Digitalization of public procurement and government commercial payments
Public procurement is a vital part of any nation’s economy, serving key policy goals and representing around 13% to 20% of GDP on average.* Because of its scale and strategic role, government procurement can present both valuable opportunities and unique challenges.
What are public procurement and government commercial payments?
Public procurement is the purchasing of goods and services by the government sector. It covers everything from pens and paper to major construction projects such as constructing schools, hospitals, and roads. It also involves services provided by third parties, such as social care and health services. Managed by various ministries, departments, municipalities, and public corporations, there are two main types of spend: Strategic and Tail.
Opportunities for card payments
Commercial payments are digital payments initiated by the public sector to pay private companies for goods and services either purchased as part of the public procurement process or paid as reimbursement for public officials’ travel and entertainment costs. Commercial payments can be handled via a number of different instruments: this paper focuses on the opportunities provided by card payments.
Public procurement represents a significant proportion of national GDP
The sheer scale of public procurement—representing between 6 and 19 percent of national GDP for 80 percent of the countries captured in the World Bank Global Public Procurement Database [1] —and the use of taxpayers’ money place public officials under intense scrutiny over the use of these funds. As a result, governments must ensure that the purchasing and payment processes are fair, efficient, and transparent. This means guarding against conflicts of interest and ensuring fair competition and equal treatment of their business partners. They must also optimize public resources by ensuring that they purchase the best goods and services at the lowest possible price, and that they pay vendors on time.
Opportunity for digitalization
This paper offers in-depth insight into the opportunity for digitalization to advance and improve government purchasing and commercial payments. Drawing on a global perspective, this paper explores the different stages of digital maturity and discusses the power of digitalization to address the shared challenges faced both by the public sector (including government procurement and treasury managers) and by private sector companies participating in public tenders. It also highlights examples of successful digitalization and its positive impact on efficiency, accountability, transparency, participation of SMBs, and national economic growth. This paper outlines a range of different approaches to digitizing public purchasing and government commercial payments—from cards for travel and entertainment (T&E) and procurement (P-cards) to procurement e-marketplaces—that can empower governments to advance the digital procurement effort independent of their starting point and technological sophistication.
- Global average based on countries for which the World Bank Global Public Procurement Database captures indicator “Percentage (%) of Gross Domestic Product as Public Procurement Expenditure.” ↩︎
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