in Public Procurement’ (2009) 4 Public Procurement Law Review 184.
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