copy the linklink copied! Size of public procurement
Public procurement, the purchase of goods, services and works by governments and state-owned enterprises, is increasingly used by governments as a strategic tool to deliver their mandates. In addition to carrying it out in line with standard principles and existing rules, governments are working to increase the efficiency and effectiveness of this key function. From an economic perspective, public procurement is recognised as a lever for improving the efficiency and effectiveness of public spending. In addition, the realisation of broader policy objectives (such as promoting innovation, sustainability, social inclusiveness and supporting small and medium-sized enterprises [SMEs]) is an increasingly important part of public procurement strategies for governments.
The sheer size of public procurement, representing approximately 12% of gross domestic product (GDP) in OECD countries, makes it a key economic activity, ranging from 4.9% in Mexico to 19.5% in the Netherlands. The economic weight of public procurement is more pronounced at times of economic recession: therefore, in three-quarters of OECD countries the relative size of public procurement spending in terms of GDP reached a peak in 2009, when economic recession struck most of them. Since then, the relative size of public procurement spending in OECD countries has been slowly decreasing, but remained rather constant over the last four years, both as a percentage of GDP (11.8% in 2017) and in terms of general government expenditures (29.1% in 2017).
Being under fiscal pressure, governments have been reforming their public procurement systems to optimise this significant public expenditure item. Such reforms are highly relevant for central governments, and even more for sub-central governments that make up 63% of overall public procurement spending in OECD countries, with substantial variations reflecting the institutional set-up of each country.
Public procurement has a strong impact in all forms of public service delivery, as reflected in the sectoral spending, from health to environmental protection, public order or economic affairs (comprising infrastructure, transport, communication, energy, and research and development [R&D]). Health expenditures represent the largest share of public procurement spending, accounting for around 30% in OECD countries and over 40% in some European countries (Belgium, Germany, Italy and the Slovak Republic) and in Japan. Notable exceptions include Hungary, Latvia and the United States, where economic affairs represent the largest share of public procurement spending. Economic affairs (16.3%), education (11.7%), defence (10%) and social protection (10.2%) represent the remaining largest areas of public procurement spending across OECD countries, with substantial variations between countries.
The size of general government procurement spending is estimated using data from the OECD National Accounts Statistics (database), based on the System of National Accounts (SNA). General government procurement is defined as the sum of intermediate consumption (goods and services purchased by governments for their own use, such as accounting or IT services), gross fixed capital formation (acquisition of capital excluding sales of fixed assets, such as building new roads) and social transfers in kind via market producers (purchases by general government of goods and services produced by market producers and supplied to households). Public corporations were excluded in the estimation of procurement spending. Data on general government procurement spending are disaggregated according to the Classification of the Functions of Government (COFOG) in Figure 8.2. Further information about the types of expenditures included in each category is available in Annex C.
Further reading
OECD (2015), Recommendation of the Council on Public Procurement, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0411
OECD (2019), Productivity in Public Procurement: A Case Study of Finland: Measuring the Efficiency and Effectiveness of Public Procurement, http://www.oecd.org/gov/public-procurement/publications/productivity-public-procurement.pdf.
Figure notes
On data for Israel, see https://doi.org/10.1787/888932315602.
8.1. Data for Chile are not available. Data for Turkey are not included in the OECD average due to missing time series. A large share of general government procurement in the Netherlands is spent on social transfers in kind via market producers-this relatively high level could be due, in part, to the country’s system of scholastic grants as well as the country’s mandatory health insurance system whereby the government subsidises individuals’ purchase of coverage from private providers.
8.2. Data are not available for Australia, Canada, Mexico, New Zealand and Turkey. Data for Chile and Iceland are not included in the OECD average due to missing time series. Data for Chile include changes in inventories and acquisitions less disposals of valuables. Data for Chile and Korea are for 2016 rather than 2017.
8.3. (Change in the structure of general government procurement spending by function, 2012 to 2017) and 8.4. (General government procurement spending by level of government, 2009, 2015 and 2017) are available online in Annex F.
Source: OECD National Accounts Statistics (database). Data for Australia are based on a combination of Government Finance Statistics and National Accounts data provided by the Australian Bureau of Statistics.
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