BOFIT Viikkokatsaus / BOFIT Weekly 2017/08

Theeconomy ministry reports that public procurements in Russia last year were valued at 5.3 trillion rubles (€72 billion) and procurements of state-owned enterprises were valued at 21.1 trillion rubles (€285 billion) (not including procurements classified as secret). The sizeable procurements have been attempted to make more efficient and less costly through regulatory measures.

Legislation governing public procurement has been tightened in recent years. To increase efficiency and transparency, procurements should be carried out by electronic competitive bidding. The economy ministry reports that last year two-thirds of public sector procurements were subject to competitive bidding, but only 5 % of those by SOEs. The competitive bidding, however, has been criticized to be illusory to some extent. Competitively bid public sector procurements last year attracted on average less than three tender offers and most procurements were won by a handful of bidders. Planned measures to increase effectiveness of public sector procurement include the introduction of a standardized catalogue for most common procurements.

Lately, procurements have been used increasingly as a tool of industrial policy, thereby reducing competition and raising prices. Among other things, many import restrictions have been imposed on public sector procurements. Russia is not a signatory to the WTO Agreement on Government Procurement (GPA). In addition, many procurements of SOEs are subject to domestic-content requirements and provide preferable treatment to domestic suppliers. There are also procurement quotas for many large SOEs, requiring them to direct a certain share of purchases to small and medium-sized enterprises and to innovative products.