engleski

Procurement at Local Government Level - Issues and Controversies

Public procurement is often recognized as a government activity where substantial financial flows are involved, but also subject to mismanagement, even fraud. That is why public procurement tends to be regulated by a set of laws and standards. According to OECD, efficiency of procurement can be measured using transaction costs and time required for procurement procedures. Efficiency can also be measured by observing the existence of specific practices, such as the use of e-procurement and of aggregation vehicles like framework agreements and consolidated contracts. Transaction costs economics represents a theoretical paradigm specially designed to interpret the issue of efficiency in inter- institutional relations. However, even though TCE might be envisaged as a tool for building better systems and institutions, practical experience suggests that efficient organization of complex multi- institutional systems is still a goal to be met. Such position is confirmed of the EU Thematic objective 11 that emphasizes the need for creating stable yet flexible organizational arrangements that deliver public services as one of its future goals. In conformance with transaction costs theory, establishing a system of control over the process of public procurement requires setting up some system of measures (processes, institutions and standards acting in conjunction can be considered as a system of controls), the presumption of efficiency should be based on the specific circumstance sunder which each specific system/institution/relationship operates. Therefore, a system of measures should be pertinent to the activity being controlled (a specific function or service), but also in accordance with the specific administrative capacity of the government unit applying a system of controls. Goal of this paper is to contribute to the on developing efficient public systems by examining a context specific situation at local government level on Croatia. Another pertinent issue kept in mind is the ongoing discussion on the size of local government in Croatia and its jurisdiction. The discussion on the ideal size and number of local government units (LGUs) tends to heat up during pre-election times. Local government as administrative units performs a broad range of services that require LGUs to establish relations with “outside” partners, including those belonging to the private sector. Therefore they represent a suitable unit of analysis when treating transaction costs. In a attempt to determine the main organizational features of the existing scope of institutions/entities involved in delivering services citizens, this paper provides an overview of the complexity of inter- organizational relations at LGU level. The findings are based on data collected through anonymous questionnaires sent to address of all Croatian LGUs. Picking up on questionnaire responses from 200 LGUs that reported having held over 350 cases of providing services through contract agreements with “independent” service providers, an opinion was formed of what could be the consequences of developing more structured public procurement procedures. Transaction costs were addressed indirectly, mainly by establishing the hardships of establishing and maintaining a transaction relationship. Transactions have been observed as two separate categories: a) transactions of LGUs with wholly owned communal firms and b) transactions with private entities occurring in regular public procurement bids. Authors’ rationale was that even though the first relationship represents a stable system formally controlled by the LGU, therefore theoretically less exposed to transaction risks/costs, both systems are administered by the same personnel, suggesting that both sorts of transactions being covered by the same (scarce) administrative capacity. This research demonstrated a pronounced conformity of procedures and organizational arrangements above the expectations of economic theory. The same patterns of contracting existed for smaller and larger financial capacity and any other distinctive feature that might have been expected to imply different distribution of tasks. In fact, even the time frame of individual process stages was very uniform across our whole sample, and vaguely depended on field of activity (which, in theory, would have corresponded to variables of task complexity, duration, market transparency, partner dependency, etc.).

economic efficiency ; local government units (LGU) ; public procurement ; public administration ; transaction costs

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