1. PUBLIC PROCUREMENT AS PART OF PUBLIC FINANCIAL MANAGEMENT
Budget Execution
Public Expenditure and Financial Accountability

2. Topics to be Covered
Define objectives of procurement system as a public sector management system
Identify key elements of a system
Establish linkages to public sector financial management
Procurement as part of the budget formulation and execution
A country-based example
Q&As

3. Procurement as a Governance System
Objectives of a public procurement system
Efficiency and effectiveness
Value for money
Timeliness
Fair and open system
Competition
Open to outside participants
Provides for remedies
Transparency
Accountability

4. Key Aspects of a Developed System
Legal framework
Oversight
Cadre of qualified professionals
Defined role/responsibilities consistent with degree of decentralization
Record keeping and data management to provide feedback
Control systems – Internal and External

5. Why Procurement is an Integral Part of Public Financial Management
The basic objectives are to obtain goods and services needed to deliver government programs at the appropriate quantity, quality and price (value for money)
Procurement expenditures are often a significant component of public expenditure and GDP (10-15%) and significantly higher in developing countries.
Many procurement projects involve multi-year expenditures
Procurement is therefore a financial management issue – not just adhering to legal requirements or obtaining goods and services that meet technical requirements
Inappropriate procurement will reduce both strategic resource allocation and operational efficiency, through inappropriate goods and services and higher than necessary costs. It may also threaten aggregate fiscal control through cost blowouts in major projects.
Procurement

6. How Procurement Fits with Key Themes of Budget Design & Reform
1. Greater Performance Focus in the Budget:
Provides actual cost data for budget formulation
2. Strengthening Internal Control & Audit:
Procurement is a key element of internal control and internal audit systems
The procurement audit function in Supreme Audit Institutions (SAIs) is important
3. Accrual Accounting and Budgeting:
Focuses on accountability of total costs, including maintenance and depreciation
Part of the issue of improving the management of public assets
4. Budget Design:
Integrating capital and recurrent budget preparation and execution involves procurement issues
5. Medium-Term Approach to Budgeting:
Does not require multi-year appropriations, rather a forward look to provide indicative figures for planning purposes
Planning of capital investment programs and projects an integral part of multi-year budgets
6. Transparency:
Fiscal transparency, as with transparency of procurement transactions, may improve overall fiscal performance and counter corruption
7. Other Applications:
E-Procurement
Public-private partnerships (PPI)

7. Mainstreaming Procurement as a Financial Management Activity – An Example
In South Africa, procurement as a technical and peripheral function has been put aside and is being integrated into the overall public expenditure management process
The term “procurement” is no longer used. Procurement officers are called “financial management officers”
Under the name of “Supply Chain Management” traditional budget management in line ministries is being restructured from:
Budget Planning
Execution
Monitoring
Reporting & Execution
To:
Demand Planning
Budget planning
Acquisition management
Logistics Management
Disposal Management
Even though “Acquisitions Management” deals with most functions of traditional procurement, each stage of the process engages financial officers, including “procurement” experts.
By doing so, officers in charge of demand planning are better able to prepare a more practical and feasible plan for the logistics and procurement stages later on
(N.B. the concept of supply-chain management bas been popular in private companies since the early 1980s)

8. Q&A
&
Discussion