Efficient Public Procurement and The Role of Competition

Abstract

The authors explain why accurate conclusions on public procurement efficiency are impossible in light of the current formal rules of the public contractual system. In regulatory acts, efficiency is replaced with saving and effectiveness - concepts that have different meaning and do not focus on the scale of transaction costs associated with contract conclusion and execution. Since assessing public procurement efficiency has no economic meaning outside the interests of particular actors, achieving the indicators specified in the Budget Code of the Russian Federation is not indicative of the desirable vector of development and result interpretation. In this case, control over efficient satisfaction of public needs is replaced with attaining the metrics (pseudo-objectives) and procedural compliance, which increases the regulator' influence. Multiple control parameters lead to adverse selection of the stuff of customer's contractual services and affect the quality of procured goods. Quasi- market competition based on directive buyer- seller interaction gives the appearance of fair transactions but does not stimulate efficiency or saving of public financial resources against transaction costs. Fair procedures designed to protect competitors from each other do not allow to build up trust-based interactions within the contractual system and engage supplier's reputation as well as establish long-term economic relations. To further develop the contractual system in Russia, would be useful to have a legal definition of public procurement efficiency and give the criteria for achieving it or rejecting procedural regulation.