7.1. Size of public procurement
Public procurement refers to the whole process from identifying what is needed, finding the best supplier, to ensuring the best quality product or service is delivered to the right place, at the right time and at the best price. Of course, the process must be carried out in a fair and transparent manner. Governments spend a large sum of money through public procurement to carry out their daily functions and deliver their mandates. As such, public procurement represents an important economic activity and a strategic lever to achieve economic, social and environmental policy goals. Yet, its economic significance as well as the close interaction between multiple actors, especially between the private and the public sectors, make it a government activity that is particularly susceptible to waste, misuse and corruption.
In 2018, spending on public procurement represented about one quarter of total government expenditures in the Western Balkan region (24%). This number ranged from 16% in North Macedonia to 37% in Kosovo. Compared to 2011, this share has significantly decreased in Kosovo (-12.1 p.p.) and North Macedonia (-7.7 p.p.), whereas slight increase was observed in Albania (+1.9 p.p.) and Bosnia and Herzegovina (+0.5 p.p.). The Western Balkans face challenges to ensuring value-for-money in their procurement spending as this in turn has significant implications on budgets. Indeed, a balance must be struck between revenue and expenditures while ensuring that quality public services are provided to citizens. As such, public procurement continues to be one of the key areas of public administration reforms in the Western Balkan region.
The size of public procurement in terms of GDP reflects the economic significance of this strategic governance tool. In 2018, the region spent approximately 8% of GDP on public procurement. The largest share was spent on public procurement in Kosovo (11%) and the smallest in North Macedonia (4.9%). This share has decreased since 2011 except for in Albania. Governments are under increasing pressure from citizens to use this large sum in an efficient way for a more effective delivery of services while mitigating and managing the risks of corruption and integrity breaches. Public procurement is a governance area with strict rules and heavy control. Governments continue to exert efforts to pursue efficiency gains and value-for-money while upholding good governance principles and rules through effective control.
The size of general government procurement spending is estimated using data from the IMF Government Finance Statistics (IMF GFS) database which applies the concepts set out in the Government Finance Statistics Manual (GFSM). The GFSM provides a comprehensive conceptual and accounting framework suitable for analysing and evaluating fiscal policy. It is harmonised with the other macroeconomic statistical frameworks, such as the System of National Accounts (SNA). However, some differences exist between the GFSM and the SNA frameworks in several occurrences which led to the establishment, to a large extent, of correspondence criteria between the two statistical systems.
General government procurement includes intermediate consumption (goods and services purchased by governments for their own use, such as information technology services) and gross fixed capital formation (acquisition of capital excluding sales of fixed assets, such as building new roads). Costs of goods and services financed by general government, also part of government procurement, were not included in this indicator because they are not accounted for separately in the IMF GFS database. For this reason, the figures in this two-pager are not compared to the OECD data on general government procurement spending which is based on the SNA framework. Public corporations were excluded in the estimation of procurement spending.
Further reading
European Court of Auditors (2018), “Public Procurement in Western Balkans”, www.eca.europa.eu/other%20publications/synthesis_w_balkans/synthesis_w_balkans_en.pdf
OECD (2019), Reforming Public Procurement: Progress in Implementing the 2015 OECD Recommendation, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/1de41738-en
OECD (2015), Recommendation of the Council on Public Procurement, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0411
Figure notes
Data for Kosovo, North Macedonia and Serbia are recorded on a cash basis. Data for Montenegro are not available. Data for North Macedonia refer to 2013 rather than 2011. Data for Serbia are not included in the Western Balkan average because of missing time-series.
Source: IMF Government Finance Statistics (IMF GFS) database.
Source: IMF Government Finance Statistics (IMF GFS) database.
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