government procurement

Government procurement or public procurement is the purchase of goods, works (construction), or services by the state, such as by a government agency or a state-owned enterprise. In 2019, public procurement accounted for approximately 12% of GDP in OECD countries. In 2021, the World Bank Group estimated that public procurement made up about 15% of global GDP. 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. One benefit of public procurement is its ability to cultivate innovation and economic growth. 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.