Public procurement refers to the purchase of goods, services, and works by governments and state-owned enterprises. Governments or state-owned enterprises are expected to carry out public procurement efficiently maintaining high standards of conduct ensuring to safeguard the public interest and guaranteeing high quality of service delivery. It is important to do so as it accounts for a large share of the taxpayers' money.
Government procurement is essential because governments cannot produce all the input materials for the goods they provide. Public goods like public infrastructure and national defense are provided by the Government. These goods are non-excludable and non-rival, meaning the quality or quantity doesn't diminish for others if it used by any individual and individuals have the right to freely use these commodities. Private markets cannot provide for public goods it is the government or state-owned enterprises who provide these goods, these are financed by raising taxes from all citizens.
Governments often also provide merit goods such as health care and education in addition to public goods. These are private goods which are rival and excludable hence are generally provided by the private markers. Governments provide merit goods for maintaining equity and fairness in the nation as a whole.
For the government to provide public and merit goods they need to purchase inputs from the private markets e.g. school buildings, uniforms, police vehicles. This process is known as government or public procurement.
Government procurement accounts for a large financial turnover and businesses interacting with politicians and civil servants so there is a high risk of corruption. Often the individual interests of the public administrators are not the same as the interests of the public which increases the risk of corruption. According to OECD, the highest cases of bribery occur in public procurement. Public procurement is subject to legal regulation to prevent corruption and ensure transparency among suppliers.
Government procurement laws normally cover all public works, services and supply contracts entered into by a public authority. But there may be exceptions, these include military acquisitions, as they account for large parts of government expenditures. Also, certain economically or politically sensitive sectors, such as public health, public transport or energy supply may also be treated differently.