On Tuesday, 26 August, the government supported the structural reforms developed by the public procurement working group to improve the efficiency of the public procurement system. The aim is to maximise the value of state budget investments while increasing competition in procurement, reducing bureaucracy and promoting transparency and efficiency in the process.
Public procurement is an important part of the Latvian economy – in 2024, its total volume reached EUR 5.45 billion, or approximately 13% of gross domestic product. However, the procedures are currently often too complex, time-consuming and lack sufficient competition, with only one bidder participating in many cases. The aim of the reform is to return to the fundamental objectives of the procurement system, ensuring the purchase of high-quality services and goods that are necessary for society, with the highest possible value for money.
"The structural reform will free the public procurement system from unnecessary administrative processes, speed up the process, ensure greater competition and ensure that every euro paid by taxpayers brings maximum benefit to society. The Ministry of Finance's calculations show that, if the reform is successfully implemented, we will reduce the length of procurement procedures by a quarter and significantly reduce the number of procedures regulated by law. While OECD calculations indicate potential savings starting at 7%, we see that, with the successful implementation of this reform, national savings have the potential to reach at least 2 to 4% of public procurement expenditure," says Arvils Ašeradens, Minister of Finance.
The reform provides for the application of procurement procedures from the thresholds set by the European Union, which would be EUR 143,000 (currently EUR 10,000) for the procurement of goods and services and EUR 5.5 million for construction works (currently EUR 20,000). At the same time, the obligation to publish information on procurement plans, concluded contracts and actual expenditure will be maintained. In future, it is planned to move to ex-post monitoring, with a comprehensive analysis of the system using public procurement performance indicators or efficiency indicators (KPIs), reference prices and analytical solutions that will allow for the assessment of both the level of competition in procurement and the speed of decision-making and process efficiency.
The reform also provides for changes in institutional governance – the Procurement Monitoring Bureau will become the central management authority, maintaining the Electronic Procurement System and the Publication Management System. Local governments will manage the procurement system centrally, while retaining the freedom to choose the most appropriate management model. At the same time, the range of goods and services procured centrally will be expanded to include, for example, insurance, transport and mobile communications.
The number of mandatory exclusion rules will be reduced from 12 to 2, providing more flexibility for contracting authorities. The reform is expected to reduce the administrative burden and the length of procurement procedures by approximately 25%.
Estimates by the Organisation for Economic Co-operation and Development (OECD) show that streamlining the procurement system can yield significant savings of up to 7%, depending on the country's approach and the scope of the reform. National savings from public procurement expenditure, on the other hand, could potentially reach 2 to 4%.
The reform will gradually come into force from 2026, after the Saeima (Parliament) adopts the necessary amendments to the Public Procurement Law and related regulatory acts.
Author: Ministry of Finance Republic of Latvia