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Centralization and decentralization
of public procurement
Analysis for the role of General Authority for
Governmental Services (GAGS) in Egypt
Karem Sayed Aboelazm
Department of Public Administration, Faculty of Economics and Political Science,
Cairo University, Cairo, Egypt and
Ministry of Finance, Cairo, Egypt, and
Attia Afandy
Department of Public Administration, Faculty of Economics and Political Science,
Cairo University, Cairo, Egypt
Abstract
Purpose –The purpose of this paper is to present and analyze the different concepts of centralized and
decentralized procurement methods; identify the advantages and disadvantages of each method and the two
methods of public procurement applied in the Arab Republic of Egypt in an attempt to overcome the
disadvantages of the Egyptian system; and introduce a new framework for government procurement in Egypt.
Design/methodology/approach –The descriptive approach was used in the framework of the
presentation and analysis of the concepts of centralized public procurement and decentralized public
procurement. The comparative approach was used for presenting some of the experiences of countries in
using public procurement methods. The legal approach was also used in the analysis of the legal frameworks
governing the public procurement methods in the Arab Republic of Egypt. In addition, the case study
methodology was used to study the role of the General Authority for Governmental Services in Egypt in the
centralized public procurement processes.
Findings –This paper attempts to find the ideal method of public procurement in general and what is the
method to be followed in the Egyptian case through the data presented and analysis of the Egyptian public
procurement system.
Research limitations/implications –This paper attempts to present a model or a theory on how to
determine the public procurement methods that should be used in a given country and give sufficient
flexibility for the conformity between the two methods upon application depending on the ecological factors
of each country.
Practical implications –This paper contributes to the development of the public procurement method in
the Arab Republic of Egypt by showing the gap between the use of the centralized approach and the
decentralized approach at all levels and providing solutions to bridge this gap.
Social implications –This paper provides implications to reduce corruption, increase transparency and
give the opportunity to the largest number of private shareholders to participate in public procurement.
Originality/value –Although there is some literature on centralized and decentralized public procurement,
there is a lack or scarcity of research and academic articles on this subject (Patrucco et al., 2017). This paper
attempted to do so by filling this gap in this area of research.
Keywords Public procurement, Centralized public procurement, Decentralized public procurement
Paper type Case study
Introduction
All the countries of the world organize several important public procurement functions within
their various government departments, agencies and bodies, but they differ in several aspects
in terms of how they are organized, the legal basis of their organizational arrangements, their
scope, extent and their location within administrative structures, the actual distribution of
functions and responsibilities among the various departments of public procurement, and how
they are linked to each other. The methods of public procurement differ from one country to
another depending on the purchasing policies used in each country.
Journal of Advances in
Management Research
Vol. 16 No. 3, 2019
pp. 262-276
© Emerald Publishing Limited
0972-7981
DOI 10.1108/JAMR-05-2018-0049
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0972-7981.htm
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The establishment of a strong public procurement contact is one of the essential
measures for countries seeking to reform or modernize their public procurement systems.
In this regard, a focal point is established at a certain level of centralization, such as a
centralized department or body with a wide range of functions and responsibilities widely
involving all different government departments, agencies and agencies. In order to
rationalize government spending in those countries, the centralized approach to
procurement is being pursued. There are also a number of developed countries that
generally follow the decentralized approach in the management of their affairs and turn to
the adoption of the centralized method of public procurement.
There are also many other countries that do not prefer to use the centralized approach
and limit their adoption thereto as much as possible in their public procurement and expand
the decentralization of public procurement to address a number of problems and overcome a
number of obstacles resulting from centralized public procurement. In addition, there are a
number of countries that combine both (centralized and decentralized) methods in public
procurement with the aim of realizing the advantages offered by both methods and to avoid
the disadvantages of either of them.
In this context, the centralization and decentralization of the public procurement process
will be discussed. The advantages and disadvantages of each method will be discussed in
addition to the presentation of the method of public procurement in some countries and the
Arab Republic of Egypt and what can be utilized in this field through four main points.
The method of centralized public procurement
The centralized approach of public procurement will be explained by discussing the concept
of centralized public procurement and the reasons for resorting to it, as well as the
advantages and disadvantages of this method. That is what will be explained in three
consecutive points.
The concept of centralized public procurement
The definitions of centralized public procurement vary widely and they are in some respects
very similar. There are those who define it as “the process by which all public procurement
procedures can be controlled in one centralized location”(Islam, 2013). It can also be defined
as “the process in which a single government institution shall be responsible for providing
the needs of all government departments and carrying out all functions of public
procurement”(Chartered Institute of Procurement and Supply, 2006). Public procurement
has also been defined as: “centralization of public procurement means that all public
procurement procedures are concentrated in a centralized procurement unit to procurement
all goods and services requested from various government entities”(Karolis et al., 2011).
Finally, the OECD (2011a, b) defined the centralization of public procurement as “the
establishment by the government of a centralized agency with the task of procuring goods
and services for the benefit of other government agencies and bodies with a view to
reducing the cost of public procurement”.
The different definitions of centralization in public procurement show that there is
agreement on the two aspects of the centralized procurement process, the first aspect is that
the centralized procurement is carried out through a single centralized government –whether
it is under the name of an agency or a body or office or department –at the level ofthe state as
a whole, and the second aspect is that the centralized procurement in most cases should be
aimed at reducing the cost of procurement . In light of this, the centralized public procurement
or centralization of public procurement can be defined as: the government shall be assigning
the task of purchasing goods and services –for various governmental bodies and
departments –to a Centralized Agency specifically created to perform this function in order to
rationalize government spending and increase efficiency and effectiveness in government
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and
decentralization
procurement as well as further control and accountability of public procurement. Figure 1
shows the public procurement process in a centralized way.
In Figure 1, the Centralized Agency entrusted with the task of conducting public
procurement operations at the level of the State as a whole receives and collects all requests
for procurement from all government agencies and bodies within the state, and then
categorizes and arranges those requests and prepares the books of conditions and
specifications of the procurement process which are called documents of the procurement
process, then the procurement process shall be tendered (by one of the established
procurement methods), the procurement shall be awarded to the best tenders and the
contract shall be entered.
The conclusion of the contract phase is the last stage in the procurement process, which
is carried out by the Centralized Agency for Government Procurement. The contracting
party (supplier/contractor) supplies the goods or services according to the different
administrative authorities. Finally, a receipt of the rest of contractor’s dues is issued, after
making sure that all the work of procurement is received in accordance with the
specifications and conditions of the contract.
Many countries in the world, in general, and developing countries, in particular, resort to
a centralized approach to public procurement, and to establish a centralized agency or body
to do that function is mainly due to greater control over the cost of public procurement to
curb growing public expenditure. Public spending is often curtailed by reducing spending
on goods and services that take a great deal of state resources (Albano and Sparro, 2010).
Centralized public procurement by collecting requests also helps to reduce public
procurement largely if the process is appropriately designed and highly efficient. This has
led many developed countries to resort to a certain degree of centralization in public
procurement (Carpineti et al., 2006), such as GSA[1] in the USA, OGC[2] in the UK, PPS[3] in
South Korea and CONSIP[4] in Italy, the Centralized Tenders Committee in the State of
Qatar as well as the Centralized Tenders Committee in the State of Kuwait, and such as the
Tender Board of the Sultanate of Oman and the Tender Board in the Kingdom of Bahrain.
Supply of
contracted goods
and services
The conclusion of
the purchase
contract
Purchase award Offering for
purchase
The preparation of
documents
procurement process
Receiving and compiling
government procurement requests
from all government agencies and
bodies
Central Authority for public Procurement
Payment of dues
to the contractor
The measures taken by
the Central Authority
for public Procurement
in the procurement
process
Figure 1.
The public
procurement
process by the
centralized method
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Advantages of the centralized approach to public procurement
The pursuit of a centralized system of public procurement is not an end in itself but rather a
means for the government to achieve a number of general objectives, which are summarized
in Figure 2.
In light of Figure 2, the advantages of the public procurement method are as follows.
Controlling public spending. The centralized procurement strategy has a real ability to
reduce the overall cost of public procurement by reducing procurement prices and reducing
transaction costs (procurement process), which ultimately helps to influence public
expenditure (Karjalainen, 2009). The actual reduction in public spending in this respect is
due to a strong interaction between two determinants that are maximized when centralized
public procurement occurs. These determinants are volume of procurement and bargaining
power of the centralized purchasing body (Albano and Sparro, 2010).
Government agencies seek to reduce government spending by increasing the
centralization of procurement ( Johnson et al., 2003). The centralization of public
procurement and the introduction of one large volume process would result in an
abundance of resources and a reduction in the prices of procuring materials (OECD, 2015).
The increase in the volume of the procurement process would help increase the bargaining
power of the centralized agency for procurement, which, of course, helps to reduce the cost
of public spending on public procurement.
The capacity of centralized public procurement agencies. The capacity of the Centralized
Agencies here means the great experience they have in many public procurement practices,
Reasons for introducing a
centralized approach to public
procurement
Administrative
efficiency
Low purchase cost
Experience of all types
(technical, legal,
administrative)
Best prices
Confidence in the legal system
of central procurement
Ease of procedures and
administrative
transactions
Support policy
objectives
Source: OECD (2011b, p. 22)
Figure 2.
Advantages of public
procurement by the
centralized method
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Centralization
and
decentralization
making them the only option in preparing and implementing public procurement processes
in complex operations in some areas requiring special treatment (OECD, 2016).
The more specific public procurement is assigned to a single body, as it is more likely to
have a positive effect on the smooth functioning of the public procurement process, in
contrast to the fact that local public procurement units have such operations that may
eventually fail due to the non-availability of sufficient capacity for such units to carry out
such operations.
The centralized agencies of public procurement enjoy the high level of the required
professionalism. The public procurement process involves a large number of risks in a
number of key aspects (legal, economic and technical aspects), requiring specialized and
highly professional staff to be able to manage these risks (OECD, 2011a, b).
This is in contrast to local purchasing units where specialized staff may not be available
to manage the risks that may result from public procurement, which may result in the
failure of the procurement process, waste of public funds and disruption of plans and
programs based on such operations. This advantage therefore enhances the assignment of
public procurement to a specialized centralized agency.
Assisting in achieving the objectives of the State’s public policies. Public procurement is one
of the most important means of government to meet its needs of goods and services so that it
can carry out its duties toward achieving the objectives of this state’s public policies. On the
other hand, by focusing the public procurement processes on implementing them through
one agency, it will achieve the objectives of the state’s public policies (OECD, 2011a, b).
For example, the centralized public procurement can be used to encourage investment in
a specific region of the country by undertaking the necessary construction work and
improving the infrastructure in this region. This can only be achieved through the
centralized public procurement agency. The state can also encourage some sectors to
engage in public procurement such as small- and medium-sized enterprises (SMEs).
Through centralized public procurement, it is easy to involve such companies in such
operations by allocating a proportion of these operations to them.
Increasing the transparency and control over public procurement. The existence of a single
agency responsible for public procurement helps regulatory bodies to control the
procurement process, in addition to making it easier to control them. In addition, public
procurement through one agency will increase transparency in this field where it is easy to
publish and provide the information and data on procurement as well as the ease of access
to them for being subject to the pressure of public opinion (OECD, 2000).
On the contrary, with the multiplicity of local units procured and the complexity of their
terms of reference and areas of operation, it is difficult for regulators to control and monitor
them. In addition, with respect to transparency, the multiplicity of public procurement
agencies weakens the process of making information available and makes it difficult to
obtain them because public opinion is not available to all public procurement units.
If these are the advantages of the centralized approach to public procurement, it is
certainly not a pure, flawless approach. Despite all these advantages that encourage
adopting this approach to public procurement, it may have some negative effects that will
be presented in the next section.
The negative effects of adopting the centralized approach to public procurement
The establishment of a centralized system of public procurement is the government’s means
to achieve a number of general objectives, but this approach may result in a number of
negative effects, which are as follows.
Market concentration and the likelihood of monopolistic practices in public procurement.
The centralized approach of procurement may result in monopolistic practices in those
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operations, as well as the concentration of the market by a limited number of companies,
which is one of the most serious adverse effects not only on procurements but also on the
economy of the country as a whole. Large amounts of centralized public procurement often
go to large companies without leaving any share to the small firms in these operations
(OECD, 2011a, b).
Limited opportunities for SMEs to participate in public procurement. With reference to the
main objective of public procurement in the centralized approach, it is clear that it lies in
reducing public spending through the collection of requests from all government agencies
and offering a single procurement through a centralized agency. Hence, the size of this
process is very large in a way affecting the possibility of entry of small and medium
enterprises in the process. This is mainly due to the qualification criteria and entry
requirements enforced in the procurement process, which far outweigh the potential of these
companies, both technically and financially (OECD, 2016).
This does not mean that the centralized approach ensures that SMEs engage in public
procurement as the entry of these companies in the public procurement is not only related to
the size of the procurement process, but it is also related to a number of other factors,
although the size of the procurement process is one of the most important and most
influential factors in the possibility of entry of these companies because it is related to the
financial capacity of these companies (OECD, 2000).
Waste of resources in the absence of coordination between different governments
departments. The centralized system of public procurement may pose a major threat to state
resources, which may lead to the destruction of the public procurement system as a whole if
it fails to take into account some of the following situations.
There may be a lack of understanding between the various government agencies and the
centralized public procurement agency, since the applications submitted and their details if
misinterpreted may lead to the procurement of non-required goods and services (OECD, 2000).
There may be a delay on the part of the centralized public procurement body in meeting
the needs and requirements of all government agencies, which may result in significant
damage to some government agencies that may be in the urgent need of certain goods and
services ordered before (Islam, 2013).
The costs of transporting goods and services may also pose a significant financial
burden if the applicant is located far from the centralized procuring entity, which is further
exacerbated if this cost is not taken into consideration when planning the procurement
process (Islam, 2013).
The method of decentralized public procurement
In order to understand the meaning of decentralization in public procurement, we must
understand the concept of decentralization of public procurement and the reasons for
resorting to it, as well as the advantages and disadvantages of this approach. This will be
explained by three main points.
The concept of decentralization of public procurement
In fact, the decentralization of public procurement is an uncommon concept in the literature.
However, there are those who have addressed this concept and defined the decentralization
of public procurement as:
“The process by which each government agency or department [sic.] controls the procurement of
goods and services”(Leenders and Johnson, 2000). It was also defined as “the process by which the
public procurement unit of each government entity is responsible for the procurement process,
which is also often responsible for a variety of products procured in less quantities than what is
procured by centralized public procurement agencies”(Islam, 2013).
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It has also been defined as “delegating local departments and authorities to regulate the
decree-making process in terms of what is to be procured, how to make the procurement and
when to procure?”(Karolis et al., 2011).
These definitions of the concept of decentralization of public procurement show that
there is agreement that procurement in a decentralized method means that each
procurement department in a government agency shall be responsible for meeting the needs
of its own body. In light of this, the decentralized public procurement or decentralization of
the public procurement can be defined as: the individual procurement units meet the needs
of their respective government entities for that unit of goods and services according to the
procurement plan established by each government body.
According to this definition, this approach to public procurement is completely contrary
to the centralized procurement approach. The centralized public procurement agency
represents the collective needs of various government ministries, agencies and bodies to be
provided to them through a single procurement process.
Advantages of decentralization in public procurement
The advantages of decentralization in public procurement are one of the attempts to avoid
the negative effects of the centralized purchasing system. These advantages are as follows.
Reducing the costs and risks of storage and transportation. The decentralized
procurement strategy is based primarily on the argument that procurement in this
manner would reduce the cost of storage of goods. In addition, through this method,
procurements will be made from local suppliers in the geographical area of the procuring
entity, which helps to provide transportation expenses of the commodity (Islam, 2013).
The procurement in this manner avoids the effects of the centralized procurement
method including the storage costs of commodity until delivery to the requesting parties of
the commodity, in addition to that it also avoids the cost of transporting the commodity
from the centralized agency for procurement or stores to the government agencies
requesting procurement and increases its cost if that the procurements requesting parties
are located in remote locations and the transfer of the goods to them requires considerable
expenses, which would be more appropriate to procurement in a decentralized manner.
Quick response to the operational needs and requirements. The decentralization of public
procurement helps to quickly procure the goods and services that the government needs
urgently (Islam, 2013). By procurement under this method, it can quickly put up the
procurement process and contract faster than the centralized procurement method.
The large-scale procurement process then receives the required commodity and then
distributes it to the requesting parties. All of these procedures would result in a significant
waste of resources if not done in the required time and shall destroy the basic objective of
the centralized procurement.
The centralized agency of public procurement concentration on larger targets.
The decentralization of public procurement for some uncommon goods and services, or
goods and services not used by many government agencies, helps the centralized public
procurement agency to focus on the objectives for which it was established, i.e. by focusing
on similar goods and services among all government agencies. Thus, their centralized
procurement would save government spending in this area (Islam, 2013).
Increased opportunities for SMEs to participate in public procurement. The offering of
decentralized public procurement processes will contribute to increasing the access of SMEs
to those operations (OECD, 2000), since these operations are not as large as operations when
adopting the centralized procurement approach. In the centralized procurement, the volume of
quantities required to procurement is very large to cover the needs of all government agencies
requesting procurement, and requires qualification standards that exceed significantly the
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potentials of these companies, both technically and financially. Decentralized procurement
thus greatly helps them enter publicprocurement and increase their chances of winning one of
them (The Charted Institute of Procurement & Supply, 2006).
The promotion of SME development can be achieved through public procurement, in
general, and through decentralized procurement, in particular (Brezovnik et al., 2015).
In fact, for SMEs and their involvement in public procurement, it is primarily related to
government policy in this area, although procurement is also an influential factor. If there
are government policies that support these companies, these companies will have the
opportunity to participate. For example, a percentage of public procurement can
be allocated in a centralized method for small- and medium-sized companies. In the
decentralized method, some procurements are ordered in small sizes to encourage these
companies to participate.
Linking the decentralized procurement units with their related programs. In contrast
to the Centralized Procurement Agency, which meets the needs of various government
agencies without knowing the purpose of these needs or the extent of their association
with the programs and objectives of the entity requesting the procurement, the
decentralized procurement helps to increase the link between the procurements of the
government agency and its programs closely, where this procurement is a means to
achieve the goals of the government and the implementation of its programs
(Deutsch, 2013).
Decentralized procurement therefore has many advantages, but as a centralized
purchasing system, it may have some negative effects on its adopters, which will be
presented in the next section.
The negative effects of the decentralized approach to public procurement
The decentralized approach to procurement in general without taking into account the
nature of the commodity or service to be procured would result in a number of negative
impacts, which are as follows:
•It may result in decentralized procurement units not having sufficient experience to
make a procurement of goods and services of high financial value that requires
certain qualification requirements and special procedures (Deutsch, 2013).
•Decentralized public procurement units may lack highly professional staff (Islam, 2013).
•There will be a rise in prices of procured goods compared to prices of goods and
services procured in a centralized manner (Leenders and Johnson, 2000).
•There will be a lack of full coordination between the decentralized units of public
procurement (Leenders and Johnson, 2000). When more than one unit of decentralized
procurement makes a procurement for a single product, then the price of the product
will be higher than if it was done in a centralized method (Wanyama, 2010).
In fact, it is possible to avoid the negative effects of using one of the former methods and to
take advantage of their advantages by designing a new method called semi-centralized or
mixed method, whereby through this method, we will receive benefit from the advantages of
centralized and decentralized methods together in addition to avoiding the negative effects
of each method. Thus, Figure 3 illustrates how this is done.
After identifying the methods of public procurement in theory as stated in the various
literature and studies of international organizations that focus on the study of public
procurement systems in many countries, the following point will present the Egyptian
situation and proposals that can be submitted to develop the methods of public procurement
in Egypt.
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The method of public procurement in some countries
Italy
The Italian Ministry of Finance and Economy established CONSIP (see Footnote 4) in
1997. The company is funded by the Italian government budget through a three-year
agreement. The main purpose of establishing CONSIP was to change IT systems in the
Ministry of Finance and Economy (formerly known as Italian Ministry of Finance). In 2001
and 2002, two laws were passed to enhance the role of CONSIP, with the main objective of
rationalizing public spending and making public resources more efficient and transparent
through unified orders and orders (OECD, 2011a, b).
In 2001, there was an obligation on all central government agencies and agencies to buy
through CONSIP. However, local management may decide to follow up its procurement
procedures for the purchase of a particular commodity, even if that commodity is included
in the goods CONSIP makes purchases on them (Baldi and Vannoni, 2014).
In addition, a number of laws and decrees were issued in 2003 which set new rules for the
purchase orders submitted by the central government authorities. In addition, these decisions
and laws increased the functions and functions of the company (CONSIP), which became
entitled under these laws and decisions the right to conclude the various agreements which
are binding on all central government agencies. In addition, for local administrations, under
these decisions and laws, they are obliged to abide by the prices of the agreements concluded
by CONSIP and all its quality requirements. The last government intervention in central
procurement in 2012 was the government’s Decision No. 95 of 2012 on the “expenditure
review,”which was later changed to Law No. 135 of 2012, which was aimed at rationalizing
public expenditure. There is a confidence in CONSIP in order to reduce public procurement
costs by aggregating and implementing various purchase orders from all central and local
government departments, which would have reduced 15–20 percent of procurement costs
without any reduction in standards the quality (Baldi and Vannoni, 2014).
The main purchase through CONSIP is in many goods and services which are as follows:
health care (ambulances and various medical equipment), fuel, electricity, mobile and ground
communication equipment, office furniture, photocopiers and printing, computers and
software, and food (OECD, 2016).
Decentralized method
Negative effects
Advantages
Semi-central or hybrid method
Advantages
Negative effects
Centralized method
Source: Leenders and Johnson (2000, p. 19)
Figure 3.
Semi-centralized or
hybrid method
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Hungary
The public procurement law in Hungary dates back to 1995, which faced a major challenge in
the absence of professional competencies to conduct public procurement, which prompted the
government to follow the central approach but without a central purchasing body. Therefore,
there were many different types of contracts: the Ministry of Defense for fuel and energy
contracts, the Ministry of the Interior for photocopying contracts and office equipment, and,
finally, health insurance for contracts related to medical equipment (OECD, 2011a, b).
In 2003, the Republic of Hungary established a Central Public Procurement Agency KSZF[5]
7 based on a study by the Council of Ministers to be responsible for central public procurement
instead of distributing that task to more than one government agency. The Public Procurement
Law, after the 2003 amendment, defined two methods of procurement: the Centralized and the
KSZF, for the central government bodies; the second is the decentralized method, which is
assigned to local governments according to their competence (OECD, 2011a, b).
KSZF covers a number of goods and services exclusively: procurement contracts, ICT
(hardware, software and services), procurement of administrative services (financial
management, development of organizational and human resources, travel and conference
management), procurement of technical materials and services (physical and facility,
vehicles, transport services, office and power supply services) (OECD, 2016).
Gambia
The public Procurement Law in Gambia was developed with the assistance of the
International Trade Center in 2001 within the framework of the grant from the Capacity
Building and Economic Management Project. The head of state approved this law in 2002,
but it came into effect only in 2003 after the issuance of the executive regulations (The
World Bank, 2005).
The public procurement law in the Gambia states to support the decentralization of
public procurement by allowing the various ministries, agencies and government agencies
to carry out public procurement according to the specific needs of each side. This resulted in
the increase in government spending in the field of public procurement due to the lack of
coordination between the various government departments in the purchase of goods and
services, mainly due to the weak capacity of employees in the field of public procurement
departments in various government agencies (The World Bank, 2005).
Tonga
The Public Finance Management Law promulgated in 1983 in the Kingdom of Tonga, which
was amended in 1984, 1986 and 1988, was adopted on the decentralized government
procurement by authorizing the various ministries and institutions to take governmental
procurement procedures in the absence of a central authority responsible for the
government procurement process. In 2002, a new Public Finance Management Act was
passed which came into effect in 2003, which made the Minister of Finance responsible for
issuing regulations governing government procurement. The government procurement
approach to the decentralized approach continued in accordance with the new law on public
finance in the Kingdom of Tonga (The World Bank, 2003).
The World Bank (2003) developed a new concept of government procurement in Tonga.
This new concept suggests that a central agency should be established to be responsible for
the Kingdom’s government procurement system. Procurement in a fully decentralized
manner to all ministries and government departments is not a sound approach in a small
country such as Tonga due to the lack of capacity and skills in procurement. In its
recommendation, The World Bank (2003) concluded that a mixed approach should be used
to balance the decentralized approach to the central approach through the creation of a
central government procurement agency.
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The method of public procurement in the Arab Republic of Egypt
There are many legislations governing the contracting process in general in the Arab
Republic of Egypt. There are the Tender Law No. 89 of 1998 (1998) and its executive
regulations, the law regulating the participation of the private sector in infrastructure projects,
services and public utilities, as well as Law No. 67 of 2010 and its executive regulations. These
laws are incorporated into laws and executive regulations, as well as periodic books issued on
these areas, and finally the issuance of Law No. 5 of 2015 on the preference of Egyptian
products in government contracts.
The study will be limited to the operation of the Tender Law No. 89 of 1998 (1998), its
executive regulations and the periodic books regulating the fields of law. The rest of the
other laws are regulating the rest of cases excluded from the scope of Law No. 89 of 1998
(1998). This will be done through three points as follows:
(1) the method of public procurement according to the law of tenders and auctions;
(2) modern government trends in modifying the public procurement method; and
(3) the role of the General Authority for Government Services (GAGS) in the field of
public procurement.
The method of public procurement according to the law of tenders and auctions
In view of the provisions of the Tender Law No. 89 of 1998 (1998) and its executive
regulations, it is clear that the decentralized approach shall be adopted in the public
procurement, as it authorizes all government agencies to carry out public procurements in
accordance with their needs without a centralized public procurement authority being
responsible for procuring any product or commodity. It is therefore clear that the legislator
intends to adopt a decentralized approach to public procurement.
Article 1 of the articles of the tenders and auctions law states that the law applies to
ministries, departments and agencies that have special budgets, public economic and
service bodies, and local administration units. This means that decentralization here is
institutional or departmental decentralization in addition to regional decentralization.
Article2ofthearticlesofissuingtendersand auctions law and the second article of the
decree of issuing the executive regulations of the tenders and auctions law stipulate that
the competent authority shall be either the minister –or his powers –or the governor or
the head of the general administration of the public body –each in his capacity –as the
case may be.
Thus, the public procurement in Egypt is done by each administrative body that
provides for its needs of goods and services in the procurements without any kind of
coordination with other entities. Each entity only looks at its own programs and
procurements plan, which puts it in isolation from the centralized authority, which has led
to a rise in the cost of public procurement over many years, which, in turn, led the
government to intervene to reduce government spending in this area. This will be dealt
with in the next section.
Modern government trends in modifying the public procurement method
The procurement situation in the decentralized method continued for eight years until the
issuance of the Circular No. 4 of 2006 (2006) by the GAGS in accordance with its competence
stipulated in Article II of the President’s Decree No. 2126 of 1971, circulating the idea of
centralized procurement of products and commodities commonly used, which included ( all
types of paper, all kinds of inks, all kinds of tires, all kinds of car batteries and all types of
lamps) 50 percent of the needs of the fiscal year 2006/2007.
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The GAGS issued a Circular Letter No. 8 of 2007 to generalize the experience of centralized
procurement of the common-used products and commodities, which included (all kinds of paper,
all kinds of inks, all kinds of tires, all kinds of car batteries and all kinds of light bulbs)
100 percent of the needs of the financial year 2007/2008.
In the following year, the GAGS issued the Circular No. 12 for the year 2008 with the
aim of continuing the implementation of the Circular No. 8 for the year 2007 for the same
previous varieties at 100 percent of the annual needs of these ministries and their
affiliated agencies for the financial year 2008/2009. This is in preparation for the
generalization of the central procurement on other varieties commonly used in the fiscal
year 2009/2010.
The centralized procurement here is not intended for the GOSP to introduce and execute
the procurement process on behalf of the government agencies. However, it means that each
ministry will form a centralized procurement committee whose task will be represented in
compiling the public procurement requests from its subsidiary bodies and to propose the
procurement process through that centralized committee for the previous five varieties.
As for the governorates, a centralized procurement committee shall be formed in the
governorate that will be responsible for collecting requests from local units of the
governorate and the launch and implementation of a single procurement.
In 2015, the first government decree was issued by the prime minister on achieving
financial and administrative discipline and raising the efficiency of government spending
No. 122 of 2015, which stated that procurement must be centralized at the level of each
ministry or governorate for the commonly used varieties, in particular computers Printers,
faxes, scanners, cameras, air conditioners, office furniture, various types of paper, inks,
energy-saving lamps, batteries and tires.
This method of public procurement does not only apply to the entities subject to the law
of tenders and auctions No. 89 for the year 1998, but also applies to all ministries,
government departments, local administration units, public bodies, public and private
sector bodies and agencies and companies with a separate budget.
Finally, the first government decree was issued by the Council of Ministers in its session
No. 28 held on 6/4/2016 to include the first directive from the State to carry out the centralized
procurement at the level of the State as a whole by collecting the requests of all government
entities in five products (paper, energy-saving lamps, cars of various types) through the Ministry
of Finance in preparation for the establishment of a specialized committee in the GAGS to offer
one procurement for each commodity to achieve the greatest possible price savings and regulate
and control public procurement.
Thus, the Egyptian method of procurement –according to the law of tenders and
auctions No. 89 of 1998 and its executive regulations and the decrees of the prime minister
and the periodic books regulating the procurement process –has begun as decentralized
method till it developed over several years until the Egyptian procurement system adopted
the centralized method as well as the decentralized method and this development
would avoid the negative effects resulting from adopting either of the two methods.
The role of the GAGS in public procurement
The GAGS is responsible for many of the functions and tasks mentioned in its
establishment resolution 2126 for the year 1971, but the research here is limited to the
competence of the General Authority for Governmental Services in the field of public
procurement, which is as follows:
•Plan and follow up the procurement and sales of the administrative apparatus of the
State and public bodies and institutions that are determined under a decree of the
Minister of Finance in agreement with the competent minister.
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•Planning, organizing and following up the procurements of movables for the
administrative apparatus and public bodies in cooperation with the concerned
authorities. These entities shall undertake procurement operations and may delegate
the authority to carry out them.
According to the decree of establishing the General Authority for Government Services, it
does not have the authority to carry out government procurement on behalf of any
administrative authority until such authority has been authorized to do so.
The decree of the Council of Ministers in its session No. 28 dated 6/4/2016 included
centralized procurement at the level of the State as a whole by collecting the requests of all
government entities in five products (types of paper, tires, batteries, energy-saving lamps and
cars of various types) through the Ministry of Finance in preparation for the establishment of
a specialized committee in the GAGS to offer one procurement for each commodity to achieve
the greatest possible price savings and regulate and control the public procurement.
This competence is limited to only five products, as well as to the financial year
2016/2017. This competence is an exceptional one and not an original competence of the
GAGS. After the end of the required procurements and the end of the financial year 2016/
2017, the various centralized and local governments shall have the competence to start their
own procurement operations.
The decree of the Prime Minister No. 2158 for the year 2017 was a new development in
this area, as it obliged –all ministries and its affiliates as well as the governorates and
other units of the local administration in addition to public service bodies –to provide the
GAGS in the Ministry of Finance needs for some goods for the fiscal year 2017/2018 so
that the Authority shall act on its behalf in the tender process.
According to Article 1 of the Prime Minister’s Decree No. 2158 of 2017, these items are
personal computers, printers, faxes, scanners, photocopiers, air conditioners, disposable
paper, energy-saving lamps, batteries and tires.
The text of the first article also stipulates that the competence of the General Authority
for Government Services is limited to offering the general tender only without entering into
any contracts or implementing any contracts. The GAGS was only required to submit the
tender and then notify the beneficiary parties after the tender was awarded to issue the
supply orders and conclude the contracts and implement them and pay for the price against
the credits included in the budgets of those beneficiaries.
Conclusion
After discussing the public procurement methods as well as the presentation of the Egyptian
situation in the previous points, many of the main points in each system were extracted and
can be used in the newly established procurement systems or even for the development of
existing systems, in general, and in Egypt, in particular. There were advantages for each
method of procurement as well as there were negative effects for each. If it were possible to
leave the negative effects and benefit from the advantages of each system, this would be very
useful. The lessons learned from previous international experiences are summarized as follows:
•Establish a unit, entity or agency responsible for centralized government procurement.
•Use the centralized public procurement method to help reduce government spending,
but not to launch it. Rather, centralized purchasing should be for the common goods
used in most government agencies.
•The centralized authority for government procurement shall add the costs of storage
of the goods and products that request this procurement, in addition to the costs of
transferring these products to the parties requesting the procurement to the value of
the commodity or product to be procured in a centralized manner.
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•Providing training and technical advice for decentralized public procurement units
by the centralized authority of public procurement, whether for government bodies at
the level of public administration or at the level of local administration.
•Adopting decentralized public procurement method for goods and services that
require a great deal of speed in their procurement.
•Developing clear provisions of the public procurement law for the goods and services
procured in a centralized manner and those left to be procured in a decentralized manner.
•Coordination among different government agencies in the case of procurement in a
decentralized manner to ensure the preservation of state resources and in order to
achieve the greatest value for money.
Notes
1. GSA: General Services Administration in the USA.
2. Office Government Commerce in the UK.
3. PPS: Public Procurement Service in Korea.
4. CONSIP: Concessionaria Servizi Informativi Pubblici in Italy.
5. KSZF: Központi Szolgáltatási Főigazgatóság in Hungray.
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Further reading
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Decree of the Prime Minister No. 2158 of 2017 (2017), Official gazette No. 40, October 7.
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Bangladesh: a focus on economic census 2013”, dissertation submitted in partial fulfillment of
the requirements for the Degree of Masters in Procurement and Supply Management, BRAC
Institute of Governance and Development BRAC University.
Corresponding author
Karem Sayed Aboelazm can be contacted at: k.s.aboelazm@gmail.com
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