Government procurement

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Government procurement or public procurement is when a governing body purchases goods, works, and services from an organization for themselves or the taxpayers.^[1][2][3] In 2019, public procurement accounted for approximately 12% of GDP in OECD countries.^[4][5] In 2021 the World Bank Group estimated that public procurement made up about 15% of global GDP.^[6] Therefore, government procurement accounts for a substantial part of the global economy.

Public procurement is based on the idea that governments should direct their society while giving the private sector the freedom to decide the best practices to produce the desired goods and services.^{[7]: Chapter 1} One benefit of public procurement is its ability to cultivate innovation and economic growth.^[8][9][10] The public sector picks the most capable nonprofit or for-profit organizations available to issue the desired good or service to the taxpayers. This produces competition within the private sector to gain these contracts that then reward the organizations that can supply more cost-effective and quality goods and services. Some contracts also have specific clauses to promote working with minority-led, women-owned businesses and/or state-owned enterprises.^[11]

Competition is a key component of public procurement which affects the outcomes of the whole process.^[12] There is a great amount of competition over public procurements because of the massive amount of money that flows through these systems; It is estimated that approximately one trillion USD is spent on public procurement worldwide every year.^[13]

To prevent fraud, waste, corruption, or local protectionism, the laws of most countries regulate government procurement to some extent. Laws usually require the procuring authority to issue public tenders if the value of the procurement exceeds a certain threshold. Government procurement is also the subject of the Agreement on Government Procurement (GPA), a plurilateral international treaty under the auspices of the WTO.