Sector News
Professor Gustavo Piga at the Porto e-Public Procurement Conference

We started our coverage of the key sessions at the recent Porto (pictured here) e-public procurement conference here with the opening remarks from Nikita Stampa – let’s jump to the closing address from Professor Gustavo Piga today. (We will come back to some of the content from the middle of the day soon as well!)

Piga is Professor of Economics at University of Rome “Tor Vergata”, Italy. He has had a long involvement in public procurement as an academic, but also in more direct roles. For example, he chaired the Italian government’s central purchasing organisation, Consip, for several years.

His presentation at Porto was titled “The Road Ahead” and he started by asking what had happened to the aims and objectives of the European Union -“The most competitive and dynamic knowledge based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion” was what the Lisbon treaty of 2000 was aiming for (by 2010, by the way).

So what has gone wrong, because it is quite clear that this aim is a long way from reality. Why is the European economy in such a bad state? Although things are a little better than a couple of years ago, in some countries at least, growth has not picked up significantly and the continent is not healthy. Indeed, Piga likened Europe to a very sick patient, and diagnosed three problems.

  1. The most urgent is that the patient is bleeding. One key sign of this is the major decline in expenditure of construction activities around Europe. That has led to a loss of economic output, but also to fewer jobs and a loss of long term capacity.
  2. Then, there is a fracture – actual GDP is a long way below where it should be based on historical trends and projections – the “output gap”.
  3. Finally, the patient is suffering from depression. Some analysts talk about not just the recent depression but a “long slump” in Europe of 40 years. We are a Continent unable to grow, that has lost its capacity to be the locomotive of growth in the world. People are scared, and are holding onto their money rather than spending, which of course makes the economic situation worse.

So what does the doctor treat first? The bleeding – and Piga says, “we have seen this before”. The biggest problem is lack of aggregate demand. Spending is way down in Italy for instance in terms of public investment. He then described the economic effect of procurement changes. If you simply cut the volume of spend, GDP collapses. But if you can take real “waste” out of the system, and spend the public money better, it does not affect GDP.

The key point is to “bring the worst to the level of the best” in public procurement. Research shows that if everyone could buy at the price of the best, the public sector could save 2% of GDP. (Editor’s note – I am slightly suspicious of broad brush benchmarks like this – but I don’t dispute the basic principle).

Piga remembered a UK speaker back in 2009 saying this. “In times when we can’t borrow anymore, we see procurement as the best revenue stream”. In other words, doing procurement better frees up government money for more investment. But, Piga says, it is not just about countries and states spending more, public investment must go with spending the money well. “Handling 20% of GDP – public procurement – requires caring, effort, attention, and dedication”.

We need better staff – in the private sector, the CPO sits near the board. We need to do that in the public sector, yet so many people in public sector procurement roles are not trained and experienced practitioners, but generalists who have just moved into the area, perhaps for a short time. So skills and professionalism must be addressed. Then better procurement can lead to more efficient expenditure, greater government investment, and perhaps to wider economic recovery.

It was an excellent session, but of course we are left with some big questions. It seems clear that public procurement is vitally important in many ways, right up to the level of national and international economic success. And to be fair, some countries (and I would include the UK here) have focused more and invested in procurement in recent years. But why do many countries still not pay the right attention to the topic? And what can all of us who care about procurement, and about spending public money effectively, do to help change that?