The Procurement Goldmine

WASHINGTON, DC – Gold is rare. More than 99.9% of the Earth’s crust is composed of oxides of silicon, aluminum, calcium, magnesium, sodium, iron, potassium, titanium, and phosphorus. So, for most of human history, people have become quite excited when they have discovered gold. Despite the serious environmental consequences of gold mining, including mercury and cyanide pollution and the devastation of landscapes, humanity has not given up the search – and seems unlikely to do so any time soon.

But there is a figurative goldmine – safer and potentially at least as lucrative as the real thing – that most countries possess, but few choose to exploit fully: government procurement.

The potential adverse consequences of government procurement are well known. It can enable companies to charge excessive prices for low-quality goods and unreliable services, while facilitating corruption, abuses of power, and waste.

To mitigate these risks, most countries have implemented requirements for open bidding processes and strict transparency rules for government purchases. Indeed, most recent free-trade agreements require signatories to open up government procurement to one another’s firms, and the World Bank publishes the names of firms barred for fraud or corruption from bidding on Bank-financed projects. Countries that forego open bidding processes end up with the kind of large-scale theft that has been documented in Venezuela and almost certainly occurred in Ukraine under deposed President Viktor Yanukovych.